Overcoming the Culture’s Influence in Young People: A Look At How We Might Realign Post-Modernist’s Progeny with the Pursuit of Virtue Ethics

Professor Marianne M. Jennings

W.P. Carey School of Business

February 21, 2008

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What word did the American Dialect Society name as the word of the year for 2006?

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Truthiness!

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"the quality of preferring concepts or facts one wishes to be true, rather than concepts or facts known to be true”

“what feels like the right answer as opposed to what reality will support”

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What word never left the top 20 most frequently looked up words in online dictionaries in 2005 and 2006? And was number one in 2005?

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Integrity!

Ethical Lapses • Student loan lenders: Sallie Mae and 17

universities• Adelphia• Boeing• Cendant• Computer Associates• Tyco International• General Electric• Global Crossing• Merrill Lynch• Enron• Qwest• WorldCom• Royal Shell• Nortel• Krispy Kreme• Refco• UnitedHealth Group• Merck• World Bank• BP

• AT&T• Xerox• Kmart• Citigroup• Lucent• ImClone• Arthur Andersen• HealthSouth• Royal Ahold• Parmalat• Apollo Group• Marsh & McLennan• AIG (Putnam)(Mercer)• Fannie Mae• KPMG• GM• Options scandals (160 companies)• HP• Universities and travel

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Government Issues• Illinois – Gov. Ryan• San Diego -- $1.1 billion pension fund deficit;

skimming to meet city budget• Connecticut – Gov. Rowland• Chicago – Mayor’s office and contracts• Embezzlement – BLM• Former Delay aides and guilty please• Abramoff• Duke Cunnigham -- $2.4 million from defense

contractors• State crime labs and scandals• Tom DeLay• Clark County Commissioner and the MyTai

concession• Philadelphia mayor and the pay-to-play contracting

system• Darlene Druyun and Boeing• HR director of JeffCo County and the $32,000 in

personal expenses on county credit card• Governors engaged in business relationships with

those who receive state contracts• BLM chief in Monterey doctoring invoices to

embezzle• USDA employees and the $100K for visas

• Oil for food UN scandal• Post-Katrina corruption in contract awards• Iraq contract awards• Rob Reiner using his favorite companies for

California commission contracts and political purposes

• Arlen Specter’s aide’s spouse gets earmarked funds• Arizona State treasurer investigation for conflicts:

Maricopa County assessor and conviction: $400 per low-income loan to seniors

• Mike Espy• Henry Cisneros• Taser and the law enforcement officials• Colorado and the $1,500 office chairs• Contributions for changing the no-touching rule at

San Diego strip clubs• Scottsdale School District and the bids• New York assistant principal who gave his son the

answers to 35 questions on the Regents’ exam• Kerik and employment of illegal immigrant• DMV employees who gave out licenses in exchange

for cash• William Jefferson and the cold cash

Some Sample Fines• Boeing• Tenet

• Columbia/HCA• AIG• Marsh McLennan• Fannie Mae• KPMG• Tyco• Cardinal Health• Pharmas• UnitedHealth Group• Siemens

• $615 million• $725 million + interest = $900

M• $1.7 billion• $1.5 billion• $850 million• $400 million• $465 million• $750 million• $600 million• $2.4 billion• $600 million• $402 million +

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Colleges and Universities• Benjamin Ladner, former president

American University• $43,982 for dinners (13-course meals)• $22,345 for first-class ticket to Nigeria• Personal chef $220,000 for 3 years)• Personal development trips for chef to

Paris, Rome and London• $100,000 for a social secretary• $44,000 in alcohol• Furniture expenses• Engagement dinner for his son• $54,000 for cars and drivers• $5,000 lunch hosted by Mrs. Ladner for

her garden club• $500,000 of personal expenses in three

years

• I do believe I have made mistakes, and I understand how the perception of the significance of these has been exaggerated in the media. In a few instances, I overlooked the fact that certain personal expenses were charged to the university. Because of my single-minded focus carrying out university business, I regret these accounting errors and have already reimbursed the university. In hindsight, I should have been more vigilant and precise. The amounts being leaked to the media are overblown and inaccurate, and will be shown to be wrong.

