Principled Profit: The Good Business Blog

Musings on the world-wide movement for ethical business, frugal marketing, and how honesty, integrity, and quality combine with deep relationship building to create business success. By the originator of the Ethical Business Pledge campaign and award-winning author of Principled Profit: Marketing That Puts People First and five other books

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Wednesday, May 24, 2006

Exploiting the Exploiter: Commenting on Enron Verdict

Last week, at Book Expo America, I attended a panel of NPR producers. I asked how my book on business ethics, Principled Profit: Marketing That Puts People First (published in 2003) could be made timely again for the Enron verdict.

They told me, have something on our desks before the verdict is issued.

So this is what I sent--a different approach to PR:

Expert Commentator: Enron Verdict/Ethics Issues

As a verdict nears in the trial of Kenneth Lay and Jeffrey Skilling of Enron, business ethics author is available for comment on Enron verdict and other business ethics issues.

Hadley, MA (PRWEB) May 23, 2006 -- As a verdict nears in the trial of Kenneth Lay and Jeffrey Skilling of Enron, business ethics author Shel Horowitz is available for comment on Enron verdict and other business ethics issues

Suggested Questions to Ask Shel (or choose your own):
* What does this verdict mean for American business? For business worldwide?
* What's the business secret that Arthur Andersen, the company founder, understood--but that the Arthur Andersen accountants who conspired with Enron were clueless about?
* You say 'nice guys don't finish last!' How can a 'nice guy' attitude generate business success?
* How did the Tylenol poisoning scare actually help its manufacturer, Johnson & Johnson?
* Does an ethical attitude matter more in a big company or a small company?

* Award-winning author of Principled Profit: Marketing that Puts People First (and six other books)
* Founder of the Business Ethics Pledge
* Regular columnist for Business Ethics Magazine
* Speaker on ethics to the Public Relations Society of America International Conference, Publishers Marketing Association University, Folio magazine industry conference, UMass Family Business Center, and many other organizations
* Blogger on ethics issues since 2004
* Host: Principled Profit: The Good Business Radio Show (WXOJ, Northampton MA)
* Frequent interviewee in major print and electronic media (see for detailed list)

Perspective: In the long run, ethics is *good* for business. Ethical, cooperative businesses make more profit, create intense customer and employee loyalty, and have a much better chance of staying out of legal and regulatory trouble. Greed of Enron's senior officials blew apart two companies and had a definite human cost. Specific comments will depend on the verdict.

Commentator Personal Profile: Shel Horowitz, 49, copywriter and marketing consultant. Lives on a working dairy farm in Hadley, MA. Married to novelist D. Dina Friedman; two children.

Shel Horowitz
Office (and best message number): 413-586-2388
Home: 413-584-3490
Email: shel AT (Subject: Ethics Interview Request) (Ethics Pledge)

# # #

I'll let you know how it goes.


At 8:09 AM, Blogger Stuart Wood said...

Hi Shel,

Couldn't agree more...

The historically and widely accepted primary purpose of business is to increase its wealth thus achieving a profit and increasing shareholder value. But how does this narrow view best serve humanity?

What this unitary ‘profits are everything’ approach does not however conceive is the wider implications of the firm operating within society, of which it is inextricably linked, and the affect that it may, directly and indirectly, have on the people and various other constituents, that make up that society.

Milton Friedman, the Noble Prize winning economist, vigorously protested against the notion of corporations taking on any wider social responsibilities. Moral responsibility, according to Friedman, is exclusive to human beings and therefore not the concern or duty of the firm. Furthermore, management should act solely in the interests of the firm’s shareholders and certainly not become involved in social issues, which he contended were the sole responsibility of government. However, if moral responsibility is exclusive to human beings, and not to the firm, then is Friedman suggesting that employees of such firms need to leave some of their humanity, and certainly their morality, at home?

How then, can the consumers engage and trust these inanimate, morally vacant firms, and would the consumer want to engage with this type or organisation if it knew about it’s ‘character’ or lack of character - surely not. Furthermore, would other constituents, in contact with the firm such as suppliers and employees, and local communities enter into a relationship with such an organisation if they too were aware of this lack of humanity within the firm? Maybe customers, potential and existing, would think differently if they knew the morally indefensible lengths that some companies will go to in order to achieve a profit.

