SPRING 2009
Setting Setting the the Tone: Tone
Ethical Business Leadership
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what’s inside
BGS Corporate Contributors and Affiliates 2009
2
A Message from the BGS President
3
Looking Ahead: Survey Reveals Growing Pessimism about the Economy in 2009
4
Setting the Tone: Ethical Business Leadership
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EBL in Action: Amy McPherson, Marriott International, Inc.
Beta Gamma Sigma thanks those organizations that generously support the Society’s programs and services
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A Message from the BGS President
T
he current economic situation has been called “the worst in a generation” by several prominent writers and editors. Others have compared this mess to the Great Depression, further expanding the notion that the hole we’ve fallen into isn’t business as usual. Whatever its historical context, most of us can recognize pain when we feel it. And as we prepare to welcome spring in a seasonal sense, a broad based warming of our economic climate would be welcome relief as well. Along those lines, I want to personally thank those that have generously contributed to Beta Gamma Sigma over the last year (see the list on page 12). We all have decisions to make when it comes to how we share our gifts; how we can have the greatest impact. That’s why I’m humbled that so many lifetime members continue to give back to Beta Gamma Sigma in spite of difficult times. This is quite a testimony to the fact that members believe Beta Gamma Sigma is doing good things for its members and the entire business community. There is a tremendous responsibility that comes with accepting your gifts, and the Board of Governors and staff of Beta Gamma Sigma take that responsibility very seriously. It is our job to ensure that we’re good stewards of those funds – that we provide the greatest impact possible. We are engaged in ongoing discussions about the value and effectiveness of a variety of services and programs, and we are committed to expanding those that are best and reducing or eliminating those that help the fewest. This may mean we are re-committing to growing the Student Leadership Forum while at the same time finding ways to hold the line on its costs. It’s just the right way to do business, and we pledge to continue working on these issues. If you’ve gotten this far in the print publication, you’ve probably noticed a style change or two in the way the BGS International Exchange is packaged and delivered. In the past the magazine was delivered flat, resulting in a more-familiar “magazine” look and feel. However, that’s the least efficient way to deliver the publication through the U.S. Post Office. The non-profit “flat” rates for postage have gone up dramatically over the last few years, and those increases are sure to continue. So the Central Office started investigating alternatives that would cut our cost while still delivering the kind of information you’ve come to expect. The result, which may be temporary or a long-range solution, is to fold the magazine down to 5 ½” x 8 ½” and tabbing the open ends. This change results in significant postage cost savings – in the neighborhood of 30 percent – and still ensures the quality you expect. In addition, with the change in the way the publication is set up for print and the type of paper used, there are significant additional savings. As I said before, it’s just good business to implement these types of changes now, when each and every dollar we receive must be spent wisely. I hope you agree this makes sense, and I assure you this is just an example of the kinds of things Beta Gamma Sigma is doing to meet its Mission in a responsible manner. Some of the other efforts include holding Training Webinars with collegiate chapter representatives electronically instead of adding additional “in-person” Training Seminars; negotiating more favorable terms with service providers when it comes to events like the Student Leadership Forum; requesting more bids for print jobs to ensure we get the best possible quality at the lowest cost; and scrutinizing every meeting we attend to ensure we get the highest possible return on our investment. Again, it’s just good business. As you may know, many of us on the Board of Governors are deans or faculty at AACSB accredited business schools, and we are facing many of the same financial pressures in our “regular” jobs as we are with Beta Gamma Sigma. And I assure you we take this effort very seriously. Even in these tough economic times we hope to enlist more members who are willing to join those on page 12 in supporting our outstanding programs and services. We recently opened the doors to the new BGS Center for Ethical Business Leadership (www.eblcenter.org), and every member should be proud to be a part of this effort (see related story on page 4). I will write more about the EBL Center in future issues, but this is an example of utilizing our limited funds to accomplish great things. As my predecessors and I have written in this space many times, this is your honor society and we need your input. I would like to hear back from you on any and all Society issues: the change in the magazine’s design, the opening of the BGS Center for Ethical Business Leadership; the Student Leadership Forum and BGS Scholarship programs; and anything else that you believe is important. What topics should we focus on in future issues of the Exchange? How would you like to be involved in the Society’s 100th Anniversary in 2013? Please send any thoughts you have for me to president@betagammasigma.org. It is critical that we have your input on these and so many other issues as we work our way through a difficult 2009 and beyond. Offering the right programs and services for our lifetime members – and doing it all in the most efficient manner possible – is the right way for us to do our business. We hope you agree.
