Friday, March 05, 2004

The Search for Blame is Always Successful

Quite frankly, I am a little surprised at the Martha Stewart Verdict. I am not a lawyer or legal scholar, and I didn't follow the case closely, but based on what I knew about the case it seemed that the government's case was pretty weak and nothing more than a political effort to show a few CEOs swinging from lamp posts after the bursting of the internet bubble, Enron, Worldcom, etc.

However, I am not holding Martha blameless. Here are a few pointers that were hammered into my head by my business ethics prof (It was a fun class. The prof was like a young version of Professor Kingsfield from The Paper Chase, intellectually skewering young minds that would dare debate with him - and you had no choice but to debate him since he would call on you, ask your opinion about the case being discussed and automatically take the opposite view):

The Line Between Legal and Illegal Isn't Fixed - The prof drew up a wavy line on the board and said that was the line between legal and illegal. And - oh yes - this wavy line moved up and down. In other words, things that were perfectly legal one year could easily be found to be illegal the next year. And a lot of it depended on politics. If you want to stay clean, DON'T stay on the "just legal" side of the line - you could find yourself on the wrong side of the line in a heartbeat. Stay FAR onto the legal side of the line and you will stay in the clear.

Use the Smell Test - The prof liked this one and used it throughout the semester. If something even smelled unethical - even if it was legal - avoid it like the plague. During case study discussions he would often pick out a hapless classmate and simply ask "Does this pass the smell test?". Of course, whatever he said the prof would take the opposite view, so the trick was always to back up your opinion with facts.

The U.S. is NOT the Safest Political Place to Do Business - This was a good lecture. The topic was "safest political places to do business in the world". Everyone assumed that we were going to talk about countries that have a Dictator of the Month. The prof said he was going to start listing countries from top (safest) to bottom. "Wait", he stopped at turned to the class, "who do you think is first?". Everyone assumed the U.S. Wrong! The U.S. wasn't even in the top five.

The risk of doing business in the U.S. is being too successful. Become too big a target and the government will come after you, guaranteed. Standard Oil (broken up the government despite the fact that oil prices dropped for consumers in every single year of its existence), Microsoft (constantly on the defense from government), Halliburton (constantly on defense from the Left), the list goes on and on and on. Or you can be regulated out of existence, have your profits taxed away (anyone remember the Windfall Profits Tax on oil companies?), or attacked just for doing economically savy business decisions (there was an item today on CNN attacking companies for doing things to lower their taxes - like putting subsidiaries overseas. Lowering your taxes isn't illegal - avoiding them is - and there was nothing illegal by what these companies did - and I would say it would pass the smell test since this is like being attacked for deducting your mortgage interest, but my prof would, of course, debate me on that).

This goes into the whole discussion of business bashing by politicians, typically the Left. They love jobs but hate the businesses that provide them. I have never have figured this one out.

The Very Big Fish and The Very Small Fish Typically Get Away - This little rule of thumb didn't hold up for Martha (and maybe not applicable after 10 years): The law is like a fishing net. The really big fish can break through and get away. The really small fish slip through the holes in the net and aren't interesting to catch anyway. It's all the medium sized fished that get caught and eaten.

The warning 10 years ago was this: If as a middle manager at a company you know about malfeasance going on, you are more likely to serve time than the CEO (so come clean, turn State's, etc.). I think this was true a decade ago when I was in business school, but I think after the past few years with Enron and what not, the CEO is more likely to serve than the middle manager. But I think it is still something to keep in mind.

The Search for Blame is Always Successful - This wasn't in business school, but a quote I read somewhere (and can't find who to attribute it to), but a truism whether discussing political grandstanding by prosecutors or office politics.

So while I disagree with Martha's conviction, I think she could have avoided her situation all together if she had known about these little lessons.

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