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Colleges and Universities• Apollo and the

University of Phoenix• DOE audit on recruiting

and advising• Stock options back-

dating investigation• The student loan

scandals

• Maricopa County CCD loses three presidents

• Maricopa County Community College• Bond issue• Funding for campaign

materials• Relationships with

builders and others who stood to benefit from the approval

The Presidents• Texas Southern University and former president

Priscilla Slade (plus VP for senior administration and senior safety engineer) for $280,000 in expenses for president’s home• Hung jury• Wrongful termination suit dismissed

• Vanderbilt and Gordon Gee ($700,000 on parties, including personal chef)• Vanderbilt defended him in WSJ article

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The Vice President (Vice Chancellor)• $2,112.00 reimbursed long-distance charges

• Calls were to counsel for one of the Texas A&M campuses

• 1,804 calls were after- or before-hour calls or during holidays and weekends

• Resigned following anonymous letter to internal audit about an affair between the two

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Colleges and Universities: Issues• Cloning fraud• Research conflicts of

interest• Funding conflicts of

interest• Relationships with

students

• Double-dipping by faculty on pay systems

• Text book conflicts• Grade inflation• College athletics• College contracting• College financial aid

Colleges and Universities

• Johns Hopkins• Syracuse• NYU• Columbia• USC• Penn• Oral Roberts Univ.• Average fine: $2 mil

• UT Austin• Vanderbilt• American University• Shoreline Community

College• Texas Southern

University• Maricopa Community

Colleges

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I. What makes good and smart people at great colleges, universities, organizations and companies do really ethically dumb things?

A. Never an issue of not seeing the issues

We see the issue.We feel the pressure.

We find ways to comfort ourselves.We hope it resolves itself.

We ignore it.We allow others to decide for us.

UT Austin

"Larry loves tequila and wine. Since becoming director at UT Austin, he has not had to buy any tequila or wine. Lenders provide this to him on a regular basis."

Senate Report on Financial Aid Offices and Student Lender Relationships

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Leadership Failures on Social Issues• Duke and the Lacrosse Team

• Virginia Tech and the Cho case• “Disruptive Students: A Liability, Policy, and Ethical

Overview,” Journal of Legal Studies Education, with Heidi L. Noonan-Day. 24(2): 291-324 (2007).

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So, if they see it, what happens?

• 65% DIDN’T REPORT (1999)

• 37% DIDN’T REPORT (2003)

• 41%-50% DIDN’T REPORT (2005)

• 50% DIDN’T REPORT (2006)

• 50% DIDN’T REPORT (2007)

Industry Surveys and SHRM

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In the academic world

• Only 44% of faculty members pursue academic integrity cases

• Feeling that there is a lack of administrative support

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So, how come they said nothing?

• 96% feared being accused of not being a team player (same 1999 and 2003)(80% 2006)

• 81% feared corrective action would not be taken

• 75%-88% (2006)• 68% feared retribution from their supervisors • 49%-64% feared retaliatory action (2006)

(SHRM and industry surveys)

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Merck and Vioxx Revelations

“I just can’t wait to be the one to present those results to senior management.”

Dr. Alise Reicin

In a 1997 e-mail on “C.V. events” (cardiovascular effects of Vioxx)

Merck had not yet begun selling Vioxx

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Hewlett-Packard

“How does Ron [Ron DeLia, Boston PI] get cell and home phone records? Is it all above board?”

H-P senior counsel and ethics officer, Kevin Hunsaker

“We are comfortable there are no Federal [sic] laws prohibiting the practice.”

Anthony Gentilucci, H-P global security officer

“I shouldn’t have asked.”Hunsaker in response

KPMG Internal Culture During Tax Shelter Years

• $1.2 billion of the firm’s $3.2 billion in annual revenue

• Mandatory weekly conference calls for 500 tax partners

• “You’re either on the team or off the team.”Jeffrey M. Stein, head of KPMG Tax Departmentto senior manager who raised concerns about tax shelters during a call

B. High Ethical Self-Esteem

Living in Denial and Slipping Into Complacency

We all think we are ethical.

• None thought their ethical standards were lower than those of their peers in their organization (1%)

Society of Human Resource Managers

Why do we fancy ourselves so ethical?

1. We are not talking about it with others.

2. We have rationalized, labeled, and defended ourselves into believing we are ethical.

3. COMPLACENCY

One additional possibility

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The Survey on Lying

• 52% said lying was never justified• 66% said lying could be justified• 65% would lie to save someone’s feelings• 40% said they’d never lied or cheated• 10% of the 40% said they had told a lie in the past week• 40% said it is “okay” to exaggerate a story “to make it more

interesting”• 33% said it is “okay” to lie about your age (only to make

yourself younger, though, not for purposes of drinking age)• 33% said it is “okay” to lie about being sick to take a day off

AP Poll, June 23-27, 2006

“We have ethics here.”