George E. Stevens President of Beta Gamma Sigma
2 bgs international exchange SPRING 2009 www.betagammasigma.org
Looking Ahead Survey Reveals Growing Pessimism about the Economy in 2009 The National Association for Business Economics released its annual survey in January, with more grim news piled onto the already bleak economy and jobs outlooks. The NABE Industry Survey report presents the responses of 105 NABE members to a survey conducted between Dec. 17, 2008, and Jan. 8, 2009, on business conditions in their firm or industry, and reflects fourth-quarter 2008 results and the near-term outlook. “NABE’s January 2009 Industry Survey depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008,” said Sara Johnson, Managing Director of Global Macroeconomics for IHS Global Insight, an international economic forecasting company. “The survey’s measure of demand fell to its lowest level in the history of the survey. “Looking ahead to 2009, respondents grew more pessimistic about U.S. economic growth. Over half expect real GDP to fall by more than 1 percent this year, and only 3 percent project growth of over 1 percent. Falling profit margins outnumbered rising margins five-to-one among respondents’ firms – the worst reading since 1982. Job losses accelerated in the fourth quarter, and the employment outlook for the next six months has weakened further. “With market prospects deteriorating, firms slammed the brakes on capital spending in the fourth quarter of 2008; the percentage of firms reducing capital expenditures (38%) was the highest in the history of the survey.” NABE Survey Highlights • Demand for goods and services increased at just 20 percent • For the first time since the economy was emerging from the of respondents’ firms last quarter, the lowest percentage last recession, the share of panelists who said material costs since the survey began in 1982. Demand fell at 47 percent rose in the previous quarter was lower than the percentage of respondents’ firms, an all-time high. This confirms that of panelists who said materials costs fell. Eighty-five percent the U.S. recession that began at the end of 2007 worsened of respondents reported no shortages of major inputs. The significantly in the fourth quarter of 2008. Demand weakness share of respondents reporting skilled labor shortages was pervasive across sectors, but was especially pronounced dropped to 10 percent from 40 percent just six months ago. in the goods-producing sector, where 79 percent of firms • The fraction of respondents who said their firms raised reported declining demand. prices last quarter dropped to just 12 percent – the lowest • Respondents continued to grow more pessimistic about percentage of respondents since the end of 1998. For the the macroeconomic outlook. Seventy-eight percent of second straight quarter, more respondents expect their prices respondents expect U.S. real GDP to be lower in 2009 than to fall instead of rise over the next quarter. in 2008. • Tight credit market conditions continue to impair • Rapidly deteriorating global market conditions are the performance of the economy. Fifty-two percent of hammering business profits. For the fourth consecutive respondents indicated that the tightening of credit conditions quarter, reports of falling profit margins (52% of has moderately or severely affected their businesses, while respondents) outnumbered reports of rising margins (10%). 78 percent reported that credit conditions have adversely This was the worst result since the spring of 1982. affected their customers. • Job losses accelerated in the fourth quarter, producing the • Of those who responded to a new question about worst survey result in 17 years. Some 44 percent of firms inventories, most reported that their firms were reducing cut payrolls, while only 14 percent added workers. Looking inventories, either in anticipation of weaker sales, or in ahead, 39 percent of companies plan to reduce payrolls an effort to cut costs and conserve cash, or both. Of those over the next six months, while 17 percent plan to increase reporting rising inventories, most indicated that inventories employment. Only the services sector continues to create rose due to weaker-than-expected demand. jobs. • The percentage of respondents reporting capital spending growth Percent of survey respondents reporting that profit moved lower for the fourth consecutive quarter. For the first time margins are: Rising Unchanged Falling since 2003, more respondents reported 26% lower capital spending than higher. 61% January 2008 January 2008 13% Only 16 percent of respondents plan to 18% 54% raise capital spending over the next 12 April 2008 April 2008 28% months, with none of these expecting 17% 53% 2008 JulyJuly 2008 capital spending growth in excess 30% of 10 percent. Forty-four percent of 15% 41% October 2008 2008 respondents expect capital spending to October 44% decline over the next year. 10% January 2009 January 2009
38%
0
0
10
10
20 20
30 30
40 40
52% 50 50
60 60
SOURCE: National Association for Business Economics, January 2009 Industry Survey
bgs international exchange SPRING 2009 www.betagammasigma.org 3
Setting the Tone:
Ethical Business Leadership The BGS Center for Ethical Business Leadership is now open After much planning and a great deal of work, Beta Gamma Sigma members can see for themselves what the EBL Center is all about. Log on to www.EBLCenter. org and as always let us know what you think. Also know that this is the first stage of the Center. Right now members and others can access a great deal of information through short clips of video arranged under a variety of EBLrelated topics. In the future we will add transcripts, corporate background information, message boards, blogs and much, much more. The next stages are being planned and developed, but the Society is asking for your involvement and feedback on progress so far. Concept and Overview Beta Gamma Sigma shared with its lifetime members in Fall 2006 that Ethical Business Leadership was an important initiative that would be a focus for the Society going forward. In that issue of the BGS International Exchange, John Wholihan, then-president of Beta Gamma Sigma, trumpeted a goal that has guided our efforts to this point: “We plan to develop ways to encourage business leaders to adhere to the highest ethical standards, and to show that this is one of the most important aspects of leadership in the 21st Century…The Society plans to emphasize that good ethical behavior in business is more often than not a result of leaders, at all levels, displaying the courage and conviction to make the right choices at the right times.” It was a lofty goal, and to be honest the road map was still being laid out at the time. Beta Gamma Sigma’s Board of Governors and staff knew this was a worthwhile effort and if done correctly could affect change throughout business, but how to proceed involved making difficult decisions. It was decided that to have the most impact, speaking directly to business leaders who made some great decisions about building ethical cultures within their organizations would be a good place to start. When discussing the genesis of EBL as an initiative, David Blake, Chair of the BGS Center for Ethical Business Leadership and a member of the Board of Governors, points to a Board strategic planning retreat held summer 2005 in Chicago. It was suggested by Board members in attendance that Beta Gamma Sigma needed to “stand for something” greater, and Blake was one of the first to endorse Ethical Business Leadership. The Board of Governors was seeking ways to serve lifetime 4 bgs international exchange SPRING 2009 www.betagammasigma.org
members, as well as collegiate and alumni chapters and the broader business community, in a more effective way, Blake said. Although this is the honor society for AACSB accredited business schools, the Board’s goal was to have a more significant impact in one of the most critical and ongoing issues of business, and that is ethical business practices. Blake said rather than focusing on business ethics itself – there are many centers, institutes and faculty members who are focusing on that – the Board members agreed it is more appropriate given the high caliber of the Society’s membership that it focus on the issue of Ethical Business Leadership. In essence, this means the Society will attempt to promote and assist managers in understanding the role of leadership in ensuring ethical business practices are followed throughout their corporations or organizations. “When we talk about leadership we are not just talking about the CEO or the very top leadership, because we know that ethical issues can crop up at any time or any place, and can affect any person in a management position,” Blake said. “And in such a situation leadership is required. Our focus is on the leadership strategies, tactics and initiatives that will help ensure that ethical business practices are part of what it is that the corporation does and the way it conducts its business all the time.” After the initial announcement, many lifetime BGS members communicated their strong endorsement of the effort. “I’m a long term (1948) BGS member from the University of Chicago,” said Bill Story. “I have been disturbed by the lousy ethics of so many in business in recent years. I fear for the ethical outlook of our younger business leaders and for the values we were taught to hold dear. “The move by the Society is very welcome and I wholeheartedly approve the decision of the Board to proceed with the Ethical Business Leadership Program.” Other members thought this was an overdue concept, and one they would be proud to share with their Honor Society. “Clearly this is an area that has been long neglected by the business community,” wrote Robert B. Eagleston (BGS 1938, Northwestern U.), “and it is so basic to all aspects of business and meaningful successful living. You have our full support.” Member support is vital to every BGS program, and the Center for Ethical Business Leadership is no different. During the recent annual giving drive, many chose to designate their gifts specifically to this program. This kind of support is necessary and appreciated as we continue to make the EBL
