Clarke Peterson and President-Elect Dawn Upperman
with Ralph Archbold as Ben Franklin

MARCH BREAKFAST MEETING RECAP
By Michael Etemad, CPCU 

The March 2008 Breakfast Meeting began with President-Elect Dawn Upperman introducing the topic “The Good, the Bad and the Ugly: Ethics in 2008.” Past-President Marty Frappolli welcomed the speaker, Clarke Peterson, CPCU. As the Principal Consultant of Atlanta Leadership Consulting, Peterson offered insight into the importance of ethics in leadership and how managers with poor ethics could cause the downfall of their company. Peterson began with details of his earlier career, when he sold life insurance unsuccessfully in upstate New York. After a brief stint in the fast food industry, Peterson entered the insurance business with Utica National Insurance where he worked first as a data manager and then as human resources director. His experience in HR provided him with the inspiration to achieve his longtime objective to work on strategic goals for organizations through Atlanta Leadership Consulting.   

With his background explained, Peterson then discussed ethics in the context of the corporate environment. According to Peterson, ethics can be explained best as a branch of philosophy dealing with values relating to human conduct. For example, the CPCU Society Code of Professional Ethics outlines rules that CPCUs must follow to serve the public with due diligence and good faith. In a sense, this Code serves as a philosophical directive, which describes the ideal manner by which insurance professionals should approach their profession. By deviating from an ethical code of society, people jeopardize not only their careers but also entire companies. Peterson provided a prime example of poor ethics through Kenneth Lay, former CEO of Enron. Abusing the fiduciary responsibility entrusted to him through the stockholders, Lay exercised share options worth just under $1.48 million once he learned that something was wrong in accounting.  Beyond using insider information to take unfair advantage, Lay also lied by saying that Enron was in the best shape of its life and was ready to tackle the next fiscal year. Peterson also described how Enron compromised its “independent” auditors through donations that allowed them to turn their eyes from Enron’s unethical practices. The poor ethics of Enron’s CEO caused an entire company’s shares to plummet below $1, costing many people their life’s savings and jobs. 

Besides Enron, other companies also failed to follow proper ethics, which risked their longevity and financial integrity. Tyco’s CEO spent $13 million on his lavish apartment, had his fortune in paintings shipped to Tyco headquarters to avoid sales tax, and even got paid to attend board meetings, a task that was part of his job. Global Crossing, which wanted to connect the world with fiber optics but received very little demand for their work, wiped out a loan for $8 million give to CEO Thomas Casey and at the same time fired two thousand people from their jobs. In addition, Global crossing erased 2/3 of a $15 million loan to their CEO while cutting medical benefits to their employees.  

Al Parish, who obtained a PhD in Economics, claimed to be “EconoMan” and showed his clients returns of 32% in their investments with him. By betraying his fiduciary responsibility to his clients, Parish chartered jets, bought four homes, and bought several jewel-encrusted items. The costs of this betrayal led to a $50 million loss to his investors and cost many people their retirement savings. 

Peterson linked the phenomenon of poor ethics to a single source: greed. Greed is the cause behind insurance fraud, which leads to an annual cost of $1,200 per family and also accounts for 25-35% of health care costs in the United States. Greed pushes individuals to breach society’s ethical codes and place their desire for money over the welfare of others.  Peterson next broached the topic of situational ethics, a concept first introduced by Joseph Fletcher. Fletcher stated that moral principles can be set aside if love is best served.  According to Fletcher, love is the ultimate law and, in the case of love, the ends can justify the means.   

Peterson described ethical lapses, which he deems to be correctable under certain circumstances. Some personal ethics only require fine-tuning when the person knows the problem and is willing to accept feedback. This advice can fail if the subject is too stubborn or too rigid to change. Some ethics, in the worst case, really are questionable with people rationalizing that the ends justify the means without Fletcher’s situational ethical concept of love guiding actions. Additionally, individuals sometimes are inconsistent with their value stances and/or don’t walk their good talk. Peterson’s advice to improving inconsistent behavior is to list your actions with accompanying examples of how you do and do not live up to your words. Also, Peterson believes it is important to declare your values, because without knowing your values you will be inconsistent in your actions and may suffer from value clashes. Finally, anachronistic values should be seen in a modern light and make sure that your ethics measure up to a new world order. 

As examples of people who live up to their ethics, Peterson cited Martin Luther King Jr., who fought for civil liberties and gave his life to this cause, and also S. Truett Cathay who stands firm in his belief that his company, Chick-Fil-A, should provide a day of rests to its employees. These leaders stuck by their beliefs in the face of opposition, and remained consistent with their established ethical code. Peterson detailed the life of one man in particular, Coach Paul “Bear” Bryant, who as a player finished a football for Alabama with a broken leg even though his team was winning by a score of 25-0.  As coach at Alabama, he won 232 games, lost 46, and tied 9. He always kept his word, especially when as a young coach he went to a local Alabama restaurant during a recruiting trip and promised to send a signed photograph of himself for the owner. Unbeknownst to him, the owner was (years later) the grandfather of a spectacular defensive lineman who Bryant actively recruited. After initially choosing another school, the young player switched to Alabama simply because his grandfather had such respect for Bryant having honored his word so many years prior. Peterson provided his audience with Bryant’s memorable advice: good actions always reap good outcomes. 

Peterson conducted an interactive session, eliciting comments from the audience. Attendees were offered two CE credits, PA or NJ, for this engaging meeting.