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Win Swenson: This is a difficult decision, but one that could be extremely important in setting the ethical climate in the company for years to come. Companies are increasingly training their employees to “do the right thing” no matter what the temptations they confront in the business environment; they also should have, if they are following best practices, codes of conduct that reinforce this message. The best codes often begin with a letter from the chief executive proclaiming the importance of acting honestly and ethically.

Most companies would not simply ignore a misstatement of qualifications on an employment application from a lower ranking employee, so doing nothing here would send a powerful and cynical message that all this “ethics stuff” is for losers – not those that expect to fly high in the business world. Radio Shack fired its CEO for lying on his resume, but many felt that the company’s poor financial performance made the difference.

The right tack by the board would be to decide, up front, that financial performance cannot be the determinant. Ethical conduct is the foundation for business activity – it needs to be considered first, before other measures of success. If the Globetech board concludes that Farnsworth knowingly lied on his employment application (and elsewhere as a public representative of the company) and that other employees would be sacked for doing so, the board should bite the bullet, fire Farnsworth and thereby signal that the rules apply to everyone.

If there are mitigating circumstances, the board might choose to do what Raytheon’s board did when it learned that contents of their CEO’s book of business rules was plagiarised (apparently inadvertently), and decline to provide an otherwise expected bonus. The important thing for the board to know is that this is a teaching moment for the entire company.

Go back for more ethical dilemmas.

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