Center even better. The Board in 2007 approved the initiative’s Mission and Vision: Mission of the BGS Ethical Business Leadership Initiative
Beta Gamma Sigma will influence discussion about and the practice of ethical business behavior by gathering information about ethical business leadership and disseminating that information in useful ways to its alumni and collegiate members and chapters and to the broader business community worldwide. Vision of the BGS Ethical Business Leadership Initiative
Beta Gamma Sigma will become a premier global resource for information and ideas about effective ethical business leadership. Its efforts will establish BGS as a significant force in the field whose impact and reputation will be both profound and global in scope and relevance. Blake said that as the Society opens the Center it is important that members become a part of this initiative. He said as an honor society, Beta Gamma Sigma is uniquely positioned to make a difference in this area. “Beta Gamma Sigma throughout its (nearly) 100-year history has defined itself not just as rewarding academic excellence – which we do, and we’re very, very proud of that – but also recognizing that it’s the whole person in his or her job and the way he or she carries himself throughout the entire career that makes a difference,” he said. “It’s not just whether they had a 4.0 grade-point average, but rather how they conduct themselves with honor – with ethical behavior. These are the things that we stand for. “We want to assist our people and the entire business community in these complex times where we frankly see a lot of people who make a lot of money, with a lot of power, who are acting in entirely unethical ways. The problem is that other people within the corporation, no matter what level, need to have the courage to be able to stand up and say, ‘This is not an ethical practice.’ Think of the thousands of jobs and pensions lost, and heartaches that should have been avoided. Think of the damage that has been done to corporations because people further down the line didn’t feel prepared or empowered to stand up and say, ‘This is not right.’ “That’s why we are focusing on something much more than just academic excellence.” The EBL Center Today While the BGS Center for Ethical Business Leadership has been developed by Beta Gamma Sigma and will be a long-
term Society initiative, it has been intentionally designed to be beneficial to the entire business community. While members are encouraged to visit the EBL Center often and take advantage of its features, non-members are invited as well. Blake said that to have the most impact, the Center had to be “open to the public.” “The Board and all of us associated with Beta Gamma Sigma recognize this is not a BGS issue, per se, or a member issue, per se,” he said. “It’s a significant societal and business issue. “If business is not able to effectively address the issue of leadership to ensure that ethical behavior and practices are engrained in the organization, then some of these really outrageous things that we’ve seen crop up again and again in the newspapers…are going to undermine and undercut the trust and confidence that business is an institution we can believe in. “I must say that if the general public no longer has that confidence, that will affect every one of us, whether we’re members of Beta Gamma Sigma or not. “So we really felt like we should join the dialogue from the perspective of leadership, because that dialogue wasn’t really being advanced very well. And modestly, we hope that we can contribute to that, and we hope that our members will feel encouraged and almost required to stand for what is right – not just in their corporate lives but in their communities and their associations and things of that sort. “This is a way of giving voice to what a vast majority of business people feel – and we hope all of our members feel – so they can then advance that dialogue and help stand for the right kinds of behavior.” One of the things visitors might notice when accessing the Center is the prominence of those featured in the interview clips. This should not be construed as meaning leadership, especially ethical leadership, is or should be limited to those sitting in the top levels of management. Blake says that on closer examination one sees the opposite is true. “Leadership takes place all the time throughout many parts of the corporation,” he said. “While we are interviewing CEOs and those at the vice presidential level and down a bit, what we’re looking at essentially is what it is that companies have done as a result of leadership to ensure that people throughout the organization deal with these complex issues – especially for those folks who are at the middle levels and have lots of people reporting to them. They have responsibilities dealing with vendors; they are dealing with different cultures, etc. These people are just as much on the firing line. So it’s the leadership that they demonstrate, hopefully supported by the very top of the corporation. “The top people cannot make everybody’s decisions. That’s why supporting leadership throughout the organization is what Continued on Next Page
“We want to assist our people and the entire business community in these complex times where we frankly see a lot of people who make a lot of money, with a lot of power, who are acting in entirely unethical ways. The problem is that other people within the corporation, no matter what level, need to have the courage to be able to stand up and say, ‘This is not an ethical practice.’” David H. Blake, Chairman of the BGS Center for Ethical Business Leadership; Professor, Strategic Management, The Paul Merage School of Business, University of California, Irvine bgs international exchange SPRING 2009 www.betagammasigma.org 5
Setting the Tone at the Top (Cont. from Page 5)
we are seeking to do.” In fact, this may be the program’s true strength. If this were simply a primer on “best practices for presidents and CEOs,” its value would be very limited. The vast majority of BGS members and other business professionals could rightly ignore the lessons of the EBL Center as “decision making that takes place above my pay grade.” Quite the opposite is true, however. The frank discussions of past mistakes and lessons learned can be valuable for leaders at any level. Perhaps an individual member isn’t currently in position to change the way her multi-national corporation deals with ethical issues involving vendors. She can, however, affect change within her sphere of influence that ethical practices lead to better business results in the long run. And relying on the thoughts and lessons discussed by the corporate leaders at the EBL Center can help in that process. A Few Lessons Learned So Far Beta Gamma Sigma has been very fortunate to have the opportunity to sit down with so many outstanding business leaders during the formation of the BGS Center for Ethical Business Leadership. The Society is extremely grateful for those business leaders who agreed to sit down with us and discuss openly the ethical cultures within their organizations. Blake said that in the interviews he’s conducted, it’s been very gratifying to see the level of commitment by such highranking individuals. “These extremely busy people are very eager to talk to us about this issue,” Blake said. “It would be very easy for people who are running multi-billion dollar companies to say, ‘I don’t have enough time. I’ve got a lot of things to do.’ “But to them, their sense of importance about this issue made it a real priority to take time away from their incredibly busy schedules and responsibilities to talk with us about this. To my way of thinking that is a wonderful affirmation of what it is we’re doing in the Ethical Business Leadership Initiative.” Blake said that some of those interviewed thought the discussions helped them reaffirm in their own minds that the ethical cultures they’ve helped develop are still working. “After the conversation they have found and expressed thoughts that the conversation was very helpful to them; it sharpened their views about what it was that they were trying to do. They were seeing the connections between the various things that have been done over the years.”
