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Issue Date: February 23, 2003
Money lessons to grow by
As scandals darken the corporate world, our editors/parents posed these everyday financial dilemmas to America's leading business ethicist. Here's Wall Street wisdom to help you and your kids do the right thing.
"Kids learn how to show integrity and respect only through practice and example," says David Batstone, the author of a new book on corporate ethics.
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Most parents don't simply want their children to succeed -- they want them to achieve success the right way. Especially now, as we continue to reel from one corporate scandal to the next, Americans are learning the hard way that dishonesty simply doesn't pay.
If you want to raise an honest future CEO, you have to start early, experts agree. And that includes teaching business ethics to children, a concept that is not as radical as it sounds. This spring, Junior Achievement, the national young businessperson's organization, will launch a groundbreaking program to bring business ethics into the classroom, alongside English, math and social studies (see box, opposite page).
Parents concerned about raising children with a strong sense of ethics that will carry into their adult lives may wonder where to start. The truth is that kids encounter issues every day that have a direct correlation to things that happen in the business world. To illustrate these common connections -- and conundrums -- the staff of USA WEEKEND Magazine, including the many parents among us, created seven such sticky scenarios. They cover commonplace quandaries, from whether it's all right to buy CDs with a gift certificate Grandma intended for books, to whether it's acceptable to exaggerate a bit on a college application.
For answers, we consulted one of the country's leading authorities on ethics in the business world -- and a father of four -- David Batstone. A founding editor of Business 2.0 magazine, Batstone is also a professor of ethics at the University of San Francisco and the author of the new book "Saving the Corporate Soul & (Who Knows?) Maybe Your Own: The Eight Principles for Creating and Preserving Integrity and Profitability Without Selling Out", due in May (Jossey-Bass, $26.95). Here is his take on the delicate problems we posed.
Dilemma 1: Michele, 17, is a high school junior on the swim team. The team needs $300 to buy new uniforms and asks Michele to head up the fund-raising drive. The coach tells her she can get the job done after school if she works on it about an hour a day for two weeks. But raising the money is much more difficult than anyone thought, and Michele actually spends three hours a day, plus considerable weekend time. She cancels baby-sitting jobs to meet the deadline. As a result of her hard work, she discovers an e-mail list of local businesses. She contacts all of them, and the response is fantastic. In the end, she raises $600, twice the goal. Is it OK if she pockets some of the extra money for herself?
Batstone: This is near and dear to my heart, because the non-profit business world is sooo bad at raising funds. That's ironic, because it's what they should be best at. They see themselves as the antithesis of the for-profit world, which they are. Yet, in doing so, they refuse to consider some of the best practices of the for-profits, such as incentives to inspire the trench dwellers who raise funds.
That's what's happening in the swim-team scenario: Michele went out and did a terrific job. Obviously, she would be the best candidate to head up the next fund-raiser, but what incentive does she have if she's not compensated for the extra effort this time around?
Michele first needs to ask the team for compensation, but not by whining about all the work she did. Instead, she should provide a very factual, detailed report demonstrating her personal investment of time and the impact it made, and quantifying how much more of an effort was needed than she was led to expect. She also needs to show a summary of wages lost because of her very results-oriented commitment. With that, Michele should get what she deserves, and the swim team will have a fund-raising star available on retainer.
Dilemma 2: Keesha, 16, has a big social studies report due in three weeks. Her high school library has only two Internet-connected computers. Keesha signs up for a two-hour block of research time, but the wait is two weeks. When her computer opportunity finally comes up, she has already finished her report without it. (She turned out to be a whiz in her research, tracking down helpful books and magazine articles.) Is it OK for Keesha to use her computer time anyway? She'd love to play some games and explore family vacation ideas. Or should she give up the time for the other students, because the computer is meant for school research?
Batstone: This ties in with computer use at work. Don't most of us who have Internet access on the job take advantage of it by corresponding with Mom, shopping online and booking that Florida vacation? Of course. There's also the subject of "company time" vs. "personal time" that's relevant here. But the vast majority of companies -- the good ones, anyway -- allow valued employees some leeway. They are clear about what expectations need to be met and then leave it to the employees to achieve them. (With freedom comes responsibility, after all.) Whether the employee takes an hour to compare resort package deals in the Caribbean online is of no significance. The employee is accountable to the company's mission statement, not a clock.
That bodes well for Keesha. She is firmly in her right to use the computer time as she wishes. She shouldn't be penalized for meeting goals ahead of deadline via alternative resources. (Students did complete research papers before the Internet. Or at least that's what historians tell me.) That said, she can make the situation better by offering to help her deadline-stressed peers by directing them to the resources she used. At a business, when one employee shines and another one struggles, it's quite common to set up a mentoring system of sorts to allow the star to pass along his or her wisdom. It wouldn't be a bad idea for Keesha to offer to do the same.
Dilemma 3: Zach, 14, is a computer whiz who started his own Web design business after school this past December. It was a huge success. In only one month, Zach made $410 -- just over the $400 IRS minimum to file a tax return and pay self-employment tax. "It's not fair," Zach argues to his parents. "It's just a little bit over." Does Zach really need to report the income?
Batstone: I know it's a hassle, and it seems that in the grown-up world you'd find some $11 write-off to justify getting the income below the limit. But the answer is a simple, unequivocal "yes." Otherwise, you slide down a slippery slope. Children (and parents!) need to understand our tax system isn't about the government taking money away from you. It's about citizens making a contribution to the strengths of their country. Consider reporting the income as a lesson for Zach, an early primer on independent earnings and the need to plan for taxes as a part of that.
