How to spot moral meltdowns in companies… Before it’s too late. Explanation of
the Seven Signs Of Ethical Collapse of Marianne Jennings. (2006)
What are the Seven Signs Of Ethical Collapse? Description
The Seven Signs Of Ethical Collapse from Professor of Legal and
Ethical Studies Marianne Jennings can
help boards, executives, employees, analysts and investors to evaluate
those company traits that, while not measurable, control the content of
the financial reports and whether executives will move into fraud…. Before
it’s too late.
After Enron, we remain poised with reporting systems,
ethics officers, ethics codes, ethics training, and a host of other best
practices. And we continue to arrive on the scene just a bit too late to
prevent the crimes, constantly in mop-up, contrition and PR-nightmare
Jennings identifies seven factors (signs)
that predict ethical crashes and she provides the following antidotes against them:
Pressure to maintain those numbers. All companies and
organizations have goals and feel the pressure to meet the numbers.
A company with a poor ethical culture, however, has graduated
meeting those numbers into a zone of perversity. Employees in these
companies start with the number they want to report and work
backwards, making things fit using accounting interpretations, and
eventually just making it all up to reach the predetermined number.
Antidote 1: Surround (numeric) goals with ethical
Antidote 2: Fire those who cross the lines you have
Antidote 3: Watch the nonverbal and nuanced
communication and signals.
Antidote 4: Encourage your employees to use a
time-out: a period of time given to employees to use when they
find themselves in an awkward situation on the job.
Fear and silence. A type of culture wherein
employees may see the issue, but they remain silent. If they do
share their concerns, they are either terminated or flatlined in the
Antidote 1: Tell employees to speak up and provide
the means for them to do so (hotline).
Antidote 2: Don’t fire, flatline, transfer,
reassign, trample, muck up or malign employees for speaking up.
Antidote 3: Reward employees who speak up and point
out ethical and legal issues.
Antidote 4: Tell employees bad news happens.
Antidote 5: Tell employees that you trust their
wisdom and that you are counting on them.
Young ‘uns and a bigger-than-life CEO.
Surrounding bootlickers, yes-men and other useful idiots. Iconic,
Antidote 1: Beware of the iconic CEO.
Antidote 2: Always question even the most
outstanding performers when it comes to CEOs.
Antidote 3: Monitor who is hired and who is fired
and who replaces them and how much they are paid.
Antidote 4: Conduct in personal lives matters.
Antidote 5: Mold and shape the young ‘uns
Weak board. Boards may be lacking experience,
consisting of friends, showing conflicts of interest, not spending
Antidote 1: Get yourself a strong board. Dig deeper
on conflicts and do not fall for the governance myths.
Antidote 2: Get information from employees.
Antidote 3: Challenge officers, managers, and their
Antidote 4: Pay attention to perks.
Antidote 5: Walk around.
Conflicts. A distinct atmosphere of
back scratching exists. Favoritism and nepotism.
Antidote 1: Believe in conflicts of interest.
Antidote 2: Establish definitive conflicts policies
and enforce the rules.
Antidote 3: Delineate what belongs to the
company and what belongs to the customer and never the twain
shall meet in employees.
Antidote 4: Do not waive your conflicts policy.
Antidote 5: Review ownership and
Antidote 6: Keep it simple! Remember there are only
two ways to manage a conflict: get rid of it or disclose it.
Innovation like no other. A belief
that we are so brilliant and innovative that the mundane rules of
accounting, corporate governance, and even basic economics do not
apply to us.
Goodness in some areas atones for evil in others.
The consistent perception of both managers and companies of
themselves as good citizens. Philanthropic, environmentally sound
and diversity-dedicated, these companies were recognized for their
good deeds and contributions. Their noblesse oblige benefited many.
Antidote 1: Shift attitudes on social
responsibility in business.
Antidote 2: Investigate your company and explore
the depths and interconnections of social responsibility and
Antidote 3: Be (very) skeptical of philanthropy and
Origin of the Seven Signs Of Ethical Collapse. History
In 2003, professor Jennings participated in a symposium on corporate
governance and ethics. Her paper was called: Restoring Ethical Gumption
In The Corporation: A Federalist Paper on Corporate Governance –
Restoration of Active Virtue in the Corporate Structure to Curb the ‘Yeehaw
Culture’ in Organizations. This paper was the basis for her 2006
book: The Seven Signs of Ethical Collapse.
Usage of the Seven Signs Of Ethical Collapse. Applications
- Avoid investing in the next Enron.
- Predicting companies at risk.
- Prevent working for the next WorldCom just before the crash.
- Identify and solve problems in your own organizations before
they cause a disaster.
- The 7 Signs apply to government agencies and nonprofits as well.
Strengths of the Seven Signs Of Ethical Collapse concept. Benefits
- Gives 7 clear signals to watch for to detect (potential) ethical
- Provides antidotes to prevent them from happening or to cure
- Deals with the underlying source of unethical conduct: company
culture, rather then treating the symptoms, or fixing the legal
system or paying to settle the charges.
Limitations of the Seven Signs Of Ethical Collapse. Disadvantages
Changing organization cultures is no small task.
- May require changing the macro-ethical culture in financial
Book: Marianne Jennings – The Seven Signs of Ethical
Collapse: How to Spot Moral Meltdowns in Companies… Before It’s Too
Late – Search at Amazon
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