Lee Iacocca is a prime example of a manager that went too far. He is a widely known as a morally vacant, single-minded, profits driven manager who went to extremes to achieve profits. Iacocca was the manager in charge of the infamous Ford Pinto over twenty years ago when it was going head-to-head in competition against the VW Beetle. There was a problem with the Pinto’s fuel tank that had a propensity to explode under impact. The executives at Ford, led by Iacocca, were fully aware that the Pinto was dangerous under certain conditions and they carried out a review of what was required to make the car safe. The findings would have certainly saved the lives of Ford’s customers.

However, the cost of improving the quality of the Ford Pinto fuel tank was $5 per vehicle and it was deemed too expensive for the cars to be recalled. The company actually carried out a cost-benefit-analysis of recalling the Pinto against the predicted number of deaths per annum that may be attributed to the weakness in the Pinto’s fuel tank and thus the amount of damages the company would have to pay out to the families of the deceased Ford customers. It was cheaper to payout to the families of the deceased than to improve the safety of the fuel tank and thus the improvements were shelved. See Ford Memo.

Hundreds of people lost their lives because of this singleminded pursuit of profit at any much for customer service!

Surely this case should have served as warning to all unitary focused, profits are everything, whatever it takes, morally vacant businesses and also motivate government to legislate. However, this has not proved to be the case with many different ethically vacant incidences over the past twenty years involving companies such as McDonalds, Enron, WorldCom, Shell, Nike and others.

There are however a few shining lights out there that have developed their businesses by steadily increasing sales and market share, without selling their souls, or behaving in an illegal or morally indefensible manner. Cafédirect, Ecover, The Body Shop, Ben and Jerry’s Ice Cream, Charles Schwab, The People Tree are testament to this fact. Recently, even big business has caught on to the idea that these “high value” ethical brands may have the potential to develop a more meaningful and human relationship with the customer. So much so that The Body Shop (L’Oreal) and Ben and Jerry’s (Unilever) have been bought out by multinationals.

Note that the primary goal of each of these "high values" companies was not to enrich shareholders; it was in fact to enrich and benefit the actual suppliers, customers, employees, shareholders and the wider society thus developing real long-term relationships that benefit all.

Businesses and their managers should be responsible to their shareholders but they should never lose sight of their responsibilities to their employees, suppliers, customers, the communities and environments in which they operate and society in general. Enlightened shareholder value, which is striking a balance between the competing interests of the different stakeholders in order to benefit the shareholders in the long run is the policy advocated here. It makes perfect business sense. The Iacocca, purely profit driven focus on shareholder value, above the lives of his own customers, is utterly reprehensible.

Good business; embracing values, ethics and fairness, as Cafédirect, Ecover, People Tree and others have illustrated, can make perfect “high value” business sense. This is an entirely more fair, intelligent and human way of doing business for all involved.

At 5:56 AM, Blogger Shel Horowitz, author, Principled Profit said...

Shel responds:

You're absolutely right. I use Ford frequently as a negative example--not only with regard to the Pinto (and my research had the cost of fixing at only $2 per vehicle, BTW) but also the Explorer; the company knew about the rollover problem before the car was even released, but it didn't learn from the Pinto and did the same thing again. And Ford took a huge financial hit when the word got out. I discuss this specifically in my book, Principled Profit: Marketing That Puts People First.

Fortunately, there are many, many ethical companies in addition to the well-known examples you cite. I profile one every month in my newsletter and am in no danger or running out.(grin)

At 4:30 AM, Blogger Stuart Wood said...

Hi Shel,

Cool. I completely agree about the amount of ethical companies out there and I will look forward to your monthly citations with interest.

I tend to believe, more so maybe, that smaller companies have greated integrity due to the fact that the vision holder is still a major driving force within the business and "owner" of the companies values.

I tend to furthermore believe that when I company floats on the stock market that this is when it starts to lose its identity and the previous values that made the company successful in the first place. This is a little simplistic I know but thereafter the unitary purpose of the firm is to increase shareholder value and not to realise the vision of the founder.

What is your thinking on this?

At 8:33 AM, Blogger Shel Horowitz, author, Principled Profit said...

I think you've hit an important point. Many public companies are pretty much forced to put shareholder value above all else, both because of legal requirements and the expectations often unrealistic) of Wall Street analysts. There are many companies that have chosen not to go public, precisely to maintain that control, and thus their integrity.


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