The level of candor – discussing topics that can be uncomfortable – has been impressive to those who have seen the clips so far. Blake says the people interviewed have a lot to teach all of us. “Every single conversation I’ve learned quite a lot from,” he said. He pointed to the strong, passionate commitment shown by those who he’s talked to as an example. “I’ve also been very impressed with how people have tied ethical business practices to effective and successful businesses so that they’re not two separate things,” he noted. It’s not that “You do ethics on Sunday and the rest of the week you make decisions that will help the company be successful. Quite the contrary. “The people we’ve talked to have made a direct link between their companies’ values – their commitment to ensuring ethical behavior throughout the corporation – and the success of their corporations. Success not only in the traditional financial sense, but also success in attracting and keeping the kind of people who will continue to help the company succeed in business terms and otherwise. “That linkage has been very clear and indeed in certain cases we’ve had situations where companies were suffering terribly in business terms – finances, market, etc. – and they felt an important part of the strategy to turn that around was to develop ethical business practices, which enabled people to feel pride in their companies and to turn the companies around altogether – financially and otherwise.” In other words, doing good helps a company do well. In several of the interviews, leaders talk about the paths their organizations’ took to develop, maintain and enhance an ethical culture. They are often quite straightforward in their belief that part of their companies’ success comes from that commitment to culture. “Quite frankly when I arrived here in 2001, for five straight years we were the poorest performing food company in the world,” said Doug Conant, president and CEO of Campbell Soup Company. “We were highlighted by the leading analyst in our sector as being the next buggy-whip in the food industry – anchored in an old product line, condensed soup; anchored with old management that wasn’t acting in an enlightened way. “So in the first three years we turned over 300 of our top 350 executives. Many of them chose not to play by the rules that we had created. But we had to make many tough calls as well. “The good news was that of the 300 we replaced, we were able to promote 150 people from within who had all the heart
“It’s so important that the people that are the most visible in the company constantly remind themselves and be reminded that you don’t break the rules…when it comes to this subject, equality is a word that really jumps out at me. You may have a senior VP making four times as much as someone else, but it’s still the same policy.” Charles R. Eitel Chairman and CEO, The Simmons Company 6 bgs international exchange SPRING 2009 www.betagammasigma.org
“Doing good and doing well are important concepts that KPMG, or any professional services firm, needs to embed into the culture and fiber of their company. That starts with the tone at the top.” Victoria Sweeney Principal, Ethics and Compliance, KPMG
for the journey that we were about to undertake. We also had to go outside to find 150 more that were living by the kind of motto we embrace here, which is Character, Competence and Teamwork, and operating within the construct of the Campbell leadership model.” In another telling clip, Willie A. Deese, president of Merck Manufacturing, stressed the need for companies to find candidates that fit their ethical culture. “In one of my previous roles I was interviewing someone and I asked him during the interview, ‘Can I trust you?’” Deese said. “And the person really thought that was a strange question. “I remember he came back to me later after we hired him – he turned out to be a great employee – and said, ‘I didn’t fully understand why you asked me that in the beginning. Later on I did…You were working to bring about transformational change in the company and you needed people working with you that you could trust because you knew it was going to be difficult.’ “It’s important to have people around you that you trust and that you can trust, particularly in an industry like ours, and particularly if you now are working in a situation where you are making significant change to the way you’re running the business.” Support for the BGS Center for Ethical Business Leadership Conceptualizing, planning, building and acquiring the content for the EBL Center has been a time consuming, staff intensive and costly undertaking. It will continue to be. In addition to the generous donations given by members, which was mentioned above, two companies have taken the lead so far in helping to fund the Center’s activities. First, in 2007, Beta Gamma Sigma received a $10,000 startup grant from KPMG and the KPMG Foundation as a way to get the program going. This enabled the Society to buy equipment, travel to conduct interviews and work on completing the first phase of the EBL Center. Then in December 2008, KPMG and the KPMG Foundation once again stepped forward as the first Charter Sponsor of the EBL Center, committing to a $60,000 grant over a four-year period. This generous commitment has allowed BGS to continue moving forward on plans to expand the Center over the next year.
