Ethical business practices should be present with or without legislative regulation according to Anton Valukas at Friday’s Ethos Week keynote address.
“Is behavior acceptable if it somehow falls within the law?” he asked the crowded Student Center ballroom. “Is that the standard we want to apply or is the law the lowest common denominator?”
Having been the federally appointed examiner in Lehman Brothers bankruptcy case, Valukas spoke at length about
the catastrophic bankruptcy of Lehman Brothers to stress the necessity for ethical practices in business.
“Lehman was not the passive victim of circumstance,” he said. “Lehman’s failure was caused by its own bad decisions.”
Valukas said the executives at Lehman made investments with dangerously high risk levels, ignoring their own risk guidelines, “believing that by taking on this risk, there would be enormous profits on the other side.”
Their risk inherent in those investments was more difficult to calculate than the executives realized and
consequently resulted in “serious gaps in these measurements.”
Once the executives realized their error, they sought a way to mitigate the financial repercussions without damaging public perception of Lehman. Valukas said they settled on a strategy called “fudge the numbers.”
Valukas said this was not only unethical, but it contributed significantly to Lehman’s demise. He said the dishonest reporting concealed the crisis from the public until it was too late and bankruptcy was Lehman’s only option.
“One word you should remember: transparency,” he said. “Had there been transparency, there would have been more time. With more time, there would have been more options.”
Offering another example of ethical failures in business, Valukas referenced the BP oil spill of 2010.
“That disaster occurred because there was a lack of culture of leadership,” he said. “They did not speak up to challenge decisions they should have been [challenging].”
Valukas said businesses must encourage their employees to “take ownership” and “do the right thing.” He said the message business administrations should embody is one of “we won’t tolerate that kind of conduct,” toward unethical practices.
Valukas challenged his audience members to be leaders in ethics and “take individual responsibility for doing the right thing.”