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Ethics Panel at California State University of Monterey Bay – April 1, 2004
The Herald

Originally published Friday, April 2, 2004

Business leaders, from left, James F. Bracher, founder of The Bracher Center for Integrity in Leadership; Basil Mills, a CSU-Monterey Bay fellow and chief executive officer of Mills Family Farms; and Paul Baszucki, chairman of communications technology company Norstan Inc., discuss ethics and corporate social responsibility Thursday at the CSUMB Conference Center. The event was presented by the university's School of Business and CSUMB Business Partners program.

Mary Kay Crockett as moderator asked each panelist (Jim Bracher, Basil Mills and Paul Baszucki) to introduce themselves and describe what integrity meant to them. She introduced herself as a recent retiree following 30 years at Merrill Lynch.

Jim Bracher introduced himself as a consultant. He went on to describe integrity as including character among the eight attributes, and defined character by repeating what an eight-year old member of the Boys and Girls Club had said: “character is what you do when nobody is watching.” Jim went on to tell of an experience he had with Mary Kay Crockett. It seems that, long ago, Jim and his wife, Jane, had purchased a home from Mary Kay. Some few years after the purchase, it was discovered that the sewer lines had never been connected to the home, and a neighbor's property had been getting the sewage from the Bracher's home. When he told Mary Kay about the issue, she immediately volunteered to, and then did, repair the damage at her expense—even though she was not the original owner; even though she had no legal obligation to do anything, but because it was the right thing to do! Integrity is what people do when they know it is the right thing to do, even if not a legally required action.

Basil Mills introduced himself, and told the audience that the Agricultural industry was in a situation where they were dealing with perishable products, and therefore had to trust one another.

Paul Baszucki, in his introductory remarks, commented that a business would make more money in the long run if it established long-term relationships with customers built upon trust. Further, that a business would be more profitable if it experienced low turnover of its employees, and that this would be the result if employees trusted the company.

The students then offered their questions:

1. What strategy should management follow to help employees live up to an integrity standard, and to hold management to such standards?

Paul Baszucki responded that many businesses used employee surveys to determine which managers were acting properly; then the offending managers were given the change to improve, and if they did not, would be replaced. Further, an employee should not stay with a company if that company failed to live up to the standards the employee expected.

2. How should university professors prepare students for integrity in business?

Jim Bracher told the audience that internships were critical to learn about integrity in business, and that professors should encourage students to obtain as many internships as they could during their university years.

3. What about outsourcing? Where is the integrity in taking jobs from Americans and putting them overseas?

Mary Kay noted that outsourcing seemed to be a “sea-change” in how business is conducted, much like the industrial revolution itself.

Jim noted that the audience needed to look in the mirror, because the driving force was lower prices. He further noted to the students that most of the jobs going overseas were jobs difficult to fill in the U.S., because “you wouldn't want them.”

Paul said that the answer really was that the U.S. is an engine of economic growth. He pointed out that, 30 years ago, there was no Microsoft, which has created a ton of jobs both here and abroad.

A faculty member interjected, what is the impact on the middle class?

Paul said that there are millions of jobs created in small companies through out the land, supporting a middle class. He noted that jobs do change over time.

4. What about Wal-Mart? They are in the news, closing a lot of small businesses?

Paul Baszucki responded that our free market system operates to give consumers what they want, and if Wal-Mart better served the consumer, they would survive the competition for the consumer. He noted that they usually offered lower prices to the consumer than the businesses they replaced.

A faculty member then raised the additional question, “doesn't Wal-Mart hire undocumented workers?”

Basil Mills answered that the statement is misleading; that Wal-Mart probably had documentation, but that the documentation was not true or correct. He pointed out that the agricultural industry has a large problem with workers who present documentation so that they appear to be in the country legally with the right to work, but that the documentation turns out in some cases to be a fraud.
He said that, before the 9-11 incidents, Congress was working on a solution to the issue as it affected the Mexican border illegal immigrants, but has not returned to deal with the issue since that time.

5. Do you (the panel) believe the penalties being applied to Martha Stewart and other white color crimes are appropriate?

Jim Bracher told two stories (about his barber, and about the gentleman who shined his shoes) that illustrated that people believe large-scale white-collar criminals are given lighter sentences at nicer prisons (country-clubs) than other criminals. Jim said that it was important, when a white-collar criminal was convicted, that they be punished—but that he did believe Martha Stewart had been made an example of, and perhaps too much so.

Paul Baszucki indicated that it is necessary to prosecute white collar criminals so that people will trust in the system. He further said that Martha Stewart stole, maybe, $50,000—while others stole in the hundreds of millions, and with them we should lock them up and throw the key away.

Mary Kay Crockett pointed out that Martha was not prosecuted for insider trading, but rather for lying and obstructing justice. Paul said that we should lock up people who do that and throw the key away.

6. At what age do you teach children integrity?

Jim Bracher responded that you begin teaching children integrity very early in their life, and you do it be example. Jim then told the story of the eight year-old child in the Boys and Girls Clubs of Monterey Bay who replied, when asked what character was, “Character is what you do when no one is watching you.”

