CEBC IN THE NEWS

Band of Ethicists
Finally Sing Hit Song

Published Tuesday, March 3, 2004 in the Star Tribune.

By Neal St. Anthony

Ron James isn't exactly a rock star.

But he's got a nice theme song going that has resulted in nearly 100 gigs in the Twin Cities and around the country over the past 18 months and a growing fan club for his organization.

James, 53, CEO of the Center for Ethical Business Cultures, and his small crew of former executives and researchers, have been lecturing, consulting, studying and speaking about the importance of ethical leadership for years from their quarters at the University of St. Thomas.

Membership in the center waned during the go-go years marked by superstar CEOs, dot-com cajillionaires and Enron-style financings. But some executives are changing that tune, which is making James & Co. more popular. On Tuesday, nearly 250 Twin Cities professionals and corporate executives showed up at a Bloomington hotel at 7 a.m. to engage with James and several Twin Cities chief financial officers in a forum about "Walking the Ethical Talk," sponsored by Robert Half Management Resources and the Financial Executives Institute.

Here's the thrust: The confluence of corporate Titanics such as Tyco and WorldCom, the big insider-trading cases, corporate layoffs and the collapse of some pension funds as stock market plummeted broke the trust with a lot of "stakeholders" -- workers, unwitting investors and communities.

"It's tough to legislate integrity," James said, referring to new laws and regulations in the wake of the excesses. "It needs to be baked into the process. It starts with those who govern and manage organizations. Good ethics is good business."

No kidding.

Dan Colao, the chief financial officer of Eden Prairie-based GE Fleet Services, noted through several shareholder-killing examples that when bad ideas or malfeasance aren't nipped in the bud by right-minded executives, public-minded board members or otherwise, it eventually results in scandal that results in huge losses of shareholder value. Look what happened to the stock of Xerox after it disclosed it had inflated revenue a few years ago or J.P. Morgan Chase after it was learned that it helped Enron cook up some partnerships to hide debt.

Jim Mitchell, a former CEO of IDS Life and a fellow at the center, a couple years ago completed a study called "The Ethical Advantage." It demonstrated that companies known for an ability to enforce the smell test, caught problems early and outperformed as investments over the long term. Hands down.

The CFOs and the audience talked at length about employee hot lines, beefed-up compliance measures, written codes of ethics. But, in the end, the conversation always went back to the importance of ethical leadership and creating the culture where the right things are "baked into" the culture.

Jim Lawrence, the veteran CFO of General Mills, is knee-deep into an SEC civil investigation of certain promotional and disclosure practices at that company. Other food and beverage companies also are under SEC scrutiny.

Employees and investors should be buoyed by the fact that Lawrence showed up -- as his boss did at an investor conference a couple of weeks ago -- spoke and answered questions, although he did not break any new ground with his comments.

The stock of General Mills has held steady in recent weeks, but it trades at a discount to its industry peers. This week Barron's called General Mills, which is still painfully digesting its acquisition of Pillsbury, one of America's most undervalued stocks. The bet here continues to be that the born-again SEC is going to change some of the rules and eventually there will be a settlement with several outfits, including General Mills. It may cost some bucks -- but not the reputation of what has long been known as high-standards outfit, a good place to work and a good company to own.

© Copyright 2004 Star Tribune. All rights reserved.

Center for Ethical Business Cultures

1000 LaSalle Avenue, TMH 331 ▪ Minneapolis, MN 55403-2005 ▪ USA

Phone: 651 962 4120 or 800 328 6819 Ext. 2-4120 ▪ Facsimile: 651 962 4042

Email: mail@cebcglobal.org

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