After a year of publication, this blog has run its course, and this will be my last entry. I thank the Foundation Board and my readers for their support.

It’s fitting that this last blog discusses how ethical companies are more sustainable and profitable than others because it’s a theme that has run through my writing for the past 12 months. It’s a lesson that is well worth teaching to those just starting their business careers and as a reminder for those whose careers are well under way.

In today’s frenzied media environment when ‘quick and dirty’ often replaces ‘respectful and thoughtful,’ I have opted for the latter category. I hope you enjoyed my approach.

World Most Ethical Companies  List Shows Good Behavior Pays Dividends – Once Again

By Larry Kahaner

           

It’s that time of year when companies pepper news media outlets with press releases touting that they’ve made the list of  The World’s Most Ethical Companies for 2011 as ranked by the Ethisphere Institute. The group calls itself  “the leading international think-tank dedicated to the creation, advancement and sharing of best practices in business ethics, corporate social responsibility, anti-corruption and sustainability.” I’m not here to dispute this list with cynical blogger jibes. I actually think that Ethisphere does a pretty good job and I applaud their transparent methodology.

            My interest is how ethical companies do profit-wise compared to others. I have always maintained that ethics pays off and the WME report bears this out once again.

            The following chart shows that ethical companies make more money than those in the Standard & Poor’s 500 Index. What’s of particular interest to me is that during the recent down financial downturn ethical companies did better than others and as the economy recovered  they’ve been doing even better as the spread in the graph shows.

            Why is that?

            Several reasons. Ethical companies rarely break down during tough times so they are ready to move forward when the economy improves. During tough economic conditions, unethical companies cut corners; ethical companies do not and that stands them in good stead when upturns occur. Last, ethical companies naturally lead the profit pack and as the economy improves these companies are better able to exploit positive business conditions.

            This year there are 145 organizations on the list. Thirty-six are new and 26 companies dropped off mainly because of “litigation and ethics violations, as well as increased competition from within their industry,” according to the report. Forty-three winners are outside the United States.

             Twenty-six companies have made the list all six years of the study including Aflac, American Express, Fluor, General Electric, Milliken & Company, Patagonia, Rabobank and Starbucks, among others.

            Here’s the complete list:

           

Aerospace Indra Sistemas Rockwell Collins Inc. The Aerospace Corporation	Apparel Adidas Comme Il Faut Gap Patagonia Timberland
Auctions eBay	Automotive Cummins Denso Ford Motor Company Johnson Controls
Banking Australia and New Zealand Banking Group National Australia Bank Rabobank Standard Chartered Bank The Westpac Group	Business Services Accenture Dun & Bradstreet Noblis
Chemicals Ecolab JM Huber	Computer Hardware Hitachi Data Systems
Computer Software Adobe Systems Microsoft Salesforce.com Symantec Corporation Teradata Corporation	Construction and Engineering CRH Granite Construction Parsons Corporation
Consumer Electronics Electrolux Ricoh Xerox	Consumer Products Colgate-Palmolive Company Henkel AG Kao Corporation
Diversified Industries General Electric Co.	Electronics and Semiconductors Freescale Semiconductor Premier Farnell Texas Instruments
Energy and Utilities Encana Statoil NextEra Energy, Inc. Northumbrian Water Vestas Wind Wisconsin Energy Corporation	Engineering and Design AECOM Technology Corporation CH2M Hill Fluor Corporation
Environmental Services Waste Management	Financial Services American Express Housing Development Finance Corp NYSE Euronext The Hartford Financial Services Group
Food and Beverage General Mills PepsiCo Solae Stonyfield Farm	Food Stores Kesko The Co-Operative Group Wegmans Whole Food Market
Forestry, Paper and Packaging International Paper Stora Enso Oyj SCA	Health and Beauty Natura Cosmeticos
Healthcare Services Baptist Health South Florida Hospital Corporation of America Premier	Hotels, Travel and Hospitality Kimpton Hotels Marriott International The Rezidor Hotel Group Wyndham Worldwide
Industrial Manufacturing Caterpillar Deere & Company Eaton Corporation Milliken & Company Schneider Electric	Insurance Aflac Incorporated Sompo Japan Insurance Swiss Re Wisconsin Physicians Service Insurance Co.
Internet Zappos	Media, Publishing and Entertainment Thomson Reuters
Medical Devices Becton Dickinson Royal Phillips	Metals Umicore
Real Estate British Land plc Jones Lang LaSalle Unibail-Rodamco	Restaurants and Cafes Starbucks Coffee Company
Specialty Pharma Medicis	Specialty Retail Best Buy Co. Hennes & Mauritz Sonae Target Ten Thousand Villages
Staffing Manpower	Telecom Hardware Avaya Inc. Cisco Systems Juniper Networks
Telecom Services Singapore Telecom Swisscom T-Mobile USA	Transportation and Logistics Autoridad del Canal de Panama East Japan Railway Company Nippon Yusen Kabushi Kaisha UPS

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The William G. McGowan Charitable Fund provides grants in three program areas including Health care and Medical Research; Education, and Community Programs for Those Most Vulnerable. It gives priority to programs that have demonstrated success, measurable outcomes, have a plan for sustainability, and aim to end cycles of poverty and suffering.

Silicon Bloggers Cash In; I Guess I’m Old Fashioned

By Larry Kahaner

            When I was a reporter at Business Week magazine we were not permitted to accept even a modest lunch from a company we covered. It was considered a conflict of interest. If a PR firm sent us an unsolicited gift – a bottle of expensive wine or some other trinket worth more than $25  – we had to send it back. We had to inform our boss about anything we received and had to call the sender and tell them not to do it again. This practice was called journalistic ethics and it seems mighty old-fashioned compared to what’s going in Silicon Valley these days with some high-tech bloggers.

