The New York Times recently reported that Richard F. Syron, the CEO of Freddie Mac, received, back in 2003, a memo from David Andrukonis, the company's chief risk officer warning him, that the firm was financing questionable loans that threatened the financial health of the company. In his memo, Mr. Andrukonis said that those bad loans "would likely pose an enormous financial and reputational risk to the company and the country." The article also revealed that more than two-dozen high-ranking executives said that Mr. Syron simply decided to ignore those warnings.

According to another New York Times' article, UBS, the Swiss bank is under investigation by the SEC for violation of U.S. securities laws in regards to off-shore accounts held by U.S. citizens. The SEC prosecutors suspect that UBS helped their clients evade U.S. Taxes. Yet as early as 2005, some UBS executives had warned the chief the legal counsel of the Bank, Peter Kurer (who is now the Chairman) of those violations. Apparently the Bank did not take the appropriate action to address this issue.

Investigation of a catastrophe often reveals that someone, somewhere, had raised a red flag but no one in authority paid attention.

There were many warning signs of danger for the Jewish community in Germany before WWII, yet comparatively to the Jewish population in Germany at that time, very few saw the threat and left the country.

Warning signs are also critical in matter of health. Paying attention early save lives. An apparently insignificant symptom can be the indicator of pending major health disaster.

Why are warning signs often ignored?

It is probably because we naturally want to believe what is positive and have a tendency not to believe what is, or could be, negative.

How can we overcome this tendency?

Below are four ideas that might help.

- We should first make sure we identify a red flag. Past experiences and other people's experience can help us do that. Norman Cousins once said: "History is a vast early warning system." Consulting with people with experience that we trust may also be wise to do.

- We should honestly ask ourselves whether we are in denial. The worst of all deception is self-deception. By seriously considering that possibility, we may very well become aware that we are indeed in denial.

- We should do a serious cost-benefit analysis, considering the potential cost of ignoring a warning sign. We may come to the conclusion that the benefit is really not worth the risk.

- Maybe the best advice to avoid ignoring a warning sign is that we should have to courage and take the time to not only listen to others but also to ourselves.

As Karl Jung once said:

"Through pride we are ever deceiving ourselves. But deep down below the surface of the average conscience a still, small voice says to us, 'Something is out of tune.'"

If both Richard F. Syron of Freddie Mac and Peter Kurer of UBS had considered those ideas, they possible would not be confronted today with one of the greatest challenges facing their respective careers and companies.

Giving and receiving favors is part of life and friendship. Favoritism in the workplace is quite common. We often use connections, friends and family as sources of support in job hunting.

However, favors or favoritism is, by definition, unfair and fairness is a key value in ethics.
Judy Nadler, of the Markkula Center for Applied Ethics says that favoritism interferes with fairness because it gives undue advantage to someone who does not necessarily merit the treatment. She also makes the point that favoritism violates transparency because most of the time it is done in secret. Favoritism can also cause resentment and reduces moral in a company.

Favoritism can also lead to a conflict of interest situation. Countrywide Financial distributed significant favors to politicians in Washington such as Senators Christopher Dodd and Kent Conrad, reducing the costs of their mortgage applications. Countrywide was also, at the same time, lobbying Congress for favorable laws to mortgage industry. The favors to Senators Dodd and Conrad are now being investigated by the Senate Ethics Committee.

How do we know if the favor we are about to receive or give is acceptable or not?

Here are four basic questions we should ask ourselves before moving forward.

1. Is it legal?
2. What is the intention or motivation behind the favor?
3. Are there strings attached creating a quid pro quo situation?
4. Will the receiver of the favor be asked in the future to do something in return that would violate his or her values?

We should always be aware that giving and receiving favors involves serous risks and consider the possible consequences before make our decision.

Charles Dudley Warner, the 19th Century essayist and novelist understood this issue well when he wrote:

"The excellence of a gift lies in its appropriateness rather than in its value."

The popular expression that "the road to hell is paved with good intentions" assumes that some intentions are never translated in actions. However, good intentions have value in that they are the beginning of a process that hopefully will lead to tangible measures.

I have just returned from Israel where I spent a week, working from our Jerusalem office.
I was honored to be invited at the launch of the Global Compact in Israel.

The Global Compact is a United Nation initiative that engages major corporations to adhere to ten basic principles in the areas of human rights, labor, the environment and anti-corruption. Today, more than 4,300 companies have signed-up including Microsoft, Novartis, Sanofi-Aventis and Norsk-Hydro.

The launch event was held at the Ministry of Foreign Affairs in Jerusalem. Tzipi Livni, the Vice Prime Minister and Minister of Foreign Affairs was the keynote speaker and addressed approximately 150 representatives of Israeli corporations and the not-for-profit sector. Among the attendees was Ofra Strauss, the Chair of the Strauss Group, one of the world's ten largest players in the coffee market, as well as the CSR Directors of Coca Cola, Motorola and IBM. "I believe" said Ms. Livni, "that there is a real need today to join forces and tackle internal and global challenges crossing boundaries between the public and private sectors."