In January 2009, Chick-fil-A became the second corporation to contribute to the EBL Center with a one-time $5,000 gift. In these difficult economic times for corporations and individuals, Beta Gamma Sigma appreciates the contributions – both large and small – of its corporate partners and generous members. If you or your company would like to be involved in helping to fund the EBL Initiative in the future, please contact Tim Weatherby, Beta Gamma Sigma Development Director, at tweatherby@betagammasigma.org or 314-432-5650. The EBL Center vs. Today’s Headlines We are constantly bombarded with news reports detailing some ethical violation or another. The business world, while already guilty of raising to the level of celebrity those who do not deserve it, keeps seeing some of its mightiest fall by the wayside. Whether it’s the latest $50 billion Ponzi scheme or the global banking operation – fresh from accepting $50 billion in taxpayer money in the form of a bailout – ordering a new stateof-the-art corporate jet for its executives, there’s no shortage of Continued on Next Page
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“If there is bad behavior in our industry, which there’s been a lot, it’s because the message hasn’t come down from the top… It’s kind of like parents in a way. Parents can tell their kids all they want that it’s not appropriate to do this or do that, but if they’re cheating on their taxes or trying to take advantage of something, or that kind of behavior, then what are the kids going to do? They’re going to do the same thing.” Robert E. Turner Chairman and CIO, Turner Investment Partners, Inc.
Setting the Tone at the Top (Cont. from Page 7)
questionable ethical decision making. So how does the good news depicted at the EBL Center make any kind of ripple? Who will pay attention to the positive when there is so much negative to distract us? “I think one of the best ways of getting attention is when there is controversy and conflict,” said Blake. “If everybody thinks everything is going just fine, then people aren’t likely to pay attention to it. “We had a very interesting comment from Anne Mulcahy (chairman and CEO) of Xerox who said, ‘If everybody says that everything is going just right, don’t believe it.’ Because that means that people aren’t really paying attention to the problems that can come up. “Fortunately, the press is independent enough to help surface these things, but within corporations it’s easy to fall into, ‘Well, we’re doing everything just right.’ If anybody believes that, problems are likely to crop up.” So, is it worrisome that ethical violations at some of the featured organizations could wind up on tomorrow’s evening news? “Will some of these companies run afoul with problems in the future?” Blake asked. “Yes they will, just by the nature of large organizations. But do I think that these companies are trying very hard to ensure that’s not going to happen? Yes I do think that, and that’s the essence of leadership. “Leadership doesn’t mean that everything you do succeeds. Nor does it mean that everyone in your community of leadership is going to conduct themselves the way you want them to. If that were the case, then every sports team would be undefeated; there would never be any issues associated with any company. But that’s not the way life is. That’s not the way people are, sadly. “But we’re focusing on good practices that others can adapt and adjust and use for their particular situation. Because what’s right for Xerox, and what seems to work for General Electric and what has worked for Turner Investments, may not be appropriate for somebody who runs a significant car dealership in Omaha. But the same kind of ethical principles and priorities are important.” Leadership is the Key The bottom line is that Beta Gamma Sigma as an honor society believes leadership is the key to ensuring the organizations of the future don’t repeat the mistakes of the past. Leadership is needed to quickly address issues as they arise, and leaders must be given the freedom and responsibility to point out the things that are wrong. “I’m a believer in leadership,” Blake said. “And I’m a believer in leadership throughout organizations – whether you’re the CEO or a regional manager or a district executive. 8 bgs international exchange SPRING 2009 www.betagammasigma.org
Leadership, I think, is essential for the effective operations of any organization. “I also feel that the ethical transgressions of a serious sort, when we see so much of it occurring at the top of some corporations, then I worry greatly about whether there will result a distrust in the corporate world, free enterprise system, and leadership. We see that the lowest approval rankings in our government are with the legislature. That’s awful, because that means people have lost confidence in that institution – not just the people, but in the institution – to serve their needs. “Same thing exists with corporations. Fifty billion dollars has apparently been lost through the actions of (Bernard) Madoff. People have lost their life savings, and we’ve all lost a great deal through the current meltdown. “If we can’t reestablish confidence – not that everything is always going to go up and we’re all going to get wealthy, but rather that there aren’t people who are skirting propriety and skirting the truth in order to enrich themselves at our cost – why would a society, why would people continue to believe in a system where that seems to be the norm?” A Call to Action “We view Ethical Business Leadership as providing an opportunity for our members not only to participate in this dialogue, but to be activists in trying to ensure ethical business behavior,” said Blake. “So this is not just something to discuss over a glass of wine. This is something that all 600,000 members have the opportunity to implement and to further. It’s for them that we are doing this.” Please visit the BGS Center for Ethical Business leadership at www.EBLCenter.org. Consider ways that the experiences shared by those interviewed could be applicable in your sphere of leadership. And let us know what you think. “Just think for a second that we have 600,000 lifetime members spread throughout the world in all kinds of corporations – very small ones, startups, regional ones, local ones, and global multi-national corporations,” said Blake. “Just think if that army of 600,000 people used their leadership skills and talents to at least ensure that as far as the scope of their leadership works, they are going to conduct things in ways that are going to advance society as a whole according to ethical principles that we all share. What a marvelous thing that would be. “Our membership has already shown how smart they are, how intelligent they are, and hopefully how effective they are. So therefore we’ve kind of armed the best to go out and have an impact. I would feel very happy if that happened.”
