Ethics: the business leader’s dilemmas

WorldCity’s CEO Club – click here for the Facebook Photo Album from this latest event.

A company has to decide whether to fire an employee for having prescription medication shipped to her, medicines that are not legal in that country. A consultant has to decide whether to fudge some numbers in a market share report he was hired to prepare for an important client in order to protect key executives bonuses — or risk getting fired. Ethical decisions. Bosses are paid for many things, but one of the most important is to make those tough decisions.

That was the topic of discussion at WorldCity’s CEO Club on Friday, a monthly gathering of the top South Florida-based executives for some of the world’s leading global brands.

Edvard Philipson, vice president for Latin America at Ferring Pharmaceuticals, led the discussion, presenting an article from the Harvard Business Review which presented five questions every manager should ask when trying to tackle tough decisions:

Edvard Philipson, far right, discussion leader and VP for Latin America at Ferring Pharmaceuticals.

What are the net, net consequences of all my options?

What are my core obligations?

What will work in the world as it is?

Who are we?

What can I live with?

The CEO Club also shared many insightful ethical dilemmas they’ve heard about in their travels, sparking helpful takeaways for managers at any level:

Ethics Vary by Culture

John Mezias, professor of management at the University of Miami School of Business

Multinational companies, by definition, employ people across the entire spectrum of societal norms and values. It becomes very important for these multinationals to not only establish organizational values but invest time in training all employees as to the expectations of how to conduct oneself within that organization.

John Mezias, professor of management at the University of Miami School of Business, cited the example of gift giving being commonplace in business settings for some cultures, but the Foreign Corrupt Practices Act is very specific on best practices for gift giving, meals and entertainment.

“When we call ourselves global organizations, we should call ourselves Western organizations,” said Andres Graziosi, head of Latin America and Canada for Novartis. “Everything that is said, at least in the company I work for, is based on Western rules and Western expectations.”

Sometimes this means the expectations customers have in different areas of the globe will contradict company values, but ethics and sometimes law demand the company’s values remain paramount.

Who Decides What is Ethical?

John Price, left, managing director at Americas Market Intelligence

The CEO Club discussed the case of a Toyota executive who was on a business trip to Japan. That executive had prescription medication mailed to herself, but bringing that medication into the country was forbidden by Japanese law. That executive lost her position. Was that too harsh? What if the executive didn’t ship it in and had a medical episode?

Should business ethics be decided strictly along legal lines by legal departments? It varies. Obviously, in the case of this Toyota example it was.

“From that legal mindset, you get this imposing of ethical parameters…that collides with other cultural differences,” said John Price, managing director at Americas Market Intelligence. “Is ethics still the domain of the legal department?”

“In our company, we have an ethics office that is different and separate from the legal office,” replied Philipson. “It reports directly to the board, to the committee of ethics.”

Company Values Dictate Company Ethics

Ricardo Villate, group VP for Latin America at IDC

Ethics starts at the top, not the bottom, of companies. It’s as simple as that.

“In my company, culture has been very strongly driven by the founder,” said Ricardo Villate, group vice president at IDC Latin America, about his company which was recently sold to new ownership. “His values are the values of the company. You can see how that drives every sort of behavior.”

“We want them to make decisions under our company values, and if (they) don’t know what to do, refer to those values,” said Marcos Zobel, international sales director for Latin America at Victorinox Travel Gear AG, the manufacturer of the Swiss Army Knife. “For us in Latin America, we tend to be a little bit on the informal side….Each time we visit the market, we always try to make reference to all the staff about our company values.”

Marcos Zobel, international sales director – Latin America at Victorinox Travel Gear AG

That means it’s important for sales teams to conduct themselves as if they are the faces of the brand and travelling management to conduct themselves abroad as if they are at work and not on vacation. Plus, e-mail etiquette is the voice of the company.

“E-mails become public. You don’t know where it’s going to go,” said Harvey W. Gurland Jr., managing partner at Duane Morris. “If you don’t want the e-mail on the front page of the Daily Business Review, don’t send it.”

Exercising of Good Ethics May Mean Losing a Client

Harvey W. Gurland Jr., left, managing partner at Duane Morris with Tony Bejarano, right, general manager at Banco Internacional de Costa Rica

Sometimes doing the right thing results in the loss of an account. One CEO Club member recalled a story from a friend where that friend’s client wanted his firm to fudge market share numbers in order for executives to still get their bonuses. The friend would not do it, and that client dropped his company the following year.

“Good ethics: in the end, you’ll lose a client every once in a while, but in the end, it pays off,” said Price.

“The easiest thing is to kill the messenger,” said Villate, when there’s an economic motivation to do so for the client.

However, Price noted another story where his own company presented a report that was not what a board member wanted to hear. That board member was angry at the time but a few years later recommended Price’s company, adding another big client, on the reputation that Price’s company was the most ethical he had ever seen.

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