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Steven Mintz, aka Ethics Sage, posted on October 28, 2016.
Steven Mintz, aka Ethics Sage, posted on October 28, 2016.
SEC May Not Be Protecting the Public Interest
A recent Conference Board study examines the use of social media by S&P 1500 Index companies to disseminate ﬁnancial information and the response from investors and traditional media. The ﬁndings show that companies use social media to overcome a perceived lack of traditional media attention and that social media usage improves the company’s information environment.
Social Media Communications
There is also evidence that, in contrast with other types of company communications, the beneﬁcial effects of social media on the company’s information environment are offset when the investor-focused social media communications are disseminated by other social media users. The ﬁndings are relevant for managers and boards establishing corporate social media disclosure policies, since they suggest that companies may beneﬁt from developing different approaches to disseminating positive versus negative earnings news.
The ethical question is whether by allowing social media postings of financial information, the SEC has opened the door to false and misleading disclosures because not many investors are familiar with all platforms and the SEC hasn’t developed a cogent set of rules for social media postings.
Back in April 2013, the SEC issued a report that makes clear companies can use social media outlets like Facebook and Twitter to announce key information in compliance with “Regulation Fair Disclosure (FD)” so long as investors have been alerted about which social media will be used to disseminate such information. Regulation FD mandates that all publicly traded companies must disclose material information to all investors at the same time.
The SEC’s position is that “One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information. Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.” This seems to be a nebulous standard to me because how are we to determine that all investors know where to look for the information on social media?
Recently, Netflix social media disclosures informed investors: “Investors and others should note that we announce material financial information to our investors using this investors website, SEC filings, press releases, public conference calls and webcasts…It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the U.S. social media channels…”
To me, this is scary stuff. Netflix is vague to say the least about its “social media channels. Moreover, regulatory requirements on social media postings have not caught up with the technology and there’s probably an infinite number of places on the Internet to discuss these results.
The SEC recently reported on an investigation of Netflix that stemmed from an inquiry the Division of Enforcement launched into a post by Netflix CEO Reed Hastings on his personal Facebook page stating that Netflix’s monthly online viewing had exceeded one billion hours for the first time. Netflix did not report this information to investors through a press release or Form 8-K filing, and a subsequent company press release later that day did not include this information. The SEC did not initiate an enforcement action or allege wrongdoing by Hastings or Netflix recognizing that there has been market uncertainty about the application of Regulation FD to social media.
Here’s a question for you to consider: Can Goldman Sachs Tweet its earnings in 140 characters or less?
This is what it did in October 2015. The bank released its third-quarter earnings using a combination of social media and its own website. The announcement came via Twitter and linked back to its own website.
But when it comes to earnings, Goldman and others should be careful what it tweets. Earnings releases are monitored by the SEC. Companies are permitted to report earnings as they like, and more and more companies do. But if they decided to use a non-standard way to report profits—say, exclude the cost of stock options, or one-time expenses, which more and more companies are doing—they are required to also disclose earnings figures that comply with standard accounting rules. That’s easy to do in a long press release, but might be harder to do in 140 characters.
Protecting the Public Interest
I fear the SEC has opened a Pandora’s box when it comes to posting financial results on social media. I can envision companies using accounting standards that are not generally accepted and confusing investors with respect to earnings results that should be based on generally accepted accounting principles. The SEC needs to act now and issue specific guidelines on what are acceptable and unacceptable ways to use social media to post earnings information to protect the public interest and ensure such information meets the dual standards of fair and full disclosure.
Blog posted by Steven Mintz, aka Ethics Sage, on October 27, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at www.workplaceethicsadvice.com.
Closing our Eyes to the True Meaning of the Message
“Shooting the messenger” is a metaphoric phrase used to describe the act of blaming the bearer of bad news.
During a recent Congressional investigation, we learned that six former Wells Fargo workers were retaliated against for calling the bank’s ethics hot line about opening fake accounts. One such employee, Bill Bado, said he was fired eight days after sending an email in 2013 to HR about unauthorized accounts. Wells Fargo’s actions to suppress Bado’s claims violates the whistleblower protections under the Sarbanes-Oxley Act and Dodd-Frank.
