Article originally published in the Philadelphia Business Journal on April 25, 2016

Margate’s nearly three-year battle with the New Jersey Department of Environmental Protection opposing the building of dunes to protect the city from severe storms and hurricanes should come to an end. On April 11, New Jersey Superior Court Judge Julio Mendes ruled that the state’s use of eminent domain to seize beach parcels of property with appropriate compensation to build the dunes is not “arbitrary or capricious.” As of this date, no decision has been made by Margate’s three commissioners on whether to appeal Judge Mendes’ ruling. Hopefully, they will not do so.

Superstorm Sandy hit the New Jersey coast in late October 2012 causing significant devastation to beach towns. In 2013, Governor Chris Christie launched an initiative to build dunes along the entire New Jersey coast to protect life and property from future storms. A vocal group of Margate citizens spoke out against building dunes, arguing in part that Margate’s system of bulkheads is sufficient to protect the city, and that attention should be paid to the flooding which occurs on the bay side of the city caused by high tides during severe storms.

In November 2013, the citizens of Margate voted against the dune project and in another vote a year later, authorized the city Board of Commissioners to take legal action to prevent the dunes from being built.

On Nov. 2, 2015, I wrote an article headlined, “Battle over Margate dunes: City and state leaders need to talk with each other.” In that article, I stated that the effectiveness and costs of both the dune and bulkhead alternatives should be evaluated to help guide the decision on how to proceed. Studies developed by the Army Corps of Engineers comparing the dune versus bulkhead alternatives were introduced into evidence during the trial. Judge Mendes used these studies to help him render his April 11 decision.

Now that the court has spoken, it is time for Margate to cooperate with the New Jersey State Department of Environmental Protection and the Army Corps of Engineers to ensure the city gets a seat at the table to influence the design of the dunes and most importantly, to address the issue of street drainage that the dunes will create.

In the interest of full disclosure, I am a part-time resident of Margate with a summer home on the beach block of Douglas Avenue, the end of which is below the grade of the beach. Currently, to drain the street, the city trenches the beach towards the ocean starting from the scuppers in the bulkhead at the end of the street. About four times a year the trench is re-dug so that storm water can continue to drain from the street. When the dunes are constructed, this method of street drainage will not be possible. Drain pipes from the street that run under the dunes will need to be installed so that storm water can be directed and drained out onto the beach. Periodic trenching still may be needed at the end of the drain pipes, depending on the slope of the beach.

Many of Margate’s beach block streets will face the same drainage issue as Douglas Avenue when the dunes are installed, because these beaches will be raised above their previous height. Since the dunes will cause a drainage issue, the cost of a street drainage system should be part of the dune project cost, including the cost of pumping stations if needed. Environmental permits to pump storm water from the street onto the beach should be granted.

I have been told that the original design of the dunes assumed that Douglas Avenue storm water runoff would collect in a trench between the bulkhead at the end of the street and the dune, and that storm water would percolate into the sand. Water will not percolate through saturated sand. It will puddle and stagnate, drawing flies and mosquitos. This is not a solution to the street drainage issue.

It is time that Margate change from being a legal adversary to a partner with a seat at the table. An appeal of Judge Mendes’ decision will risk Margate’s ability to get what it needs to deal with street drainage and other dune related issues.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on April 18, 2016

The CEO has the ultimate responsibility for employee safety in the workplace. The board’s role is to hold the CEO accountable not only for the safety of the company’s employees, but also for workplace health hazards and company environmental performance. These should be included in the metrics the board uses to evaluate CEO performance.

On April 6, Donald Blankenship, the former CEO of Massey Energy, was sentenced to prison for 12 months after being found guilty in December 2015 of conspiring to violate federal mine safety standards. On April 5, 2010, an explosion in the Upper Big Branch (UBB) mine of Performance Coal Company (PCC), a subsidiary of Massey Energy, resulted in the deaths of 29 miners.

In May 2011, an independent investigative report commissioned by the governor of West Virginia titled, “Upper Big Branch – The April 5, 2010 explosion: A failure of basic coal mine safety practices” was published. The report documented instance after instance of safety violations, and showed that production of coal had a higher priority than the safety of the miners.

The U.S. Department of Labor’s Mine Safety and Health Administration (MSHA) imposed a fine of $10.8 million on Massey Energy. A MSHA report on the explosion states, “Massey’s corporate culture was the root cause of the tragedy. MSHA has issued Massey and PCC 369 citations and orders … for an unprecedented 21 flagrant violations, which carry the most serious civil penalties available under the law.”

MSHA Assistant Secretary Joseph A. Main stated, “Every time Massey sent miners into the UBB Mine, Massey put those miners’ lives at risk. Massey management created a culture of fear and intimidation in their miners to hide their reckless practices. Today’s report brings to light the tragic consequences of a corporate culture that values production over people.”

So, how did the Massey board assess Blankenship’s stewardship of employee safety? Bobby Ray Inman, a well-respected leader who has served as an admiral in the U.S. Navy, director of the National Security Agency, deputy director of the CIA, interim dean at the LBJ School of Public Affairs at the University of Texas and a long-term director at Massey Energy, offered his views.

In an April 27, 2010 article by Reeve Hamilton in The Texas Tribune, Inman is quoted as saying, “Blankenship … [is] the best coal miner in West Virginia.” In the article, Hamilton writes, “As Inman sees it, much of the backlash against Blankenship stems from the ripple effect of a [prior] political incident.” Really? The backlash wasn’t due to the 29 deaths at Upper Big Branch mine, and a cavalier culture by Massey Energy regarding safety?

In his article, Hamilton writes, “The Upper Big Branch mine had 19 times the national rate of violations according to a recent MSHA report. … Determining the cause of the explosion will take weeks, and in the meantime, Blankenship has the board’s – and Inman’s full support.” Quoting Inman, “This I learned through my military career: As angry as you may be with somebody, you do not shake the structure in the middle of a crisis. You work your way through the crisis, and then you hold accountability and responsibility. Those words are not carelessly chosen.”

