We've all railed and ranted about unethical business and political leaders. Ever wonder how they got that way? Did they always cheat and skirt the rules, or did something taint their judgment as they went along? How can they not know that what they've done is wrong?
I have some recent personal experience in this area as I begin walking the road that corporate and government leaders all must tread.
The Slippery Slope
As I enter the worlds of real estate investment and business management, the ethical precipice seems to be a small misstep away on either side. I am reminded of the razor-thin ridges of the Na Pali in Kauai:
Trails in this region sometimes dance along these knife edges, under perpetual rain, slicked with greasy red mud. When someone says "slippery slope," my hike along the Na Pali is what comes to mind.
Now, I'm no big-timer. My wife and I have invested in a couple of rental properties in regions that are growing but still inexpensive. The business we've acquired has a total of four employees (counting me). Yet even at this level, ethical precipices yawn nearby.
Who is this guy?
Some quick background about me and why I'm entering business (and, eventually, government):
My friends and I like to joke that I'm evil, but we all know I'm exactly the opposite. It's just my sense of humor that tends to the dark side.
I've always got an ear and a thoughtful word for my friends. I'm the buddy who drives 2 hours on a work night to help unload your furniture at 11 p.m. because the movers are coming in the morning to take their truck back no matter what's still inside. I'm the guy who, on his own dime, goes to Iowa and New Hampshire in the dead of winter because this country needs Dr. Dean and the people who support him and by damn I will get off my ass and do something about it.
After the 2004 election, I took it upon myself to dial up my involvement. Not satisfied with the results I achieved as a volunteer activist, I decided to get into office (or at least onto the policy team for a solid progressive candidate).
Upon careful consideration, I concluded that I would have to radically remake my life in order to achieve these goals. One key realization: I must get out of the paycheck economy. If I'm working 50 hours a week for a salary, I'm not going to be able to run a campaign for office, devote sufficient energy to local political action groups, or dedicate time and energy to the necessary research and training (from books and research studies to university courses and seminars such as those offered by Camp Wellstone).
In pursuit of this mission, I'm preparing for law school in the fall; I've myself to investigate and acquire a business (and just closed escrow on one); I've taught myself how to research and invest in real estate; and I've arranged to become a corporate trainer on a contract basis with my current company (to provide some income on a more flexible schedule).
A mortgage broker laughs
I love my mortgage broker. He's very thorough and detail-oriented. He also handles thousands of transactions yearly. So he's got a good statistical perspective on borrowers (his clients).
Recently we were discussing a loan on a new property. "Okay, so we'll call that 4-plex you own a single-family residence, and you can call this new place a second home, right?"
Well, no, actually. I wrote him an email back:
We are sticklers for doing it by the book, even though that can cost extra. So we want both investment properties to be characterized as investment properties (rather than second homes), because that is what they are. Similarly, we want the 4-plex represented as a 4-plex (not as a single-family residence), because that is what it is.
We respect and hugely appreciate your desire to get us the best deal. Unfortunately, we have personality disorders that intervene sometimes.
He called me back, laughing. "I read your email, and was trying to figure out why it made me laugh so hard. I just figured it out.
"Out of 4,000 borrowers, every one of them busts my balls to get them the best deal. 'Why didn't you get me that quarter-point rate cut? Can't we call this a second home?' So I've been so trained to bend and twist and weasel whatever deal I can, that I'm doing it automatically. Now I get one borrower who says 'Just do it by the book. We'll pay more if we have to and we don't mind doing any extra paperwork,' and I have to laugh at myself for going to all that extra work figuring out all these complex ways to do this when you just wanted to play it straight."
He's a good guy. He loves his family and he genuinely cares for his clients. He's health conscious, and wants the best for people he meets. Yet he's been turned into an agent for gray-area ethics thanks to pressure from his borrowers -- most of whom are small-timers, not Enrons or WorldComs or Halliburtons.
"God bless you for having vision"
I spent my first full day in our new business (a retail shop) just getting to know our two key guys. They're there 7 days a week, between the two of them, and they bust their butts selling our products to customers who want them. The store is "destination shopping," with no real street presence, so people who come into the store are really looking seriously at buying what we sell. So what our guys do is help them figure out what exact product (or set of products) meets their needs. Their attention to customers, and genuine care for them, is excellent.
So we were talking, getting to know each other, and I found out how the former owner had run the place. I'll say right away that the former owner is really customer-focused. He'd do anything to make his customers happy, even if it wasn't good business sometimes. Where he was less admirable was in his personnel policies (which has become a familiar pattern as I talk to other small businessmen).
He had fair wages and a generous commission system. So the guys were well compensated. As I talked to them, though, I found out that there was no retirement plan. No health care. No profit-sharing or ownership stake for them. And only one full-time employee (the other two were part-time).
Small business accounts for the majority of job creation in this country. That's well-known and often cited. Look at what kinds of jobs those are, though. Part-time. No retirement. No health care.
Again I resisted going down the slippery slope. I told them about the company's intention to establish a health plan, a retirement plan, and a profit-sharing plan. I explained that I considered that to be a fair benefits package for all the work they were giving us. I then gave them a copy of the business plan, and talked about the company goal of making every employee the owner of his or her own store one day. I'll never forget what one of them said to me, without irony:
"God bless you for having vision."
Vision? I didn't invent any of these ideas (except for the ownership one, I'm sort of proud of that). I'll take credit for bringing them to small business, a realm where some of these ideas are still rare perhaps, but that's it.
Keep your footing
Those who get to high positions in government and business have faced thousands of the kinds of ethical opportunities I'm just getting a taste of now.
Each such decision may be small at the time. "Can I afford a health care plan?" "Lenders don't care if the house becomes a rental property a year after you buy it, so what's the harm in calling it a primary residence now and changing our minds later?"
One thing leads to another. We cut a corner here, slide sideways a little there, and pretty soon we're at the bottom of the ethical abyss. That decision not to provide medical coverage makes me richer, and leads to feeling comfortable with a "pay your own way" approach to health care. That decision to fudge the disclosures when securing a loan leads to fudging my campaign contribution characterizations.
The slippery slope is real.
If we're going to take back this nation in a campaign about ethics, we must do more than talk the talk. Walk the walk, every day, in every way.
You know what's right. Now gather up your courage and do it.