Bado added during his testimony that he had been asked on several occasions to do things he knew were unethical. For example, his branch manager asked him to send out a debit card, “pin it,” and enroll customers in online banking – all without customers request or knowledge.
The kill the messenger syndrome is alive and well this campaign season. Hillary Clinton blames WikiLeaks, Russia, and Vladimir Putin himself for hacking DNC files and, most recently, the emails of John Podesta, chairman of the Clinton campaign. Blaming the Russians may be the right thing to do but we shouldn’t lose sight that the information disclosed is important to an informed electorate.
It appears Clinton used a “pay for play” approach to gain access to her while she was Secretary of State. Monies given to the Clinton Foundation gained access. Clinton hammers WikiLeaks for its actions and states consequences must be imposed. In her mind, WikiLeaks should be exposed under a kill the messenger reaction to the disclosures.
Donald Trump has been dealing with allegations of improper sexual comments and actions from ten women and counting. This reminds me of the Bill Cosby case. These women feared going public because of Trump’s power and influence. So, what does he do? Trump blames the women for disclosing actions he denies. It’s hard to believe so many women are lying. Trump would like to shoot these ten messengers. Yet, their actions have alerted the country to a potentially fatal flaw in his candidacy.
Then there is the infamous case of Edward Snowden. In June 2013, reporters at The Washington Post and the Guardian ran a series of stories about the U.S. government’s surveillance programs. Leaked top-secret documents showed that the National Security Agency was spying on American citizens.
At first, Snowden was treated like a pariah and the kill the messenger syndrome was in full force, including labeling Snowden as a traitor. With the passage of time many have changed their mind and lauded Snowden as it has become clear that privacy is a critical feature of an open society.
Snowden’s actions have led to a skyrocketing use of Web encryption and making our sensitive traffic more secure than ever before. Also, people are adopting better security habits: stronger passwords; better privacy settings, and more. A lot of good things have come from Snowden’s documents. Still, he should be held accountable for his actions.
Is Whistle-blowing a Moral Act?
Whistleblowers should be willing to pay the price for their disclosures if any laws have been broken. This raises the question: Is whistle-blowing a moral act? A noted expert in business ethics, Richard De George, has said that criteria establish the foundation for moral behavior to occur when contemplating whistle-blowing. He rejects the position that external whistle-blowing is always morally justifiable, and, he also rejects the position that external whistle-blowing is never morally justifiable.
De George’s position is that the whistleblower should have a moral motivation to engage in the act (i.e., to expose unnecessary harm, and illegal or immoral actions). In other words, the whistleblower has chosen to do the right thing because it is the right thing to do, not for notoriety or a financial reward. I believe in all the cases cited in this piece the whistleblowers acted morally.
The kill the messenger syndrome can lead an organization to develop a defensive posture when it comes to dealing with whistleblowers. The ethical standing of the organization morphs into what I call a counter-ethics culture. It harms the organization and disguises information that the public has a right to know.
Blog posted by Steven Mintz, aka Ethics Sage, on October 25, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Tags: corporate culture, Edward Snowden, ethics sage, sexual harassment, shoot the messenger, Steven Mintz, Wells Fargo, whistleblower protection, whistleblowing, workplace ethics, workplace retaliation
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Responsible Behavior Shoved Aside for Biased Reporting
The media has been referred to as “The Fourth Estate” with the important function of being the news media – “the press” – and serving as the eyes and ears of the public. The traditional print and media reporting has been viewed over time as the way to insure the American public gets the real scoop on the functioning of government and viewpoints of political candidate. The news media is a societal or political force or institution whose influence is not consistently or officially recognized. A free press serves four essential purposes:
Free media plays an important role in influencing political discourse during elections. When free and balanced, traditional media (print and broadcast) foster transparency and the determination of important electoral information. The rise of new media provides further opportunities for participatory citizenship.
Citizens are increasingly turning to social media platforms to follow election news and developments. Referred to as “The Fifth Estate,” this form of “news” media is a socio-cultural reference to groupings of outlier viewpoints in contemporary society, and is most associated with bloggers, journalists publishing in non-mainstream media outlets, and the social media.
