Doing the Right Thing Pays off despite Evidence to Contrary, Many Companies Show They Mean Business with Ethics Policies

By Comerford, Mike | Daily Herald (Arlington Heights, IL), February 5, 1999 | Go to article overview

Doing the Right Thing Pays off despite Evidence to Contrary, Many Companies Show They Mean Business with Ethics Policies


Comerford, Mike, Daily Herald (Arlington Heights, IL)


Byline: Mike Comerford Daily Herald Business Writer

A national survey recently asked employers to rank the qualities they value most in college graduates. Communication skills came out on top; ethics languished at 10th.

That along with the favorable poll ratings for President Clinton, who is often described as a great communicator who's ethically challenged, could make one wonder how highly prized ethics are in the American marketplace.

Local examples of alleged backsliding on business ethics abound:

- Hoffman Estates-based Sears, Roebuck and Co. is embroiled in a class-action lawsuit alleging it is one of 17 American retailers using low-cost suppliers in the American territory of Saipan that lure immigrant workers to sweatshop jobs by offering "jobs in America."

- Northbrook-based Allstate Corp. is under criminal investigation for its practices in settling claims stemming from the 1994 Los Angeles earthquake.

- Mercury Finance, a Lake Forest-based sub-prime auto lender, cooked its books for four years running and its stock price, now at about 13 cents, got burned.

Ethics violation allegations, true or false, can pulverize a corporation's stock. So much so, in fact, that many large companies have major ethics programs partly as a matter of risk management.

"Companies are moving towards hotlines, ethics codes, training and ethics officers," said Barbara Ley-Toffler, a partner at Arthur Andersen and director of ethics and responsible business practices, adding that the Chicago-based firm has all the above.

Perhaps ironically given the presidential impeachment trial now going on in the Senate, the widespread study and institutionalization of business ethics first took off after the Watergate era, which ended in President Richard Nixon's resignation for ethical abuses. Then in 1991, federal regulations were enacted stating that having an ethics policy would be a mitigating factor in federal cases.

Industry analysts estimate that about 95 percent of Fortune 500 companies have ethics policies.

In general, large corporations get more attention during scandals, but also are the leaders in ethics initiatives.

A nationally recognized leader in implementing ethics policies, Sears is a model for many large corporations.

The retailer began revamping its ethics policies in 1994, shortly after Chief Executive Officer Arthur Martinez took over the company.

It has rewritten its policies, set up a toll-free service line, trained employees and appointed long-time employee William Giffin as vice president of ethics and business practices.

Having good policies doesn't guarantee a company won't have ethical lapses.

In the last few years, for example, Sears has been accused of several ethical and legal misdeeds. Among the most costly occurred in 1997, when Sears took a $320 million charge after allegations of illegal debt collection tactics.

Ethically speaking, however, it is all in the way you look at it.

Giffin maintains the settlement was an ethical response to a bad business practice.

"Being a company of good business practices doesn't mean bad things won't happen. Its a matter of how you react to it," said Giffin, adding that the company repaid the wronged customers with interest. "We didn't say, 'Poor us.' We said some people in Sears didn't do the right thing, and we're going to make things right."

Allstate maintains it is doing the same following allegations that independent contractors filed bogus appraisals after the 1994 Los Angeles earthquake. …

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