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Ellen Frishberg

• Former head of student financial aid office at Johns Hopkins

• Accepted $160,000 in consulting fees and tuition reimbursement from student lenders

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"Appearance of impropriety is as important as impropriety itself."

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A thought on conflicts

"I do serve on . . . some advisory boards -- kind of like the medical junkets the pharma companies offer -- we go to a resort for 3 days, and pay a nominal fee. But I still insist on best pricing and good service before I bring a loan to my students. The new generation of administrators just don't have the same moral center."

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Ellen Frishberg, former head of financial aid at Johns Hopkins, in an address in 2000 to the National Association of Student Financial Aid Administrators

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“Do more with less!”

Holly L. Mooreformer President, Shoreline Community College, WA to employeesfollowing her $25,000 raise awarded in violation of open meeting laws

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Guess who said it!

“I have the highest ethical standards.”

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Dr. William McGuire

Former CEO UnitedHealthGroup, to his board when confronted by it with an

investigation that revealed backdating on one-half billion in his stock options

In Dec. 2007 agreed to repay $600 million

Guess Who Said It!

“The things he did to that company are horrible. I don’t understand the mindset of a man who would do what he did to that company.”

Richard Scrushy, former CEO of HealthSouth, while sitting in on the Jeffrey Skilling trial on March 6, 2006. Mr. Scrushy is now serving 7 years for bribery. HealthSouth took 4 years to decipher its real earnings once Scrushy was ousted. Revenue restatement totaled $2.5 billion

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Guess Who Said it?

“It’s only illegal if you get caught.”

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Another CEO

Greg ReyesFormer CEO of Brocade, a Silicon

Valley companyNephew of Google’s CFOConvicted in 2007 of backdating options

(fraud); facing 7 years

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Guess who said it!

“I did not do anything wrong.”

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Lawrence Burt, VP of student affairs and director of the office of student financial services at UT Austin, who owns 1,500 shares and 500 warrants in Educational Lending Group, a preferred lender at UT Austin.

II. Our Students

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The State of Ethics Is Not So Great• 60% of high school students cheated on an exam in the last

year

• 62% of high school students lied to a teacher in the past year

• 82% of high school students lied to their parents in the past year

• 33% copied something from the Internet

• 28% stole from a store in the past year

• 23% stole from a parent or relativeJosephson Institute 2006

Thoughts from a high school principal

“They’re not bad kids. They only cheat because they are under pressure.”

Thoughts on cheating from high school students• “Students who cheat do so on their own

terms. Of course there has been no penalty, but they know there is a risk, and apparently it seems like it’s worth taking.”

• “Just about everyone is cheating in some way or another. It is a common thing among society that is seemingly accepted.”

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Thoughts on cheating from a high school teacher• “Cheating is done on a daily basis and there is

little effort to curb it. Kids will ditch class by having their parents excuse them during the period they are to take a test, and then the kids find out from their friends what is on the test. Kids can then take the test the next day. . . . The new camera cell phones are now being used to take pictures of tests and also they are using instant messaging to cheat.”

Cheating in College

11% reported cheating in 1963

49% reported cheating in 1993

75% reported cheating in 2003/2005/2006/2007

50% graduate students reported cheating (2006)

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Schools that discovered cheating scandals• Duke• San Diego State• Naval Academy –

Annapolis• Air Force Academy –

Colorado Springs• West Point• UNLV

• Berkeley• Dartmouth• Columbia• ASU

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“What happens when your 75% figure on cheating reaches 100%?”

Do I have some fixes?

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1. Thoughts on Truth: It Exists“I never lied to you. I always told you

some version of the truth.”Jack Nicholson to Diane Keaton in Something’s Gotta

Give

“Truth doesn’t have versions.”Diane Keaton to Jack Nicholson in Something’s Gotta

Give

Truth and Its Percolating QualityThe laws of probability do not apply when it comes

to the surfacing of unethical or illegal conduct 1. Three people can keep a secret if two are dead. - Hell’s Angels’ motto (courtesy B. Franklin)

2. Lying is good. It’s the only way we ever get at the truth. - Dostoevsky

3. Circumstances beyond your control will cause bad acts to be discovered.

- Anonymous

Remember . . .

“It’s not the first mistake the gets you. It’s the second, the cover-up, that will.”

M. M. Jennings

“It’s not the first step; it is the turn of the road.”