George Kell, the Executive Director of the Global Compact said, in his presentation that: "commerce trade and investments build bridges between cultures and nations" and are "fundamentally important to build peace."

The launch was coordinated by a great organization called MAALA, (which stands for Business for Social Responsibility,) Israel's leading CSR organization. Talia Aharoni the Executive Director said: "Tonight in Jerusalem we expand the borders of Israeli Corporate Social Responsibility. We join thousands of companies from 88 countries around the world that together act in the framework of the Global Compact to address the world's crucial issues. On MAALA's 10th Anniversary we look wide and far and launch a new dimension to Israeli Corporate Social Responsibility and to the globalization of Israeli companies some of which are already significant players in the global world".

The question could be asked: Are these just good intentions or real commitments that bring real change? It is difficult to know, and in some cases only time will tell. Every year, each member company must summit a progress report that is posted on the Global Compact's website. The Global Compact obviously cannot verify the accuracy of every submission but rely on an honor system that expects a company to be truthful in what it declares. (The Global Compact will occasionally remove a member for non-compliance to the 10 principles.)

Commitments play a central role in our lives because we need to trust people that make them. If we had no trust we would never ride an elevator, drive a car or have surgery. Therefore it is crucial that we make every attempt to keep our commitments, however large or small they may seem to us.

I have a friend in Switzerland, Philippe Pidoux, a very well-respected politician and attorney who says:

"I make very few commitments because...... I keep them!"

That is a good motto.

The quote below, which has been attributed by some to Abraham Lincoln, very well represents the ideal of the Global Compact:

"Commitment is what transforms a promise into reality. It is the words that speak boldly of your intentions and the actions which speak louder than the words... Commitment is the stuff character is made of; the power to change the face of things. It is the daily triumph of integrity over skepticism."

As we were celebrating the 4th of July, I had the opportunity to reflect on the concept of patriotism. Time magazine devotes this week's issue to the subject.

The etymology of the word "Patriotism" comes from the Latin word "Pater" which means father. It is interesting that we do not use the expression "father country" but rather "mother country." The Germans are more linguistically correct when they speak of patriotism for the "fatherland." The metaphor of a "mother or father country" seems incorrect. Our nation or country cannot be compared to a father or a mother simply because a country does not give life.

How do we define a nation? In the past one could identify a nation by the common language, ethnicity or religion of its people. Today, we have numerous countries, including America, that have such a diversity of people that the old definition of a nation may no longer apply.

Maybe the best definition or comparison would be that of kinship much like in a family. Both a family and a nation have each a common history, share similar fundamental values and in spite of differences and have a sense of unity, and purpose.

In this election year, it seems that both the presumed republican and democratic candidate for the presidency are competing as to who is more patriotic. Maybe that is a good thing.
Peter Beinart, a senior fellow at the Council of Foreign Relations, writes in the lead Time Magazine article that conservatives and liberals have two different views as to what is true patriotism. "Conservatives tend to see patriotism as an inheritance for a glorious past [while] liberals see it more as the promise of a future to redeem the past." We do have in our history some dark pages that we should acknowledge honestly.
What are some key values of patriotism? Let me list a few:

Love

Loyalty

Dedication

Service

Sacrifice

Responsibility

These values apply both to a citizen and a family member.

Adlai Stevenson said it very well:

"What do we mean by patriotism in the context of our times? I venture to suggest that what we mean is a sense of national responsibility which will enable America to remain master of her power -- to walk with it in serenity and wisdom, with self-respect and the respect of all mankind; a patriotism that puts country ahead of self; a patriotism which is not short, frenzied outbursts of emotion, but the tranquil and steady dedication of a lifetime."

The New York Times, in its June 23rd issue, tells the incredible story of Mr. Biggs, a Manhattan prosecutor. He was in charge of prosecuting two men accused of the murder of a bouncer at the Palladium night club. However, he decided to help the defense because he believed that the two men were innocent. They are now both free.

He informed his superiors that he had serious doubt about the men's culpability and thought that the case should be dropped. Nevertheless, he was instructed (or pressured) to prosecute the case anyway.

He did.

However he also helped the defense by tracking down reluctant witnesses, preparing them to testify for the defense and coaching the defense lawyers. "I did the best I could," he said, "to lose."

Mr. Bibbs had a conflict between his conscience and his obligation to his superiors.

Some say that if he really believed the men were innocent he should not have prosecuted them. Daniel Castleman, chief assistant district attorney said: "Nobody in this office is ever required to prosecute someone they believe is innocent." However Mr. Bibb believed that if he had resigned the case, another prosecutor would have been successful in convicting them.

