And, the worst news of all may be survey results of 12,000 high school students polled by the Josephson Institute of Ethics. Nearly 74 percent of these students admitted to cheating on an exam once in the past year, compared to 61 percent in the Institute's 1992 survey. Students who admitted stealing from a store at least once in the previous year rose from 31 to 38 percent since the last survey. Ninety-two percent confessed to lying to their parents in the last year, up from 83 percent a decade ago. Another 43 percent agreed with the statement that "sometimes a person has to lie or cheat to succeed." The moral: when our role models behave badly, they may also corrupt our youth. A reminder _ these respondents are our future teachers, priests, corporate analysts, auditors and other leaders.
One other news flash _ Meg Whitman, the widely respected CEO of eBay, sent an e-mail to her employees this week defending herself and other eBay executives for receiving shares from Goldman Sachs in initial public offerings (IPOs). These were private offerings not available to the public. Questions had been raised about whether access to these IPOs constituted preferential treatment because of Goldman Sachs' corporate relationships with eBay. In her e-mail, Whitman noted that "while reasonable people can debate whether giving private banking clients preferred access to IPO shares is fair or whether policies regarding such transactions should be reformed, there is no question about the legality of this practice today." Setting aside the legal question, the essential standard may be the smell test: Does it look and feel right to the public that one of the most admired corporate leaders in America engages in a practice that may skate on the edges of the line in the sand?
There are endless debates on how to elevate corporate ethics. Paul O'Neill, the outspoken Treasury secretary, asserted in an address to business school students that the federal government can't legislate honesty. I agree. Legislation would have to be enormously complex and clairvoyant to be able to prescribe legal standards for each and every business practice or eventuality.
Executives who just last year were thought to be excessively conservative and risk-averse have now emerged as corporate heroes. A year ago, Business 2.0 published a tally of MBAs' most admired business leaders (October 2001). The top six were Jack Welch, Bill Gates, Michael Dell, Meg Whitman, Herb Kelleher and Sandy Weill. Warren Buffett or Dave Thomas (of Wendy's fame) were not to be found among the top 10.
Harvey Pitt, the Security and Exchange Commission chairman, sternly told an audience of corporate directors that they have to lead by example. It is the subtle cues and signals that speak volumes. Cultures where managers practice ethics day-to-day _ fair practices with customers and suppliers, transparent accounting systems, open reporting, executive perks and compensation levels within reason, and real channels for employee expression of ethical concerns _ those are cultures that breed honesty from the ground up.One corporate CEO noted that if he can discern the line in the sand, even if he's on the right side, he's getting too close. Increasingly, companies are including ethics-related questions in screening practices to see if candidates intuitively gravitate toward the "right" behaviors, the assumption being that it's easier to hire honesty than to convert INTO honesty.
Only 51 percent of respondents to a Gallup poll last month said that people who run companies are honest and ethical. We've been shaken, but I wouldn't despair. The vast majority of corporate leaders in America are ethical, honest and good role models. But I wouldn't bank on the codebooks or the law. It's the routine practices and everyday decisions from the top that make it clear that there are lines in the sand ... or not.