President and CEO Institute of Management Accountants
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How to Recognize an Ethical Lapse at Work

May 17th 2016
President and CEO Institute of Management Accountants
Columnist
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There is an old proverb that says, “Money is the root of all evil.” As accountants, we’re not sure that’s entirely true, but it’s undeniable that money has served as a primary motivation for many corporate scandals. Enron, Madoff, Lehman Brothers, and countless others have been brought down by greed and accounting scandals. At the root of these scandals were smaller ethical lapses that snowballed into organizational crises.

Ahead of the IMA’s Annual Conference, I sat down with Marianne Jennings, emeritus professor of legal and ethical studies in business at Arizona State University’s W.P. Carey School of Business, to get a preview of her session, “What Went Wrong in Organizations that Made the Headlines for Ethical Lapses.” During our talk, Marianne discussed the best career advice she’s ever received – a simple trick to build trust and stay honest.

Jeff Thomson: How would you define ethics in an organization?

Marianne Jennings: A culture that welcomes and fosters truth, transparency, and challenges to groups and individuals. An organization that thinks about issues and dilemmas by understanding how others are affected by their decisions.

Thomson: You’ve worked with numerous government agencies, professional organizations, and educational facilities to create and sustain ethical cultures. How can someone recognize a headline-worthy ethical lapse in their own organization?

Jennings: We don’t really see the headlines when we’re conducting our day-to-day responsibilities. Instead, what we see ourselves doing is making exceptions, waiving rules, or skipping steps to get our work done. For example, suppose that someone in your organization has not completed the required company IT training. This individual has been on medical leave, just returned from medical leave, or just received a promotion or big assignment – they are in a time crunch. So, you let the IT training slip – sign off on it as completed because they promise to do it. Then you have a system hack. The headline never captures the human reasons that made you feel justified. The headline is, “Security breach resulted from falsification of records,” or “Hackers access facilitated through employee who skipped training.”

Or you waive a travel reimbursement rule or a requirement for a receipt. The headlines when the company has financial issues: “Lax records on travel expenses,” or “Unauthorized expenses reimbursed.”

We have to start thinking about what could happen if a rule or process is broken and anticipate what the headline will be. If something goes wrong, every little thing can become front-page material. Hindsight makes the importance of the little missteps clear. We develop that hindsight if we work to anticipate the headlines.

Thomson: As an organization, how can you tell if you’ve crossed an ethical line?

Jennings: You may have crossed a few ethical lines if:

  • You charged $374,860 in personal expenses to your corporate credit card (Shana Madoff – Bernie Madoff’s niece and the compliance director for the Madoff fund).
  • You are chasing garbage trucks at 2 a.m. in order to dispose of the smashed hard drives from your computer at your hedge-fund firm because you heard the Feds were investigating hedge funds for insider trading.
  • You are an FBI agent and dating the wife of your suspect in a fraud case.
  • You are a member of the House of Representatives from New York and then claim Maryland residency on your tax return in order to reduce your state income taxes.
  • You write in an email, “There is more to what’s going on here, but I don’t want to put it in email.”
  • You say, “You can’t ever say anything about this,” “Just between you, me, and the wall … ,” “We can just spin it a different way … ,” “What he doesn’t know … ,” “We can reverse it out next quarter … ,” or “Who’s to know?”

Thomson: What’s one of the most common unethical hiccups professionals have at work?

Jennings: It can be a number of things. Some of the most common hiccups include: letting others take blame for our own mistakes, not speaking up when someone misrepresents facts or events, or when someone’s interpretation of a rule, regulation, law, or policy is incorrect. It could even be misrepresentations about work and dishonesty with time, like being late, taking longer lunches, leaving early, clocking in and out for others, or playing computer games.

Thomson: In what department do you see the most ethical lapses occur, and why do you think that’s so?

Jennings: It depends on the type of ethical lapse, but there is a universal problem in any area when there are records kept and goals to meet. For example, if safety is a goal, then those who fill out the paperwork for incidents, classification, etc. have the same temptations that those in finance and accounting do – making the numbers work.

Similarly, if a sales contest focuses on the number of new customers the salespeople bring in, then you will find interesting definitions and classifications for who exactly is a new customer, and you might find that shipments are sent to an existing customer but put into the system as a new customer.

Thomson: What is the greatest career advice you’ve ever received?

Jennings: Be the same person no matter what the setting. That way, you say the same thing in the same way to everyone. Everyone knows you as one type of person – it builds trust. So, if you would speak up in a staff meeting about an issue or concern, you should speak up if you are on a board of impressive members. If you tell the truth and are honest in your personal life, be the same person at work.

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