You’re getting my Friday business ethics tips post a day early thanks to Politico.com, which just broke the story of a shocking gaffe at The Washington Post. According to Politico.com, the Post’s business division for conferences and events released a flier yesterday that offered lobbyists and association executives “intimate, exclusive” access to Obama Administration officials, members of Congress and the Post’s own reporters and editors. The event would be “an off-the-record dinner and discussion at the home of [the Post's] CEO and Publisher, Katharine Weymouth.” The price to attend? A measly $25,000 - $250,000.

Politico.com quotes the Post’s Executive Editor Marcus Brauchli as saying that he was “appalled” by the flier and promising that the newsroom staff would not participate in the event. Quite correctly, Brauchli championed the independence of his reporters and told Post reporter Howard Kurtz that the flier “appear[ed] to offer, in exchange for sponsorships, the good name of The Washington Post.” Now, the Post’s media team is scrambling to do damage control. Politico.com quotes the communication’s director of Washington Post Media, Kris Coratti, as saying that the flier “went out before it was properly vetted.”

No kidding.

What amazes me is that anyone associated with The Washington Post could be dim-witted enough to issue this flier, properly vetted or not. Doesn’t everyone at the Post understand that the paper’s reporters and editors need to be objective to be credible? And whose bright idea was it to put together an event where the Post might appear to be selling sweetheart access to “those powerful few” government leaders who’ll shape the healthcare reform debate? The Post is a newspaper, not a dating service. And the fact that this story broke on the eve of Independence Day gives the holiday a whole new meaning.

The Post will undoubtedly recover from this embarrassing incident, but it demonstrates an invaluable lesson that every large business should keep in mind. It’s important for everyone in your company to understand and adhere to the ethical rules that govern your industry. The Post’s newroom staff already knows not to promise preferred treatment on controversial issues. When it comes to the Post’s conference and event staff, though, it appears that the Post has a lot of training to do.

To read the entire Politico.com post, go to http://www.politico.com/news/stories/0709/24441.html.

Topics: Business Ethics, Professional Ethics, business communications, corporate responsibility, customer relations, ethics | No Comments »

Today’s Wall Street Journal includes a fascinating article describing how banks are making it easier for con artists to steal from the elderly and infirm. According to the Journal, banks that automatically cover overdrafts make it easier for their more vulnerable customers to be ripped off by giving them more money for scammers to steal. The author, Karen Blumenthal, reported that one of her elderly relatives agreed to give power of attorney to his son when he began falling behind on his mortgage and other important bills. The son tried to control his father’s spending by whittling down the balance in his checking account. He soon discovered, however, that his father’s bank was routinely covering up to several hundred dollars of overdrafts each month then charging $33 for every overdraft, quickly building up another monthly mountain of debt. When the son contacted his father’s bank to complain, he was told that automatic overdraft protection was a standard customer courtesy and couldn’t be stopped. (The bank did eventually agree to turn it off.)

And that, folks, is how regulations are born.

The Obama Administration has proposed treating such automatic overdraft protection programs like credit lines, which would bring them under Truth in Lending disclosure requirements and could make it necessary for customers to opt into such programs instead of being automatically enrolled. If the Administration’s proposal is adopted, banks will undoubtedly grouse about being subjected to more red tape when their goal was simply to provide a convenience. (Of course, those hefty overdraft fees might have motivated them, too.) But if banks had thought through the probable consequences of offering automatic overdraft protection, they might have concluded that the risks outweighed the rewards.

Ultimately, of course, it’s the customer who’s responsible for managing his or her money, and banks shouldn’t have to monitor their customers’ spending habits. But banks and other businesses would be wise to treat Ms. Blumenthal’s story as a cautionary tale. If businesses fails to regulate their own conduct, sooner or latter the government will step in and do it for them.

To read the full Wall Street Journal article, go to http://online.wsj.com/article/SB10001424052970204556804574260062522686326.html.

Topics: Business Ethics, corporate responsibility, customer relations, ethics | 2 Comments »

Today, U.S. District Judge Denny Chin sentenced disgraced financier Bernard Madoff to one hundred fifty years in prison for running the largest Ponzi scheme in history. According to press reports, Madoff scammed his investors out of more than $60 billion, using the money to treat his family to an extravagantly lavish lifestyle. At the hearing, Madoff turned for the first time to his victims in the courtroom (a small group of the many people he swindled) and said, “I am sorry. I know it will not help you.”

He got that right.

People who’ve read my book, The Art of the Apology, know that I believe it’s entirely possible to make an effective apology even after you’ve done something very, very bad. Unfortunately, Madoff blew it today. Yes, he finally said he was sorry without beating around the bush and, by pleading guilty, he took at least some responsibility for what he’s done. But Madoff has never given his victims a chance to tell him to his face what his actions have cost them. And the cost has been appalling, with thousands of people losing vast amounts of money and, in some instances, being driven to the edge of survival. (One recently retired woman told NPR today that she has to dumpster-dive for food at the end of each month after losing her entire retirement fund to Madoff.) When his victims testified in court, Madoff’s back was turned to them. He may have heard them, but there’s no way his victims can possibly be sure that he listened.

