Secret CIO: But It's A Business Favor, Herb, Not Ethics

I've always been of the opinion that corporate ethics statements have about as much value as company mission statements. They're essentially a waste of time unless they're short enough to be memorized by everyone in the company and are truly important to the people in charge. Even in good companies, the ones where the leadership walks the talk, it's surprising how often it's necessary to reinforce the culture to avoid a slide down that slippery slope that leads to all those unpleasant newspaper headlines.

I hadn't really reflected on the ease with which a company can begin to go wrong until one quiet Tuesday morning when I was catching up on my in-box. My first appointment wasn't until 10 a.m., when I was to meet with the head of one of our smaller business units. Doug Slatner isn't one of my favorite people. It's not that I ever had problems with him; it's just that I've always had a nagging feeling he can't be trusted. Maybe he's too glib, ready to agree at a moment's notice with anyone north of him on the organizational chart while belittling those who can't touch him because he's head of a business unit. Or perhaps it's because he seems to view people as pawns to be manipulated in his quest to get ahead. Still, until he came walking into my office with his request, I never really had a quantifiable basis for my attitude. When he left, I had my reason. Doug wanted an unusual favor: He said it was important to him that there was a slight delay in paying bills this month.

Our company is highly automated, as are many large businesses. Drop an order into the electronic hopper and out grinds a delivery from a plant, along with all sorts of associated paperwork or electronic invoices. Pay us and the accounting gods are duly fed, with everything neatly placed in the appropriate account.

The companies from whom we buy tend to operate in much the same manner. When we receive their bills and approve them for payment, they go to accounts payable, where they're matched electronically against the contracts or purchase orders for payment terms. Since we're clever, and like the float on the money, we cut the checks accordingly. If the terms are net 10 days, we automatically pay in 10 days. If they're 30 days, then we pay in 30. To disturb this process requires human intervention.

It didn't take an accounting superstar to figure out what Doug was trying to do. Since our business-unit monthly profitability reports are calculated on a cash basis, actual receipts vs. actual expenses, Doug wanted to keep some of his outflow down so he'd look good. Obviously, it would catch up with him--we track payables as well as receivables--but the end of a quarter is rather important to an up-and-coming (in his mind) executive. "Make my targets now, and the future will take care of itself" was evidently his mantra.

I didn't answer immediately. I was seething. Did he think I was so stupid that I wouldn't know he was trying to fudge his numbers, or had he assumed I didn't care enough about honesty to mind? Either way, it was a poor reflection on me. The only bright side was that I figured he was in my office because no one in our IT shop would help him. Even if he had found someone in finance to do his bidding, if it were to come to light, the internal auditors would be notified because it would indicate a violation of our controls. He obviously didn't realize how tightly we monitor such things. If we manually change the terms on a contract, an exception report is printed, one that goes to the CFO.

I told him that I wouldn't authorize overriding the payment-match module, and that if anyone in the shop did it for him, I would probably fire the person. He said, "It's not such a big deal! Anyway, you can't blame a guy for trying," and walked out with a sullen look on his face.

I wish I had said, "Yes, it is a big deal and, yes, I can blame you for trying. You know we don't do business that way." Instead, I said nothing further and sat there with what I imagined was a rather cold look on my face until he left.

I calmed down and thought about it. I then pushed Gornish's number on my speed dial. Sid doesn't have much of a sense of humor, especially when it comes to messing around with company financial reports. He's one CFO you'll never see invoking the Fifth Amendment in front of a congressional committee. I wondered whether he would insist on calling Doug's boss before I did.

I don't know what kind of future Doug has in the company, but the more people that get an insight into how he operates, the better. How many such tricks has he pulled in the past? Are our business pressures such that we nudge people into compromising behavior? Or are we dealing with someone who has a tendency to cut ethical corners? There needs to be a lot of discussion about what just happened.

Herbert W. Lovelace shares his experiences (changing most names, including his own, to protect the guilty) as CIO of a multibillion-dollar international company. Send him E-mail at [email protected].

To discuss this column with other readers, please visit Herbert Lovelace's forum on the Listening Post.

To find out more about Herbert Lovelace, please visit his page on the Listening Post.