The media has immense power within the American democracy because just about all Americans get their news from cable news and social media rather than hard news sources. The problem today is these very people who report the news are biased towards one candidate or the other, as we have learned in the Trump-Clinton campaigns.
Gone are the days when Americans trusted the media and relied on it for hard news. There are no Edward R. Murrow’s around anymore, David Brinkley, or Walter Cronkite. I suppose for most people the person who most engenders trust and reliability today is Wolf Blitzer. The worst comment I’ve heard about him is he is boring. Well, I think we need more boring and less biased opinionated statements today. [Editor to Wolf: Please stop saying “right now” every time you raise an issue to be discussed].
As I blogged about last Tuesday, the press has acted with impunity by selectively reporting information about the Clinton and Trump campaigns based on who they are supporting in this election. By being part of the dirty tricks and behavior drip, drip, drip, the media is playing the role of “The Sixth Estate,” that of biased newsfeed.
Citizens are increasingly turning to social media platforms to follow election news and developments. According to a 2014 Pew Research Center survey, 16 percent of registered American voters used social media platforms like Facebook and Twitter to get political information and follow election news during the 2014 U.S. midterm elections, more than doubling the number of registered voters who used social media for the same purpose in 2010.
In many ways, the rise of the Internet and the social web has made things a lot better when it comes to being informed about the world. But in other ways—as with so many other things the Internet touches—it has made them much worse. And our trusted relationship with media (to the extent that we ever had one) has taken the brunt of the damage.
The click economy has driven even traditional, mainstream media outlets to focus on quick hits and “viral” stories, even if they have little truth to them. And even if those stories are later corrected, only a tiny number of people will see or share the correction. In any case, opinions have already been formed, biases established, and alliances strengthened.
Trust in the media is at an historic low. There are a number of reasons, but one of the most obvious ones is that today’s media landscape looks nothing like what U.S. news consumers took for granted in 1972, or 1982, or 1992, or even 2002.
These days, politicians often complain about bias in the media, usually a liberal bias against the views of conservative politicians. They complain that the media’s ability to decide which stories to report often reflects its partisanship. The news media would like us to think that the bias is restricted to the media’s outlet’s commentary and opinion pages. Have they read their own newspapers lately?
The ethics of print and social media folks can be questioned on many levels including a failure to act unbiased in reporting the news; spinning the stories to advance the cause of their “chosen” candidate, and even coloring the questions asked during political debates.
The sad story is America has morphed into a culture of citizens who do not want to put in the time to truly learn about the issues facing our country and are taken in by the salaciousness of cable news and social media reporting and, in this regard, these media outlets have acted irresponsibly.
Blog posted by Steven Mintz, aka Ethics Sage, on October 20, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Tags: civil society, ethics sage, Fifth Estate, Fourth Estate, media and democracy, media and politics, participatory citizenship, Pew Research Study, political ethics, public discourse, Steven Mintz
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Private versus Public Positions of Candidates Raise Questions About Their Commitment to Honesty and Transparency
I have criticized Hillary Clinton and Donald Trump for their lack of character. Both seem to have only a passing acquaintance with the truth and integrity. They seem to have a different public persona than a private one. For example, Clinton seems to say one thing in private and another in public, the latter to appeal to her supporters, win over “Bernie’s” crowd, and appeal to independent voters. But, this is nothing more than politics as usual and why she isn’t trusted by many in the electorate.
A pay for play mentality seemed to have existed when she was Secretary of State and in dealings with foreign officials. It’s also clear from Clinton's campaign fundraising activities and leaked emails by WikiLeaks that she depends on the wealthy for financial support whether it be rich Hollywood types or investment bankers such as Goldman Sachs where she earned millions in speaking fees. These are the very people she says will be hit the hardest by tax rate increases to pay for a never-ending litany of social programs that are costly and may not have a discernable effect on fixing the problems facing the nation. For example, we’ve been throwing good money after bad in education funding for over twenty years yet our kids still lag those in many countries in terms of math and science skills. Will this change when public college becomes free and more money is thrown at the education problem? No, because it is a lack of a work ethic, lack of parental oversight, and excessive time spent on social media that is the underlying cause of poor scores on achievement tests.