I would respectfully disagree with Inman. Blankenship retired from Massey nearly nine months after the explosion in December 2010. So for those nine months, an opportunity was lost to improve the safety culture at Massey, during which employees continued to be exposed to unsafe conditions.

Was the Massey board ever concerned about Blankenship’s poor history of compliance with federal mine safety standards and a corporate culture not focused on safety? The company had a history of safety issues. Why wasn’t Blankenship held accountable to a higher standard of performance by his board prior to the explosion?

I have served on the boards of a number of companies where, due to the nature of their operations, there were inherent risks to the safety and health of employees as well as to the environment. In many of these companies, management did not report to the board their safety, health, or environmental incidents, and what management was doing to improve performance in these areas. They do now, after I brought this important discipline to the board.

As CEO of PQ Corporation, I took the issue of employee safety very seriously. Our safety, health and environmental performance was presented and discussed as the first topic at every board meeting, before discussion of financial performance. If plant employees were about to perform a task that they felt was unsafe, or they felt that an established procedure was unsafe, they raised the issue with the plant’s management. Hazardous conditions were addressed, to avoid future accidents.

At conferences with plant managers and hourly employees who led plant safety committees, I would state that the safety of our employees came before production. Hazards were promptly addressed. A sense of ownership was instilled in employees for their personal safety and that of their colleagues. Our OSHA recordable accident rate improved, and we achieved first quartile performance within the chemical industry.

Directors, hold your CEOs accountable for more than just financial performance. Hold them accountable for their tone at the top and the culture they nurture within their organization. The world is changing, driven by a focus on reputation, and where millennials, the future leaders of your company, want to work. Companies that do the right thing will be the ones that produce the best returns for investors.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on April 11, 2016

Have you ever worked in an organization where there was a low level of trust among peers, or where direct reports did not trust their boss or the CEO of the company? This type of organization has a toxic atmosphere, which significantly reduces its effectiveness and its ability to achieve results.

What is “trust?” The Merriam-Webster dictionary defines trust as a “belief that someone is reliable, good, honest and effective … one in which confidence is placed.” Wouldn’t we all like to work within organizations in which all employees felt this level of trust in their leaders and peers?

Stephen Covey, the late motivational speaker, writer and advisor, once wrote, “Without trust we don’t truly collaborate; we merely coordinate or, at best, cooperate. It is trust that transforms a group of people into a team.” When people don’t trust each other, there is an invisible elephant in the room, which may adversely impact the effectiveness of any decision.

Whether you are the CEO, a mid-level manager or an individual with no direct reports but a member of a team, trust needs to be earned. So, how do you earn the trust of others?

Be consistent and readable by those within your organization.

As a CEO or other leader, there should be no misunderstanding as to your tone at the top – the values to which you hold yourself and your employees accountable, and the type of organizational culture you are nurturing. Employees trust and want to work for an organization with high ethical standards, and work for a leader that lives by those standards. As a leader, ensure your expectations are understood. Situations will arise when decisions need to be made by your employees for which there is no operating procedure or precedent. Employees will fall back on their good critical judgment and proceed in a way consistent with your expectations, tone and culture.

Learn to effectively work with those within your group.

Get to know your co-workers and peers on a personal level, in addition to a professional level. Be genuine. Take an interest in them. Be supportive and collaborative with what they do. Treat them as valued and respected colleagues. Sense how they view you, and change your behavior if you sense you are not being accepted. There are few things worse than feeling like an outsider, or not trusted by those in your group.

Meet your commitments.

Don’t make a commitment you cannot keep. If the situation changes and you find that you can’t keep a commitment, notify the individual immediately. She may have made a commitment to others, based on your commitment to her.

Don’t blame other people for your mistakes.

If you make a mistake, own it, and share how, in the future, the issue will be handled in a different manner. You don’t create trust by blaming others for your mistake. Employees that do this never last long within the kind of organization in which we all want to work.

Listen.

Focus on what others are saying. Listen intently. Ask questions for understanding. Maintain an appropriate amount of eye contact. If your gaze drifts, you send a signal that you are not interested in what an individual is saying. If they are perceptive, they will stop talking to you. When someone is talking with you, make them feel that you are genuinely interested in what they have to say, even if you don’t agree with them.

Allow your direct reports to share with you a contrary points of view.

I have worked for bosses who were not interested in contrary views. This did not engender trust. As the leader, compare their opinion on how to proceed on an issue with your own view. Through discussion and debate, you may accept their view, or may discover a third alternative path, better than either of the first two paths. Follow this process, and you will rarely choose the wrong way to proceed.

Create an environment that allows employees to share the brutal facts of reality.

As a leader, you want your people to feel safe in sharing bad news. Don’t shoot the messenger. You can’t solve a problem unless you know what it is. You want your people to have trust and confidence that you will listen to them.

Help employees develop a sense of ownership in what they do.

Empower employees, don’t micromanage. Show your employees that you trust them by letting them decide how to accomplish an objective. This will help your employees develop a sense of ownership in what they do. When this occurs, you can rely on them to drive results.

Be accessible and transparent.

Create opportunities for employees other than your direct reports to talk with you. Walk around the office or factory floor. Ask how people are doing. However, avoid telling them what to do. If an issue arises that needs to be addressed, talk with your direct report responsible for the area. Hold town meetings to talk about the business and respond to employees’ questions. Be as transparent as possible, realizing that there are things that cannot be publically shared.

Before making a decision, hear both sides of an issue.

No matter how compelling an argument is presented by an individual on one side of an argument, there is always the other side, which may be more compelling. Hear both sides before making a decision. The individual on the losing side of the issue won’t like your decision, but will respect the fact that you went through a fair process and heard both sides.

Live your values.

Living your values engenders trust. As CEO of PQ Corporation, I experienced a minor OSHA recordable accident while traveling on business. I insisted that the accident be written up, and for that quarter, I was one of PQ’s safety statistics. Word was spread to our 56 manufacturing facilities around the world that the CEO called an OSHA recordable accident on himself. That demonstrated that I held myself accountable to the same standards as I held our employees.

