The Trouble With Business Ethics

Companies are increasingly emphasizing ethics, but a recent case at Wal-Mart shows how problematic such policies can be for employees

By Pallavi Gogoi

In the post-Enron, post-WorldCom, post-Tyco era, ethics has become one of the hottest topics in the business world. Business schools have entire courses dedicated to the topic. Companies have instituted more rigorous ethics policies and set up global ethics offices. One of the fastest-growing employment categories is chief ethics officer, as evidenced by the creation of that post at the New York Stock Exchange (NYX), Nortel Networks (NT), Marsh & McLennan (MMC), and Hewlett-Packard (HPQ).

But a recent case at Wal-Mart Stores (WMT) shows how difficult it can be to push "ethics" in the corporate world. A few months after going through a new employee training session with a heavy emphasis on ethics, Chalace Epley Lowry acted on the guidance to report any activity that seemed the least bit suspicious. Lowry told the company's ethics office about what she thought could be a case of insider trading by one of her supervisors, Mona Williams, vice-president of corporate communications.

The company determined that Williams had done nothing wrong. But Lowry's identity was revealed to Williams, leading Lowry to conclude that she could no longer work in the department. Now she's looking for another job, but there's no guarantee she'll get one at Wal-Mart. "I acted in good faith, just pointing out that there might have been some wrongdoing," says Lowry. "But it was really disheartening to see how it was handled." (See BusinessWeek.com, 6/12/07, "Wal-Mart's Latest Ethics Controversy")

The Dangers of Whistleblowing

Lowry's case, unfortunately, is representative of exactly how ethics complaints and whistleblowers are handled at many corporations. "Most employees are reluctant to make any complaints for fear that they will either lose their job or get redirected into another position," says Jim Fisher, Shaughnessy fellow at the Emerson Center for Business Ethics at St. Louis University. "People who go into a situation naively thinking that they are taking care of a problem often find that it doesn't turn out that way. In fact, 95% of the time, whistleblowers lose their jobs."

The emphasis on ethics is hard to miss. Many of the companies leading the way are those that have been embroiled in scandals in the past. For instance, CA (CA), the former scandal-tainted Computer Associates, two years ago had hired Patrick Gnazzo, a former chief trial attorney for the U.S. Navy. And former Securities & Exchange Commission Chairman Richard Breeden, who was first hired to be an outside monitor of accounting firm KPMG moved into a similar role at Hollinger International (HLR), where Conrad Black stirred up trouble and ultimately a lawsuit.

Eric Dinallo and Beth Golden, alumni of former New York Attorney General Eliot Spitzer's office, were hired at Morgan Stanley (MS) and Bear Stearns (BSC), respectively (see BusinessWeek.com, 2/13/06, "The New Ethics Enforcers").