A Difficult Decision–Google Leaves China

Posted: 03/25/2010 | Author: | Filed under: Ethics and Compliance | Tags: | Leave a comment

It is common to read media stories about excessive self interest in the news, particularly in the business media, like the Wall Street Journal. But today reading the WSJ’s front page article about Google’s principled management decision to withdraw its search engine service from China made my eyes water.  I am certain serious decisions made by high tech companies are not made by one person alone. These decisions are vetted among highly successful, sophisticated, business people inside and outside the organization. And by all reports, it was controversial and not an easy one for Google, but founder Sergey Brin’s position prevailed. As a young Russian Jew whose father emigrated from the Soviet Union, Mr. Brin retains memories of Soviet control over individual’s fundamental life choices. China’s past insistence on political censorship and its recent theft of Google’s proprietary software code in order to spy on political dissidents was “the straw that broke the camel’s back”. The WSJ reported that Mr. Brin was motivated by China’s behavior that was reminiscent of his Soviet memories.

Yesterday Jack Welch, former CEO of General Electric, in discussing Google’s decision on NBC’s Squawk Box, commented that much of government behavior is beyond the control of any business, which is primarily answerable to its shareholders. He observed that if a company makes the choice to enter a country’s market, it will be subject to its laws and ethical standards. He recounted GE’s struggle for many years with continuing to do business in South Africa, because of its apartheid policies. Management considerations for staying and leaving were strongly argued among themselves. Yet, clearly the stakes long-term are far greater for Google exiting China, than GE staying in South Africa.   

We are again reminded by a first generation immigrants of the importance of America’s principles. And when we regularly see reports of business executives who have behaved so badly out of self-interest: it is refreshing to be reminded that there are many successful executives who deal with tough, controversial questions and make the principled decision.

Ethics Program Commitment and Values

Posted: 03/22/2010 | Author: | Filed under: Ethics and Compliance | Tags: | Leave a comment

In the past government prosecutors and agencies began looking for remedies to address corporate wrongdoing beyond convictions and fines. It was economically and politically necessary to maintain the viability of companies while finding ways to make sure they didn’t engage in further wrongdoing. Consequently, as part of their plea agreements, companies were required to establish programs that demonstrated their commitment to ethical business behavior. This was particularly applicable to companies, which relied heavily on government funded programs, such as; defense contractors and health care providers. In response, to the government, companies developed ethics and compliance programs. This trend expanded with the Federal Sentencing Guidelines and Sarbanes Oxley (SOX). 

As discussed previously (1/18/10), comparisons of effective ethics programs suggest they each have ten common elements. While emphasis of a particular element or group of elements may vary, depending on the needs of the organization, each of the ten elements will likely be present in an effective program.

The first three elements are:
1. High level commitment by executive management and the board of directors.

Often managements’ establishment of an ethics and compliance program arises from a crisis threatening the company in the form a; government investigation, indictment, major litigation, or threatened loss of customer or market share. Sometimes too late, management recognizes that the absence of an ethics and compliance program could seriously impact the success and even viability of the company. Typically, as part of a settlement, prosecutors will require that an effective ethics program be established to avoid even greater penalties. However, there have been cases of enlightened boards and management that decided to establish an ethics program, absent any pending crisis, because they value the contribution the program makes to workplace morale and culture. KEY POINT: If senior management and the board do not support the program, don’t waste your time and resources. Alternatively, consider implementing more modest compliance initiatives.

2. Statement of fundamental values.

The thought leaders of the organization should establish core values for the organization; whether it be technical innovation, customer service, or order execution. Among those values should also be a statement of ethical principles–fundamental values of conducting business in an honest, open and ethical manner. This commitment should go beyond a statement of compliance with the letter of the law to embracing morally sound business practices. KEY POINT: A values statement must be conceived and embraced by everyone as a statement of goals to pursue and be evaluated by.

3. Initial ethics orientation training followed by regular updates and communications.

An effective ethics program must be a process not an event; thereby it becomes ingrained in the employee’s decision-making process. In order to establish and reinforce the process there should be regular training and ongoing communications. However, it is common that the company conduct an attention getting event “kicking-off” the program to generate enthusiasm and awareness. KEY POINT: Adopt a strategy and tone in the training and communications that the program is not just management’s “flavor-of-the month” initiative, but rather will become a fundamental part of the culture and a performance evaluation tool.

Future blogs will discuss other elements.

©2010 Kevin Teismann all rights reserved.