This story appeared on Network World at

http://www.networkworld.com/columnists/2006/100906bradner.html

Corporate dishonesty: Is HP the only one?

'Net Insider

By Scott Bradner Network World, 10/06/06

Watching HP's slow-motion train wreck has been fascinating. Every day in the last two weeks there has been a new revelation of questionable behavior on the part of this once admired company. So far Wall Street does not seem to have joined in the fun; HP's stock price has not been affected much, even though The Wall Street Journal has been the most aggressive source of news about the story.

Even congressional hearings, complete with posturing politicians and current and former HP employees invoking their right to not say anything, have failed to get Wall Street to react. One aspect of this story has puzzled me throughout the whole ugly saga - why did some HP employees go along even though they were not going to individually benefit from their misdeeds?

This question is hardly a new one, but what makes a secretary at Enron or an accountant at Arthur Anderson go along with breaking the law when their pay will not be affected? According to a recent New York Times story, scientists at Bayer did not tell the Food and Drug Administration about possible adverse effects found in a new study on people using Bayer's heart-bypass-surgery drug Trasyolol during a meeting called by the FDA to talk about the drug's safety. Why is loyalty to an employer higher than the respect for honesty and to the law?

Boston University law professor Tamar Frankel explores some of these issues and much more in her recent book Trust and Honesty: America's Business Culture at a Crossroad. She outlines a number of reasons that people go along with falsehoods and dishonesty even if they understand that it is wrong and they will not directly benefit from doing so. Frankel says that major forces include pressure from fellow employees (peer pressure), actions by those in leadership roles, isolation of the leaders behind a wall of "yes persons," a feeling that those who object have bad intentions and a feeling that everyone does it.

She also points out the societal tendency to redefine what is wrong. Sen. Daniel Patrick Moynihan of New York described this as "defining deviancy down". Moynihan wrote that "the amount of deviant behavior in American society has increased beyond the levels the community can afford to recognize" and that we have been redefining deviancy so as to exempt much conduct previously stigmatized.

If dishonesty becomes the norm in corporate behavior there is a tendency to see this as something not to worry about. Not everyone agrees with Moynihan's assumptions, but it does seem to explain what went on within HP and Enron and many other corrupt organizations.

In the HP and Bayer cases the public found out about the wrongdoing because someone would not go along with the falsehoods and dishonesty - so not everyone falls to the pressures. The Sarbanes-Oxley Act requires that public corporations set up a way for people to anonymously report corporate wrongdoing; clearly this is a critical facility if we are to avoid having to redefine corporate malfeasance as normal.

Disclaimer: The Harvard Business School's emphasis on ethics (announced just before the Enron collapse) tries to do its part, but that only covers a small part of corporate America and the above opinion is mine alone.