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A company cannot succeed without the help of its employees. One company that takes this notion to heart is Marriott International. The hospitality chain, which has about 3,000 lodging properties located in the United States and 67 other countries and territories, has been recognized time and time again for its dedication to its employees. In 2008 alone, Marriott was named one of the “100 Best Companies for Working Mothers” by Working Mother magazine, one of the “Best Places to Launch a Career” by BusinessWeek, one of “Top 50 Companies for Diversity” by DiversityInc., as well as one of “America’s Most Admired Companies,” and one of the “100 Best Companies to Work For,” by Fortune. Recently, Robert D. Reid, Dean of James Madison University’s College of Business, sat down with Amy McPherson (BGS 1985, College of William and Mary), Executive Vice President, Global Sales and Marketing, Marriott International, Inc., and discussed the role of Ethical Business Leadership within Marriott’s employee-centered culture. The following are excerpts from that conversation. Robert Reid: Marriott obviously has had a long history of the Marriott family being at the center of what you do, and they have obviously brought a culture to the company. How do you incorporate Ethical Business Leadership into what you do day in and day out? Amy McPherson: Well, as you say the Marriott family basically sets the tone, and they set it at the top with Bill Marriott. The culture is all about treating the associates with respect, and that it’s just as important how we do business as the business that we do...I think the company culture continues to support that and it’s really driven from the chairman on down. RR: How has that culture evolved? AM: Well the culture itself is pretty much about: We take care of the people, and they will take care of the guest, and the guest will keep coming back. What has changed is, with all the new regulations and practices that businesses have to adhere to, the focus on compliance is greater. Part of the culture is holding people accountable for results. Well it’s also holding people accountable for ensuring ethical business is conducted in everything that we do, and with the people that we do business with. I would say that the culture itself has only gotten stronger – about how we want to act as a business – but the focus on compliance with new regulations becomes that much more important. RR: Marriott has literally hundreds of thousands of associates scattered in many countries around the globe, so hiring new associates is a challenge. How do you ensure that you hire people at the entry level and other levels who will uphold and adhere to the set of values the company espouses? AM: The great thing we have going for us is that people really want to work for Marriott. Not only do we have a great reputation for business, but because the culture in and of itself is very well known, people really, really want to work for Marriott. So we get to draw from a much larger pool, and we’re very careful about how we do background checks – depending on the position it might be a criminal background check – and we make certain to adhere to our standards. We know that we want the best people. It is all about getting the best people in the hospitality business. We want to make sure the selection of those is important. 10 bgs international exchange SPRING 2009 www.betagammasigma.org
RR: Are you ever surprised by what comes out in a background check? AM: The only real surprise is, actually I should say, the only thing that is somewhat consistent is people tend to expand their resumes, or pad their resumes…Enhancing their resume about the types of work that they’ve done and how much responsibility and accountability they really had to do something – I led something, I initiated something, some major transformation – and it turns out they are on a work team. That obviously, if you are hiring a leader, is a big difference when someone’s saying they were responsible for creating and designing something and rolling it out when really they were responsible for being part of a larger group. Those are the things that can come out in background checks or through reference checks that you can get a better sense for. RR: If an employee or an associate sees some things or perceives some things that they’re just not comfortable with, what kind of processes do you have in place to allow that person to bring forth those perceptions, or those observations? AM: We have two things. One is an open-door policy. That is standard, that they can go to their supervisor and express any issue that they’re seeing or experiencing. If the supervisor is potentially the problem, there is also the second opportunity for them, which is to use a 1-800 business integrity line. That’s available to them 24 hours a day, seven days a week. That’s staffed with people outside the company, we outsource that, and basically, anonymously they can describe the issue and then there’s follow up beyond that. RR: And that company does whatever level of investigation seems appropriate? AM: Actually what happens is that for each instance that is reported on that integrity line an attorney is assigned, and then that attorney will work with, as appropriate, human resources, an internal investigations group that we have here, and if it’s a financial related issue our internal audit department. So they’ll decide who needs to be involved in addition to the business resource. If it happened at a certain hotel the general manager may be apprised of the situation. There is a business person that is actively working on it with the attorneys, human resources, internal audit, or internal investigations depending on the situation.
“We’re
not compensating more for (ethical behavior). It’s the minimum that we would expect; that people are adhering to strong business ethics and our code of conduct. So if anything it’s a stick. It’s not a carrot because that’s expected.”
Amy McPherson Executive Vice President, Global Sales and Marketing, Marriott International, Inc.
RR: So you take it pretty seriously? AM: Yes, I mean I’ve been involved in something in one of my business units at a lower level and I was asked to come to internal investigations. I knew the individual involved. I gave a little background of what I knew about it because I did know a little bit about the situation, not so much the person’s interaction in the situation....They took that and worked through the operating unit that he was involved in, and investigated it thoroughly and then came back with a recommendation. So it was a big deal. RR: Looking at the way evaluations are done, the way people are rewarded, promotions, what role does ethical leadership play in someone’s promotability, reward structure, etc.? AM: (Ethical behavior) is expected. We’re not compensating more for it. It’s the minimum that we would expect; that people are adhering to strong business ethics and our code of conduct. So if anything it’s a stick. It’s not a carrot because that’s expected. It’s a stick to the extent that we find out somebody is not doing that and potentially it’s going to lead towards termination if that behavior continues to exist. RR: Marriott obviously is an international company with hotels in many other places, other countries. How does Marriott ensure that its values align with international partners, knowing that some other parts of the world operate with a very different set of standards? AM: I think what our experience has been is, yes we operate all over the world and it’s not necessarily that international laws are significantly different as it relates to business ethics, it’s what is accepted practice and that’s where you get into trouble. While there might be a law in a country, the accepted practice is something completely different. (Of all) our people internationally we only have 2 to 3 percent of our workforce that are expatriates, so they’re (mostly) local hires. If they’ve lived in environments where the accepted practice is to give $50,000 to the guy that does your trash, or whatever it is because that’s part of the game, you know we don’t accept that. We have to then do coaching, training that says this is not accepted practice as it relates to Marriott, and how we conduct our business. That’s where we’ve really tried to focus our training. The head of international has his regional meetings and there is always ethical business reinforced training at these meetings with their operation leaders, with our legal group to remind them what’s acceptable. RR: Is that training mostly a case-based approach, or how do they try to convey, “Here are the standards we are operating under,” and “Here’s what you will find in this place, this place, or this place?” AM: We do conduct training based on ethical case studies. We also take the latter approach and say, “here’s basically our accepted practices, our standards, you know this is the way you should be doing business. Here’s where we’ve seen some countries have some deviations. We’ve experienced differences in the accepted practice.
