The news media wraps itself in the mantle of the “public’s right to know,” shielding sloppy, unfair, or erroneous coverage with a First Amendment excuse.
And I have already expressed my opinion of Wall Street, an arena in which misinformation is considered a virtue.
My point is there are larger issues of personal ethics, integrity, and human decency that, on occasion, ought to override the traditional standards of professional practices.
I have reserved my harshest rhetoric for this problem because I feel so strongly that integrity is central to all else virtuous. It is distressing that two people these days must necessarily be uneasy about simple oral agreements or that we don’t take responsibility for our own errors.
Reestablishing concepts of personal responsibility and one’s word being one’s bond, means kicking the lawyer dependency. We can avoid many unpleasantries, legal and social, by offering trust, accepting responsibility, and standing by our word, even when it causes discomfort.
Reestablishing concepts of personal responsibility and one’s word being one’s bond, means kicking the lawyer dependency.
Most spouses, neighbors, and business colleagues don’t require lawyers every time there is a disagreement. If we adhere to basic moral values, voluminous legal contracts would become unnecessary.
Abraham Lincoln, himself a lawyer, was on target: “Discourage litigation. Persuade your neighbor to compromise whenever you can. As a peacemaker, the lawyer has the superior opportunity of being a good man. There will still be business enough.”
There is a fun fact that suggests America has 40 lawyers for every engineer, whereas China, emerging as one of the world’s most dynamic nations, has 40 engineers for every lawyer. I am not sure exactly what that says, but it can’t be a plus for the United States. It may only be coincidence that the explosion in ethical and legal lapses in the business world parallels proportionately the increase in lawyers.
“Most business decisions involve risk,” notes Norm Brodsky in his Inc. article. “That’s why the business person has to make them. Who else can say how much risk he or she is willing to live with? Unfortunately, some lawyers don’t understand that it’s the client’s responsibility…to assess risk.”
Don’t misunderstand. It is important that we listen to lawyers, but only for a second opinion. Your opinion ought to be the first—and the last.
Some of us refuse to act or to move ahead in life without legal advice. In so doing, we lose our individuality. Somebody else is thinking for us, speaking for us, acting for us, making us mistrust everyone.
It is important that we listen to lawyers, but only for a second opinion. Your opinion ought to be the first—and the last.
The legal profession has made life far too complicated. The problem is we believe we must always have a lawyer at our side. Virtually everyone brings along a lawyer to business transactions in anticipation of the other side pulling something.
Because the devil supposedly is in the details, negotiations represent a grand and lucrative playpen for lawyers. The law, like medicine, computer programming, and lunar landings, is complicated. Most of us aren’t skilled in computers, medicine, rocket science, or law. We feel we aren’t in a position to question, but we are. Insist the outcome be honorable and make good business sense.
Lawyers have us trained to believe nothing is airtight, any agreement can be broken, and that life is one big loophole. A handshake ends up as meaningless as an Enron audit. Heaven forbid the law be the law. Today, the law is whatever the client wants it to be. Today, we can sue anybody over anything. We can ruin a reputation with a simple allegation, trumpeting the canard worldwide on the Internet in seconds.
Because the devil supposedly is in the details, negotiations represent a grand and lucrative playpen for lawyers.
All that said, I have been privileged to know some wonderful lawyers who genuinely seek justice and embrace honest deals. Lawyers certainly can be helpful steering one through today’s myriad government regulations and contractual prose embedded with technicalities, legal pitfalls, or unintelligible blather. And, of course, they are invaluable should you find yourself in court, more than a remote possibility in today’s litigious jungle. That, though, ought to be the extent of their help.
The CEO is the individual who takes the risk; who must determine the personally decent, ethical route; who orders the speed and direction of the ship. If lawyers are allowed to decide all that, they are the ones leading the company. So far as I know, corporate attorneys are advisors.
During these litigious times, it is not surprising that more companies are seeking CEOs with legal degrees. Although there are exceptions, that seems like the wrong direction. Lawyers can be trained in accounting and finance principles, but team playing, entrepreneurial risk taking, allowing handshakes to say it all, and market vision do not readily attach themselves to those steeped in the work habits and mindsets of the legal profession.
I have observed that in most cases where the CEO is a lawyer, the company experiences a major void and, regularly, a financial catastrophe. The basic ingredients of customer satisfaction take a backseat to legalistic jargon. And heaven help suppliers and employees who want to continue a simple and straightforward relationship.
As Business Week noted at the end of 2004: Don’t look for JD degrees to replace MBAs anytime soon.
Keeping one’s word often requires great resolve. Two personal examples follow.
In 1986, after lengthy negotiations with Emerson Kampen, chairman and CEO of Great Lakes Chemical Company, we agreed he would purchase 40 percent of a division of my company for $54 million. Negotiations had been long and arduous, but a handshake sealed the deal.
I didn’t hear from Kampen for several months. Approximately four months after those discussions, Great Lakes lawyers called to say they would like to draft some documents. They had been dragging their feet—business as usual. It took three months for this rather simple purchase agreement to be placed on paper. The time lapse between the handshake and documents was now six and a half months.