7. Can something be illegal, and yet be ethical?

The panelists did not directly answer this question. This writer observes that people who engage in civil disobedience to laws that they hold to be immoral are engaging in activity that is illegal, yet can be highly ethical—as the early citizens who provided the “underground railroad” to enable slaves to escape to freedom in the Northern states early in the history of the United States of America; or the German citizens who protected their Jewish neighbors from the Nazi death camps by hiding them from the police, or helping them escape to the West.

8. Are companies who excessively earn profits by taking resources from other countries behaving ethically?

The panelists engaged in wide ranging discussion, but the sense of their comments was that the question becomes one of whose definition of the word “excessive?” Certainly it is unethical to take “excessive” resources from another country—if the word itself can be commonly defined. Countries need to set ground rules before the “taking” of the resources.

9. (From a faculty member) Is it ethical to do business with companies who exploit human rights, such as the use of child labor by Nike and similar companies?

Paul Baszucki said that there needs to be a “win-win” balance in decisions, as these affect all stakeholders in the decisions. It is good to ask, “Would my mother, would my family, be happy with my decision?” If the answer is “no,” then don't do it.

Jim Bracher and Basil Mills agreed that the ethical consumer is the real answer. That consumers should avoid buying products made by companies who exploit child labor and engage in other human rights abuses; that recent history has shown examples that the consumer will do that, when the truth is brought to light, bringing pressure on the offending company to stop their unethical practices.

10. Are you obligated to become a whistleblower when you know you might lose your job?

Basil Mills commented that companies cannot fire whistleblowers and get away with it! Jim Bracher observed that if you find yourself in a situation where the people in your company are engaging in unethical practices, you should use internal grievance procedures to get these identified and corrected; that if you find this process ineffective or working to your own disadvantage, you should find another place to work.

11. To Jim Bracher: As a former Minister, did you find there are ethics in the Ministry?

Jim responded that, beyond the instructions of scripture, there is an understanding that “if it doesn't feel right, then don't do it.”

12. Are so-called non-compete agreements ethical?

Paul Baszucki responded that you are always entitled to have a job utilizing your knowledge and skills; but, that companies are entitled to prevent you from sharing their specific intellectual property with competitors. There are many types of activities that an employer wishes to prevent. Disclosure of proprietary information is one; stealing of other employees is another, and the stealing of customers is yet another. General non-compete agreements are often not enforceable, but employers can usually enforce non-solicitation agreements not to “steal” their employees and non-disclosure agreements to protect their customer lists. It is ethical to prevent theft; it is not ethical to prevent someone from using their professional skills and knowledge.

13. The panel contains successful people. Can you give us tips on how you were able to be so successful?

Jim Bracher answered in a word, “Listening.” Paul Baszucki replied that having a high energy level and the right attitude was key, to which Basil Mills added that we can control our attitude, even when we cannot control anything else.

Jim added that lament is a waste of time; that you need to make yourself vulnerable, admit you need help, and ask for it. Having mentors was particularly important, and Jim added that he had benefited from 12, whose pictures hang on the walls of his company's boardroom.

Paul Baszucki said that a fundamental question was: “Do you want to be successful, or not?”

14. What about medical ethics? There is not enough funding for rare diseases, while things like AIDS and Cancer receive a lot of funding.

Jim Bracher told of his own experience with macular degeneration, and the lack of research funding to deal with that disease. Paul Baszucki added that you set the tone for medical ethics one person at a time, and observe the need to lead medical companies with integrity. The discussion expanded to general questions of medical research, with the comment that recent articles suggested that mapping the blood flow to cut off the blood supply to cancer was a high potential area of research that needed more funding. Jim Bracher commented that the grant-writing system that generates funds for medical research is broken.

14. How can you get the word out when you see something that is wrong?

Paul Baszucki said, “It is not a perfect world, but you need to take the matter up the chain of command. If you cannot get the condition changed, then consider leaving.”

Basil Mills said that you should take a positive stance, and you can sometimes change people. Jim Bracher agreed, saying that it was important to have clarity.

15. Should Affirmative Action still have a place in society today?

Paul Baszucki indicated that, while enforced racial goals were not a good idea, the voluntary implementation of affirmative action was simply good business.

16. When dealing with other countries—international ethics, whose ethics do you use? Do we have a right to tell other countries how to do things? What about “baksheesh” or “guanxi?”

The panelists asked Dan Halloran to comment. Dan replied that, out of his own experience, it was necessary to view business issues internationally through the word integrity—doing what you say you will do, and telling the truth about what you did. He said that what is ethical will vary from culture to culture, but that integrity was a more universal concept and valued in all cultures. Dan went on to say that businesspeople in other countries are well aware that the United States has specific practices that are considered ethical, while others are viewed as unethical. But if an American business person follows American ethics, is clear about what his or her practices are, does what he or she promises, tells the truth and is consistent, then he or she will acquire a reputation for integrity, and earn more business over time.

At Motorola, where Dan spent his career, he said that the polices were clear, that gift-giving or receiving in order to obtain a business advantage was totally unacceptable. In China, “guanxi” is part of the business culture, yet Motorola did not engage in the practice. Over time, our integrity was valued, and Motorola has been highly successful in China.