Idealistically both the prosecution and the defense should search the truth and serve justice, but in reality it is often about winning.

We may all be faced with a dilemma where our conscience is in conflict with our obligations. How can we resolve such a conflict?

Here are some suggestions that might help.

1. We should make sure that our "conscience" is well informed. We should have as much facts as possible before making any determination. Even then, we should consider the possibility that we could be wrong.

2. We should consult with someone that we trust and that is independent.

3. We should think of possible alternative solutions that could satisfy both our conscience and our obligation.

4. We should consider the consequences of our planned action, not only to ourselves but to others as well.

5. Finally, we should have the moral courage to do what we believe is right.

As C.S. Lewis once wrote:

"Courage is not simply one of the virtues, but the form of every virtue at the testing point."

What lessons can we learn from the WorldCom debacle or how can we identify a situation that could become a slippery slope? (see last week's entry)

The concept of a slippery slope asserts that a minor violation or infraction to a moral code or the law will gradually lead to more serious offences that ultimately can culminate in very serious consequences. Some people believe that the slippery slope concept is a fallacy that certain events will not inevitably lead to other events. However, human psychology and experience allow us to consider it seriously.

The concept of the slippery slope is also one linked to the understanding of conscience.
I remember the story of a man who was driving very late at night in a remote area. He accidentally hit a pedestrian. Seeing no one around, without any hesitation he just took off. He was later caught (or turned himself in) and did jail time. He now speaks in public about his experience and makes the point that it was because of the many prior minor violations of his values and conscience that he did not even hesitate before taking off.

How can we identify and avoid a slippery slope situation?

1. The mere fact that we ask ourselves that question is an important step. Being aware that we may be faced with such a situation might protect us.
2. We should exercise caution remembering that the first step is the most critical.
3. We should resist the temptation to cut corners and take risks even when the pressure of the work environment presses us to do so.
4. We should learn from the experience of others. If it happened to them, it can happen to anyone of us.
5. We should get advice from a respected counselor or even colleagues whether the step we contemplate taking could lead to a slippery slope situation.
6. We should be willing to exercise morale courage.

I am sure that David Myers, of WorldCom, with 20-20 hindsight, would agree. He told the judge, at his sentencing: "At the time I consider to be the single most critical character-defining moment of my life, I failed."

As Michael Josephson, of the Josephson Institute said:

"Moral courage is a body-guard to conscience and character."

I participated in an Ethics and Compliance Officer Association conference in Scottsdale, Arizona last month and attended a fascinating session called The Causes of Corporate Corruption: On the panel, brilliantly moderated by Jeff Benjamin, the ethics officer for Novartis, was David Myers, the former Controller at WorldCom, David Anders, the former Federal prosecutor of WorldCom and Evan Chester a white-color crime attorney. The session lasted 3 hours and was fascinating.

David Myers, who went to jail for his role in the WorldCom scandal, told his side of story. As controller he was first asked by the Scott Sulivan, the CFO, back in October 2000, to enter an amount in the reserve for which there was no validation. He first refused and so did the people who worked for him. He was then approached by Bernie Ebbers, the then Chairman and CEO in a very friendly manner. Mr. Ebbers told him that he sympathized with his situation and that he should not be asking him to do anything that made him uncomfortable. However, he promised, this would be the one and only time such a demand was made, and based on the financial projections of the company, this "error" would be corrected in the next Quarter. David Myers believed him. He also knew that if he refused to make the entry he would, most likely, lose his job and would be unable to meet his financial commitments such as his mortgage payment and college tuition for his children. After much hesitation he entered the amount in the company's reserve. Predictably, the same request was made for the following Quarters until it was discovered in 2002 and the whole scandal broke out.

On June 25, 2002, WorldCom announced financial restatements for 2001 and the first Quarter of 2002 for the amount to $3.85 billion. The stock (which had traded at an all-time high at $62) closed under $1. The company went bankrupt a month later. Scott Sulivan and David Myers each entered a guilty plea. Scott served 5 years and David 1 year and one day. Bernie Ebbers is serving a 25-years sentence.

Once David Myers had made that "one and only" fraudulent entry, it would have been extremely hard for him to refuse to make the second one because he could never justify making the first one.

A slippery slope is, by definition, irreversible.

What lessons can we learn from the WorldCom debacle and how can we identify a situation that could become a slippery slope?

That will be the topic of my next blog.

Ethics and Blogs:
Last week I was invited by the Central Pennsylvania chapter of PRSA in Harrisburg to speak about ethics and blogs. The session was video taped and will be posted on their website shortly.

My co-presenter Brian Shoff is a known blogger. It was encouraging to discover that he and many other bloggers are concerned about ethics.

