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Can You Afford to be Ethical?

Author: Jim Mahurin

March is Ethics Awareness Month. I want to ask if you can afford to be ethical? You may be surprised to learn that my short answer may be "No." It is expensive in many ways. To learn how from the findings of a study and my own personal experience, keep reading.... ​

There is a wonderful scene in the play My Fair Lady where Eliza Doolittle's father, a cheerful amoral street drunk, is asked by Professor Higgins and Colonel Pickering, "Have you no morals, man?"

"No, No," he replied, "I can't afford them." 

Alfred Doolittle was thereupon declared one of the world's original moral philosophers, sent to America on a lecture tour and became a wealthy cheerful amoral street drunk. 

March is CPCU Society Ethics Awareness Month. I want to ask if you can afford to be ethical? You may be surprised to learn that my short answer may be no. My basis for this statement is that a significant percentage of incidents involving unethical conduct involve illegal activity. When an individual steps up to confront many situations, particularly challenging people in positions of superior authority, they may be in for a long, lonely, embittering and occasional dangerous trip. It is expensive in many ways.

A business ethics conference led by staff from the University of Virginia Graduate School of Business used a case study approach to examine the value of companies that had made unethical decisions. They tracked the sequence of events to identify internal discovery of the problem, cover up, public disclosure, resolution, etc. They also tracked the careers of men and women involved in the incident, focusing on the ones who objected to the problems before they became public. Their observations were most interesting.

  1. Men and women who had raised objections early in the internal discovery phase - and did not prevail - were finished. They may not be forced out or fired, but their careers in the organization were toast.

  2. This phase was followed by a departure of high quality, and ethically minded, personnel. This group may not have challenged those in authority, but decided to pursue their careers elsewhere. 

  3. The loss of responsible people resulted in a negative change in the culture of the company (or division).

  4. Public disclosure of the problem ultimately resulted in adverse publicity, changes to earnings reports, lawsuits, criminal charges, etc. The value of the firms took a dive.

  5. Public disclosure was followed by another departure of high quality ethically minded personnel who were not previously aware of the situation.

  6. The loss of value in the companies continued for years. Some continued for a decade or more. 

  7. The cause of the loss in value of the companies was not particularly attributable to the internal problem that had been covered up. It was their loss of employees who had made a personal decision to leave in the face of unethical behavior by their co-workers or superiors. 

  8. The men and women who left these companies for ethical reasons had often paid a high price. But long term they had enjoyed successful careers - largely elsewhere. 

I spoke briefly at this conference. Since 1984 I have had several projects that resulted in investigations for large scale fraud and criminal activity. Reporting illegal activity can be quite an experience. You may be prohibited from speaking with anyone outside a narrow circle of people you don't know. You cannot discuss the situation with co-workers, friends or family. The specter of retribution is real. You may live, for good reason, in fear. It's not like the movies where the tension ends in two hours. The situations drag on for weeks, months or years. It can be a terribly isolating and miserable experience. 

But don't hesitate for a moment to do the right thing. Carefully collect your information. The information you possess may not be complete, but it can be invaluable to a separate investigation. 

The process of reporting is not straightforward. A conversation with your attorney may be in order. 

It may be prudent to find someone outside your circle of co-workers, family and friends who can listen. The stress can be dreadful.  

You may pay a high price for your decision. But don't back down an inch.

Jim Mahurin, CPCU, ARM

​127 South Peyton Street
Alexandria VA 22314
​phone: 800.221.7917
fax: 703.683.7556

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