Trump is no better. We know he won’t get Mexico to pay for the wall unless he captures President Nieto and puts him in jail with a $500 million ransom. He’s made other statements like cleaning up our streets and ending years of promising to do things for African-American community with no likely follow-through. This has been a persistent problem for years – political promises unkept. There is no reason to expect Trump to advance the cause any more than anyone else. It’s all talk and no action because of deep, underpinning biases.
We now find out that Trump may be a sexual predator. Recent revelations seem to parallel the Bill Cosby case. Women are coming out of the woodwork to accuse him of unwanted sexual advances and demeaning behavior. What’s worse, he seems to have given up on any pretense of civility by his oft-colored comments about others. And, in suggesting the election is rigged and government led by losers, Trump has painted a broad brush on actions that are limited to a handful of people and, yes, recent revelations suggest a coordinated effort by the media to follow a drip, drip, drip approach to disclosing bad behavior.
The sad part of the current focus on tearing down one candidate or the other is in both cases information has been held out and now selectively leaked just weeks before the election. The timing of the leaks gives credence to the view that the media are a bunch of unprincipled individuals hell-bent on pushing their candidate to victory by disparaging the behavior and comments of her/his opponent. Check out Thursday's blog for more on this issue.
As we draw closer to the election day, thank goodness, I feel the need to take a bath and wipe the grime and soot off my body. It’s a sad day in American politics when so much time is spent on personal behavior and virtually none on political philosophy and the soundness of each candidate’s positions. Let’s hope the debate tomorrow is better focused than the last one. It’s our last time to truly look into the soul of each candidate.
Blog posted by Steven Mintz, aka Ethics Sage, on October 18, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Trump and Clinton have discarded their Moral Compass -- if they ever had one
I can’t recall a presidential election when the two candidates fell so short of being an ethical person. On the one hand we have Donald Trump who has made crude remarks about others and seemingly has no problem with sexually harassing women – and that’s for starters. On the other hand, we have Hillary Clinton who seems to have only a passing acquaintance with the truth as evidenced by comments about her use of a private server when Secretary of State and classified information on the server.
Abraham Lincoln said “Character is like a tree and reputation like a shadow. The shadow is what we think of it; the tree is the real thing.” How true this is when it comes to Trump and Clinton. They both have said one thing in private and another in public on numerous occasions. Does ‘The Donald’ love and respect women even though he has constantly criticized them for their appearance and capabilities? Will he create jobs for African-Americans and Hispanics even though he has routinely used foreign workers in his properties?
Does Hillary really dream of a hemispheric common market, with open trade and open markets, as she said in a speech to foreign bankers in a leaked email? Is the trans-pacific pipeline (TPP) the “gold standard” for trade or bad for the country?
Character counts because it defines who we are. The novelist Robert McKee puts it best: “True character is revealed in the choices a human being makes under pressure – the greater the pressure, the deeper the revelation, the truer the choice to the character’s essential nature.” How can we believe in the character and integrity of Trump and Cilton when their professional opinion differs so frequently from their public stance?
Character is also about what people do when no one is looking. Here, the private comments released from old transcripts and speeches illustrates the lack of character of both candidates who banked that their offensive comments (Trump) and private position (Clinton) would never become public knowledge.
Character also counts because it gives us a peak into the soul of each candidate. Trump demeans many groups including prisoners of war, the disabled, and virtually everyone in the media. Clinton doesn’t understand the meaning of transparency.
What do they believe in? Was Trump against the war in Iraq even though he was quoted in an interview with Howard Stern as supporting it? We now know some of Clinton’s emails were marked classified and a Secretary of State should have known they contained classified information even if not so marked simply based on her experiences and knowledge of foreign affairs.
In the recent town hall debate Trump and Clinton each pulled out the sleaze card. But, is this the dirtiest presidential campaign in history? Not but most accounts. That ‘honor’ goes to the 1824 election between Andrew Jackson and John Quincy Adams. Jackson had a fierce temper. Among other things, he ordered the execution of six men in his militia who were accused of desertion. He spread false rumors that Adams had provided the Russian czar with sexual services of an American women and that he gambled while in the White House using public funds for a pool table.