The best talent will want to work for companies where there are high levels of trust with the senior leadership and among fellow employees. These are the companies that have the lowest turnover and achieve the highest long-term returns to shareholders. This is the type of company at which we all want to work.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on April 4, 2016

Does your company have a whistleblower hotline in place? It should. Hotline reports from employees provide an opportunity for your company to address issues in a proactive manner, and avoid or lessen financial liability and legal or reputational damage to your company.

Congress passed the Sarbanes-Oxley Act (SOX) in 2002, requiring public companies to put in place a whistleblower hotline to report fraud and illegal activity. Those who retaliate against whistleblowers are subject to criminal penalties. Dodd-Frank legislation, passed by Congress in 2010, states that under certain circumstances, rewards be paid to whistleblowers who report securities violations and other illegal activities.

Hotlines were in use at some companies prior to SOX legislation, but they were not common. This legislation was passed in the wake of the 2001 accounting scandals at Enron, Tyco, WorldCom and Adelphia Communications, resulting in criminal charges brought against the CEOs of those companies and the unprecedented dissolution of one of the “Big Five” accounting firms, Arthur Anderson, auditors of Enron. Many private companies as well as nonprofits now have a hotline in place.

In practice, employees use hotlines for anything they are uncomfortable reporting using normal company channels, mostly for fear of retaliation. In addition to fraud or illegal activities, these reports could run the gamut from perceived violation of employee anti-discrimination laws, to violation of company travel and entertainment policies, to a tyrant in a management position making life miserable for direct reports.

The audit committee of the company’s board often has the responsibility for reviewing hotline reports and the results of the subsequent investigation. The hotline is monitored by the organization’s internal auditor, legal counsel, or in some cases, an outside firm. Whoever is monitoring the hotline informs the chair of the audit committee and the CEO, as long as the CEO is not the subject of the hotline report. In the event that the hotline report involves the CEO, the monitor directly informs the chair of the audit committee.

I have been a member of many board audit committees and chairman of one. The CEOs of these organizations embrace the hotline as a valuable resource to uncover wrong-doing in their companies, and as a way for corrective action to take place before an issue escalates out of control. Boards view hotlines as a way to ensure they are made aware of issues that require attention.

When SOX was passed by Congress, there was much skepticism as to its utility in the many areas that the legislation addressed, including the whistleblower hotline provisions. As the CEO of PQ Corporation at the time, I had a different view. Having once worked for a tyrant in my earlier years at the company with no practical way to report how this individual was micromanaging and adversely impacting the decision-making ability of the profit center’s employees, I embraced the hotline legislation. No one would take the risk of being personally identified with a complaint about this individual. No one trusted the HR department or the CEO to take action. Had we had the hotline at the time, our concerns would have gone to the audit committee of the board, which after a proper investigation, might have forced the CEO to take action.

Bad managers drive out good employees. I nearly left the company due to this tyrant. Had I left, the company would have been deprived of its future CEO. That is how important a hotline is for employees – a way to report these types of managers and feel safe doing so.

Due to this experience, as an audit committee member, when a tyrant is reported through the company’s hotline, I always take a personal interest in how the complaint is investigated by executive management and the actions to be taken.

Are many hotline reports found to have little substance, or are malicious in some manner? Yes. All hotline reports, however, need to be investigated. That is part of the process. A rough measure of the climate within an organization and a company’s relationship with employees is reflected in the types and substance of the hotline reports that are submitted.

Have there been instances in which whistleblowers using their company’s hotline were retaliated against for reporting fraud or other illegal actions? Yes. Often these situations become public, damaging the company’s reputation. The company runs the risk of being assessed huge monetary damages for retaliating against the employee. It takes courage for an employee to submit a hotline report knowing that retaliation may still occur despite the potential company penalty.

In an Oct. 25, 2014 article in the Harvard Law School Forum on Corporate Governance and Financial Regulation, Kobi Kastiel writes, “SEC Chair Mary Jo White recently commented that it is up to company directors, along with senior management under the purview of the board, to set the ‘all-important “tone at the top” for the entire company.’” Recognition by employees throughout the organization that hotline reports are taken seriously, are visible to members of the board and are effectively investigated and resolved sends a very strong message about the high standards to which all employees will be held regarding ethics and obeying the law.

Employees pick up on everything, including the tone set by the organization’s leadership. CEOs, set the right values, standards of ethical behavior and the right tone within your company. Ensure all employees are informed about the existence of the hotline, and ensure that those submitting hotline reports learn of the results of the investigation. You will significantly reduce the possibility of a scandal and damage to the reputation of your organization.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

On March 21, the world lost a genuine American hero, Robert Ebeling. He was one of five courageous engineers who warned NASA against launching the space shuttle Challenger due to cold weather conditions, which would risk failure of the O-rings on the Challenger’s rocket boosters. The Challenger exploded 73 seconds after launch due to failure of the O-rings. Ebeling told NASA the brutal facts of reality. Organizations need more people like Ebeling.

Howard Berkes, the National Public Radio correspondent who wrote about Ebeling’s efforts and made his story public on the 30th anniversary of the Challenger disaster in January, wrote a tribute to Ebeling on March 21. Berkes’ article chronicles the chilling events leading up to the launch, and the long-term impact on Ebeling, who for 30 years blamed himself for the Challenger disaster. Permission was granted by Berkes to include his article, below. His article can be found at https://www.wnyc.org/story/challenger-engineer-who-warned-of-shuttle-disaster-dies/. Berkes also created an audio account of Ebeling’s story for National Public Radio. It can be found at https://www.wnyc.org/radio/#/ondemand/586604.

Challenger Engineer Who Warned Of Shuttle Disaster Dies

March 21, 2016

Howard Berkes/NPR

Bob Ebeling spent a third of his life consumed with guilt about the explosion of the space shuttle Challenger. But at the end of his life, his family says, he was finally able to find peace. “It was as if he got permission from the world,” says his daughter Leslie Ebeling Serna. “He was able to let that part of his life go.”

Ebeling died Monday at age 89 at in Brigham City, Utah, after a long illness, according to his daughter Kathy Ebeling.

Hundreds of NPR readers and listeners helped Ebeling overcome persistent guilt in the weeks before his death. They sent supportive emails and letters after our January story marking the 30th anniversary of the Challenger tragedy.

