a crowd of individuals walking an opposite path from a lone individual, this symbolizes the stand some executives must make to uphold good c-suite ethics

When You Are the Only Ethical Voice on the Executive Team

Executives who uphold C-Suite ethics and speak out against fraud can pay a heavy price. Continue reading to learn more about C-Suite ethics and what sometimes happen when executives refuse to participate in wrongdoing.

At Gardner Employment Law, we have counseled C-Suite executives on all manner of decision making. We can help you make the right, ethical decision when the time comes.

What is C-Suite Ethics?

C-Suite ethics means that ethical morals such as transparency, honesty and fairness should permeate the decisions and foundations of the executive team. An ethical executive team leads to an ethical company. Employees notice. Studies show that 94% of employees say it is “critical” or “important” that the company they work for is ethical. Those who lead a company from the C-Suite must be ethical in order for their company to be ethical. Just as a driver is responsible for the path their car travels , the C-Suite is responsible for the path the company they are leading follows. In psychology, this concept is known as the “pecking order.”

An unethical C-Suite may not only run afoul of laws and regulations, but also can compromise every facet of their company. A dishonest C-Suite cannot expect their investors or employees to trust them. A closed off and shadowy C-Suite cannot expect the benefit of the doubt from the public when a scandal arises.

While no one overarching ethical philosophy will work for every company, each and every one of us knows the difference between right and wrong, between truth and lies. Everyone knows that it is wrong to lie, cheat, steal or defraud. Everyone knows the value of transparency, honesty and fairness. Despite this common knowledge, it nevertheless can be difficult to speak up when we see unethical practices arising in our company or within the C-Suite where we hear strategies that may not be legal. However, with every unethical decision we do not resist, our character and reputation erodes, and the company that we lead risks paying an unbearable price.

What is the Cost of an Unethical C-Suite?

With every turn of the newspaper page or the changing of the television channel, we see stories of companies whose unethical decision has resulted in ruin. Oftentimes, this lack of C-Suite ethics which resulted in the ruinous decision could have been stopped if an executive had just spoken up.

The results of unethical decision making can be seen in the recent fall of Sam Bankman-Fried (also known as SBF) and FTX. SBF was the founder and CEO of FTX, a cryptocurrency trading platform. At its peak, FTX was considered one of the premier crypto currency trading platforms and was endorsed by the likes of Kevin O’Leary, Tom Brady and Larry David. According to the Wall Street Journal, by SBF’s account, his company was founded on ethical principles and operated honestly in the beginning. However, as time went on, SBF slowly began to unethically and illegally trade the funds his clients had deposited on FTX for greater profit. Despite already having a stable business which was profitable for both his customers and the C-Suite, he decided to jeopardize his company with unethical decision making. No one in his C-suite spoke up and now SBF faces jail time, his company is in ruins and every executive in the company has had their reputations irreparably tarnished.

While this scandal is ongoing, we can safely say that many of the high ranking executives at FTX were aware at least in some part as to what was going on. Despite their knowledge, none spoke up and none spoke out. Apart from the ruin brought to the company and its customers, the individual executives have suffered directly as well for their lack of ethics. Article after article has come out identifying every executive at FTX by name and forever branding them as unethical. For their decision not to speak up against unethical practices, they may never have a job again.

What Can One Voice Change?

Sometimes it only takes one person to speak up and stop unethical practices before they even begin. However, even if a lone voice cannot stop the unethical practices, an executive’s voice can protect himself or herself and save others through their actions. Dealing with unethical events in C-Suite ethics is not easy for one person. Fears of retaliation and pressures to conform with the rest of a C-Suite are very real. But, those who speak out despite these pressures can save themselves and the company they are a part of.

Sherron Watkins of Enron gives us another illustration. Sherron was a high level executive at Enron who spoke out against the fraud they were committing. She circulated a memo to the CEO of Enron detailing the fraud she saw and was later called to testify in investigations when Enron’s fraud was eventually brought to light. By speaking out, she was a critical piece of uncovering the fraud Enron was undertaking and in doing so, she protected herself. Her decision to uphold C-Suite ethics allowed her to pursue a fruitful career after leaving Enron, untarnished by the fraud her company was a part of. Her courage was the genesis for the Sarbanes-Oxley Act. Watkins was honored by being named one of Time Magazine’s persons of the year in 2002.

Sherron Watkins was not alone in this honor, however. Another executive, Cynthia Cooper, was also named in the persons of the year in 2002 for her ethical stand. Cynthia refused to take part in the fraud being perpetuated by her company, WorldCom, and was pivotal in bringing the fraud to light. In doing so, she likely saved the company from total destruction. Following WorldCom’s fraud being brought to light, the company filed for bankruptcy. However, Cynthia’s ethical stand showed that there were still ethical and honest people in WorldCom. Because of this, Cynthia and other executives were able to bring WorldCom back from bankruptcy and return it to a prospering company. Cynthia continued to work for WorldCom for many years after her ethical stand and WorldCom was later bought for 8.4 billion dollars by Verizon. Solid C-Suite ethics, even by just one executive, was enough to save the company.

Standing Up Against Wrongdoing Is Difficult

An executive does not always save the company or help create new laws. Standing up for what is morally right can cost you to lose your job and can damage your career. We represented an executive in the healthcare industry who refused to go along with a scheme that would have constituted Medicare fraud. When she continued to hold her ground, the CEO walked into her office one afternoon and told her, “We do not need you any longer.” There was no evidence that the termination was because of her resistance to the planned scheme and, therefore, she had no legal claim against the company. The executive had given up a lucrative position in New York City and had taken a pay cut to move to Houston, based on her hopes for success. It took her several years to get back on her feet.

We were able to help the client recover what she was owed under her contract, but that did not make her whole. However, this client believed in doing what was right. She also believed that her counterparts eventually would be found out. In the long run, staying true to your values will allow you to sleep better at night.

When to Speak Up

Standing up for good C-Suite ethics and speaking up are imperative in a well functioning company. An ethical C-Suite creates an ethical and profitable company. Despite its importance, it is easier said than done. However, as the stories of SBF, Sherron Watkins and Cynthia Cooper show, standing up and speaking out can make a difference.

If you want to learn more about C-Suite ethics or have legal concerns regarding what your company is doing and what could happen if you speak up, reach out to us before it is too late.

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