Adams was repelled by the mud-slinging and withdrew from active participation in the campaign although an Adams newspaper wrote that “General Jackson’s mother was a common prostitute, brought to the U.S. by the British soldiers.” My “favorite” claim is she afterward married a mulatto man, with whom she had several children, of which General Jackson was one.
Trump and Clinton have set the bar so low that even the most accomplished limbo dancer couldn’t clear it. The campaign has been a tale of two corrupt individuals who lie to the public as easily as they breathe or sniff through a microphone during a debate. Once again the American people are the big losers as we will be forced to hold our noses and vote for the lesser of two evils on November 8th.
Blog posted by Steven Mintz, aka Ethics Sage, on October 13, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Message From John Stumpf, CEO of Wells: Do What I Say, Not What I Do
Wells Fargo is the poster child of an unethical company. We now know its employees opened more than two million unauthorized bank and credit card accounts to meet sales projections. It cost customers almost $2.5 million in fees. The actions of the bank can be attributed to an unethical corporate culture, as I have previously discussed in a workplaceethicsadvice.com blog.
On September 9, 2016, Wells Fargo agreed to pay a record $185 million fine for the actions of employees. The bank agreed to set aside $5 million to repay customers. In a letter to employees, CEO John Stumpf called employees’ actions “inconsistent with the values and culture we strive to live up to every day.” Seriously?
Wells Fargo may have a set of values on paper but the bank doesn’t incorporate into the its daily activities. This is not the first rodeo for the bank. On April 8, 2016 Wells agreed to pay the U.S. government $1.2 billion for hiding most of its bad loans in the years leading up to the 2008 housing market crash. The bank admitted certifying thousands of subprime mortgage loans that were eligible for Federal Housing Administration insurance.
Why did the bank play fast and loose with the lending rules? The answer is the risk of loss was transferred to the U.S. government. This is another example of the “moral hazard” effect whereby one party takes a questionable action when the risk of loss can be transferred to another party.
Ethics is all about what we do when no one is looking. Wells Fargo thought it could get away with illegal actions because no one would notice. It didn’t count on some of its employees raising issues about bogus customer accounts.
During a recent Congressional investigation, we learned that six former workers were retaliated against for calling the bank’s ethics hot line about opening fake accounts. One such employee, Bill Bado, said he was fired eight days after sending an email in 2013 to HR about unauthorized accounts. Wells Fargo’s actions to suppress Bado’s claims violates the whistleblower protections under the Sarbanes-Oxley Act.
Wells Fargo admitted to firing 5,300 workers over the past few years for their actions in creating phony accounts. But, what should happen to the CEO of the bank? Some in Congress believe he should resign or be fired. Others claim the government should exercise the “clawback” provision in Sarbanes-Oxley that requires a disgraced CEO like Stumpf to repay executive compensation during the period of the fraud.
Last month the board of directors announced that Stumpf will lose his bonus and unvested stock awards in the amount of $41 million. The problem is since the stock options haven’t vested Stumpf can’t buy the stock right now and pay below market for the shares so only a paper loss exists.
The beat goes on for Wells Fargo. A week ago the bank was charged by the U.S. Justice Department with as many as 413 alleged violations of the Servicemembers Civil Relief Act because it unlawfully repossessed cars from hundreds of members of the military. The bank’s regulator, the Office of the Comptroller of the Currency, fined the bank $20 million for its transgressions that went on for a decade. So, now we learn Wells Fargo doesn’t have a heart or a soul.
Today we hear a lot about breaking up mega-financial institutions because they are too big to fail. Many in Congress would like to reinstate the Glass-Steagall Act that prohibited commercial banking institutions from engaging in investment banking activities. I doubt this is the answer because the banks will find other ways to broaden their services to customers who want one-stop-shopping for financial services.
Examples of irresponsible behavior occur all too often in business and these are not minor incidents. Whether it’s Wells Fargo or automobile companies like VW that sold thousands of diesel cars in the U.S. with software specifically designed to evade government pollution tests, corporate greed crowds out ethical behavior. Corporate social responsibility is easily tossed aside for the pursuit of profit. Top management does not “walk the talk” of ethics and then blames its employees who engage in the very actions the organization promotes.