Ebeling was one of five booster rocket engineers at NASA contractor Morton Thiokol who tried to stop the 1986 Challenger launch. They worried that cold temperatures overnight — the forecast said 18 degrees — would stiffen the rubber O-ring seals that prevent burning rocket fuel from leaking out of booster joints.

“We all knew if the seals failed, the shuttle would blow up,” said engineer Roger Boisjoly in a 1986 interview with NPR’s Daniel Zwerdling.

Ebeling was the first to sound the alarm the morning before the Challenger launch. He called his boss, Allan McDonald, who was Thiokol’s representative at the Kennedy Space Center in Florida. McDonald phoned Ebeling recently after hearing the NPR story. “If you hadn’t called me,” McDonald told Ebeling, “they were in such a ‘go’ mode, we’d have never been able to stop it.”

Three decades ago, McDonald organized a teleconference with NASA officials, Thiokol executives and the worried engineers. Ebeling helped assemble the data that demonstrated the risk. Boisjoly argued for a launch delay. At first, the Thiokol executives agreed and said they wouldn’t approve the launch. “My God, Thiokol,” responded Lawrence Mulloy of NASA’s Marshall Spaceflight Center. “When do you want me to launch? Next April?”

Despite hours of argument and reams of data, the Thiokol executives relented. McDonald says the data was absolutely clear but politics and pressure interfered. Ebeling blamed himself for failing to convince Thiokol executives and NASA to wait for warmer weather.

“I think that was one of the mistakes God made,” Ebeling told me in January. “He shouldn’t have picked me for that job.”

The morning of the launch, a distraught Ebeling drove to Thiokol’s remote Utah complex with his daughter. “He said, ‘The Challenger’s going to blow up. Everyone’s going to die,’” Serna recalls. “And he was beating his fist on the dashboard. He was frantic.”

Serna, Ebeling and Boisjoly sat together in a crowded conference room as live video of the launch appeared on a large projection screen. When Challenger exploded, Serna says, “I could feel [Ebeling] trembling. And then he wept — loudly. And then Roger started crying.”

Three weeks later, I sat with Ebeling at his kitchen table, tears and anger punctuating his words. He didn’t want to be recorded or named at the time. Both he and Boisjoly, who died in 2012, became NPR’s anonymous sources in the first detailed account of the effort to keep Challenger grounded.

“That’s my engineering background coming out,” Ebeling explained three decades later. “Somebody should tell … the truth.”

Ebeling retired soon after the Challenger disaster. He used his engineering expertise and what he proudly called his love of ducks to help restore a bird refuge near his home, which was damaged by floodwater from the Great Salt Lake. In 1990, President George H. W. Bush presented Ebeling with the Theodore Roosevelt Conservation Award.

Ebeling continued to volunteer at the refuge for 22 years and was named the Volunteer of the Year for the National Wildlife Refuge system in 2013.

But that work didn’t diminish lingering pain and guilt. God “picked a loser,” Ebeling said in January, thinking back to his role in the Challenger launch. Then Ebeling heard from hundreds of NPR readers and listeners, who responded to our January story.

“God didn’t pick a loser. He picked Bob Ebeling,” said Jim Sides, a utilities engineer in North Carolina. “Bob Ebeling did his job that night,” Sides continued. “He did the right thing and that does not make him a loser. That makes him a winner.”

Ebeling also heard from two of the people who had overruled the engineers back in 1986. Former Thiokol executive Robert Lund and former NASA official George Hardy told him that Challenger was not his burden to bear.

And NASA sent a statement, saying that the deaths of the seven Challenger astronauts served to remind the space agency “to remain vigilant and to listen to those like Mr. Ebeling who have the courage to speak up…”

The burden began to lift even as Ebeling’s health declined. A few weeks before his death, he thanked those who reached out to him. “You helped bring my worrisome mind to ease,” Ebeling said. “You have to have an end to everything.”

Bob Ebeling is survived by his wife Darlene and 35 descendants spanning four generations, including a grandson studying engineering and granddaughter Ivy Lippard. Lippard joined NPR readers and listeners in posting a message about her grandfather on our website.

Lippard described Ebeling as a man “full of integrity” with a “legacy of compassion. It’s an honor,” she wrote, “to be able to pass down his legacy.”

Thank you, Howard Berkes, for writing such a compelling story.

Ebeling’s legacy reminds all leaders of the critical need to nurture a culture that welcomes those who state the brutal facts of reality, and to encourage those with the knowledge of reality to express those views. They just might help us avoid disasters.

Stanley W. Silverman is the founder and CEO of Silverman Leadership.  He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation.  Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on March 22, 2016

Have you ever given any thought to how to sell your ideas to others, and the most effective way to do so? The “art of selling” is usually associated with the selling of a product or service. This is much too narrow. We are always selling our ideas to others. Our ability to get others to buy into our ideas and initiatives and rally them to our cause is a prime determinant for a successful career.

On March 9, I attended the Drexel University College of Engineering dinner honoring Phil Rinaldi, CEO of Philadelphia Energy Solutions. I have written about Rinaldi in previous articles. He rescued two large oil refineries in South Philadelphia from being demolished. By keeping the refineries open, Rinaldi saved over 1,200 high paying refinery jobs, avoiding the loss of an industry that provides important diversity to Philadelphia’s business base, heavily weighted towards “eds” and “meds.” Reinvestment in these refineries also provides a strong platform for increased business activity and employment in the Philadelphia region.

In Rinaldi’s address to the audience comprising a wide variety of individuals at various levels within their organizations as well as engineering students, he stated a principle that should be self-evident, but for many is not recognized or apparent: No matter what your profession, no matter what your level within your organization, you are always selling your ideas.

Many writers on this subject quote Lee Iacocca, the former chairman of the board of Chrysler Corporation, who said, “You can have brilliant ideas, but if you can’t get them across, your ideas won’t get you anywhere.” How true.

Rinaldi sold the idea to his private equity partners that acquiring and operating these refineries would be a good investment. Most of us are not selling such large-scale initiatives to our colleagues – we are selling relatively smaller ideas and initiatives, ones that are formulated and proposed in organizations every day.

