I’ve been too busy with other Ideasphere Partners business lately to take the time and write another entry into my public blog, but this morning I was looking through my “Things I don’t like but have to do this week” list and noticed a pattern that made me want to scream, or at least vent in public. Almost all the things on the list have to deal with potential litigation stemming from differences in the definition, and lapses (at least in my maybe-not-so-humble opinion) in ethical business and personal behavior. Since, unfortunately, illegal and unethical are not always aligned, and ethical standards vary, there are always multiple views on what to do. Here are some situations from my current and some older lists arranged from worst to not-as-clear-as-I-may-think unethical behavior. Obviously I can’t share the specifics but, as always, I look forward to your e-mails on the subject.
A very large company partners up with a start-up company to develop customized solutions, create proposals, and be the back end processor for a specific service they intend to sell in the marketplace. As part of the partnership, the small company works with the large company on a particular proposal to a very large defense contract agency. The small company goes all out. They provide Intellectual Property, help with the sales calls, reduce their margins to help close the deal, and clearly help the large company secure the contract. Their investment is significant, but based on the opportunity the large company presents, they do it without asking for a legally binding exclusivity agreement. Three months after the deal closes, the small company has worked out most of the kinks in the service, and is starting to finally recoup their initial investment. At that point, the large company decides to squeeze them out and replace them with another company who sells an inferior product at a lower cost without compensating the small company, or telling them or the client of their change. To make matters worse, they are serving the men and women of the US military with lower quality product. Unethical scale rating – Extreme! What I advised the small company: Reach out to the executives in charge and ask them to address the problem. If they do nothing, then file a lawsuit against the large company for theft of IP and Trade Secrets, and stop doing business with them. This type of behavior is indicative of a culture that tolerates anything in the pursuit of profit! Oh; and once the lawsuit becomes public record, one or more of the government watch-dog groups will pick it up and this can become a defining issue for the large company.
An individual independent contractor signs a non-disclosure agreement with a company, to work on the development of a new product they had no experience in prior to the engagement. After the engagement ends, the individual turns up selling the new product to the original company’s clients on behalf of a competitor. Unethical scale rating – Really bad! What I advised the company: Let the competitor’s executive team know this individual is legally bound by a non-disclosure and should not share any of the information/knowledge they gathered during their original engagement. Observe what happens next. If the pattern continues and you think the contractor is using information they are not supposed to, and the competitor allows it, pursue litigation against both. This type of behavior could be indicative of a culture that allows any means to get a sale.
A competitor of a client company presents themselves as able to provide a particular product at extremely competitive prices. Any competent buyer with a little research can discover the raw material cost for the product is higher than the price the competitor quotes. The client company concludes the competitor must be using lower quality raw material than they claim they are. In addition, any buyer with access to a search engine can find out the competitor is in litigation with various customer for their products failure to perform as specified. But the company hides behind distributors who are re-selling the service without telling their clients this company is their back-end provider. Unethical scale rating – Bad! My advice to the client company: Keep doing what you do and educate your clients and the market in general on what is involved in providing your service. Unethical or deceptive business practices may succeed in the short term, but eventually the market catches up.
A partner, and majority investor, in a four-way joint venture finds out that two of the other partners have committed significant equity in the partnership to an unrelated third party in exchange for access to markets, without informing him, or getting his consent. To make matters worse, the third party is clearly capitalizing on his position with a government agency, has significant conflicts of interest, and could potentially be viewed as taking kick-backs.The partner backs out asking for his investment back.The other partners refuse to return his investment. The venture fails within a few months. Unethical Scale Rating – Really bad but happens all the time! My advice to the original partner: Pursuing litigation is a waste of time.Take the losses; move on; and, the next time you agree to invest in a partnership, make sure everyone is clear on what the operating parameters are. Oh, and if you are the majority investor, control the checkbook.
A functional executive in a major corporation who is in charge of a certain compliance process decides to use a vendor who will “check the box,” even though she knows the vendor is not actively ensuring compliance. This way she can report she engaged a firm to do the work and be off the hook with the government agency.&
nbsp; My client, the CEO, finds out and asks her about it. The executive acknowledges the situation, and justifies it because the compliance is “just paperwork;” has no real impact on the business or the customer; and the fine, if found non-compliant, is insignificant. Unethical Scale Rating – Somewhat bad but happens all the time! My advice to the CEO: This is a good executive who applied bad judgment. Since it truly is just paperwork (some government agencies are notorious for demanding compliance with meaningless and ridiculous paperwork), don’t punish the executive, but rather ask her to immediately fix it, and use this incident as a teachable moment to re-enforce a culture of high ethical standards, even with ridiculous regulations. Who knows, if this was the culture at BP; maybe the situation in the gulf could have been prevented.
A female employee files a legitimate sexual harassment complaint against a plant supervisor. The facts are confirmed. The executive in charge of the unit assures the employee he will take action to correct the problem. He does that by transferring the supervisor to another plant in another state. Unethical Scale Rating – Bad but happens all the time. My advice to the CEO: Fire both the executive as well as the supervisor! Neither of their behavior should be tolerated. If it is, it re-enforces a “sweep things under the carpet” culture, which eventually leads to much bigger problem
A consultant works on a joint venture for a new product between a software company and a customer. The software company offers the consultant a contract that would compensate him if the new product is successful with other customers outside the joint venture. The consultant informs the customer of the offer, and the customer has no problem with such an arrangement. Unethical Scale Rating: As long as all parties are aware, not unethical. My advice to the consultant: Politely decline the offer anyway. In the end, if, because of the upside potential in the offer, the client has any doubts you are providing truly unbiased opinions on the joint venture, your credibility will always be challenged.
So what do you think?