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Can
ethics be taught?
CEO group responds
to corporate scandals by funding ethics institute at
The Unviersity of Virginia
by
Jim Strader
for Virginia Business
July
2004
The top job can get people in trouble.
That much has been painfully obvious from the bruising
headlines of the last two years with executives such
as former Enron CFO Andrew Fastow becoming a poster
boy for bad business ethics. After crafting complicated
transactions that illegally pumped up profits for the
energy-trading company and its executives, Fastow pleaded
guilty to securities fraud and was hit with a 10-year
jail sentence.
The fall of Fastow
and other top executives from the corporate suite to prison
makes the case for the kind of ethics training started
recently at the Darden Graduate School of Business Administration
at the University of Virginia. Working with other leading
business schools and the Business Roundtable — a
group of 150 CEOs of leading corporations from around
the country including Virginia-based Norfolk Southern
and The Brink’s Co. — Darden has become home
for the Business Roundtable Institute for Corporate Ethics.
Funded with $2.7 million from the roundtable,
the program signals corporate America’s concern
with the loss of public trust in executive leaders that
followed a wave of scandals that swept through companies
from Enron to Adelphia, Tyco and Martha Stewart Living
Omnimedia. “A number of the CEOs saw that through
a few scandals, corporations and executives were being
painted with a broad brush as unethical. That finally
became too frustrating for them, and they wanted to
do something serious about this,” says veteran
management consultant Dean Krehmeyer, who was hired
as the institute’s executive director.”
With the breaches occurring at well-known public companies
with many investors, “all of a sudden, it was
making an impact,” he adds.
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The need for renewing
the relationship between ethics and everyday business
practices was brought home by the scandals, says Darden
professor Pat Werhane. She points out that Fastow has
been described as deeply religious, coached his son’s
baseball team and started a foundation that gave away
lots of money. “He’s an exemplary citizen,”
Werhane says. “But then from nine to five …
he was not living up to it. I think he’s one of
the best examples of someone who didn’t do what
we aim to do in the classroom.”
Key to the three-year pilot program
is this mantra: corporate responsibility starts at the
top. As part of the training, executives will be asked
to think through ethical dilemmas in case studies and
to consider how to deal with difficult ethical issues
on the job. About 20 executives attended last month’s
inaugural training session. The next session, slated
for October, is being developed for senior leaders from
Business Roundtable companies. Over the next two years,
sessions will be open to a broader range of corporate
executives, with plans calling for the institute to
become self-supporting, with costs paid by executives
or companies who enroll in the program.
In addition to U.Va., the team of academic
advisors includes members of the faculties of Wharton,
Harvard, Northwestern, Penn State, Notre Dame and the
universities of Texas, Minnesota and Michigan. The institute’s
commitment to providing hands-on ethics training to
current and emerging business leaders was highlighted
by Business Roundtable Chairman Hank McKinnell when
he announced its formation in January.
“As the chief ethics officers
at our companies, we know setting and maintaining the
highest ethical standards starts at the top,”
noted McKinnell, chairman and CEO of Pfizer. “If
we are not living and creating a culture of ethical
business practices and decisions, we cannot expect those
who work with us to be standard bearers for ethics.”
But can ethics be taught? Or is the
molding of character beyond a certain age a fruitless
mission? A certain amount of how a person behaves —
ethically or unethically — is there virtually
from the start, says Arthur Brief, who teaches organizational
psychology at Tulane University’s Freeman School
of Business. “It’s who we are as humans
and how we’ve been socialized at very early ages,”
he explains.
Still, Brief believes that the early
ethical foundation can be built upon in an academic
setting. To be successful, he says, a program like the
one at Darden needs to approach ethics in two ways —
teaching executives how to make ethics a part of their
thinking in a business setting and how to manage ethics
in their companies. Good intentions, without implementation,
aren’t enough. “You can have the absolute
best intentions and still end up with egg all over your
face,” warns Brief. One fundamental problem is
that ethical issues are rarely on the table when business
decisions are made. “Business decisions tend to
focus, understandably, on the economic outcome. …
In terms of teaching ethics, you teach about how to
have them on the table,” he says.
In addition to being part of the decision-making
process, ethics should figure into recruiting, says
William C. Byham, an organizational psychologist who
is chairman and CEO of Pittsburgh-based human resources
training and consulting firm DDI. “If you really
want to get good ethics — the number one thing
to do is select people with ethics. … Start to
publicize stories that illustrate the ethical value
of the company and be sure that the top people in the
company are modeling ethical values.”
Darden’s one-day course aims to
show executives how to incorporate personal values into
the workplace and how to provide a framework for ethical
decision-making in the boardroom.” I know you
can teach that,” says Werhane. “Does that
mean that every one of our students goes away and never
commits errors or never goes to jail? No. There are
always two or three scummy people around, and you’re
not going to change them.”
Eventually, Darden’s faculty hopes
to teach its undergraduate and graduate students lessons
learned from the Business Roundtable institute. Real-life
examples of ethical struggles from companies that send
executives could be used for instruction. That sort
of interaction at a leading business school like Darden
is an encouraging sign, says
Brief, the Tulane professor. “I’ve
been studying ethical decision-making for twenty-some
years, and this is the first time that I am optimistic
about change,” he says. The reason? Elite business
schools are beginning to change. … Business leaders
are going to be educated differently and those leading
schools will be the models for the rest.”
Does that mean no more $6,000 shower curtains? That
remains to be seen, but perhaps the well-paid CEOs of
the future will know better than to put such extravagances
on the company tab.
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