Business ethics is easy to talk about when it’s the other fellow’s business.
However, the “ifs” and “buts” can seem endless when the enterprise is your own, and making the right decision could cost you a bundle of money.
You then would discover ethics is a luxury steamship in fair weather and a dinghy in foul.
Better Business Bureaus occasionally serve as a pilot for companies navigating ethical shoals. For example, what should a company do when its employee or subcontractor has tricked a customer into making the cheque payable to himself?
The contractor is entitled to payment under the terms of the contract. Should the customer have to pay twice?
I have received calls at the BBB of Southern Alberta from contractors victimized in such a manner by their own employees.
The most recent came five weeks ago from a Calgary renovator who discovered that an employee had conned homeowners into making their payments to him.
The defalcation totalled thousands of dollars – money the small business could not afford to write off.
The Bank of Montreal found itself in a similar situation on a much grander scale in 2002 when retired Mexican oilman Salvador Casanova complained that BMO official Anita Koo of Calgary, who supervised his term deposits, had stolen $9 million US – his entire nest egg.
The Council of Better Business Bureaus in Arlington, Va., says employees across Canada and the U.S. steal well over $50 billion per year from their unwitting employers.
“It is important to keep your eyes open and be aware of the things that go on in your business,” the CBBB advises.
Prof. James Gaa of Edmonton, who teaches ethics at the University of Alberta School of Business, says companies should take whatever preventive action possible. “Nobody wants to be in the middle of an ethical-legal situation,” he says.
“If you can find some reasonable way of anticipating problems and preventing them from coming up, everybody is better off.”
Here are some tips:
* Conduct background and credit checks on all new employees, especially those hired to fill positions of trust.
* Protect yourself and your clients against theft and fraud by bonding your employee. Bonds are sold by commercial insurers and obtained through insurance brokers, says Insurance Bureau of Canada official Louise Bremness of Edmonton.
* Include a clause in your contract forms that states payments are to be made payable to your business; never to anyone else.
* Ask your customers to initial that clause when signing the contract.
When the Calgary renovator called me about his plight, I counselled him to fire the employee, then notify the police – which he had already done. Next, I told him that he should consult with a lawyer to review his legal position and determine the appropriate steps of action.
I then advised him that the appropriate ethical response might differ from his legal remedies. It was the business’s responsibility to employ honest people, and the customer should not have to pay the penalty for failure to do so, I suggested.
I did not hear from the contractor’s customers, so I assume he did the right thing.
When contemplating such dilemmas, I like to recall a scene in a classic oldie, Frank Capra’s It’s A Wonderful Life. The idiot uncle of George Bailey, the small town banker played by Jimmy Stewart, had misplaced a large sum of the bank’s cash.
George, faced with financial ruin and disgrace, could leave Bedford Falls with his own money intact. But he faces the mob of townsfolk, people he grew up with.
“Here’s two thousand dollars,” he says, waving a wad of cash. “All right, Tom, how much do you need?”
Valerie MacLean, spokesperson for the Vancouver-based Better Business Bureau, says she has had to address employee fraud situations with BBB members, and her bureau’s position has been clear: The ethical course of action is to write off what the customer owes.
“We’ve terminated memberships of companies that haven’t agreed to do exactly that,” she says. “The business should just fire the individual and move on and learn from it.”
The Bank of Montreal eventually did the ethical thing for Casanova. Last May, BMO settled a lawsuit by the Mexican depositor who had pleaded that the bank breached its fiduciary duty to him through inadequate supervision of Koo.
I like to think that the bank did so because it was the right thing to do and not just the law.
Determining the correct ethical course is not always easy. What if a home renovator’s customer were in a position where he or she should have known better than to make the payment to the employee? For example, what if that person were a lawyer, or a business owner?
What if letting such a perversely stupid person off the hook would leave the contractor unable to feed his five kids?
Such situations present an ethical Gordian knot. Nonetheless, MacLean and the CBBB have the correct formula for cutting through these complexities.
When the line between doing what is right and what is legal is not clear, move back to what you know is right.
(Brock Ketcham is the director of trade practices for the Better Business Bureau of Southern Alberta. He can be reached at brock@businessedge.ca)
