So what's the big deal? Running a business means making compromises on a daily basis. While this CEO took a check for a job he knew he couldn't deliver, he reasoned that if he didn't cash the check, he wasn't really taking the money. And c'mon, his decision ultimately had no adverse effects on his company or its employees. Ethics, be damned. He's running a business, not a Sunday school.
Well, here's the issue: Listen to yourself the next time you start yapping about the customer that hasn't paid its bill for two months. Pay attention the next time you're griping over that vendor who signed on to do a job for you that he had no business doing but took because he needed the cash. Prick up your ears when you hear watercooler tales about the government's taking forever to pay a small-business customer. And then remind yourself that you are that small company being stiffed, misled, and strung out. Suddenly, the appropriateness of stepping back and asking yourself and your management team the tough ethical questions that go hand in hand with managing a less-than-virile cash flow comes clearly into focus.
The consequences of whether--and how--you address such questions can have broader implications than you realize. Ultimately, bad ethics lead to bad business practices' becoming acceptable behavior. "Our client was surprised when we returned the check," says the software-company CEO, "not because we didn't cash it but because they thought we'd keep the money and try to snake out of repaying it somehow. In the type of business we're in, there's a lot of maneuvering that goes on."
Jeffrey L. Seglin is an executive editor at Inc.
(The following readers' comments appeared in a subsequent issue of Inc.)
Bulletin Board
Readers' Debate: 'Does Your Word Mean Anything?'
January's Black and White column, "Always a Payroll to Meet" chronicled one CEO's predicament: facing a payroll he knew he wouldn't be able to meet, the CEO was relieved when a check for $94,000 showed up on his desk. That amount was sufficient to cover payroll, but a customer had sent it as payment for a customized-software order that the CEO knew his fast-growing company couldn't produce. Still, he needed the cash. What to do? Rather than leveling with the prospective customer, the CEO stalled by putting the uncashed check into a folder and proceeding to go through the motions of speccing out the project while he tried every method possible to speed up the collection of every bill owed to his company. The CEO succeeded, then returned the uncashed check. The column concluded with the observation: "Ultimately, bad ethics lead to bad business practices' becoming acceptable behavior." Readers disagreed not only over the right thing to do in such a cash-flow crunch but even about whether there was any ethical issue at all.
Roy Muller, president of BGB Inc., in South San Francisco, Calif., didn't see any ethical issue: "The whole concept that there are ethics involved in cash-flow decisions is ludicrous. It is a fact of life that with a small, fast-growing business without lines of credit or large capital backing, you have to make choices. The only ethics involved are that you don't try to snake out on anyone or hide from them. It is also a fact of business that every time we extend credit to someone, we are taking a risk that we won't get paid or will get paid late."
But Suzanne Du Molin, vice-president of Du Molin & Du Molin Inc., in Tiburon, Calif., found Muller's observation disheartening: "I really hate to hear anyone say there are no ethics involved in the question of paying on time. To me, it boils down to, Does your word mean anything? I've run up against clients who had Roy Muller's attitude...and I was careful not to extend credit to them again."
Steve Lawler, president of Ethos Consulting Inc., in St. Louis, felt that the CEO ought to learn something from the experience: "It wasn't clear whether this incident ushered in any kind of policy decision for future situations. Creating an ethical climate that is not simply reflexive requires thoughtful and reflective practice. The best news from this situation would come if after this happened, the company now had another piece of clear ethical modeling to add to its continued process of becoming a place with a certain culture. That would be the best return on the CEO's and managers' investment of time, stress, and fear."
Finally, Frank Navran, a senior consultant with the Ethics Resource Center, in Washington, D.C., reminded us that what's at stake reaches far beyond the individual ethics of any one CEO: "To rationalize that I cannot do anything about the state of business, because I am just a [fill in your position here] is ignorant, cowardly, and incorrect. The only way the state of business will become more ethical is through the commitment of individuals at all levels of organizations to the highest ethical standards: CEOs who refuse to play cash-flow games with other people's money, leaders who tell their key employees the truth, vendors who accurately communicate their capacities, and employees who understand that anything less than the ethical choice is unacceptable."