Leaders cannot just announce a new initiative and expect it to be adopted without convincing those within their organization that there is merit to their idea. Depending on the initiative, they may need the support of their peers or their direct reports. Leaders need to help create a sense of need and a feeling of ownership in employees for the initiative so they are committed to its success. So, how do you sell your ideas? How do you influence others to pursue your initiatives?

Your idea should focus on the needs of customers, the organization or the individual to whom you are selling.

Your idea is more likely to have better reception if you show how it benefits your customers or clients, improves a business process or fulfills a need or solves a problem of the individual to whom you are selling the idea. Does your initiative build competitive position? What is in it for them or others – financial gain, societal benefit, or fulfilling their desire to leave a legacy to future generations? Find out, and position your idea to garner interest and commitment.

Have you fully evaluated the idea, and can you articulate responses to probing questions?

Some questions one should consider are: What are the benefits of the idea? Who will benefit? Are there any risks, and are they acceptable risks? Do the benefits outweigh the risks? Is there a cost to implement the idea, and if so, is the cost within the ability of the organization to absorb? What are the alternatives, including the alternative of doing nothing? What are the risks of doing nothing, and are those costs too high to bear? What happens if the idea fails?

Are you fully convinced of the merits of your idea?

If you are not convinced of the merits of the idea, you will never have sufficient conviction to convince others. If the idea fails, you will be in-part held accountable because your name is on it. Therefore, you need to be convinced that the idea will work. If the idea is a good one but there are some issues, talk those through to minimize risk.

Approach the individual to whom you want to sell an idea when they are not distracted.

Don’t raise the subject unless you feel that you can have their full attention. Watch for eye contact. Not maintaining eye contact is an indication they are not interested and not absorbing what you are saying. If you sense that the message is not impactful to the individual you are speaking with, change the messaging. Be aware of how you and your message are being received.

If you need to sell a group of people on an initiative, first speak to group members individually.

By explaining the initiative in one-on-one conversations, you have a chance to gauge reactions and address any concerns. You might also get good advice on modifying the initiative to increase its attractiveness or probability of success. By introducing the initiative first to the group, the group may respond with a negative reaction without individual thoughtful consideration.

Do you have credibility? Does the team trust you?

When you are selling ideas, you are selling yourself. Do people have confidence in you? Within any organization, those with the highest credibility and trust will have an easier time having their ideas considered and accepted. How do you build credibility? Develop a reputation and a track record of success with previous initiatives. How do you earn trust? Be transparent, admit failures, don’t blame others for your mistakes and always meet your commitments to others.

Selling others on your ideas and initiatives is a skill not formally taught in college but should be, since the ability to sell your ideas and influence others is a core skill.

There are people who don’t want to engage in process of selling ideas, or don’t have ideas to sell. Some people just don’t like change, and don’t realize that change is a constant in life. This is unfortunate. These individuals are missing out on an opportunity to influence their organization. When they are searching for their next job, they will not have in their background what is most valued by a new employer – a track record of contributions that drove their former organization forward.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on March 14, 2016

Rarely does one have the opportunity to talk with an individual who played a key role in a historic event, especially when that role serves as a major lesson for others. That individual is Robert Ebeling, one of the Thiokol engineers who strongly advised against the launch of the Challenger space shuttle on a cold January 1986 morning.

On Feb. 1, two days after the 30th anniversary of the Challenger space shuttle disaster, I wrote an article headlined, “The importance of independent thinkers: Helping leaders face the brutal facts of reality.” In that article, I wrote about the importance for leaders to surround themselves with independent thinkers who are not afraid to express their views, and for leaders to nurture an environment and institutional culture that encourages individuals to express those views. These individuals are invaluable to the CEO and to the decision-making process within all organizations.

Robert Ebeling is one such independent thinker. Thiokol was the sub-contractor that designed the O-rings on the Challenger rocket boosters. The air temperature at time of launch was below the design temperature of the O-rings, which would make them brittle and would significantly increase the risk of failure.

Even when the risk of a course of action is low but the possible result is catastrophic, one should not take the risk. In this case, the risk of O-ring failure was high. The advice of Ebeling and his fellow engineers not to launch was ignored by Thiokol and NASA, the O-rings failed and the Challenger exploded 73 seconds after launch.

Writer Howard Berkes recently wrote an article for the NPR publication “The Two-Way,” headlined, “30 years after explosion, Challenger engineer still blames himself.” Quoting that article, “The data [Ebeling] and his fellow engineers presented, and their persistent and sometimes angry arguments, were not enough to sway Thiokol managers and NASA officials. Ebeling concludes he was inadequate. He [feels he] didn’t argue the data well enough.”
I referenced Berkes’ article in my Feb. 1 article, which he sent to Ebeling’s daughter, Leslie Ebeling Serna. In response to my article, Serna emailed me the following letter:

Dear Stan,

I want to thank you for your article about “The importance of independent thinkers…” submitted to the Philadelphia Business Journal, Feb. 1, 2016. Robert Ebeling is my father and I was sitting right next to him, at work, when the Challenger exploded. In the last month the media has been reporting on his life, 30 years after the incident.

There has been a tremendous number of letters, hundreds, written to my dad about his integrity and honor. These letters have lifted his heavy heart and we have witnessed a miracle. His eyes are brighter and he is overwhelmed with gratitude over this loving out pour.

He will be 90 this September and is currently being cared for by Hospice due to cancer. I am certain he will pass this earth with a lighter heart and a smile. During the end of March someone will be doing a documentary about my dad. I am so happy for him. Thank you again for your inspiration.

Thank you.

Leslie Ebeling Serna

After receiving Serna’s letter, I called her to learn more about the culture at the time within Thiokol and NASA. That culture can be characterized by the now very recognizable and chilling statement by one NASA official who is quoted as saying, “My God, Thiokol, when do you want me to launch, next April?” It took courage to disagree with the prevailing views of the senior managers at NASA. Ebeling exhibited that courage. Thiokol management, facing pressure from NASA, acquiesced and agreed that the launch could proceed.