Last year, the Pew Internet & American Life Project estimated that there are some 12 million bloggers in the U.S. Some bloggers have been debating whether the Weblog community should follow specific ethical guidelines. Responsible bloggers recognize that they are addressing the public and have some ethical obligations to society in general. CyberJournalist.net has created a model "Bloggers code of ethics." Although all bloggers are not journalists, many believe that they should follow more or less the ethics code followed by journalists.

Libel and defamation is a critical issue for bloggers. According to the Media Law Center, there are approximately 150 lawsuits in the US against bloggers. Most of the lawsuits claim defamation and libel. However, only six of these lawsuits have resulted in penalties for the bloggers. Most of the cases have been dismissed by the anti-SLAPP (Strategic Lawsuit Against Public Participation) laws. These laws protect from litigations whose only purpose is to intimidate a critic by the threat and cost of a lawsuit.

Last year, Andrew Left, a blogger, posted negative information on his blog, about GTX Global Corp .,a provider of IP multimedia technologies. GTX claimed that his intent was to depress the stock price of the company so that he could make a profit by short selling the stock. GTX Global sued Andrew Left for defamation and securities fraud but the court dismissed the lawsuit under the anti-SLAPP laws.

Neville Hobson, a leading influencer in social media communications gives good advice for corporate bloggers:

"If an organization isn't already in place where openness and transparency in communication exists and is practiced, then using tools like blogs will be unlikely to do anything positive for the organization. If your openness/transparency foundation isn't there, don't blog."

I believe we have those foundations at Ruder Finn!

In the June issue of Portfolio, a Conde Nast monthly magazine, the Editors ask in an article called "The Age of Attack" whether we are at a tipping point of "our corporate culture where civil discourse-politesse about our professional peers- is about to be come defunct?" The Editorial gives the examples of Jack Welch severely criticizing Jeff Immelt his successor at GE and Paul Volcker, the former Chairman of the Federal Reserve making very negative comments on Ben Bernanke, the current Chairman. According to the Editors of Portfolio there has always been a "code that you don't beat up on the person who takes over from you."

The same question could be asked about our political culture. The presidential political campaign has provided numerous examples of loss of civility when instead of debating issues and ideas, candidates attack each other viciously and question the character of their opponent.

There is room in the public discourse for criticism, but it should never be an attack. A criticism should never be destructive. A criticism of a particular action should be accompanied with positive suggestions.

The etymology of the word "civility" comes from the Latin Civilis which means proper to a citizen. The word citizen comes from the word city. Civility is how one should behave in the "City" or in a close proximity with other people, such as neighbors, co-workers or any other person we come in contact with.

Civility can also be understood as a form of respect and tolerance for others.

Why is civility important? One could argue that without civility, ultimately we would not have a civilization. Without some respect and tolerance for others we would be facing violence and chaos and ultimately destruction of Society. After all, the antonym to civilization is barbarism!

What makes us lose our sense of civility in our actions?

They may be more than one explanation but I imagine that the root lies in our human nature that is essentially selfish. We should try to remember the biblical directive to love our neighbor as ourselves. (Leviticus 19:18)

Jane Adams, the U.S. social worker, sociologist, & suffragist wrote:

Civilization is a method of living, an attitude of equal respect for all men.

Time Magazine in its May 12th issue lists what it considers the 100th most influential people in the world. The issue's contributors such as Archbishop Desmond Tutu (who wrote about Peter Gabriel), Bill Clinton (who wrote about Tony Blair) and Edgar Bronfman Jr. (who wrote about the rock band Radiohead) are themselves influential and famous.

Richard Stengel the Managing Editor says in the introduction, that influence although subjective is measured by the effect people have on the world.

On a numerical smaller scale we each are the most influential person to someone, whether it is a family member, such as a 2-week old baby, a colleague at work or just a friend.

We all can use our financial resources to influence the lives of others. A small $10 donation to a hunger project will have a significant impact on someone who earns an average of $1 a day.

Our knowledge and experience can also be of great influence to many.

How careful are we about how we use our influence or power in order not to impact negatively the lives of others?

Ideally we should try to use our influence for the well-being of others. Many actors and actresses in Hollywood and elsewhere have used and are using their fame for good causes.Angelina Jolie has become a spokesperson of the United Nations High Commissioner for Refugees (UNHR,) Jerry Lewis has raised hundred of millions of dollars for research on muscular dystrophy and Bono is using his celebrity status to combat poverty in Africa.

We should also make sure that when we use our influence for our own benefit, as we should, we do not do it without consideration for others and try to be fair as much as we can. Fairness is a great value, but it is extremely difficult to determine and apply because we live in a very competitive world.

Fairness and justice are closely related concepts. The French word for fair is "just." Justice is an easier concept to comprehend and one to think about when we use whatever influence we have.

Eleanor Roosevelt once said:

"You can never really live anyone else's life, not even your child's. The influence you exert is through your own life, and what you've become yourself."