Published Work

Walking the Thick Gray Line of Business Ethics

Let me get one thing straight: I am no business saint. In hindsight, I am not proud of some of the ways I have accomplished business over the last 20 years. I have used certain means because I thought the ends justified it. In a strict ethical sense, it was not the right thing to do.

Business ethics are a huge issue in our society today. Sure, September 11, 2001 and the bursting of the Internet bubble have hurt the economy over the past few years, but we also have to squarely point a finger at ourselves and our business leaders.

We have lost faith from the stream of wrongdoing with companies like Enron, WorldCom and Tyco parading in the media. Oh no! Here comes Martha Stewart to shatter us all.

Deborah Gersh, a partner of the law firm of Piper Rudnick, says that "trust in corporations has waned and is at an all-time low." She states that one of the most difficult jobs surrounding business ethics is "advising clients about the need to balance being truthful and ethical with not losing the competitive and business edge."

I have always faced ethical dilemmas in my companies. When my last business had just started, I remember that our first customer wanted to visit us to check us out. We had no employees and no furniture in our office. We thought this would hurt our chances of landing our first customer.

A few days before our customer came to visit, we purchased a lot of furniture on a credit card with a 30-day return guarantee. We had our computers dial our phone system to make it seem like we were a busy company receiving a lot of calls.

I also "hired" a few good friends for the day to make it seem like we had at least a few employees. It worked out since we landed them as a large customer. After we sent all the furniture back, we faced another problem. The customer wanted to come back a month later to visit us again.

Ben Bradley, who runs a networking group called Growth Company, was recently faced with an ethical dilemma that many of us have struggled with during the Internet bubble of the 1990s. He said a potential investor wanted to seed a technology he had been working on for about a year.

"I'm emotionally attached to it but now I'm starting to see that it may not have the upside we originally thought," he said. "Though his money would pay a lot of bills and fund some development, I realized that if I wouldn't put any more of my money into it, how could I ask him to do the same?"

Sometimes business ethics issues start very small. Andy Denenberg, president of Upright Software, reminded me of the vendors that give "gifts" to win your favor and business.

It starts with dinners, then Cubs tickets and then rounds of golf. It grows to complimentary business trips for you and your spouse. Following the "thick gray line," when do all of these gifts amount to a vendor buying sales from your business instead of "just being friendly?"

Should your business comply with a government regulation when there is virtually no chance of your company being penalized for violating it? Richard Buchanan describes his challenge when he recently applied for a city of Chicago business license for his online Web content company The Opinion Exchange, which he will be launching later this summer.

"After spending five hours fighting a fairly 'can't do' dictum of questions, forms and explanations, I did indeed obtain a business license," he said. "The looks of incredulity by fellow entrepreneurs in the license applications queue as I walked through my business' Web screen shots, methodologies and mission statements with my City Hall 'associate' delivered to me the sense that 'business ethics' are easier said than done."

Red Clark, CEO of Cary, Ill.-based Metalforming Controls (where I am a board member and a Prairie Angels investor) says: "When I started out, if anyone had asked me whether I was an ethical person, I would have answered yes without a moment's hesitation. If you asked me today, I would probably give the same answer, but it would be given after some careful thought.

"My responsibilities get a lot tougher when one area of responsibility conflicts with another. For example, health insurance costs for small companies are rapidly becoming unaffordable. It is not unusual to see health insurance costs outpace aggregate company profitability for a start-up. Cash management is a life or death issue for a small company but so is health care for your workers.

"What is the right thing to do? When cash is short, do you abuse vendors or do you hold off paying some of your employees? Do you save a few bucks and cheat on environmental or workplace compliance or do you consistently try to comply even when compliance costs precious dollars with little apparent gain?"

Clark retells a particular example: "An auto body shop owner struck gold when he found that a development company had purchased land across the street for a new mall. Within six months, he was offered $1 million for his business, which was enough for him to retire. The contract was signed and the purchaser had an environmental site investigation performed before the close.

"Unfortunately, the body shop owner had been dumping small amounts of paint waste over the years into his septic system, which is in direct violation of state environmental regulations. It was just a quart or two every day when he painted a repaired car. The deal fell through and the clean up cost him his business. In this case, doing the ethical thing would have cost the shop owner about $1 per day."

It is important to remember that your business code of ethics gets built incrementally over time with everyday decisions. There are typically few big things that set a course for a lifetime.

Each small decision you make as you go back and forth over this "thick gray line" builds the kind of businessperson you are and the kind of company you run. We need to realize that most of these decisions produce both good and bad results.

As Clark says: "When I find myself off track, it is rarely because I made a conscious decision to do something dishonest or marginally honest. Rather, it has been caused by a series of snap decisions made on the spur of the moment that gradually move you in a wrong direction. Living ethically is an ongoing effort."

Although I am not proud of every decision I have made, I accept responsibility for making each one of them. I learn from what I did right and wrong in each situation. I hope that this will help every day when I struggle with my next one. Having your own personal struggle will help you, too.