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New Ethics Vigilance May Hinder Corporate Initiatives

Friday, April 1, 2005

The spate of ethics-related dismissals of high level executives, most recently featuring AIG, Wal-Mart, and Boeing, may have an unexpectedly deleterious affect on corporate profits, according to a sampling conducted by The Society for the Advancement of Consulting (SAC).

"Companies have justifiably created arm's-length relationships or even severed relationships with any board member or executive who may be suspect of transgressions," says Alan Weiss, Ph.D., and CEO of SAC, "but in so doing they may be dampening the initiative, innovation, and risk-taking of those who remain. The old 'it's easier to seek forgiveness than permission' has given way to 'let's not risk it.' "

In canvassing its international membership, SAC has determined that formerly high-risk managers, "the kind that lead the charge and encourage others to follow," says Weiss, may just decide to become much more prudent risk-takers. "That's particularly true," adds Weiss, "if those people perceive that corporate ethics are taking the form of a witch hunt, or if the ethics oversight is lodged in traditionally bureaucratic enforcement areas, such as the human resources department or the legal department."

The affects of such conservatism on the part of formerly aggressive managers and executives would include being slower to market, more conservative about introducing new campaigns, and less results-oriented. "The corporate energy would move from the external focus on service, product, and relationships, to protection, conservatism, and approvals," notes Weiss. "It's easy to see how some formal and informal leaders might not want to chance their careers and futures on habitual behavior which is now seen through a different set of filters, even though the behavior may be quite proper."

The ethics pendulum seems to be significantly in motion, and there may well be ramifications for competitiveness, productivity, and performance for quite some time.

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