A new regard for ethics on the job

Trust: Business scandals are prompting new laws, while companies and schools are paying more attention to ethical behavior.

Kenneth L. Lay Indictment

July 09, 2004|By Meredith Cohn | Meredith Cohn,SUN STAFF

The high-profile legal entanglements of former Enron Chief Executive Officer Kenneth L. Lay, style guru Martha Stewart and other executives are prompting a major transformation in the way corporate America regards ethics, industry watchdogs say.

Business schools and corporations are scrambling to expand their programs, new associations are forming and new laws and rules are appearing on the books. And while the ultimate impact of photos and headlines of executive perp walks and trials is uncertain, those in the field are seizing the moment.

"Jail is scary and real," said Webster Hubbell, the former chief justice of the Arkansas Supreme Court who served a prison term in the 1990s as a result of the Clintons' Whitewater probe and now gives speeches on the need for a culture change.

FOR THE RECORD - Gary Zeune's name was misspelled July 9 in a business article on corporate ethics.
The Sun regrets the error.

The cases of Lay, who pleaded not guilty yesterday to 11 criminal charges alleging a huge conspiracy; of Stewart, to be sentenced in a week for her part in a cover-up on an insider stock deal, and of John and Timothy Rigas, the father and son convicted yesterday of looting Adelphia Communications Corp., have stoked a sense of urgency, said R. Edward Freeman, academic director of the Business Roundtable Institute for Corporate Ethics.

The institute, a newly formed group of academics, executives and students at the University of Virginia's Darden School of Business, recently surveyed chief executives and found that restoring public trust was the most important issue facing them today.

"They know businesses can't operate without public trust," Freeman said. "The legal problems and scandals all create a moment."

To be sure, business ethics is not a new discipline. Its practitioners credit the works of history's great philosophers for its start, and the field gained attention in the 1980s after a wave of fraud in the defense industry and on Wall Street. But the size and scope of recent cases, from the Wall Street-shaking bankruptcy of Enron to the lavish party videos of the Tyco trial, have become much more visible in a world of 24-hour news, and the damage to investors and employees more widely acknowledged. Some foresee an epochal shift in boardroom approach, much as equality for women and minorities in the workplace became pivotal crusades in earlier generations.

Hubbell, now 57, was once a law partner of U.S. senator and former first lady Hillary Rodham Clinton. He went to prison in 1995 for 16 months for embezzlement after reaching a plea bargain with independent counsel Kenneth W. Starr. The conviction resulted from an investigation into the role that Hubbell and Hillary Clinton played as attorneys in a failed land deal that contributed to the collapse of a savings and loan. Hubbell - who kept promising himself he'd pay back the money each time he dipped into his law firm's accounts - was ultimately caught. The man who had been mayor of Little Rock, chief justice of the Arkansas Supreme Court and the No. 3 man at the U.S. Department of Justice said the pain and humiliation of prison wasn't the end.

He was banned from practicing law after his release. He's struggled to regain trust from those he knows and the public at large. Now he is working toward an insurance broker's license from his Washington office at The McLaughlin Co.

Culture of support

Hubbell, who has since written and lectured about his experience, now believes that it's possible to develop a support system and culture at work that emphasizes help rather than punishment for desperate low-level employees and even for stressed - or arrogant - chief executives. He also says sending white-collar criminals to prison is not the best way for offenders to repay society, although he acknowledges it gets society's attention quickly.

"It doesn't matter how much money or power you have, being in jail is a dreadful thing," said Donald Margotta, an associate professor of finance at Northeastern University in Boston, who also teaches business ethics. "A headline about Martha Stewart going to prison can say more to you than anything I can say about ethics."

The problem isn't understanding the difference between right and wrong, Margotta said, it's creating an institutionalized ethical culture and understanding the repercussions of breaking from it.

"People down in the ranks see people at the top using the company as their own piggy bank and they think their behavior is OK," said Gary Zuene, who runs a speakers' service in Columbus, Ohio, called The Pros & The Cons. "There needs to be a code of conduct for everyone. It's not OK to spend four hours on the company long-distance talking to relatives, but it's OK to call home in an emergency. If you need a pad of paper, that's OK, but don't take a box. Set limits, tell people what's in bounds."

Zuene said the first thing ex-convicts-turned-lecturers have to do is admit to wrongdoing and take responsibility.

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