In the interim, the price of raw materials had decreased substantially and our profit margins were reaching all-time highs. Profits had tripled in that half a year. Nothing had been signed with Great Lakes, and no documents had been exchanged. Kampen called with a remarkable proposal.
“Forty percent of Huntsman Chemical today is worth $250 million, according to my bankers,” said Kampen. “You and I shook hands and agreed on a $54 million price over six months ago.” Although he did not think he should have to pay the full difference, he thought it only fair he pay at least half and offered to do so.
My answer was no, it would not be fair to use the appreciated value, nor should he have to split the difference. He and I shook hands and made an agreement at $54 million, I said, and that’s exactly the price at which the attorneys would draft our documents.
“But that’s not fair to you,” Kampen responded.
“You negotiate for your company, Emerson, and let me negotiate for mine,” was my response.
Kampen never forgot that handshake. He took it with him to his grave. At his funeral, he had pre-arranged for two principal speakers: the governor of Indiana and me. I never was personally close to Emerson, but he and I both knew that a valuable lesson had been taught. Even though I could have forced Great Lakes to pay an extra $200 million for that 40 percent ownership stake in my company, I never had to wrestle with my conscience or look over my shoulder. My word was my bond.
(It is ironic that when I wrote this revised manuscript I was involved in a business situation where the executives of the company that contractually agreed to buy my company decided they no longer wished to pay the agreed-upon price. I had to take them to court, where the judge held that the company indeed was bound by its word.)
Back in the early 1980s, my first big deal was purchasing a petrochemical facility from Shell Oil Company. Peter De Leeuw, a vice president of Shell Chemical, drew up a strai
ghtforward draft agreement. He asked me to review it overnight and the two of us would then discuss it in the morning. I read it carefully, made a few minor changes, and signed it on the spot. Although he had not as yet submitted it to the corporate attorneys, it was the shortest, best-prepared, most binding document I had ever read.
De Leeuw was taken aback by my action. He wanted my lawyers (and his) to have a look at the agreement. I said I trusted him. Although he still had Shell’s attorneys look it over (they, of course, had scores of questions and additions), my immediate signing and display of trust gave De Leeuw confidence that I was serious and paved the way for his help working out one glitch after another in the months to come. When negotiating, seek out players you can trust; keep the lawyers on the bench.
I offer these episodes in no self-serving sense; it would be boorish to the reader to do so. It is imperative, though, that we all understand the importance of keeping one’s word.
We need not eliminate lawyers—simply reduce their modern-day omnipresence in our dealings. Use them for legal advice and leave other decisions to the experts.
Trust more in each other and in ourselves. As the late journalist and author Frank Scully once asked: “Why not go out on a limb? Isn’t that where the fruit is?”
Trust, however, should not be blind. Save blind faith for religion. A prudent businessperson knows with whom he or she is negotiating and exactly what is being negotiated. When it came to this, President Ronald Reagan had a great line: “Trust but verify.” If we trust in our own instincts and ability to evaluate, we will have less trouble trusting others.
Trust should not be blind. Save blind faith for religion.
As captains of our own character, it is essential we understand the great legacy of trust and integrity. We will be remembered for truthful disclosures and promises kept.
Individual and corporate integrity must become the hallmark of the marketplace. Deep in our hearts, we all have a basic understanding that when we shake on something, it’s supposed to stick. Remember the “cross my heart and hope to die” line? A handshake should always be as binding as a signed legal document.
We ought to negotiate earnestly and with all diligence for the best possible outcome. When a handshake is given, it must be honored—at all costs. Tough bargaining occurs only before the deal is agreed to. When you shake hands, the negotiating is over. Your word is your greatest asset; honesty is your best virtue. Without it, Cicero believed, there is no dignity.
WHOEVER LOVES MONEY
NEVER HAS MONEY ENOUGH;
WHOEVER LOVES WEALTH IS
NEVER SATISFIED WITH HIS INCOME.
—ECCLESIASTES 5:10
Chapter Six
Why We Cross the Line
There are many temptations, but reminders help.
Why is it that some bright students choose to cheat? Why do some otherwise upstanding citizens chisel on their income tax returns? Why do some physically-fit, talented athletes inject themselves with performance-enhancing drugs? How can some folks who profess to be religious look you in the eye and tell you a lie? How is it that some law-abiding people cheat on their spouses? Why do some super-wealthy corporate executives line their already bulging wallets through fraudulent methods? And, while we are figuring out life’s mysteries, why is it that some of the richest people seem to have the hardest time parting with money for those in need?
All simple questions with various and complex answers. We certainly aren’t forced to perform in unethical ways, but dishonesty (and selfishness) occurs often enough, if news media, academic research, and our own experience are valid indicators. Some claim dishonesty is rampant, although there is no empirical evidence to support that contention. (Who would trust a poll of liars and cheats, in any case?) There may be less ethical behavior today, but it also is true that it is more publicized than 50 years ago. High-profile anecdotes may give the impression that it’s more commonplace.
This I do know: Dishonesty is not a modern phenomenon.
Dishonesty is not a modern phenomenon.