17. What do you do when one of your top performers is a jerk, yet makes money for the company? Do you teach or fire him?

Paul Baszucki responded that you must give the person a chance to understand what behaviors are unacceptable and an opportunity to improve; however, if the individual's behavior continues such that the risk is greater than the return, you must let him or her go. If the behavior is a character problem, then you must act as soon as that is clear. Paul indicated that life should be a process of constant improvement, listening, and further improvement.

Basil Mills told the story of Cesar Chavez, who certainly raised the level of discomfort in the industry, and how Basil had joined the board of an association of which Cesar was a member. He said that you do the right thing, even if it is not popular. He further said that he continuously learns, and that he believes in a process of lifelong learning.

Jim Bracher told the story of an employee in his experience who suggested to Jim that he could immediately improve his profits by 40% by cutting service—that this employee clearly was not of the same value set, and had to leave.

18. Does the practice of corporate spying happen a lot? Should we just ignore the issue as an aberration? Is it ethical? What if your boss asks you to do it?

Paul Baszucki pointed out that you can obtain a great deal of competitive information from legitimate sources—10K reports, newspaper articles, patterns of advertising, etc., and therefore illegal spying efforts are really not necessary. However, it does happen, and it is illegal.

Jim Bracher said that, yes, it does go on, and is unethical—and if you are asked to do it by your boss, either move up the chain of command or find another employer.

Basil Mills said that it gets back to how you obtain the information. Use sources that are legitimate.

19. To Jim Bracher: In your eight core values of integrity, is the “handshake” a realistic business process?

Jim Bracher deferred the question to Basil Mills, stating that the row-crop farming industry was an excellent example of the “verbal handshake.”

Basil Mills explained that in his industry, the product is perishable, and therefore the industry must operate on trust—there just isn't time to go through lengthy contractual processes. They have a saying, “sell it or smell it,” that describes the urgency of the process. Basil went on to describe the Produce Reporter Company “Blue Book” and the Packer newsletter's “Redbook” that are 100 year-old financial reporting firms that report on the character, finances and credit history of people in agribusiness that help to keep the trust climate alive.

Mary Kay Crockett volunteered that the securities industry operates somewhat the same way that securities sales are done by phone and internet, and therefore trust between buyer, seller and broker must be substantive and stable to secure the process.

20. How big is too big? Wal-Mart versus small business—where do you draw the line ethically? Shouldn't Wal-Mart be concerned about the businesses they hurt? Should you be concerned about whom you hurt in competition?

Basil Mills responded that a good competitor helps everybody, by growing the market and providing new industry practices and innovation. He went on to describe the “five a day” program that many competitive businesses are promoting in the agribusiness industry to help fight obesity by encouraging people to have five servings of fruits and vegetables every day.

Paul Baszucki reminded everyone that we live in a free market economy and that competition is a necessary part of that, and the best survive.

Jim Bracher pointed out that, unless free markets regulate themselves, governments will.

21. There have been a lot of scandals—do you think the practice of unethical decisions will stop? When will it stop?

Paul Baszucki replied that it is necessary to apply real penalties to white collar crime, because there will always be a very small minority of people willing to break the rules to gain a short-term advantage. Leaders have a responsibility to lead the way.

Basil Mills described the agribusiness leaders' efforts in the Salinas Valley to create and integrity-based leadership program to help lead the way.

22. What about the consumption of fossil fuels? Aren't we being unethical in the disproportionate share that we consume, and won't these be gone within another 100 years?

Mary Kay Crockett stressed that we have a responsibility to conserve, and to research alternative fuels.

Basil Mills said that the world will change, and necessity will bring new fuels.

23. To Basil Mills: What about the issue of pesticides in agriculture?

Basil responded that, through research, agriculture has been able to reduce the amount of pesticides substantially through the years, and continually has found more desirable alternatives to use.

Basil informed the audience that the US spends about 10% of Gross Domestic Product (GDP) on food, compared to 14% in the rest of the world, and that the American Farmer provides food for more than our own population because of our productivity.

23. What about integrity in the media? Big media conglomerates are wiping out small TV companies, etc., and controlling the news. What happens to fair and accurate reporting? Recall the Hearst story.

Paul Baszucki cautioned the audience not to place a value judgment on the word “big.” Further, with the internet, it seems there are more opportunities to get the truth, thus encouraging all media companies to tell the truth. He suggested there is more information out there and available to consumers than ever before.

24. How do you maintain a balance between family and business?

Mary Kay Crockett took the question, and said that she is a living example, being forced back into the work environment when her children were very young, and provide for the family herself. She worked for Merrill Lynch for 30 years, and was able to do so because she sought out a support system of family and friends to help her through the difficulties. She suggested that a single Mother needs to do that. If there is none, then the society's welfare system does provide some help.

25. Is it ethical for companies to give or sell their file of information on you to other companies?

As time was running out on the session, the panelists assured the audience that it is not ethical, and in some cases illegal for companies to sell your private information given to them in trust.

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