I believe corporate compliance is a concept in name only. Many companies apply an “ethical legalism” philosophy that as long as an action is legal, it’s ethical. Still, I don’t want more government oversight because existing regulations haven’t stopped the continuing flow of despicable actions.
Ethics comes from within – the culture of a company and tone set at the top. The answer is for the board of directors to take a more active role in insuring compliance not only with regulations but the organization’s ethics code. It must be a proactive approach to ethics compliance and not based on what the CEO or CFO tells the board.
Public companies have an audit committee of the board of directors with one member a financial expert. I would add a requirement for a second member to be an ethicist and task that person with assessing whether the actions of the company are consistent with ethical behavior.
Blog posted by Steven Mintz, aka Ethics Sage, on October 11, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Tags: clawback, corporate culture, CSR, ethical business practices, ethical legalism, ethics sage, John Stumpf, moral hazard, Steven Mintz, Wells Fargo, whistleblowing
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Debunking Trump’s Claim that Using the Tax Code to His Advantage Makes Him the Only Person to Reform It
Donald Trump reported a $916 million “net operating loss” on his 1995 taxes that allows him to deduct those losses against future taxable income for 15 years. This means through 2010 Trump may have paid little or no taxes. There is no way to know for sure how these amounts were spread out without Trump releasing his tax returns. But, it is undeniable that Trump used the tax laws to his advantage. He is legally within his rights to do so but the ethics of doing it can be questioned.
A net operating loss occurs when a taxpayer (individual or corporate) losses money in one year from a business activity. Since that taxpayer is not eligible for a tax refund in such cases, the taxpayer can carryback the loss and claim a refund for taxes paid the prior three years or carry it forward for 15 years to offset future taxable income. These were the rules in effect in 1995. Today the carryback is two years and the carryforward is for 20 years. The carryforward was extended in the aftermath of the financial recession where many businesses lost lots of money.
The purpose of the NOL is to “save” a business that has a down year(s) hoping it will become profitable in the future. On one hand it makes a lot of sense. If the business can survive as a result of the NOL provision, then it can hire and pay employees, make investors and creditors whole, invest in new business opportunities, and eventually turn a profit. In other words, the NOL does make sense on an economic level. There is no doubt it is a legal maneuver.
The problem is you and I wouldn’t be able to use the NOL absent a loss from a small business operation we own and report on our income tax return. NOL’s are typically triggered by businesses losses that pass through to the individual taxpayer owning the business. This is the case with the Trump Organization, a privately owned company.
The most ironic statement made by Trump is paying no income taxes makes him a genius. He stated that because he was able to use a “questionable” provision in the tax code to his advantage (some would call a tax loophole), he is the only one who can fix the federal income tax laws that favor the wealthy over middle class taxpayers. This is like saying Hillary Clinton is the only one who can fix the U.S. government’s outdated cybersecurity system because she used a personal server for government business; deleted emails; and, apparently, destroyed or had others destroy hard drives on computers.
The bottom line is just because something is legal it doesn’t mean it’s ethical, a concept known as ethical legalism. I’m not saying Trump should forego using a legitimate provision in the tax code. After all, you and I might be able to buy a home, take out a mortgage, and then deduct interest on the loan and real estate taxes paid. We have opportunities to lower our taxable income as well, although lower income folks probably don’t have the same opportunities. I believe the only way around the unfairness in our tax code is to level the playing field by instituting a “fair or flat tax.”
One problem with our current tax code is it offers many advantages for the rich in addition to the NOL. For example, if you own real estate as Trump does, you get to take a depreciation deduction for your property and reduce taxable income from the property. Most of us are locked out of tax advantages on real property owned because of a lack of investible money.