If he eventually makes this venture a full-time business and makes a fortune, it will be a valuable experience. And it will shed guidance on the bigger picture as well: When you carefully examine corporate scandals -- how a company cooked the books to hide income and reduce tax burdens -- it rarely begins with a major act of corruption. No, it usually starts with a minor transaction.
Take a hypothetical company that sells software as its main bread and butter. But it also has a staff that is skilled at the service and maintenance of the information systems on which the software is installed. A few customers are in a fix and pay the company to troubleshoot their computers. Given that it's a relatively small amount, the budget folks don't report the income to the government. As word of the service spreads, hundreds of customers start using it. By now, however, the new modus operandi of unreported income is embedded in the corporate culture. It's only a matter of time before what started out as a good thing seriously shreds the reputation and financial health of the company.
With strong parental guidance urging Zach to report his income, he'll learn that being guilty is a matter of much more than whether you get caught.
Dilemma 4: Ed, 50, has put aside $3,000 a year for his daughter, Amy, 18, to attend college. But part of the plan requires that Amy turn over one-third of her allowances, baby-sitting fees and wages to the college fund as well. Her contribution amounts to roughly $300 a year. Now, with interest, there's more than $125,000 in the fund. As it turns out, though, Amy, a terrific soccer player, gets a full-ride scholarship to her top choice of schools. What should Ed do?
Batstone: Well, first, he should take a moment to appreciate his good fortune. This is a good problem to have, after all! Then, he should offer Amy a choice: "You can either have your share now or wait until after college. You may want to go to graduate school. Or you may want to put a down payment on a house. In the meantime, we can let the principal grow with interest for four years before we have to decide."
Regardless of whether she wants the money now or later -- and it is her choice -- the split should not be 1 to 10, i.e., reflecting the proportion contributed by both parties. There should be some recognition of Amy's achievement. I'd advise Ed to cut her 20%, as opposed to 10%. It's a nice way to say, "Thanks!"
Dilemma 5: For Maria's 13th birthday, her grandmother gave her a $25 gift certificate from a books-and-music superstore and wrote in the card, "Enjoy buying your favorite books on me!" But Maria would rather buy Avril Lavigne CDs. Should she?
Batstone: Sure. It's her birthday. But she also should respect her grandmother's wishes. Buy one book and one CD.
At a company, a certain amount of money is set aside for purposes such as training. However, after the Sept. 11 attacks, the teleconferencing industry experienced quite a boom. Companies found they could meet their training needs without spending thousands of dollars on airfares, hotels, meals, etc. So it was quite common for a company with a $20,000 training budget to end up with $10,000 left over by the fiscal year's end. Would it be all right, then, to take some of that leftover money and spend it on a company party? Sure. It's an employee morale booster, and besides, the company did meet the original objective: to train staff.
So get a good book, Maria, and enjoy Avril's CD. Life, after all, shouldn't be that ... er ... "Complicated"!
Dilemma 6: Casey has two sons: Leon, 16, and David, 14. Leon always has been very motivated at school and gets straight A's. David struggles more, with B's and occasional C's. Casey wants to give David some extra incentive: "I'll give you $25 for no C's and $5 for every A.'' Leon, who is offered nothing, objects. "You don't need any incentive," Casey reminds him. Is Casey's plan fair?
Batstone: No. You can't effectively punish people who are more talented and motivated in the workplace. It's bad for morale. If you reward an underperforming sales team for achieving a modest improvement but don't offer a similar incentive package to a more successful sales team, the fallout will be considerable. In fact, those overachievers may notch down their performance for a year, to lower expectations, so they can swing back and take advantage of a bonus system based on a lower bar of performance results.
Similarly, Casey shouldn't discourage Leon in his attempt to inspire David. So give out the bonuses, Casey, but make them consistent across the board.
Dilemma 7: Greg, 17, is a strong candidate to attend the University of Virginia. U.Va.'s application requires an essay in which Greg needs to write about how he made an impact on another person's life. His financial aid package may depend on it. He writes about a student he mentored. Greg knows that, although the student improved, he still cuts school from time to time and risks expulsion if he keeps it up. And even though the boy's grades are better, they're still mostly C's and D's. In his essay, Greg writes that he "turned the student's life around 100%." Is that OK?
Batstone: That speaks to the résumé inflation that is rocking the business world. It's important never to undersell your assets, but you can't oversell them either. Greg is caught in a gray area where subjective language is in question.
But there's more to this than reporting honestly on an application -- take it from a guy who actually reads a bunch of these essays. Greg may improve his chances of being accepted by getting rid of phrases like "turned his life around 100%." As a college professor, I see all kinds of applications that state similarly feel-good but fuzzy declarations. I'm more impressed by the kid who gives me details. It's OK that the struggling student didn't transform into an honor-roll lad overnight. It's more believable that he would make only incremental progress. And such credibility in an essay would go a long way toward impressing me.
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Elementary ethics
Think teaching business ethics to kids sounds extreme? It isn't, really. This spring, in the first effort of its kind, Junior Achievement, the 83-year-old organization that counts 4 million student participants, will start teaching kids in grades 4-12 about the importance of ethical behavior.
With the nation's top CEOs taking part, and with the support of the professional services company Deloitte and Touche LLP, the program will feature ethics activities and case studies with topics to include "Business Ethics vs. Personal Ethics" and "Facing Difficult Decisions With Honor."
Cover illustrations by The InkLab for USA WEEKEND
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