Jeanne Sahadi Commentary:
Everyday Money by Jeanne Sahadi Column archive
When good executives do bad things
No one is immune from obsession and short-term thinking, two root causes of unethical behavior.
By Jeanne Sahadi, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Here's a sentence you won't see in any company manual:

"The company reserves the right to achieve its goals through deception, fraud, invasion of privacy and any other flaming ethical transgression that seems like a good idea at the time (assuming our lawyers give us the thumbs-up or are at lunch when we call)."

Yet that warning might as well be written down given the number of ethical lapses that occur in a lot of workplaces -- even by otherwise top-notch executives.

The most flagrant offender of late, of course, is Hewlett-Packard (Charts), where the CEO, the board chairman, the company's counsel, and even the chief ethics officer had a hand in a press-leak investigation that flouted countless ethical (and very possibly legal) boundaries.

Their cause was legitimate. The investigation was instigated to find who on the board was leaking confidential information to the press -- itself a major ethical transgression.

But even when the cause is noble, those in charge should seriously question, "Is the ethical cure worse than the disease?" said Thomas Donaldson, a professor of legal studies and business ethics at Wharton.

While the HP case may be a contender for worst offender, there are significant ethical transgressions that happen all the time at work.

Say a boss hears indirectly that someone is pregnant or seriously ill (and hence may cost the company more), or gets wind of an employee criticizing him. Rather than acknowledge to them that he knows, he may include that person in the next round of layoffs or manage them out by giving them less and less favorable treatment until they quit.

Then there's the team-effort ethical violation. For example, unofficial company practice may be to goose numbers to makes sales, inventories or safety records look better.

Or remember hearing about how some stock analysts rated the stock of their employer's clients more highly than the stock of the clients' competitors, or investment advisors who pushed their employer's financial services even if they weren't in the clients' best interests?

And don't forget the old standby: lying to stave off an uncomfortable moment. Consider managers who lie about the company's future plans or promise to promote you ... next year.

Most ethical transgressions at work have their roots in two things: obsession and short-term thinking, according to Donaldson and Aine Donovan, executive director of the Ethics Institute at Dartmouth's Tuck School of Business.

Whether the goal is cost-cutting, lawsuit avoidance or just getting rid of a political problem, "there's a syndrome that repeats itself ...an almost obsessive preoccupation with a particular goal that can become a blind ambition that sweeps away all other considerations," Donaldson said.

And it can sweep up otherwise upstanding employees.

"There comes to be an accepted pattern of going over the line," Donaldson said. "Ethics is like water, it flows down. My sense of the pressure to compromise my ethics is correlated directly to my perception of the ethics of the top guy."

Two considerations often overlooked are just how bad the company will look if the media get word of the underhanded practices, and how it may hurt morale at the company.

At HP, the long-term fallout in terms of morale isn't clear yet.

The response to Fortune's reader question "Should HP CEO Mark Hurd resign?" was decidedly mixed. Those who said he should cite everything from the "buck stops with him" argument to the contention that if others are fired for the same actions, then the CEO should go, too.

Others said Hurd should stay because he has turned HP around.

Wrote one current employee: "Quite honestly it is really not a big deal, I work for HP and feel that yes, it would have been preferable that it didn't happen, but if you worked for the circus that (Carly) Fiorina presided over and now the HP that Mark Hurd runs, you, too, would feel a little disappointed but very much in a mood to forgive."

Donaldson notes that people often excuse the alleged transgressions of those who bring success to an organization. But that quid pro quo can lower ethical standards in the long-run.

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HP's Hurd: I'm not resigning

BP (Charts) employees tell Fortune that BP managers shouldn't be surprised that the worst spill in the history of the North Slope occurred on their watch.

How ethical are you? Find out.

Does your company keep political secrets? Chevron (Charts), Citigroup (Charts), J.P. Morgan Chase (Charts) and Verizon Communications (Charts) have all opposed companies disclosing political contributions.

Execs: Meeting expectations is 'like trying to land a 747 on a postage stamp'

Jeanne Sahadi writes about personal finance for CNNMoney.com. For comments on this column or suggestions for future ones, please e-mail her at everydaymoney@cnnmoney.com. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.