The day after speaking with his daughter, I phoned Ebeling and told him that he is a true hero, and an example to not only the independent thinkers that followed him, but to every leader who appreciates the value of having independent thinkers who are not afraid to share the brutal facts of reality.
We can all learn from Ebeling and the Challenger tragedy about the importance of listening to those who have different viewpoints. Doing so will lead to better decisions and might help to avoid a disaster. Be on the lookout for the upcoming documentary on Ebeling to learn more about the Challenger tragedy through his eyes.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on March 7, 2016

How does a city rise in stature and preeminence as a place where people want to visit, live, work and establish businesses? It takes bold visionary leadership that can rally the diverse constituencies with a stake in that vision toward a common goal, as well as leveraging the city’s location, transportation and legacy assets, and its intellectual, cultural, natural and “livability” assets. This is what is happening in Philadelphia today.

The latest initiative on Philadelphia’s journey toward preeminence occurred on March 2, when John A. Fry, president of Drexel University, announced the University has selected Brandywine Realty Trust, led by CEO Jerry Sweeney as the University’s partner to develop “Schuylkill Yards.” This is an eight million square foot mixed-use real estate development project at the eastern end of Drexel’s campus adjacent to Amtrak’s 30th Street rail station. This station is the third most heavily used rail station in the country, sitting on the 50-yard line of the northeast megalopolis between Washington D.C. and New York City.

Philadelphia’s 30th Street Station, within a 76-minute Amtrak Acela train ride to New York and a 100-minute Acela ride to Washington D.C., is a very significant location and transportation asset. It is a major stop on SEPTA’s regional commuter rail system within the Philadelphia region, serving many thousands of rail commuters each day. Schuylkill Yards, which will create the market momentum for the mixed-use real estate development of the air rights above the Amtrak and SEPTA rail approaches to 30th Street Station, will take advantage of this asset.

The plans for Schuylkill Yards are further enhanced by the location of the intellectual assets of University City, home of numerous technology-oriented companies, The Children’s Hospital of Philadelphia, Hospital of the University of Pennsylvania, University of Pennsylvania, University City Science Center, The Wister Institute, University of the Sciences and Drexel University.

University City Science Center, a hub for innovation and technology development, is in the process of a decade long major expansion of its University City facilities to accommodate additional technology-based firms. Headquartered at the Navy Yard and with offices within University City, Ben Franklin Technology Partners also plays an important role in the Philadelphia region’s technology-oriented business development eco-system as does Comcast, which is building a second office skyscraper in Center City to house its Innovation and Technology Center.

A few years ago, visionary Phil Rinaldi saw something that others did not see in the two oil refineries in South Philadelphia – irreplaceable legacy oil refining assets, that could be revitalized and serve as an economic engine for the region. Now called Philadelphia Energy Solutions, these refineries provide high-paying jobs to over 1,000 employees. These refineries will play an important role in establishing Philadelphia as an east coast energy hub, based on another of the city’s natural assets – its adjacency to the Delaware and Schuylkill Rivers, proximity to Marcellus Shale natural gas and a rail network that rivals most cities.

Another initiative to increase the preeminence and attractiveness of Philadelphia includes the one I wrote about recently. On Feb. 26, Mayor Jim Kenney announced his support of the unprecedented broad coalition of bi-partisan political leaders as well as business, labor and civic leaders to move forward with a comprehensive tax restructuring initiative. This initiative, spearheaded by the leadership of Paul Levy, president of the Center City District, and Brandywine Trust’s CEO Jerry Sweeney involves raising the city’s relatively low commercial real estate property tax rate to pay for reductions in the city wage tax rate as well as the business income and receipts tax rates. The initiative will increase employment and business growth in Philadelphia, an area that has underperformed compared with the municipalities in the region and the nation.

Center City has undergone a renaissance, and continues to do so. Today, the residential community within Center City is thriving. Residents and visitors enjoy the performing arts, museums and Philadelphia’s numerous restaurants and other assets. Philadelphia is a very livable and walkable city with many cultural and life-style assets.

The New York Times published an article last year headlined, “52 places to go in 2015,” Philadelphia was listed as third in a list of prestigious world destinations. The article mentioned the recent opening of Dilworth Park with its cafe and winter ice skating rink in Center City, the new boardwalk over the Schuylkill River – an instant favorite of runners and cyclists, and Philly’s bike share program. These are the kinds of quality of life amenities that have reversed the trend of millennials leaving Philadelphia after graduation. A majority are now staying to live and work.

The one major area that has not yet been successfully addressed in Philadelphia’s journey toward preeminence is the state of public education in Philadelphia. The school system is chronically short of funds, and has been eliminating sports, arts and support services, which are taken for granted by schools that are in a much better financial situation. Classes are over-crowded and it is hard to attract teachers to work in the school system. The children within the public school system are being short-changed.

Let’s hope that Philadelphia School District superintendent William Hite, Philadelphia Federation of Teachers president Jerry Jordan and the city’s political leadership can find creative solutions to the problems of public education, with the same type of focus as leaders across the spectrum have in improving so many other aspects of our city.

The residents of Philadelphia have every reason to brag about our city! Philadelphia is fortunate to have business, labor civic and government leaders wanting to make a difference, and to leave their legacy. Our city has a bright future.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on February 29, 2016

On Friday, a major step was taken on the road toward decreasing Philadelphia’s high resident and non-resident wage tax rates as well as the business income and receipts tax (BIRT). These reductions will lead to business and job growth in our city.

Mayor Jim Kenney and an unprecedented broad coalition of bi-partisan political leaders as well as business, labor and civic leaders announced their support of a comprehensive tax restructuring initiative for Philadelphia. Paul Levy, president of Center City District, Jerry Sweeney, president and CEO of Brandywine Realty Trust and Steven Scott Bradley representing the African American Chamber of Commerce helped build the consensus needed for Philadelphia to reach this major milestone.

It is not surprising that Levy is one of the coalition builders of this tax restructuring initiative. Ask the business, labor, civic and political leadership of Philadelphia the name of the individual most responsible for transforming Center City Philadelphia into a cleaner and safer place to live, visit and do business, and in unison the response will be Paul Levy. Since 1991, Levy has been at the forefront of the journey to raise the quality of life and the preeminence of our city.