Trump typically lives on the edge of what’s legal and what’s ethical when it comes to things like name-calling and disparaging others. Shaming others is legal but unethical because it shows a lack of respect and lack of empathy. Bragging about using the tax code to his advantage is just as unethical from the perspective of Aristotelian ethics and the “golden mean.” The golden mean in philosophy holds that there is a desirable middle ground between two extreme behaviors: one of excess and the other deficiency. Boasting is one extreme and not taking credit for something you have done is the other. An ethical person accepts credit but exercises humility in doing so, a character trait we have yet to see in Donald Trump.
Blog posted by Steven Mintz, aka Ethics Sage, on October 6, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Why Ethical Issues Arise in the Workplace and How to Deal with Them
The 2013 National Business Ethics Survey reported by the Ethics & Compliance Initiative found that 47% of employees observed misconduct at their organizations while 63% reported it. A weak ethical culture was blamed for 34% of the violations and 21% of employees experienced retaliation after reporting misconduct.
I am concerned that while misconduct is down overall from previous studies, a relatively high percentage of misconduct is committed by managers – the very people who should be establishing an ethical culture and providing ethical leadership. Workers reported that 60% of the misconduct involved someone with managerial authority from the supervisory level up to top management. Nearly a quarter (24%) of observed misdeeds involved senior managers. Also, workers said that 26% of misconduct is ongoing within their organizations and about 12% of wrongdoing was reported to take place company-wide.
These results are disturbing on many levels. First, if 50% of employees admit observing misconduct, then in all likelihood the real number is higher. The result is it becomes more difficult to instill an ethical culture in an organization. Second, with 60% reporting managerial involvement in misconduct it is challenging at best to establish an ethical tone at the top. These high levels of observed and reported misconduct raise questions about how an organization can improve its commitment to ethical behavior.
The key is to focus on managerial behavior. Top management must make it clear that violations of ethical policies will not be tolerated. Just as a parent models behavior for his/her kids to learn from, top management must demonstrate by their actions that they don’t just pay lip service to a code of ethics. Managers must be committed to making decisions in accordance with core values such as honesty, integrity, respect for others, taking responsibility for their actions and being accountable for them.
To be an effective, ethical leader, managers must learn how to spot ethical issues in their organization. Moreover, managers must learn how to raise ethical issues especially in gray areas. A key area is to look for rationalizations for unethical actions. Probing employee behavior entails looking out for signs that values have been compromised and corners have been cut by deviating from ethical norms. The rationalizations come in many forms.
A common rationalization that I have observed is to claim it’s someone else’s responsibility. This is true when an employee feels he/she is just following orders of a superior. Another is to pass it off as no big deal, a kind of materiality test for ethical conduct. Here, managers must make it clear that even a “minor” deviation from policies is cause for alarm because it could portend greater problems and lead to more serious misconduct down the road.
Some managers rationalize unethical actions by claiming it is standard practice in the organization. Dennis Kozlowski, the infamous former CEO of Tyco who rationalized his theft of $150 million from the company,” stated in an interview with Morley Safer of 60 Minutes that he wasn’t doing anything different than was done by his predecessor.
Culture is often seen as abstract and difficult to measure. Documents such as a statement of values, a credo, and ethics code means nothing unless top management models ethical behavior in every action taken and decision made. Moreover, there must be consequences for unethical behavior and rewards for employees who have acted in accordance with prescribed ethical standards much like employees should be rewarded for meeting or exceeding production goals.
A report by the SHRM Foundation titled “Shaping an Ethical Workplace Culture” describes an ethical workplace culture as one that gives priority to employee rights, fair procedures, and equity in pay and promotion, and that promotes tolerance, compassion, loyalty and honesty in the treatment of customers and employees. The reason is when employees respect the rules of conduct and feel fairly treated by management, the employees begin to trust managers and internalize the company’s values as their own. Once that happens, ethics becomes embedded in the workplace culture.
In my blog tomorrow posted on workplaceethicsadvice.com I will address some of the common ethical issues in the workplace and how managers can best deal with them in order to effectively defuse tensions that can build up and eventually explode if untreated.
Blog posted by Steven Mintz, aka Ethics Sage, on October 4, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at: www.workplaceethicsadvice.com.
Tags: ethical business practices, ethical culture, ethical leadership, ethics and compliance, ethics sage, NBES, Steven Mintz, tone at the top, workplace ethics, workplace retaliation
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