Managing Risks for Corporate Integrity: How to Survive an Ethical Misconduct Disaster

Citation

Dupree, J. (2007), "Managing Risks for Corporate Integrity: How to Survive an Ethical Misconduct Disaster", Journal of Consumer Marketing, Vol. 24 No. 2, pp. 122-123. https://doi.org/10.1108/07363760710737157

Part warning, part confessional, part strategy, and part marketing piece for the Integrity Institute, Managing Risks. is a must read for corporate executives concerned about the ethics in their firm or industry. Team written by an executive who has been there and two academics highly respected in their fields, the book offers readers the best of current research, personal experience, and detailed strategy for managing corporate ethical misconduct.

Begin with the second chapter detailing Ms Brewer's descent into Dante's seventh level of hell at Enron. This will provide the energy to work through the frightening facts cited in the first chapter and the lengthy detailed strategies of Chapters 4 through 8.

Opening without preamble, the authors make an extensively documented and clear case for the costs and consequences of ethical misconduct disasters (EMDs) by citing example after example, study after study, of the loss of shareholder value, ancillary legal costs, and even the eventual collapse of subject companies due to ethical misconduct. Their premise is that bad things (EMDs) eventually will happen to every company, but proper preparation can retard their occurrence and minimize their impact when they happen. Since business is essentially about trust ethical misconduct strikes at the very basis of doing business and will cause irreparable harm if not managed properly and ethically. This point is amply supported in a closing appendix citing the findings of the OCEG 2005 benchmark study regarding corporate ethical compliance.

Chapters 2 and 3 are worth the price of the book. As you read Ms Brewer's odyssey, you will feel like the audience watching a horror movie victim approach her doom behind the door. Clearly laying out her path to ethical failure, taking full responsibility for her choices, Ms Brewer reveals that “but for the grace of God  … ” The enticements at each step were so mundane, so ordinary, yet led to a disastrous outcome. Except for a pivotal choice, she too (we?), would be where many of the characters of the story reside – in prison. But realizing the consequences of her choices, she ended her involvement and facilitation of the unethical conduct of others. (Ms Brewer is the whistleblower in the Enron scandal.)

The role of leadership in preventing ethical misconduct, discussed in Chapter 3, while written to the corporate executive, is easily applied to any leader – manager or entrepreneur – in almost any setting. Ferrell's model of ethical decision making is helpful in understanding the issue in any ethical decision. He clearly demonstrates that the “compartmentalization” of our personal and professional lives can lead us to ethical misconduct. The point is driven home by Gebler, “most unethical behavior is not done for personal gain, [but] to meet performance goals” (p. 57). He also reviews cases of executives who were role models in their community while ethical miscreants in their companies. Offering a possible solution in the nature of an ethical leadership model, he shows that competent proper management is the key to ethical behavior.

From this point on Ferrell and Chandler dominate the book with very thorough chapters on discovering and assessing ethical risk (Chapter 4), developing and implementing an ethical continuity plan (Chapters 5 and 6), and the steps for handling the blowup (Chapter 7). They conclude with detailed instructions on recovery from an EMD (Chapter 8).

The starting point is a thorough discovery process of the ethical risks your firm faces, built on nine key questions. These data are then taken through a six‐step analysis process, moving from securing senior officers' commitment, to reporting the data to the board. The discovery process of Chapter 4 establishes the basis for a prevention plans offered in Chapters 5 and 6. Critical is an ethics continuity plan using “double‐loop learning” (from Senge's, The 5th Discipline). Chapter 6 briefly reviews previous material and then moves into concrete action steps, largely focusing on training employees and executives. It thereby provides a primer on the development and conduct of corporate ethics training.

Chapters 7 and 8 handle the EMD when, despite your best efforts, things go wrong. This is nearly 30 percent of the book. Your PR, HR, and executive teams should learn this material cold. The authors provide detailed tactics and strategies, explaining when to use what, and why to use or not use a particular approach. To their credit, their suggestions always stress proactivity, speaking the truth, and behaving ethicality – no spinning the message here. A strength here is the concrete specific tips anyone from the CEO of a Fortune 50 that the “Dad” of the family‐held business could use when dealing with the media. This material is specific, concrete, practical, and helpful. Chandler brings home that the most significant mistake business people make is not understanding the “nature of the beast;” who media people are, how they see their job, and what they need. These insights will go a long way to help business people cooperate wisely so both their needs of surviving and the media's need to report are met.

Despite all of the book's strengths, I do have three bones to pick: the authors mix legal and ethical situations, focus on corporate executives, and present a model in the concluding appendix that is so detailed, so thorough as to prevent use but by any but the largest of firms or the Integrity Institute.

Examples in the book continually mix legal and ethical situations and decisions. My concern is that the authors sabotage their own message that ethical compliance is critical when they move from ethical examples and legal examples, such as their discussion of Coke and Burger King's fraudulent, illegal behavior, and Coke's unethical choices in their marketing of Dasani water. Legal and ethical behaviors are not the same; legal compliance is not inherently ethical behavior, and the distinction should be clearer in the book.

A second concern is that the authors' intended audience is clearly Fortune 500 company executives, limiting its usefulness to leaders of small and medium‐sized enterprises (SMEs) or entrepreneurs. The contexts, the solutions, and the structures presented are all large corporate environs. The solutions can only be afforded by the largest of companies. As the authors point out, it is the individual employee or manager who will make the key decision that either hinders or facilitates unethical behavior. By the time it gets to an executive we are at Chapters 7 and 8. Beyond Chapters 2 and 3 and some of the points of Chapter 7, there is little here for the majority of business leaders. Unless you are the CEO of a very large corporation or a compliance officer of the same, you could never muster the resources to do what they recommend.

The book concludes with two substantive appendices; Appendix A: the OCEG 2005 benchmark study results and Appendix B: the Integrity Institute's model for measuring corporate integrity. The study, cited in the book, is more thoroughly detailed here. The Institute's model is presented with substantive arguments for each element, making this appendix the longest section of the book. An excellent academic model, with ten sections comprising over a half‐dozen separate subsidiary models and more than 70 distinct elements, it is a very thorough process that would require an institute or significant staff to manage. It is impressive how thoroughly the authors have thought through these issues. But can anyone but the Institute actually implement it and in less than 12‐18 months?

A worthy read; Chapters 2 and 3 for personal application, Chapter 1 and Appendix A to support your argument with the board that this is important enough to invest in doing, and Chapters 7 and 8 when things go wrong and you need the right help fast.