Erosion of ethics

Recent survey of area business leaders indicates diminishing trust and growing concern for unethical practices

Story by Lee Marie Reinsch

MATT EVERETT FELT THE ODDS WERE STACKED against his industry.

In northeast Wisconsin in recent years, several incidents involving less-than-upfront contractors and construction companies have tainted his line of work.

“You put that ‘contractor’ word out there and you got the stigma following you around,” said the owner of Paul Davis Restoration of the Fox Valley. “There is this assumption that you’re guilty even before you’ve done anything.”

The good news for Everett and other area businesspeople is that they have more faith in each other than they do in business across the United States.

A recent Pulse survey for Nicolet National Bank by the De Pere-based firm Intellectual Marketing found that northeast Wisconsin business owners and CEOs trust their colleagues here in the region far more than they trust businesses nationally.

A total of 84 percent of those surveyed reported they felt unethical business behavior in northeastern Wisconsin was either “not too serious,” “not at all serious,” or at the very worst, “somewhat serious.” Of this group, 57 percent thought it not too serious or not at all serious.

Of those who thought business ethics problematic, 4 percent called it very serious, with 10 percent deeming it moderately serious.

Intellectual Marketing partner David Wegge, Ph.D., expressed confidence in the perceptive abilities and judgment of his survey respondents.

“Because we are talking to business leaders in northeast Wisconsin, they should have a pretty good sense of (the degree of) unethical behavior taking place, because they are in that community, interacting with their colleagues,” Wegge said.

Not that Everett was worried. He received validation last month when his Fox Valley office won one of four Wisconsin
Better Business Bureau Torch Awards for businesses.

Ethics watchdog
THE BBB’S TORCH AWARDS REWARD ethics among businesses and not-for-profits, said JoEllen Wollangk, vice president and northeast Wisconsin manager for the Better Business Bureau office in Appleton. “It’s a way of honoring and celebrating those businesses that stand out and operate ethically,” Wollangk said.

In 2007, a Gallup study commissioned for the BBB found one in five Americans felt their trust in business had diminished. Another study around the same time found only one in six people trust companies doing online business, Wollangk said.

BBB’s outreach programs aim to educate consumers about what red flags to look for in a company before doing business with them. For example, a BBB-accredited heating and air conditioning business will speak to the public about what to look for in an HVAC serviceperson. The BBB also talks to senior groups about scams targeting senior citizens and to service organizations on topics of consumer safety, identity theft and more.

“In the marketplace, the only person you can be 100 percent sure is watching out for you is you,” Wollangk said.
The BBB does outreach talks at service organizations and senior centers on topics of consumer safety, identity theft, scams and more.

Four Torch Awards each year are given to businesses – two to small businesses and two to large – and two Torch Awards go to charities and other not-for-profit organizations.

Torch Awards for charities are a relatively new development – the BBB evaluates those candidates to ensure they’re run by a board of directors and not by a family or tightly held group of people. “So donors know that their money is going to the program and not to fundraising,” Wollangk said.

Contrary to popular conception, the BBB isn’t a branch of the government. Accreditation starts at $390 a year, dependent upon the size of the business.

Standards for behavior
ETHICS ARE STANDARDS OF BEHAVIOR that guide our responses to decisions, said Jeffrey Reed, dean of the School of Business at Marian University in Fond du Lac. Marian requires all of its undergraduate business majors to take a business ethics class.

Reed’s classes have touched on ethics of pollution, outsourcing jobs to other countries, exorbitant executive bonuses, sweatshop labor, downloading music from the Internet illegally, and even whistle blowing.

“Some people take the approach that their decision is based on what benefits the most people,” Reed said. “Others take the approach that ‘We’re going to do the things that are right to do,’ and they (have a clear definition of) what they mean by right. Others take the approach that they will do the thing that has the consequences that are best in the end.”

Downfalls of modern day empires like Tyco, Enron and Worldcom – and more recently those of Merrill Lynch, Fannie Mae and AIG Insurance – have soured the public on big business, Reed said. But those aren’t the types of situations most of us are dealing with.

“We are looking at expense reports and if a person should tell the truth or shade things a certain way - what is the cost of telling the actual truth versus not telling all of the information?” Reed said.

The first hurdle is to recognize that a decision is an ethical decision.

“One of the challenges is that people don’t often think of a business decision or situation as involving an ethical component,” he said.

