Does dishonesty in business pay? The answer to this question is: Yes, No, Maybe, and Sometimes. Dishonesty may pay, but usually only over the short run, and the consequences may be severe. Honesty may not always pay, although it’s still the “best policy.”

Examples

Bernie Madoff, the famous Wall Street Investment Advisor is a prime, and recent (December, 2008) example of business dishonesty on a large scale, and for a long period of time. While, at this writing, details of his scheme are still emerging, it appears as though an elaborate Ponzi scheme was perpetrated over at least a twenty year period. The total amount involved could be as much as $50 billion, as the $17 million that Mr. Madoff had under management was highly leveraged. In the meantime, Mr. Madoff was released on $10 million bail. The primary concern about this story is that Madoff was a highly regarded Advisor, practically above reproach,with heretofore unquestioned integrity. The man was an icon, as one of the founders of the NASDQ exchange. The damage to investor confidence may be considerable.

There are numerous other examples of fraud, deception, and thievery on an even larger scale. Some scandals reach into the hundreds of millions, perhaps billions. The Forbes Magazine “Corporate Scandal Sheet” (Patsurius, 2002) listed over twenty big ones, while acknowledging “chronicling every corporate transgression would be impractical.” Names like Enron, Global Crossing, Adelphia, Time-Warner, Bristol-Meyers, Haliburton, K-Mart, Tyco, WorldCom, and Xerox are on the list. But there have been many more. In fact, cheating, falsification, and “crooked” accounting seems rampant. Everyone from big brokerages, accounting firms, manufacturers and retailers had their turn.

So who can you trust?

Enforcing Corporate Honesty

The Sabanes-Oxley Act (2002) was enacted following the Enron scandal. The law strengthens reporting requirements and directs corporate oversight and internal controls. But can external requirements work when the rewards for a little corruption can be so astonishing? Obviously not. Corporate scandals continue unabated. There is a “risk-reward” equation in operation that seems to favor taking chances. Ethics and honesty often lose out when confronted with the possibility of huge financial rewards, the profitability demands of shareholders, and the relatively small chance of legal recourse.

The Consequences of Dishonesty

The consequences can be severe. Not the jail terms, personal disgrace and business failure, but the taint of the entire business community and the distrust of even reputable businesses. Commerce can grind to a halt, liquidity shrivels, and financing may be practically unattainable. Consumers may curtail their spending, investments and purchases. Promises, guarantees, and contracts will be under suspicion, or of limited meaning. These are the consequences of dishonesty. If we can’t trust each other how do we transact business?

Copyright © 2008, Dr. Ben A. Carlsen, MBA. All Rights Reserved Worldwide for all Media. You may reprint this article in your ezine, newsletter, newspaper, magazine, website, etc. as long as you leave all of the links active, do not edit the article in any way, leave my name and bio box intact, and you follow all of the EzineArticles Terms of Service for Publishers.

Ben A. Carlsen, Ed.D, MBA, is an experienced CEO and manager. Dr. Carlsen has over 30 years experience in management, consulting, and teaching. Currently the Head of the Business Department at Everest Institute, Hialeah, FL., he was Chairman of the Los Angeles County Productivity Managers Network and President of the Association for Systems Management (So. Calif. Chapter). Additional information can be obtained at http://drben.info

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