Lately, Steve Priest’s phone has been ringing off the hook.
As the founder of Wilmette, Ill.-based Ethical Leadership Group, and purveyor of his own brand of corporate Spin n’ Span, Priest has become one of the most sought-after consultants in the nation. For now, most of his day is spent helping management craft and draft corporate ethics codes. But he took time from his development sessions recently to speak with CFO.com’s Lisa Yoon about ethically tricky situations, and to pass along some advice for CFOs about how to improve ethical leadership.
Q: What’s the underlying practical approach to your programs? Can you really teach people to be ethical?
A: The most fundamental form of resistance we encounter is from people who question us, demanding, “Who are you to teach me what ethics is? I know what ethics is.” We explain that we’re not trying to teach them what ethics is. Our underlying assumption is that people know that, and have a set of broadly defined values that they all align with. Instead, we spend most of our time applying their ethics to the very complicated business world that we live in. It gets tricky sometimes in the real-life, give-and-take of the business world. But that’s what we want to talk about. .
Q: Can you give me an example of a tricky situation?
A:We’ve been working with one client for 6 or 7 years now. When we first started, the company had a heavy “make plan” culture. Making plan was priorities one, two, and three—there were no others. We did some case studies and found that there was a lot of discomfort among employees about managing to make plan while remaining ethical. There was a tremendous amount of grey area especially at the end of quarter, for things like creating new programs for customers to push merchandise out the door; telling suppliers to delay invoices; or playing around with reserves to make the numbers. A lot of the measures were probably legal, but very aggressive and a detriment to the long-term success of the business. After working with them for five years, it’s a different company. They don’t take aggressive measures just to make the numbers, but they provide more than legal reasons for what aggressive action they might pursue. Management says it would be bad for long-term prospects to revert back to old ways.
Q:CFO Magazine recently reported that the problem with ethics training is that no one thinks they need it. Do you think that’s especially true of senior managers?
A: In one sense that it’s true that most people don’t need ethics training. I’d say 99 percent of the don’t need it, and the one percent that do, well, ethics training is not going help them. However, look at it this way. Americans spend roughly 2000 hours at work a year. For 1,999 of those hours, the message is “make plan. Make the numbers.” Spending a few of those hours reinforcing the idea of making the number within legal and ethical parameters is a necessary message these days.
Q: What can CFOs do provide good ethical leadership?
A: We’ve found that employees very often view CFOs as the guardians of the company’s integrity. Even if there’s an ethics officer, CFOs have traditionally held that role because of the power and influence they wield, and because of the system of control that emanates from them. So the advice I would give CFOs is to seize every opportunity to send that dual message: The numbers are important, but how we make the numbers is equally important. CFOs give a lot of presentations to employees in their organization. CFOs should spend a minute of every presentation referring to the company’s ethics code. That constant reminder makes a difference. The other advice I would give is don’t shoot the messenger. Be readily available to hear honest, bad news. Look at the news this week, the controller at WorldCom tried to shoot down the honest concerns of a lower-level finance employee. Well, that message spreads really fast [around the organization].
Q: There’s a renewed vigor in exercising ethical due diligence in the wake of the corporate scandals exposed this year. How long do you think it will last?
A: Some economic historians say that the collective American memory is far shorter, and much more forgiving, than the collective memories of other countries and regions. Reportedly, Americans do things in 15-to-20-year cycles. I would say the during the next three to four years, we’re going to see a massive effort to practice due diligence. After that, I don’t know. There will be some companies who will continue to be careful even after it’s not a hot-button issue. And there will be others who will go back to “business as usual”—and I mean that in quotes.
On the Move
>> A Growing Concern. Lawn and garden specialists The Scotts Co. appointed SVP of finance Chris Nagel to CFO post effective January 1, when EVP and CFO Patrick Norton retires. Norton will serve on board of directors and as a consultant for Scotts LawnService … Canadian brewer Molson Inc. named Brian Burden EVP and CFO. Burden spent 15 years at British consumer products company Diageo Plc, most recently as SVP of Seagram Corporate Venture Transition. Replaces Robert Coallier, who became president and CEO of Cervejarias Kaiser, Molson’s recently acquired brewing business in Brazil … PNC Financial Services Group Inc. announced that William S. Demchak has been named vice chairman and CFO. Robert L. Haunschild resigning to pursue other interests. Demchack most recently served as the Global Head of Structured Finance and Credit Portfolio for JP Morgan Chase … Philip G. Zuccaro named VP, CFO of The ABC Cos. Inc., Buffalo, N.Y.-based commercial-receivable management firm. He was formerly VP, finance and VP, operations support at Sorrento Cheese Co.