Ethikos Weekly Editor’s Picks – June 17, 2014

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Editor’s Top Choice:

6 Reasons ethical businesses make for better investments 

From Ruchira Roy at Wall St. Cheat Sheet:

American corporate history is full of accounts of ethical failures. For example, in December 2001, energy-to-paper conglomerate Enron was outed for systemic accounting fraud. Enron reported revenues of $101 billion in 2001, but after it came to light that the numbers were largely fabricated — the company lost some $79 billion — it collapsed and declared bankruptcy.

Another example is WorldCom, which met a similar fate in 2002. At its peak, the telecom company employed 60,000 people in 65 countries and claimed $107 billion in assets. However, just one month before filing for Chapter 11 the company disclosed that it had misrepresented about $3.8 billion in expenses. Already cracking under a $41 billion debt burden, WorldCom declared bankruptcy and was later folded into Verizon.

With a few notable exceptions — such as the Sarbanes-Oxley Act in 2002, which mandated, among other things, that top management certify the accuracy of the reported financial information and made penalties for fraudulent reporting more painful — fraud is insufficiently addressed by regulators and sometimes even the market. Instead of the company collapsing or executives being fired or going to jail, usually fraud just pushes the company to issue an apology and to engage in brand building exercises. Read more


Other Featured Picks of the Week

Policies, procedures and other crimes against humanity

Jim Nortz  for Rochester Business Journal:

Several years ago, I had the privilege of speaking to a room full of corporate attorneys and compliance officers at the Practising Law Institute in New York City on the topic of implementing effective corporate policies and procedures. I kicked off the presentation by using an audience polling system to find out what the authors of corporate America’s policies and procedures thought about their own creations. The results of this impromptu survey confirmed my suspicions that most corporate policies and procedures were not only generally ineffective but widely viewed—even by those who write and enforce them—as a form of cruel and unusual punishment. Read more


This one quality signals that you’re leadership material

Drake Baer of Business Insider, “f you’re angling for the corner office, you need to have gravitas.

Having gravitas — a serious manner that commands respect — communicates that you have what it takes, says economist Sylvia Ann Hewlett. “You need to be seen as someone who knows their stuff cold and can go three to four questions deep in the their domain.”

Hewlett came to this finding as part of researching her new book “Executive Presence.” She and her team at the Center for Talent Innovation surveyed 4,000 American professionals looking for the signals people need to send in order to be tapped for a leadership opportunity.

But it’s not all about your accomplishments.

“(Gravitas) is about what you signal, the impressions you give,” Hewlett says. “It’s not about performance. It’s about when you’re given the chance at the next opportunity, and of course that’s a big part of whether you’ll succeed or not.” Read more


7 Psychological insights that will increase the effectiveness of your code of ethics training

From Jillian Heim for JD Supra Business Advisor, “This is part three in a four part blog series on the psychology behind bad behavior. In this blog I will cover reasons 15-21 that good people do bad things and how we can use this information to modify code of ethics training.

15. The Free-Rider Problem. The Free-Rider Problem occurs when people perceive their actions to have a limited impact. From an ethics and compliance standpoint this could be something like insider trading. Consider for a minute that you work for a large financial institution. You, along with several thousands of your colleagues, are privy to inside information on a variety of stocks. If you are the only person that shares ONE tip with ONE friend for perceivably insignificant gains, how likely is it that you’ll get caught? You probably assume very unlikely – especially if the tip yields gains that aren’t large enough to pique the SEC or DOJ’s interest.”

Takeaways:
I’ve said it repeatedly now, and I’ll say it again. I think most people are inherently good. But, sometimes for extraneous reasons good people do bad things, especially if we experience undue monetary stresses. You can save your money for unexpected expenses, but depending on what the expense is, your savings might not be enough. My mother recently got in a car accident, totaled her car and broke her wrist. She doesn’t have health insurance. Fortunately, her car insurance is covering her medical expenses, but if they couldn’t what would she do? The expenses are well over 20K. I wouldn’t be able to help – I wish I could say I have the means, but I don’t. Read more


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