Years ago, as cries about the latest “moral crisis in American business” were surfacing yet again, I wrote a law review article entitled Structuring a Workable Business Code of Ethics. (It’s available online, unfortunately behind a paywall.) Unlike writers who spent most of their time bemoaning the current state of business morality, I focused on the alternative structures, approaches and provisions that could be used in creating a code of ethics that businesses might actually adopt. Supported by 355 detailed footnotes (Yikes! What was I thinking?), I dug through professional standards, state corporate codes, federal banking and securities laws, classic treatises on law and morality and even the Bible.
The result was a multi-layered code of business responsibility where I used five “Canons” to lay out the high-level ethical concepts. I then used some mid-level “Ethical Principles” to add more detail for each Canon and supplied even more specific guidance in some detailed “Rules of Conduct”. Still valuable today, the five Canons are worth listing. Each began with “a professional manager should” (omitted here for ease of reading).
1. Assist in maintaining the integrity and competence of the business community.
2. Preserve the confidential nature of business and customer information.
3. Place the interests of the company ahead of any private interests and disclose the facts in any situation where any conflict of interests may appear.
4. Avoid even the appearance of impropriety in business matters.
5. Be honest in dealing with the public and with the company’s officers, directors, employees, experts and customers.
As you can see from the list, I was particularly interested in using honest and full disclosure as a deterrent to ethical breaches. I still am.
People think twice about their actions if they know disclosure will turn the spotlight on what they have done or said. But for disclosure to be effective, it must be complete. One of my ethical principles under Canon 5 included the following text: “Honesty requires the furnishing of all information that the manager has that would be material to a given decision. The failure to furnish information that is known or thought to be necessary, or the provision of information that is known or thought to be inaccurate, misleading or incomplete, is unacceptable.”
In other words, you can’t meet your obligation of disclosure by withholding or manipulating relevant information. It’s a simple precept that forms the essence of the anti-fraud provisions of our federal securities laws. Yet, failure to comply with this admonition sinks a lot of careers.
The concept of honest disclosure is so essential to business ethics that I’ve often told students and colleagues to use one easy test if they are ever struggling with how to deal with a decision that presents ethical questions. Years ago, I first phrased it as: “Ask yourself how you would feel if your parents, friends and boss read all the details about your action on the front page of your local newspaper.”
In today's world of an omnipresent internet, that language seems outdated and quaint. But the pervasive impact of the internet on our social stereotypes and values actually makes the idea of this simple test even more compelling. So, I phrase the current version of my simple test as: “Ask yourself how you would feel if your parents, friends, boss and everyone else read about all the details of what you did on social media and the internet.” The idea is the same, but today’s surging, raucous internet, with its mob of influencers, social media manipulators, social activists and partisan news sources, makes the current version of the test faster and more deadly in ending careers—in part because of the mob psychology and lack of due process inherent in the internet. (But that’s for another story.)
This is an article about business ethics, but in our current environment where everything is politicized, we’d all do well to remind our friends in the political class that this essential ethical test is good guidepost for candidates and elected officials as well. Time and again, we see political careers at all levels and from all political points of view ruined when people do something they simply would not do if they really believed all the details would come out.
In politics as well as business, ego, power and success can combine to make people believe they can stretch or cross over ethical and even legal limits if they just do it in a room with a closed door and the lights off. Desperation can create the same motivation. The problem is that, far too often, someone opens the door and turns on the lights.
Technology has made the risk of unexpected disclosure far greater today than in decades past. We see it almost every day. Someone will turn on the lights, virtually or otherwise. And the internet will be ready to spread the news and serve as judge and jury. Good to think about if you’re prone to ethical lapses. Even better if you’re looking for a simple reminder to help you decide to do the right thing.
Note: This post initially appeared as an article by the author on LinkedIn on October 3, 2019.
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