From spj.org

            Here’s how it works: A blogger becomes influential by doing strong work, breaking stories and doing what I would consider real reporting. Then, he or she decides to cash in by establishing an angel fund that collects money from venture capitalists. The money is used to invest in start-ups that the blogger knows about before most anyone else because he or she covers the industry. The blogger keeps writing stories – supposedly unbiased stories – that tout the company. If other bloggers write negative stories about the startup, a verbal fistfight ensues and some have gotten pretty ugly. The end game occurs when the company either goes belly up of its own volition, gets bought or goes public and the blogger and his fund, in both of the latter cases,  make a veritable mint.

            Blogger Dan Lyons has dubbed this the Silicon Cesspool and explains how some VCs willingly throw money into a blogger’s fund because a few hundred thousand is ‘a rounding error’ and it couldn’t hurt to have an influential blogger on their side.  

            Some might consider this just another form of PR, but it’s not. PF flaks tell you who they’re working for. These bloggers present themselves as independent journalists and readers believe that what they write is fair, unbiased and accurate. “In fact this is a new version of an old racket that used to be practiced in the tech space by guys who called themselves ‘independent analysts,’ writes Lyons. “Their deal, back in the day, was this: ‘Pay seven figures a year to buy a corporate subscription to my newsletter and I’ll say nice things about your company, and when the press needs a quote, I’ll be there to puff you up. Or, don’t buy a subscription and I will bash you relentlessly.’ Most big companies paid up and considered it a cost of doing business.”

            I remember this newsletter scam (and various offshoots employing a ‘pump and dump’ scenario) as well but this new incarnation makes for an even sadder state of affairs because of the internet’s enormous reach and low barrier to entry. This kind of activity will just make readers more cynical than they are now about the media and drive honest people away from what I consider a noble profession which, in the end, should be about public service and not money.

            I guess I’m old fashioned.

                         

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Don’t forget; you can become a follower of this blog by using your existing Google, Twitter or Yahoo! logon. You can follow us on Twitter @mcgowanfundblog.

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The William G. McGowan Charitable Fund provides grants in three program areas including Health care and Medical Research; Education, and Community Programs for Those Most Vulnerable. It gives priority to programs that have demonstrated success, measurable outcomes, have a plan for sustainability, and aim to end cycles of poverty and suffering.

Upper Class Tends to be Unethical… It’s a Learned Behavior

By Larry Kahaner

We all have a love/hate relationship with stereotypes. On the one hand, they allow us to quickly size up someone we just met based on their dress, accent or mannerisms. On the other hand, stereotypes are often inaccurate, perpetuate wrongheaded beliefs and discount individualism.

One particular stereotype concerns money and it’s this: Rich people are less ethical than  others. The corollary is that poor folk are more honest and ethical. These are stereotypes that are ingrained in most cultures across the globe. It’s even become part of current election rhetoric in the U.S.

Well, there’s new research that shows this old saw may be true.

The study is titled Higher Social Class Predicts Increased Unethical Behavior produced by Paul K. Piff of UC Berkeley and others. Unfortunately, I cannot offer you a link to the study for free as I usually do due to copyright issues but you can click here to buy a copy for $US10 or use your school, corporate or local library account to download it. The article will appear in the upcoming issue of the Proceedings of the National Academy of Sciences, a peer-reviewed publication. 

Here’s what the researchers wrote:  “Seven studies using experimental [under controlled situations] and naturalistic [in the field under real life conditions] methods reveal that upper-class individuals behave more unethically than lower class individuals.” The studies looked at how people reacted while driving and then how they acted in lab studies making decisions which looked at lying, cheating and stealing in work and non-workplace scenarios.

What did researchers conclude was the reason for unethical upper class behavior? “Mediator and moderator data demonstrated that upper-class individuals’ unethical tendencies are accounted for, in part, by their more favorable attitudes toward greed.”

Hello Gordon Gekko.

But it’s not that simple. While many will read the headline and a few lines about the research -  and take from it what they want -  the last part of the study was the most revealing and the most important. It’s a nuance often missed in our quick-paced, shallow-thinking web world.

Attitudes toward greed are learned and people can be ‘primed’ to act unethically. When participants in the last part of the study were prepared to think about the advantages of greed and then presented with opportunities to act badly such as stealing cash, accepting bribes and overcharging customers they indeed acted unethically – and it didn’t matter to which socio-economic group they belonged.

In other words, upper class people, in general, have been primed to see that greed is good and lower class people have been taught the opposite. As Piff put it in a prepared statement: “These findings have very clear implications for how increased wealth and status in society shapes patterns of ethical behavior, and suggest that the different social values among the haves and the have-nots help drive these tendencies.”

The question that researchers do not answer is why upper class people believe that greed is good?  Is it because, in their experience, unethical behavior has paid off or do they subscribe to the notion because their parents and peers think so? Or is there another reason?

Piff’s study is the latest in a series of UC Berkeley investigations into the relationship between socio-economic class and prosocial and antisocial emotions and behaviors. I hope my question is explored in future studies. It may be the most important question of all.

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Don’t forget; you can become a follower of this blog by using your existing Google, Twitter or Yahoo! logon. You can follow us on Twitter @mcgowanfundblog.

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The William G. McGowan Charitable Fund provides grants in three program areas including Health care and Medical Research; Education, and Community Programs for Those Most Vulnerable. It gives priority to programs that have demonstrated success, measurable outcomes, have a plan for sustainability, and aim to end cycles of poverty and suffering.