Are You Aware of the Risk?

Did you know that the single biggest threat to your company is moral failure? Consider this: of the 6 largest corporate bankruptcies in American history, 4 of them are directly related to a fundamental breakdown in ethics. But what makes these collapses even more frightening is the speed at which they occurred. Compare, for example, the troubles at GM (#4 on the list) vs. those of Enron (#6) or Bear Stearns (#1). GM’s filing was more than 20 years in the making. With better management, they could well have avoided bankruptcy altogether. And even with the filing, GM had time to prepare and has subsequently emerged successfully. Contrast this with Enron’s collapse, which took place in a matter of months, and Bear’s, which occurred in weeks (neither company will recover).

What accounts for the difference? This: unethical behavior erodes the fundamental value of a company while causing only minor visible symptoms, symptoms that are easily ignored. Indeed, just before their demise both Enron and Bear appeared robust. But a foundation that has been undermined will eventually give way. Sooner or later circumstances will conspire to reveal the underlying damage. And by this point, it may be too late for any recovery to be made. Decay develops slowly, but is often discovered in an instant. It is the peril we deny or ignore that poses the greatest danger.

What are you as a leader doing to ensure that ethics remain a central concern of your organization?