Even worse, Madoff has yet to make amends for the harm he’s caused. Apparently he hasn’t told federal investigators where the money went, and very little of it has been recovered so far. Unless Madoff returns his ill-gotten gains to the people he stole them from, his claim to being sorry is nothing more than empty air.

Press reports said Madoff apologized today, but they missed the point. All Madoff did today was make a statement. It might have been a reasonably good statement … but it wasn’t an apology.

Topics: Apologies, Business Ethics, Personal Ethics, ethics | 1 Comment »

This week, I’m kicking off a new Friday series of tips and suggestions that businesses can use to keep themselves out of lawsuits. It’s no secret that U.S. courts are jammed to the rafters with litigants these days. And the costs to all of us are staggering. Companies don’t just eat their legal expenses; they tack them onto the price of whatever goods or services they offer. Consequently, experts estimate that the average American family of four spends anywhere from $4000 - $10,000 each year to cover companies’ costs of going to court.

I don’t know about you, but I think that’s a horrible waste.

Trouble is, by the time a lawsuit actually gets to court, much of the financial damage has already been done. Lawyers charge hundreds of dollars an hour and spend hundreds of hours preparing each case. That means that, by the time the judge’s gavel falls for the first time, tens of thousands of dollars have often already been spent. Even if a case settles “on the courthouse steps,” one or both of the parties to the suit will often have invested an appalling amount of money in winning. And that’s just the financial cost - litigation is time-consuming, distracting, and incredibly stressful for almost everyone concerned. Defending a single lawsuit can destroy a small business … and that’s true even if the small business ultimately prevails in court.

So, here’s my first tip: manage your business so that you never get sued in the first place. Yes, it takes time, thought and sometimes a little money to design and implement suit-reducing business practices. In the long run, though, they’re more than worth the investment. I’ll start teaching you the specifics next week. See you then!

Topics: Business Ethics, business communications, customer relations, ethics | No Comments »

The Associated Press reported today that Bernard Madoff’s lawyer, Ira Sorkin, has asked the judge who will sentence Madoff to limit his jail time to a mere twelve years. Sorkin contends that sentencing the 71-year-old Madoff to only a dozen years in prison would be appropriate, given that Madoff surrendered voluntarily, accepted responsibility for his crimes, and made an effort to cooperate with authorities. And, as Sorkin points out, Madoff’s crimes were non-violent … sort of.

Sorkin’s arguments paint a rosier picture of Madoff’s behavior than his client probably deserves. It’s not as though Madoff’s actions (summarized in eleven felony counts of securities fraud and perjury) were exactly a one-time thing, nor did he voluntarily come clean and make restitution before the government finally caught up with him. Sorkin’s argument that Madoff’s crimes were “non-violent” doesn’t entirely hold water, either. It’s true that Madoff didn’t shoot anyone or steal from people at gunpoint. However, Madoff not only deprived individual investors of much of their money, he preyed on charitable foundations, stripping them of funds that could have helped people in desperate need. It doesn’t take physical violence to impose a world of hurt on the poor.

Madoff has reached an age where a twelve-year sentence might well keep him in prison for life, and the public humiliation he’s suffered has no doubt taken its toll. Sorkin promises that Madoff will “speak to the shame he has felt and the pain he has caused” at his sentencing hearing, and I hope his statements give his victims some comfort. Still, Sorkin has ignored one critical factor in asking the court to take it easy on his client. Sentencing Madoff to only twelve years in prison could send a message to other would-be financial pirates that they won’t risk serious consequences if they pick up where Madoff left off. That would be a serious mistake. I’m a great believer in mercy … but deterrence is important, too.

Topics: Apologies, Business Ethics, Legal Ethics, ethics | 2 Comments »

My friend Sam was in a foul mood a few days ago. He brought me the annual report published by a respected mutual fund in which his aging mother was heavily invested. “Look at this!” he fumed. “Over two hundred pages long, and it doesn’t say anything useful. Just think how many trees get cut down and pulped to produce CYA reports that go straight into landfills. What a waste!”

I explained to Sam that, in an effort to avoid financial scandals like the infamous one that brought down Enron and the Arthur Anderson accounting firm a few years ago, the federal government has imposed regulations requiring financial firms to make extensive and detailed disclosures. The idea is to provide more information so investors can make better decisions. Sam was unimpressed. “This can’t be what Congress had in mind. Yeah, there’s a lot of data here, but it’s not organized so people can understand it. I could read this report cover to cover and I still wouldn’t know whether Mom’s made a good investment or not.”

Sam had a point. Unfortunately, it can be extremely difficult to summarize complex financial information so that ordinary people can understand it. The people who have to compile these reports have a miserable task. If they don’t include every last scrap of information, they can get in trouble for failure to disclose. On the other hand, if they do include every piece of data that could possibly be relevant, their reports can be too unwieldy to be useful to the investors who receive them.