Everyone has value systems, it’s just that those value systems vary from person to person. What one person values, another might not value as much. What is ethical to one person may not be to another.

“We try to put them in context. There frequently isn’t a right or wrong answer – it has to do with the standard you are using,” Reed said.

Marian’s business ethics classes talk about relationships between customers and supplier and how much responsibility should a supplier bear if the part he supplies is defective. They discuss living wages and what’s a fair rate to pay workers in developing countries.

“Is it fair to pay someone $2 a day, or 50 cents an hour?” Reed said. “You can go by the perspective that it’s unfair because these are lousy wages.” But if 50 cents an hour is twice as much as the prevailing wage in that country, it might not be unfair.

They discuss what to do with the profits a company makes – pay bonuses to upper-level management, reward the workers who did the physical labor, distribute dividends to shareholders, or invest in research and design. Different answers are right for different sets of values, Reed said.

“Do you choose to behave in a particular fashion because your decision will be of benefit to a larger number of people or because this is the standard you are adhering to – never mind what the rule is,” Reed said. The results can be different. “Sometimes you make a decision and it may be harmful to people.”

‘We don’t chase fires’
EVERETT SAID HIS PEOPLE DON’T CHASE fires, and they won’t eat the deductible. Paul Davis Restoration cleans up after floods, fires, storms and other disasters.

“We are an industry where you have a loss and you have a (insurance) deductible. There are companies that will eat the deductible and they’ll short you (that amount) in service,” he said. “There are companies that listen to the scanner and chase fires and give you their business card, while your house is still burning. We don’t do that.”

Everett said the fact that all of his business is made only by referral speaks volumes about his company’s ethical procedures. His clients are referred to him by their insurance companies in the event of a loss.

Paul Davis Restoration belongs to the insurance networks of 40 different insurance companies, Everett said.

“You have to earn your place on their program,” Everett said. “Insurance companies are very conservative. They don’t recommend people they don’t think will do the job.”

Two different companies, including one independent firm, review Paul Davis Restoration’s customer service, Everett said. Out of his last 1,200 customers, he only received one complaint.

 “We have to be ethical because we are in people’s homes and businesses,” Everett said.

 It’s been said that true character is who you are when no one’s looking. On more than one occasion on a job site, his staff has found quantities of money or jewelry hidden away in a wall or in the rubble of the disaster. Each time, they packaged up the goods and returned it to its rightful owner.

“That’s the kind of staff any company would love to have,” Everett said.

15,000 complaints and counting
Even though the perception of business ethics in Wisconsin is favorable, that doesn’t erase the fact that every year, the BBB of Wisconsin processes more than 15,000 complaints against Wisconsin businesses.

“The scammers are epidemic, and they’re getting worse with the economy because more people are financially desperate,” Wollangk said. “If you are desperate, people are more likely to grasp at straws, more likely to believe they’ve won money and need to put a down payment on it.”

For the record, that’s a common hoax, Wollangk said.

Scammers aren’t necessarily from Wisconsin, but they are victimizing Wisconsin residents, she said.

Consumers and other businesses can check BBB’s Web site at www.bbb.org to find out if a company they’re doing business with is accredited with the BBB or has any complaints lodged against them.

Nearly 75 percent of the complaints lodged against Wisconsin businesses get resolved, Wollangk said. Of the 25 percent that don’t, often it’s the case that the consumer had an unrealistic expectation, she said.

 “We’ve become a mechanism of communication between the consumer and the business,” Wollangk said.

And Wegge’s not overconfident that Wisconsin is totally free of dishonest people, either.

“Because 10 percent (of the aforementioned Pulse survey respondents) said they felt unethical business in Wisconsin was a moderate problem, there is a little concern,” Wegge said.

Even with another 14 or 15 percent saying unethical business practices are very serious or moderately serious, it’s not nearly the level of concern seen regarding the national business community, Wegge said.

The Pulse survey found that 64 percent of business leaders responding felt the public’s trust in the national business scene had eroded significantly or moderately over the past few years. A total of 39 percent said their own trust in national business had eroded significantly or moderately over the past few years.

The quarterly Nicolet Bank Business Pulse surveyed nearly 360 CEOs and business leaders in 10 counties across northeast Wisconsin, with about half of the participants representing the manufacturing or service sectors.

An alumna of Ripon College, Lee Marie Reinsch is a freelance writer based in Green Bay.