M.M. Jennings’ grandmother

Public trust and the long haul

• Once betrayed . . .

“You really don’t understand. This story will be filed. It will be pulled up every time I am in the news. These stories never die.”

Actress Anna Scott (Julia Roberts)

Notting Hill

• Assumptions about corruption and the resulting stereotypes

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The Attitude Survives: Stanford

We took a beating. It was sufficiently bad that after the hearings and during the summer of 1991, it became clear to me that there was so much faculty concern about the ruckus and whether Stanford would continue to be a target for this kind of thing that I decided that if you're part of a problem, you can't be part of a solution and so I resigned. I think that steadied things down considerably. It wasn't any fun to do that. It was not any fun to take a certain amount of newspaper abuse in connection with it. Stanford's recovered nicely. We're still not paid the indirect cost rate I think we are entitled to under articulated government policies, but the sequelae to the whole furor, I think, made it plain to everybody that Stanford hadn't engaged in any wrongdoing.

Donald Kennedy, former President, in interview in 2000, on the federal grants issues

2. Think Marathon, Not Sprint!

Remember . . .

“A management team distracted by a series of short-term targets is as pointless as a dieter stepping on a scale every half-hour.”

Larry Page and Sergey BrinGoogle Owner’s ManualLetter to investors

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The Story of Sandler O’NeillFifteen years from now, my son will meet the son or

daughter of one of our people who died that day, and I will be judged on what that kid tells my son about what Sandler O’Neill did for his family.”

Jimmy Dunne III

Sole surviving senior partner from 9/11/01 WTC attacks

One of 17 survivors out of a firm of 83

3. Ethics and Leadership

• Leadership is the ability to see around corners

• Leadership is the ability to see the problem before others

• Leadership is the ability to fix the problem before it becomes a headline

Social/Regulatory/Litigation CycleSocial/Regulatory/Litigation Cycle

Opt

ions

Time

Public

Moves

the

Cycle

Latency Awareness Activism Regulation/Litigation

Options over Time

COST

TIME

OPTIONS

What you are thunders so loudly that I cannot hear what you say to the contrary.

- Ralph Waldo Emerson

4. Don’t fall victim to “Lack of Enforcement”

Absolute, Unequivocal, and Egalitarian Enforcement

• “If the janitor had taken the liquor, he would have been fired.”

Student’s observation on discussion of tolerance for a manager who “borrowed” three bottles of vodka on a Friday night for her birthday party after work and brought in replacements on Monday morning

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5. Watch the Rationalizing: “It’s a gray area.”• Why is it important that it be gray to you?• Is it legally gray?• Is it ethically gray?• Is it a good-faith disagreement?• Interpretation vs. loophole vs. nondisclosure of

relevant information• Descriptors: “Aggressive opinion”

“Aggressive accounting” “Financial engineering”

6. Develop standards

• Personal integrity

• Unit, division, college, university

• Think of and list the lines you will not cross to be successful

• The role of a personal credo

7. Define Dilemmas by Values, Not Circumstances

Avoid the “either/or” conundrum and its false security: Use value-based decision making

• The ease of resolution vs. the long-term implications

• Failure to define the issue properly

• Interferes with creative and strategic thinking

• Solve the problem; don’t compromise values

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A Scenario

Joe, a student taking a stats course, was injured by a hit-and-run driver. The injuries were serious. Joe was on a ventilator. While Joe did recover, he required therapy for restoring his cognitive skills. He asked for more time to complete his course work. The prof denied the request. Joe would have to reimburse his employer for the tuition if he did not complete the course with a passing grade. Joe’s father works with stats a great deal. Joe’s father went and took the course final for Joe. Joe earned an “A” in the course. Any problems?

8. Watch the Slipping . . .

“You slip-slide into evil, he thought. You cross the line for just one moment. You cross back. You feel safe. You change things, you believe, for the better. The line is still intact. Okay, maybe there’s a smudge there now, but you can still see it clearly. And the next time you cross, maybe that line smudges a little more. But you have your bearings. No matter what happens to that line, you remember where it is.

Don’t you?”Harlan Coben, Chapter 32

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Organizational Issues

Who is responsible?

IndividualAction

Organizational Regulations

Government and Systems Regulations

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Layers of Ethical Development

EvolutionDean Ned Hill

BYU Marriott

School of

Business

Ethical Leadership

Ethical Courage

Ethical Knowledge

9. Keep It Simple!

The Pack of Gum

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