The answer may be for financial firms to provide hard-copy executive summaries of their annual reports to their investors while posting supporting information online. That approach could provide full disclosure while giving investors a higher-level, understandable look at how their financial interests are being served. But for companies who take compliance seriously (and any smart company does), that approach could be fraught with risk. Congress and the Obama Administration are taking a hard look at how to more effectively regulate the financial services industry. While they’re at it, this would be a great time to revisit the financial disclosure rules. A little rewriting might make it easier for financial firms to provide investors with relevant information that they’ll actually be able to use.

Topics: Business Ethics, Social Ethics, business communications, ethics | 1 Comment »

I’m going to conclude my Friday series of tips on effective business apologies with a tip that can make a huge difference to the future success of your business. After you’ve made your apology and resolved things with your unhappy customer or client, take some time to learn from your apology. Was the mistake that made it necessary for you to apologize a one-time fluke, or part of a larger pattern? What flaws were revealed in your company’s systems? How can you make things better so that you won’t have to make this same apology again?

It can be tempting, in the wake of a business apology, to scapegoat someone in your company. Resist that temptation! Your employees are only human, after all, and blaming them won’t help you make things better. Instead, take a look at your systems and processes. If possible, make systemic improvements to guard against inevitable human error. Your goal should be to fix the error, not the blame.

This tip doesn’t just apply in business — it’s a good approach to take in personal settings, too. But if you’re the owner of a business that’s had to make a careful apology to an unhappy customer or client, learning from that apology can be one wonderful way to improve your business going forward.

Topics: Apologies, Corporate Governance, business communications, customer relations, ethics | 3 Comments »

This week, I had the pleasure of speaking to a group of health care professionals at INOVA Alexandria Hospital about how to make effective apologies in the wake of medical error. While preparing for the presentation, I spent some time looking at a system developed by the Studer Group to help medical staff build a rapport with patients. It’s called AIDET, and it’s absolutely great!

AIDET is an acronym for a process that works like this. Before a medical procedure:

Acknowledge: Greet the patient;
Introduce: Say hello and introduce yourself;
Duration: Let the patient know approximately how long you expect the procedure to take;
Explanation: Tell the patient how the procedure will go in plain English, so the patient knows what to expect;
Thank you: Express appreciation to the patient for giving you the opportunity to serve him or her.

The Studer Group describes AIDET as “a simple acronym that represents how we can gain trust and communicate with people who are nervous, anxious, and feeling vulnerable.” How many of your clients and customers meet that description? Personally, I think AIDET is a system that would enhance communications in many businesses. It may have started out as a medical tool, but AIDET has a lot to offer companies as well.

Topics: Lauren Recommends, business communications, customer relations, ethics | 6 Comments »

It’s my privilege to be a member of the Society for Corporate Compliance and Ethics, a non-profit organization that trains and supports certified compliance and ethics professionals. (Yes, I’m one of them.) SCCE provides reams of great materials on business ethics and, from time to time, conducts surveys to see how well companies are running their ethics and compliance programs.

Recently, SCCE teamed up with the Health Care Compliance Association to sponsor a survey asking how much companies were doing to incent ethical behavior in their executives and line employees by tying compensation to compliance. The disappointing answer? Very little. The survey revealed that less than half of the companies responding included compliance or ethics metrics in their employee evaluation programs. Worse than that, a whopping 76% of respondents admitted that compliance and ethics metrics had no significant impact on their employees’ bonus or incentive compensation awards.

Oh come on, people!

If a company is serious about business ethics, it’s essential to make sure that employee salaries and bonuses are awarded, at least in part, in recognition of ethical behavior. Telling employees that you want them to be ethical, but paying them for achieving targeted profit margins without regard to how they got there, is about as broad a wink and a nod as you can deliver. As Jerry Maguire so famously put it, “show me the money!” And when you do, I’ll show you where your real priorities are.

Topics: Business Ethics, Corporate Governance, business communications, ethics | 2 Comments »

Once you’ve apologized to your unhappy customer or client and made amends, you may be tempted to sit back, rest on your laurels, and presume that all’s well with your relationship. Don’t do it! For any of several reasons, your unhappy customer may harbor some lingering resentment. She may not be terribly angry any more, but if you want to keep her business it’s smart to follow up.

Sometimes, of course, it’s not possible to check back in with an unhappy customer. Restaurant owners and retailers, for example, may not even know how to make contact with a customer after an apology. (That, of course, makes it all the more important to apologize effectively in the first place.)

But if you’ve had an ongoing relationship with an unhappy client or customer and have a telephone number, address, or even a follow-up appointment, take the next opportunity to check back and confirm that things are really okay between you. It doesn’t have to be a big deal - a simple “just wanted to make sure you understand that we’re very sorry for what happened and we appreciate your business” will suffice. That offers the customer one more opportunity to tell you if something’s still amiss. If it is, fix it! If not, breathe a sigh of relief in the knowledge that all is well.

Topics: Apologies, business communications, customer relations, ethics | 1 Comment »

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