Outside View: Corporate chutes and ladders

By PETER J. PITTS, An Outside View commentary   |   July 11, 2002 at 10:22 PM
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INDIANAPOLIS, July 10 (UPI) -- As President George W. Bush speaks out on corporate ethics, a new Conference Board panel is meeting to develop "best practices" guidelines for business ethics.

According to Richard E. Cavanagh, Conference Board president, "There will be no sacred cows. All issues are on the table. Wherever the chips fall is where the chips fall." In today's topsy-turvy business environment, magnitude and gravity have intersected with complexity and uncertainty to produce a backdrop akin to chutes and ladders. Getting it right, however, is not a game.

Of course all firms need to have comprehensive plans and processes in place through which crises (both ethical and otherwise) should be managed. But all things being equal, as the dice are rolled and the game unfolds, why do some companies seem to land on ladders, while others on chutes? The one word answer is ethics.

Corporate boards, and in particular their governance committees, must constantly gauge the moral compass of top management. The small, day in, day out decisions a company makes regarding not only its accounting procedures, but also its employees, its customers, its suppliers, its creditors and government regulators will very likely predict how management will make decisions when facing a crisis.

When the turn of events inevitably lands the company on a chute, the ethical decision taken early will safeguard the company from falling beyond corporate salvation. The correct ethical decision is always the best business decision.

Because of the viral nature of today's mega-crises, boards should also ensure that company management is enriching the company's sources of knowledge. New and diverse perspectives will generally yield fresher solutions to the problem than large amounts of existing resources, however well intended. Whether legal or legislative, scientific or social, management must not hesitate to augment their skill sets in a time of crises.

When a crisis looms, rather than circling the wagons, savvy boards must facilitate the search for outside expertise that can create ladders from chutes -- and help make the inevitable chutes less slippery. Today, companies need fewer yes-men and more chessmen.

Finally, boards should ensure that management is always prepared to flex the organization. Not only should skills be broadened, but also lines of responsibilities morphed so that the demands of a crisis supersede the functional ego and emotions within the firm. Boards should also keep in mind that an intense, company- enveloping, crisis can provide an opportunity for positive, dramatic change. A ladder extender, you might say.

Ultimately the motto for dealing with crises in business is that coined by the founder of the Boy Scouts movement, Sir Robert Baden Powell: "Be Prepared." But preparedness in today's world has new elements that boards must ensure are forever more part of management's repertoire.

A verified moral compass, a fearless passion for enriching the knowledge of the company, and a willingness to flex the organization will greatly increase the likelihood that the company will not just survive the chutes and ladders game, but will emerge stronger from the experience.

Peter J. Pitts is a senior fellow at the Institute for Strategic Communications and an adjunct professor at the School of Public and Environmental Affairs at Indiana University.

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