I recently interviewed Levy at CCD headquarters, just a block west of Independence Hall in the Old City section of Philadelphia. Levy spoke with passion about improving our city. Early in our conversation, he gave credit for the success of CCD to his team and to other Philadelphia leaders who share a common vision of what Philadelphia can become.

Center City has undergone a renaissance, and continues to do so. Today, the residential community within Center City is thriving. Residents and visitors enjoy the performing arts, museums and Philadelphia’s numerous restaurants. The population is growing as empty nesters from the suburbs move into Center City. More millennials are choosing to stay in Philadelphia after they graduate, reversing the trend of just a few years ago.

Despite these positives, Philadelphia’s high wage tax rates and high BIRT adversely impact job creation. This is an issue that Levy is fully committed to changing.

Quoting from written testimony to Philadelphia City Council on Jan. 28, 2015 by Levy, Sweeney and Bradley, “We are pleased to testify in favor … of a phased schedule of wage tax reduction … Despite all recent positive developments, Philadelphia has the third highest poverty rate among the largest U.S. cities, only behind Detroit and Memphis. From 1990 to 2013, the poverty rate in Philadelphia increased from 20 percent to 26.9 percent, growing at two to three times the national rate. … From 1990 to 2013, Philadelphia’s unemployment rate increased from 6.3 percent to 10 percent, while the national rate rose from 5.6 percent to 7.4 percent.”

According to the June 30, 2015 Philadelphia Jobs Growth Coalition report, Philadelphia’s wage tax rate for residents is four times higher than that of the suburbs, and is the highest on the list of 50 of the largest cities for workers earning less than $100,000 per year. The BIRT is 20 to 30 percent higher than the surrounding suburbs. High wage and BIRT taxes are a significant impediment to increasing job growth and reducing Philadelphia’s poverty rate.

Levy and other Philadelphia business, labor and civic leaders are advocates of not just a wage tax and BIRT reduction, but a comprehensive tax restructuring, which will lower wage tax and BIRT in a phased manner over time, funded by an increase in commercial real estate property taxes. The restructuring will be revenue neutral to the city.

Wage taxes and BIRT will be lowered only as commercial real estate taxes increase. A decrease in BIRT for a business will work to offset the increase in commercial real estate tax. Residential property taxes would see no change. This proposal is consistent with the 2009 report issued by former Mayor Michael Nutter’s Task Force on Tax Policy and Economic Competitiveness.

During my interview with Levy, he stated, “Commercial real estate property taxes are … [significantly less] than in comparable cities. About 20 percent of Philadelphia’s budget is funded by real estate tax compared to New York, Washington and Boston, where that number ranges between 30 and 40 percent, so there is room to raise taxes on commercial real estate.”

In a Nov. 6 article in Philadelphia Magazine, Jared Shelly quotes Jerry Sweeney, president and CEO of Brandywine Real Estate Trust as stating, “We want to shift the revenue base of the City of Philadelphia to be more real-estate-tax centric and less wage-and-income centric. … We are prepared to pay more in taxes. … We want to invest in [our] city’s future.” As one of Philadelphia’s most prominent commercial real estate developers, Sweeney recognizes that a higher commercial real estate tax rate and lower wage tax rates and lower BIRT will generate growth and benefit Philadelphia.

Over the long term, the best way for Philadelphia to increase tax revenues is through growth – by attracting new businesses to the city, by encouraging existing businesses to expand, and by increasing employment. This tax restructuring initiative will do exactly that.

The Pennsylvania constitution states that real estate tax rates on commercial and residential properties need to be uniform. The proposal is that this uniformity be changed, so that commercial property in Philadelphia can be taxed at a rate 15 percent higher than the tax rate on residential properties.

This change to Pennsylvania’s constitution will require approval by two consecutive sessions of the state legislature and approval in a referendum by the citizens of Pennsylvania. Levy, Sweeney and fellow supporters of this effort are hopeful that this change will be approved before the close of this current legislative session at the end of June, be approved again during the next legislative session and go before the Pennsylvania voters in November 2017.

At the end of our interview, I asked Levy, “What matters to you?” He thought for a moment and then replied, “What the CCD does every single day is visible in the public environment. We’ve made [Philadelphia] clean and safe. … The most gratifying thing of this job is what we do collectively here. It is visible and has an effect on what people see [and has an effect] on their psychology and on investment. Driving change in a way that’s really visible is the most gratifying job I have ever had in my life. … To me, helping be part of a process of change, seeing that change is incredibly gratifying.”

With leaders like Levy, Sweeney, Bradley and the many other talented and dedicated leaders like them, Philadelphia has a bright future.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on February 22, 2016

How often does our experience as a customer, guest or spectator at an event fall short of our expectations? The first rule of any provider of a product, service, or experience is to think like a customer, guest or spectator and ask, “What would be my expectations, and how would I like to see my expectations met, and then exceeded? How would I like to be personally treated?”

As a provider, how do you ensure that you will exceed your customers’, clients’ or guests’ expectations? You should “operationalize” their experience. You should think through every encounter and interaction in detail and determine whether they would have a great experience dealing with your organization. Is it easy for a customer or client to speak with the right person to have their problem resolved? Are they treated in a courteous manner? Does your company always meet its commitments?

In an Aug. 25, 2011, blog published in Unitiv, Meredith Estepon, a writer on how to deliver a great customer experience, states the following reasons why businesses lose customers: “[Businesses] … ignore customers, undervalue customers, don’t solve [customer] problems, stand by unreasonable business practices, and don’t keep their word.” These are common sense things businesses should not do. As business leaders, we should keep these five reasons for losing customers in mind when training our employees. Focus on these areas, and you will gain competitive advantage over those companies that do not.

Many professional sports teams do a great job hosting their fans at games, treating them as welcomed guests. As a former Philadelphia Flyers season ticket holder at the Wells Fargo Center, and now as an occasional attendee at games, my expectations are always met and often exceeded. Entrances to the Wells Fargo Center are easily navigated due to well-trained and friendly security screening personnel. Concession staff members, ushers and other employees are courteous and helpful. The fan experience has been operationalized and well thought out by Wells Fargo Center and Flyers management.

As I wrote last fall, the expectations of many guests with tickets to the papal mass were not met during Pope Francis’ September visit to Philadelphia. Many were not able to enter the Parkway security zone to see Pope Francis and participate in the mass due to an insufficient number of security check points. Some check points were prematurely closed for no apparent reason before the crowds could be cleared to enter the security zone, and they were shuffled to other check points that were overcrowded. It should be noted that the TSA and not the City of Philadelphia was responsible for managing the security check points. The TSA should have operationalized the security screening process and ensured there were a sufficient number of check points. They did not view the security screening process through the eyes of the papal mass attendees.

The TSA had much less at stake in providing a great visitor experience than the city’s administration, whose goal is for visitors to feel like welcomed guests and have a great Philadelphia experience. Visitors should depart with the belief that Philadelphia ranks with the preeminent cities of the world, which over the long term attracts more visitors, businesses and residents to the city.

Leaders, operationalize interactions with your clients, customers or guests. Make adjustments to how you execute to ensure they have a great experience interacting with your organization. Treat your clients, customers and guests as you would like to be treated. Meet and then exceed their expectations. Build competitive advantage.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Article originally published in the Philadelphia Business Journal on February 17, 2016

On rare occasions, corporate leaders lose sight of a major principle in business and in life. When they take an action that in the eyes of the public, customers, government regulators or elected officials is unreasonable or egregious, or act in a way that is disrespectful or with disdain, their behavior will come back to haunt them and their company.

Such is the case of Martin Shkreli, the former CEO of Turing Pharmaceuticals. This company acquired the rights to Daraprim, a drug used to treat toxoplasmosis, a disease that weakens the immune system of people who have cancer or are HIV positive. Turing increased the price of Daraprim from $13.50 to $750 per pill, pushing this drug out of the financial reach of many patients.

Shkreli resigned from his position as CEO of Turing Pharmaceuticals after being indicted on Dec. 17 for securities fraud committed prior to him joining Turing. Quoting Brooklyn U.S. Attorney Robert Capers, who said in a press conference on Bloomberg Business, “Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company.”

During his appearance at the U.S. House Committee hearing on Feb. 4, Shkreli continually invoked his Fifth Amendment right, refusing to answer any questions which might incriminate him. Unfortunately, Shkreli had a dismissive attitude during much of his appearance. After the hearing, his lawyer, Benjamin Brafman, chalked up Shkreli’s behavior to his young age of 32 and being nervous. However, after his appearance before the House Committee, Shkreli tweeted, “Hard to accept that these imbeciles represent the people in our government.” An immature action, and not the proper behavior for any current or former CEO.

The media had a field day. USA Today quoted U.S. Rep. Trey Gowdy, R-South Carolina, as commenting, “Drug company executives are lining their pockets at the expense of some of the most vulnerable families in our nation. … It’s not funny, Mr. Shkreli. People are dying and they are getting sicker and sicker.” Quoting the Wall Street Journal, “… Shkreli appeared to smirk, look away and otherwise goad lawmakers…” Bloomberg Business ran a story headlined, “Congress tweet ‘unfortunate,’ lawyer [Brafman] says as Shkreli goes online.”

This guy was the CEO, the leader and the public face of a company? Why would a board appoint an individual with these behavioral traits as CEO? Turing is a privately held company, and only two individuals are listed as board members on the Turing website, chairman of the board Ron Tilles and Walter C. Blum. Tilles assumed the additional position of CEO on an interim basis when Shkreli stepped down from that position. I am sure that Tilles and Blum are not happy with Shkreli’s performance in front of the House Committee. Shkreli tarnishes the public image of all business leaders. He is an embarrassment to the position of chief executive.

It is understood that the price of pharmaceuticals must not only cover a new drug’s research and development, animal and human trials as well as safety testing costs, but also the costs for drugs that never make it to market. Without the ability to recover the cost of drug development, many lifesaving drugs would never be introduced.

Daraprim, however, is not a new drug. It is an existing drug that Turing Pharmaceuticals acquired from another company, so its research and development costs many decades ago have long since passed. Increasing the cost of Daraprim 5,500 percent shows a lack of sensitivity to patients who rely on the drug, and damages the reputation of the company and pharmaceutical industry in the eyes of the public. Where was Shkreli’s good critical judgement, an attribute all CEOs must have?

During an interview at the Forbes Healthcare Summit in December, Shkreli stated that the additional profits from the Daraprim price increase would be plowed into research and development of new toxoplasmosis drugs. What Shkreli didn’t mention was that Turing needed to earn a return on the acquisition cost of Daraprim, and that return would be paid for by Daraprim’s patients through the huge price increase.

At the Forbes Healthcare Summit, Shkreli stated, “I probably would have raised the price [of Daraprim] higher … I think healthcare prices are inelastic. I could have raised… [the price] higher and made more profits … this is a capitalist society, capitalist rules, and my investors expect me to maximize profits, not to minimize them or go half, or go 70 percent, but to go to 100 percent … [like we] are all taught in MBA class.”

Wow! Is that what was taught in Shkreli’s MBA class? He should have been taught that personal and company reputations matter, that markets react. He should have been given media training. Industries and the companies within those industries are given a license to operate by the public. The public controls this license through the lawmakers they elect, who in turn, appoint regulators whose goal is to ensure that companies obey the law and operate in way that is not detrimental to the public interest.

There are now calls to pass laws and regulations that protect the public against excessive pricing of pharmaceuticals. In cases where the customer is a company and it feels that it is being taken advantage of by its supplier, that company will go to the ends of the earth to find an alternate source of supply. That Mr. Shkreli, is how the capitalist system works. There is always a reaction to egregious behavior.

Leaders need to understand that their decisions and actions have consequences, including damage to their personal reputations and that of their company. Reputation is the most important thing we have. Once lost, we never really gain our reputation back. We must carefully protect it.

Stanley W. Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com