Here’s what you need to do about this.” Again, we don’t change our standards, we’re going to go by the law, and we’re going to go by our standards. What we try to highlight to them is the accepted practice; while it might be an accepted practice in India to do that, it’s not (to us). We do not support that or condone that, and so here’s how you need to act and how you need to train your managers to respond to that situation. RR: Would it be safe to say or appropriate to say that when confronted with a situation like that, in another country or even domestically that you would rather walk away from a deal than compromise what Marriott stands for? AM: Yes, we would rather walk away from a deal. How we communicate that position may depend on what the context of the relationship is. If it’s somebody we’ve never worked with before, that’s easy. If it’s somebody that we have a longstanding partnership with and this was an aberration or some new thing that’s come up, we do our best to convey our position diplomatically–but just as clearly–and preserve the relationship. You’re going to try to work through the situation; I need to get you to here by this date. You know, you’re violating something that’s against our standards, but I understand that this is a different practice here, but I’m going to work with you. By this date we have to have this resolved in a way, or we have to sever the relationship. RR: Let me change context from international to just sort of more general life. Is there a difference between ethical business behaviors in a business setting versus private life? AM: I think that one is on a case-by-case basis too, because clearly what people do in their personal lives, we might never even hear of. To the extent that we are aware of something or are made aware of something, it almost depends on the situation, and what that situation was. RR: In terms of the Marriott culture, and how it has evolved, do you see it changing significantly or moderately in the next five to 10 years? AM: We believe that our culture gives us a competitive advantage... We believe that the core of this company, what makes us better, is that we promote this culture where associates are so much more engaged to work here and we track that. Our human resources group has an associate engagement index that we benchmark ourselves off of other industries, not only within the hospitality industry, but outside the hospitality industry, and our people are more engaged. They will do anything to promote the values and the culture of the company because it aligns more with their values and their culture. And because of that we have more productivity and less turnover. It’s (good) business for us to have them engaged in the culture because we don’t have the churn that other companies have. We don’t have some of the issues with ethics and all of that that other companies have, and as a result we get more profits because of that engagement by our workforce.
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Gifts from Friends Beta Gamma Sigma gratefully acknowledges the support of the following individuals, as well as the organizations listed on page one. Without this assistance, the Society would be unable to continue adding value to the lifetime membership. Chairman’s Board $2,000 - $4,999 University of Rhode Island James A. Viehland Director’s Table $1,000 - $1,999 Baruch College, CUNY William E. Oakley Francis Marion University James W. Fenton, Jr. University of Georgia Carl W. Gooding Instituto Tecnologico Autonomo de Mexico Carlos A. Monroy James Madison University Robert D. Reid Kent State University George E. Stevens Louisiana State University John M. Norwood Loyola Marymount University John T. Wholihan North Carolina A&T State University Bernard J. Milano The University of North Carolina at Greensboro James K. Weeks Northwestern University Paul R. Seegers Oklahoma State University Sara M. Freedman Oregon State University Donald F. Parker University of Pennsylvania John C. Hanson University of Pittsburgh Donald R. Beall Valdosta State University Kenneth L. Stanley Western Illinois University Vicki C. Klutts Friends of Beta Gamma Sigma AACSB International President’s Cabinet $500 - $999 University of Alabama Marinda J.C. Wood University at Buffalo, State University of New York Paul F. Eckel Kenneth P. Ferris Business Achievement Award Martin Mintz University of California at Berkeley Marc J. Desoer California State University, Chico Henry W. Wright University of Chicago James R. Sanger University of Denver Charles H. Albi Drexel University Chad W. Tursi Duquesne University James M. Zillian University of Iowa William C. Hunter University of Michigan Allan D. Gilmour Michigan State University Bruce D. Bottomley University of Missouri – Columbia Duncan L. Matteson New Mexico State University M. Don Kidd The University of North Carolina at Chapel Hill Paul H. Broyhill Northwestern University Ronald Neale Paul Ernest C. Styberg University of Notre Dame Jeffrey W. Yingling Ohio University Albert J. Weatherhead III Seattle University Gary P. Brinson Villanova University Debra A. Arvanites University of Washington Philip B. Hartley Washington University Robert E. Markland Western Carolina University James A. Valkenaar, Jr. Dean’s Club $250-$499 University of Alabama Joseph M. Farley University of Arkansas Harry C. Erwin University of Baltimore Barry A. Benz Baruch College, CUNY Murray H. Neidorf Baylor University Tim D. Brewer Boston College Bennett Soo Yee California State University, Bakersfield David F. Glossbrenner
