University Times

Unethical business practices — besides being immoral and, often, illegal — are bad for business, three Pittsburgh corporate officers said at a conference here March 25.

A share of stock in Enron plunged in value from $33 to 19 cents during the scandal that made that corporation notorious, noted Jack Radke, director of ethics at H.J. Heinz Co. Among 20 corporations that came under government investigation early in this century, shareholders lost a staggering $236 billion, he said.

Conversely, a national survey by a group called the General Council Roundtable found that every $1 invested in corporate compliance yields a 421 percent return, said Radke. The UK-based Institute for Business Ethics concluded that British companies with ethics codes out-earn companies without them, he added.

The costs of non-compliance with laws and ethical standards include low employee morale, distracted managers and harm to companies’ reputations (and, as a result, to their profits and share prices), said Radke and the conference’s two other speakers: Michael Bleier, general counsel and legal affairs manager for Mellon Financial Corp., and John Friel, president and CEO of Medrad, Inc., a worldwide provider of medical devices and services for imaging the human body.

The conference, hosted at the Pittsburgh Athletic Association by Pitt’s Ford Institute for Human Security and by Citizens for Global Solutions Pittsburgh (formerly the World Federalist Society), was called “Beyond Rhetoric: Highlighting Integrity and Corporate Codes of Conduct.”

In keeping with that title, Radke challenged audience members to identify the corporation whose code of conduct read, in part:

“We treat others as we would like to be treated ourselves. Ruthlessness, callousness and arrogance don’t belong here….We are dedicated to conducting our business in accordance with applicable local and international laws, and with the highest professional and ethical standards.”

You guessed it: Radke was quoting from Enron’s conduct code, which prior to that corporation’s downfall was an acknowledged model for such documents.

“So what happened at Enron?” Radke asked. “Obviously, it was a paper [ethics] program. Senior management ignored the code, in my mind, and they set the exact opposite tone at the top that you would want to be set in an organization.”

In contrast, Radke, Bleier and Friel described how their companies pay more than lip service to promoting corporate integrity:

• Each company maintains a toll-free, international, 24-hour hotline, which it encourages employees to call (anonymously) to report suspected violations of law and/or the company’s code of conduct by company employees as well as partners and clients.

• Mellon, Medrad and Heinz all hold mandatory orientation and training sessions to instruct employees — from senior managers to lower-level staff — on conduct code requirements.

• All three executives said their companies discipline employees who violate conduct codes and reward employees for doing business ethically. Bleier said Mellon Financial Corp. annually holds an Academy Awards-style dinner in Florida to honor 30 mid- and lower-level employees for “exemplary commitment to shared values.”

While Medrad is a young company, Heinz and Mellon both were founded in 1869. Bleier bragged that Mellon was “the bank that stayed open during the bank holidays of the Great Depression.” Radke noted that his company’s founder, H.J. Heinz, championed the use of clear glass bottles for processed foods (to show foods were free of fillers like sawdust) and lobbied for the first federal Pure Food and Drug Act.

Friel said he used to doubt the necessity of conduct codes — until, ironically, Medrad was in the running last year for a Malcolm Baldridge National Quality Award, the top honor a U.S. company can achieve for performance excellence.

Medrad won the award. But not before a Baldridge Awards site examiner asked Friel: How do you really know your company is performing ethically? Worse, Medrad employees responding to a company survey later gave Medrad a mediocre rating for ethical behavior.

Stung, Friel and other Medrad formed a business ethics committee, benchmarked against other companies, convened focus panels, and gathered employee input on a draft code of conduct, which eventually was adopted. Medrad established its first ethics hotline and, on Jan. 1, set up a corporate compliance office.

—Bruce Steele