Driscoll was certainly burned, first by his experience with the demise of Emerald Electric and then when Coffee by George flamed out. But not so burned, apparently, that, as Bartmann and Graff did, he felt compelled to make Emerald Electric's creditors whole when he found success in his new venture, Darlyn Development Corp. Of course, Driscoll had no obligation to make such restitution. But he did have the choice.
Driscoll's view exemplifies just how murky a world situational ethics can create. They let you define what's ethical as each situation suits you. If the laws are such that you end up getting burned in a business deal, even though no law has been broken, you can feel violated by someone of dubious ethics. If your business fails, and you have no resources left to repay your creditors, then you can feel vindicated by the protection of the laws.
But here's the pitfall that a case like Driscoll's demonstrates: when you tailor your ethics to fit whatever situation you happen to be in, you may feel fully justified in seeing ethical lapses in situations that are just unfortunate. Sure, it feels good to accuse people of an ethical transgression if they've wronged you somehow (problem employees you've got to fire, greedy creditors you're trying to string out until your cash flow improves, deadbeat customers who've been stringing you out until their cash flow improves). But a situation that feels unfair doesn't necessarily stem from unethical practices.
As entrepreneurs, you can make choices for your business based on what you believe is the right thing to do. You can, like Naddaff and Driscoll, choose to close down a business, liquidate its assets, and pay creditors back an agreed-upon percentage of what you owe them and not a dime more, ever. Or, like Bartmann and Graff, you can choose to pay people back in full regardless of what the law requires. Sure, Driscoll can have as strong an opinion as he wants to about how Naddaff should have behaved--even if that contradicts the choices he himself has made--but that doesn't mean Naddaff did anything unethical.
"This is a man who is upset, and rightfully so," says Naddaff. "Especially if it hurt him in other ways. But it was a decision that was made by the board, who said, 'This business is not viable.' A brave man does it with a sword. The coward with a kiss. And that's the way it's done in business."
Jeffrey L. Seglin is an executive editor at Inc. If you owe him money, we think you know what to do.
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."
What do you think? Cast your vote here:
