Article published in the Philadelphia Business Journal on July 7, 2024.
Given the importance of ethics and integrity in business, one must wonder why ethical breaches occur as often as they do, resulting in reputational damage to employees and the company. Today I share with you excerpts from two Philadelphia Business Journal columns on ethics and integrity that I wrote in July 2021 and April 2022.
The most admired leaders are those who have a personal reputation for acting ethically and with integrity, and establishing a culture in which their employees do the same. The organizations with these types of leaders are the ones people want to work for and that flourish over the long term.
A vivid example of reputational damage caused by unethical and illegal behavior occurred in 1991. Major investment bank Salomon Brothers Inc. didn’t make a timely disclosure to its board or federal regulators of illegal acts committed by two of its traders of U.S. government securities. Both individuals were terminated. An October 1997 Fortune Magazine article by Carol Loomis chronicles the chilling events that nearly led to Salomon’s bankruptcy.
Due to the delayed disclosure, the Federal Reserve Bank of New York initially banned Salomon from participating in the auction of securities issued by the U.S. government. This would have signaled a loss of confidence in Salomon, leading to the firm’s certain bankruptcy. It was through the efforts of Warren Buffett that the FRB reversed its decision. Buffett was the chairman of Berkshire Hathaway, director on the Salomon board and a highly respected business leader with a reputation of ethics, honesty and integrity.
The senior leaders at Salomon Brothers who delayed disclosing the illegal trading activities either resigned or were terminated. Buffett was appointed by the Salomon board as interim Chairman to not only lead the firm, but also change the tone at the top.
So, what message did Buffett communicate to Salomon Brothers employees regarding his ethical expectations? Shortly after his appointment as interim chairman, Buffett testified before the House Subcommittee on Telecommunications and Finance during which he apologized for Salomon’s illegal actions. On the subject of ethics and integrity, Buffett said:
After they first obey all rules, I then want employees to ask themselves, whether they are willing to have a contemplated act appear the next day on the front page of their local [news]paper, then be read by their spouses, children and friends … If they follow this test, they need not fear my other message to them. Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.
In an October 1998 speech to University of Florida MBA students, Buffett said, “In determining whether you succeed, there is more to it than intellect and energy. …There are three things in hiring people [that you] should look for: integrity, intelligence, and energy. If [the candidate doesn’t] have the first … the latter two will kill [you].” Wise advice from Buffett.
So, how do you determine the ethics and integrity of the people you hire? You should ask the candidate if they have taken a course in business ethics and, if so, what they learned from the course. You should ask if they were ever asked by their boss to do something that was unethical, and how they handled that situation. Describe to them hypothetical situations that test the bounds of unethical behavior, and ask how they would respond.
The higher the position you are hiring for, the deeper the due diligence you must do, including background and reference checks from individuals not suggested by the candidate to uncover anything that might disqualify them from employment.
When applying for a job, your reputation precedes you. It takes years to build the kind of reputation that gets you hired. It can take as little as minutes to destroy it. Always act with integrity.
In his departure comments from the U.S. State Department, Rex Tillerson, former chairman and CEO of Exxon Mobil and former secretary of state under President Donald Trump, said:
Never lose sight of your most valuable asset, the most valuable asset that you possess—your personal integrity. Only you can relinquish [your integrity] or allow it to be compromised. Once you’ve done so, it is very, very hard to regain it. So guard it as the most precious thing you possess.
All leaders should remember Buffett’s and Tillerson’s advice. It should guide the tone we set at the top and the culture we nurture within our organizations.
Stan Silverman is a former CEO and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership. He can be reached at stan@silvermanleadership.com.