Most of us think of ourselves as honest, decent, moral human beings—and, for the most part, we are. The apparent dilemma—our perception versus real life—suggests we are, at times, in some level of denial. In fact, we periodically engage in minor dishonest and unethical acts for a variety of reasons.
For some, the motivation may by nothing more than the cheap thrill of stepping over the line, of tempting fate. For others, the answer may lie in whether the dishonest act makes “sense” to us on a cost-benefit analysis, whether the ill-gotten gain exceeds or “justifies” the risk.
Are there times when we feel so beleaguered, we believe we have no choice but to engage in ethical corner-cutting as the only practical avenue out? Do some people experience an ethical short circuit because of the pressures? Or are they simply too self-centered to care? The reasons for improper conduct are many; the right route is but one.
The reasons for improper conduct are many; the right route is but one.
Honesty is viewed by all religions and nearly every society as a virtue. Study after study reveals that people value honesty and strongly believe they are honest. We don’t like to be lied to, or lose out to a cheater, or be confronted with fraud. It angers us when public officials engage in wrongdoing and when CEOs cook private-sector books.
Furthermore, we know unethical behavior when we see it. Parents know when their children are fibbing. Recent research into a toddler’s sense of values produced evidence that children as young as three years old can detect when someone is not telling them the truth.
That each of us occasionally stumbles is no revelation. Ever since Adam failed the original taste test, the world is replete with examples of individuals making bad choices. We, after all, are frail, imperfect humans, prone to mistakes. Our biases, greed, and conceit generally are the underlying causes of jumping righteous rails. The occasional slip, fortunately, does not become habitual with most of us because when we make a mistake, we feel bad, embarrassed, and guilty. Sooner or later, we own up. None of us wants to break his or her word.
Yet there are times when it is impossible to keep it. Remember, though, that a bad turn of events does not release us from our promise. Only the person to whom your word was given can release you from that. We must inform the person of our dilemma and give him or her the opportunity, if he or she so chooses, to let us off the hook.
In prosperous times, people sometimes wander from the ethical walkway, blinded by the glitter of the gold. The temptation lurks to prolong the euphoria by the easiest means possible. We may decide that engaging in ethical behavior may put us at a disadvantage with respect to how others fare. (Athletes who use performance-enhancing drugs, for example, feel that they can’t afford to stop because their competitors take them.)
Unethical acts can be viewed as the more practical route. The potential penalty for dishonesty may appear small compared to the perceived advantages that it makes sense to do it.
In uncertain times, people may see dishonesty as the only way to preserve their careers, as the fastest cure to rebuilding wealth, or the only way to keep their heads above water. They may falsely believe they have nothing to lose, or that the dishonesty will only take place “just this once.” It is a greasy slope, to be sure.
There is no excuse for lying, cheating, and selfishness under any circumstances, but one can see how the pressure to do so builds during a crisis. That’s why I feel compelled to reissue a strong call for reaffirming our moral foundations.
Some people—probably small in number—in business, sports, academics, politics, and organizations are flat out pathologically unethical. They need help beyond what I can offer here. Additionally, there is a group of folks out there who don’t give a darn about others. They are in it for themselves. This latter group is a growing problem and a menace to the values we hold dear.
We are all pulled, at times, between competing motivations: the short-term gain from cheating versus the mai
ntenance of a positive self-image. Either choice requires a sacrifice. If the reward is not large, the cost of remaining honest is minimal. If the benefit is larger or perceived to be more necessary, the decision to remain honest becomes much harder.
This cost-benefit theory was the basis of an experiment, “The Dishonesty of Honest People,” undertaken in 2005 by economists Nina Mazar and Dan Ariely of the Massachusetts Institute of Technology, and On Amir, a marketing expert at the University of California at San Diego.
Participants carefully weighed the advantages and disadvantages of honesty and dishonesty, reaching a decision that maximized their best interests, including internal rewards. The individuals were paid so much for each correct answer. In other words, if a respondent did not know the answer to a question, cheating to find the correct response would net him or her additional compensation.
Needless to say, there was considerable cheating. The threat of getting caught did not seem to figure into the equation. When the conductors of this test added a twist to the exam, however, the results were dramatic. (I will provide the details shortly.)
Winning isn’t always measured in money. There will be times when one will lose money—sometimes a lot of it—but winning is much more than ledgers. In assessing our worth, look first to the bedrock of our lives: values, health, family, and friends. Dying is no fun, even if you leave behind a pot of gold. Family and friends are the lifeblood and legacy of our lives.
Family and friends are the lifeblood and legacy of our lives.
Our values, if properly anchored, will see us through these storms. Take a deep breath in the middle of a crisis and consider these bright stars in our human solar system. If they are aligned, all is well. From there, one can set about restructuring what it is that put us in the mess. Never adjust your values downward. To do so requires that you must lie to yourself. Once you see yourself as a fraud, your positive self-image evaporates. The best way to keep that from happening when in crisis mode is to actively change the status quo. Talk to people, take a break, stuff any money left under a mattress until the hurricane blows over. Start over. (I have started over on three occasions, each time reaching or exceeding a billion dollars in value.) It can be done, and you can do it.
Winners Never Cheat: Even in Difficult Times, New and Expanded Edition Page 6
