S&P and the New Challenge of Integrity in Business
We’ve all read tales of corporate wrongdoing – think Bernie Madoff, Enron, LIBOR. In most cases, managers engaged in nefarious behavior, knowing they were doing wrong. There are a few cases where the miscreant could plausibly argue ignorance, or good intentions – Martha Stewart, perhaps.
But a recent courtroom defense by Standard & Poors in response to a Federal charge of fraud, opens up a whole new threat to corporate ethics.
Subordinating Ethics to Legal Arguments
Back in April, S&P responded to a Justice Department’s complaint that S&P’s claims of ratings objectivity, independence and integrity were false, and part of a scheme to defraud investors.
S&P’s creative approach was to argue that such statements were only “puffery,” and that a reasonable investor would not depend on them.
Let’s underscore this. S&P, as a legal strategy, decided to disavow its own declarations of objectivity, independence and integrity, saying in effect, “everyone knows we’re just blowing smoke.”
- Picture Boeing saying, “About that 787 safety stuff – you didn’t really think we were serious, did you?”
- Picture Legal SeaFood saying, “Oh, you thought we meant genuine bluefish? Ha ha, silly you.”
- You get the picture.
This is not a company trying to avoid being caught. It’s not a case of extenuating circumstances, or offsetting benefits. It is not even arguing an interpretation of what is wrong.
S&P is arguing – as part of a legal strategy – that “integrity” is just a marketing tool. This subordinates “integrity” to both marketing and legal considerations. It puts it somewhere on a par with market research or creative ad spots.
The Name of the Problem
It’s not just S&P that is confused – the media is implicated too. In his Bloomberg News story on the issue, Jonathan Weil characterizes the problem this way:
The problem is that sound legal strategies sometimes create public-relations nightmares…Often PR and legal professionals end up pursuing conflicting agendas if they don’t work cooperatively. There’s an old test that everyone in the public eye should use when making important decisions: How would this look if you read about it on the front page of a major newspaper or website?
Where S&P’s lawyers confuse ethics and legal arguments, Weil is reducing ethical issues to ones of reputation and PR.
At least Bernie Madoff had a moral compass. He knew what he was doing was wrong, and tried to hide it. But if “integrity” is a marketing tool, justified by ROI or PR, then we are in uncharted waters.
A Simple Problem
This should not be hard to manage. If someone brings a legal strategy of “integrity as puffery” to the Chief Counsel or CEO, this is what they should say in response:
“Excuse me – you are deeply confused. This is not a legal or marketing strategy issue. There will be no analyses of riskiness, ROI, or trade-offs with reputation. Integrity is not something we bargain with. It is a core value. That means precisely what it says.
“Throw away immediately any work you were doing in that direction. And I want to know tomorrow at 9AM, in writing, why it was you were even thinking in this misconceived direction. Am I clear?”
Which would you trust? A company with leadership that answered this way? Or a company that went to court with integrity for sale?
Judge Carter, who heard the case, was clear:
The court cannot find that all of these ‘shalls’ and ‘must nots’ are the mere aspirational musings of a corporation setting out vague goals for its future. Rather, they are specific assertions of current and ongoing policies that stand in stark contrast to the behavior alleged by the government’s complaint.
Charlie- are we really in uncharted waters? For years marketers have been using some “loose definition of the day” in trumpeting “trust” in their advertising.
Here is an example of a bank using the slogan “Trust Us” and shuttering their entire operation the day after the ad ran.
The examples are endless.
Unfortunately, the word “trust” and now perhaps “integrity” HAVE become PR and advertising tools and nothing more, and business leaders allow it, as we see in your S&P story.
Barbara Kimmel, Executive Director
Trust Across America – Trust Around the World
Great post, but I agree with Barbara that these waters are well charted. Another great current example is Thomson Reuter’s TRust Index. Here is Thomson proclaiming its expertise in the arena of trust, while at the same time being called on the carpet for selling its data early to those who can and are willing to pay. Yet on their website there is a fairly long and somewhat verbose treatise on the foundation of trust that their business is based upon. Too many companies claim values that are useful for selling their products but “puffery” when called on them. It would be terrific if these waters were “uncharted”, but to mix a metaphor, they are well trod.
There is no such thing as a little integrity or there is integrity only when it suits me. You either are or are not.