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GENEROUS DONORS SUPPORTING BETA GAMMA SIGMA January 16, 2008 to January 15, 2009 University of Nebraska at Omaha Howard P. Doerr University of Nevada, Reno Richard A. Cable James L. Mercer New Mexico State University Sherry Kay Mills New York University Joseph E. Adiletta Diane J. Beckman Mario P. Borini Alice R. Buedden Paul Farber Stuart S. Flamberg William A. Heineman Arthur J. Krakower Lester A. Leight David M. Levine Joseph P. Martori Sanford J. Moster David Kenfred Owens Warren D. Schaub Thomas Dso Yun Fok New York University Graduate School Janet L. Pegg Gunda E. Vesque The University of North Carolina at Chapel Hill Alan B. Flaschner Vickie L. Gibbs J. Dale Whitworth The University of North Carolina at Greensboro Gloria Leebrick Keesee The University of North Carolina at Wilmington Joan Cecile Williams University of North Floirda Walter L. Moore Richard Dana Palmer Alvin L. Sack University of North Texas Hugh D. Erskine Northeastern University Richard C. Cloran James M. Fowler Baker A. Smith Northern Arizona University James O. Carnes Northern Illinois University Denis M. Desmond Northwestern University Albert Delighter Frank C. Gorom Kurt L. Janavitz Jerome Lamet Edward C. Messinger Don H. Reuben Gordon G. Rockafellow University of Notre Dame Dennis C. McInerney Robert M. Tobben University of Notre Dame Leo V. Ryan Oakland University C.S. Bud Kulesza The Ohio State University John R. Ervin Barry S. Feldman Philip E. Mark John L. Marshall E. A. McClintock James G. McMillan William B. Patrick William L. Roberts Press C. Southworth III Dennis G. Thornbloom University of Oklahoma Nancy L. Gray Cheek Michael F. Farren Shelle G. Lutke Sandy Harland Singleton Cynthia Bingman Smith University of Oregon Kevin W. O’Neill Oregon State University Joan Austin Ken Austin University of Pennsylvania Michael Freeman Barry Michael S. Blechman Anthony J. Deleon Dwight R. Fearins William V. Ledford Thomas L. Markl Robert C. Nevin Pepperdine University Donald K. Goss, Jr. Goran Matijasevic University of Pittsburgh Elizabeth Anne Herzberg Edward W. Kay Donald H. Peters Portland State University George E. Miller Purdue University Kenneth J. Wilson University of Rhode Island Louise A. H. Bookman Michael F. Reed University of Rochester Ramachandra Bhagavatula Gary P. Johnson Rochester Institute of Technology Edwin J. Carroll III Herbert W. Jarvis Rollins College David M. Currie Roosevelt University Jacqueline J. Goldberg Rutgers - The State University of New Jersey George W. Gardner Martin M. Lin John J. Pascucci Charles W. Stewart
San Diego State University Carla M. Kuhns Charles M. Medvitz University of San Francisco David R. Dull James L. McKenna San Francisco State University Steve Yat Lui Hui Wesley R. Petit San Jose State University Charles Q. Bulygo Dave L. Coles Peter W. Harper Santa Clara University Robert T. Burson Robert E. Daley Robert J. Emmons John L. Fetter Anthony J. McKeon Mary Dana Niemiller Seattle University Terrence C. Kabanuck Seton Hall University Ludwell Alden Sibley Shippensburg University Robert J. Lieblein Brad McMullen University of South Alabama Donna L. Conner University of South Carolina Deonne Nicole Fine Elmer F. Frick Robert O. King Clayton B. Meeks Ruth A. Moyer University of South Dakota Tom Lavin University of South Florida Darrell J. Ferrigno Charles R. Mitchell Helene L. Ross Lois A. Sorensen University of Southern California Robert S. Brezovec James F. Childs, Jr. Frank J. Dinoto Robert R. Dockson Jay H. Grodin Eugene J. Holt Terrence O. Hughes Jason White Southern Illinois University at Carbondale Roy A. Causey Southern Illinois University Edwardsville Mildred L. Willmont Southern Methodist University Robert W. Calloway Gary A. Feather Robert E. Henderson Gene W. Hewett Christopher C. Loy Michael Weiss St. John’s University Edgar Collado Gary J. Glueckert Margaret Mary Healy Eileen T. Lemonda Vivien M. Hegarty Saint Louis University David A. Gardiner Stephen F. Austin State University Charles P. Engel Syracuse University Gustav J. Braun H. Minton Francis Charles E. Kunkel Frederick H. Weeks Temple University David L. Balint Marvin Comisky Lawrence W. Davis Eric A. Girardi Stephen H. Morris Gary Mozenter John W. Wilchek The University of Tennessee at Knoxville Edgar J. Bostick R. Gale Manley Texas A&M University Karen W. Currie The University of Texas at Arlington Joe Foster Mark C. Hensel, Jr. Daniel K.C. Wu The University of Texas at Austin Orville A. Armstrong Donald R. Broadland Donald G. Calhoun Allen R. Pierce Carol A. Shepherd Texas Tech University Peggy Sue Aguilar James Mitchell Blackshear Barbara Ann Frankhouser The University of Texas at Tyler Cadmus Williams University of Toledo Borge R. Reimer University of Tulsa Nancy B. Quigg-Young University of Utah Jeffrey B. Higgs
Vanderbilt University A. J. Kazimi Kenneth L. Roberts University of Virginia George P. Buckey David E. Houseman Brian S. Roberts Virginia Commonwealth University Robert E. Rigsby Virginia Tech University Hermann Burger James A. Hixon John G. Rocovich, Jr. John E. Wilson Washington & Lee University Reid T. Campbell Glenn O. Thornhill, Jr. Washington University John F. Danahy B. C. Downs Howard E. Lovely Gary W. Rust Henry L. Seifert Joe E. Strawn, Jr. John K. Wallace Wayne State University Debra L. Bernstein Matthew Russell Gonda Larry A. Rose Gustaf A. Stinstrom West Virginia University Richard Meredith Gardner D. Steven Hamilton Western Michigan University Robert J. Trainor, Jr. Quenten T. Wilber Wichita State University Douglas L. Yoder College of William & Mary Brantley S. Orrell Winthrop University Martina Benedikovicova University of Wisconsin – Madison James Fetek David Geraldson Daniel L. Goelzer Richard J. Howell James F. Kress Kimberly K. Peterson Barbara J Pope Thomas G. Ragatz Friedrich J. Von Rueden University of Wisconsin – Milwaukee Marillyn J. Cole Richard Erb Thickens University of Wisconsin – Oshkosh Sharon F. Alferi Larry R. Koeppen Youngstown State University Betty Jo Licata Friends of Beta Gamma Sigma Herndon Foundation Eugene and Linda Holt Memorial Gifts University of Oklahoma John W. Nichols by Mary Nichols Matching Contributions Aetna Foundation, Inc. Joseph T. Doyle Amsted Industries Foundation Marilyn R. Franson AXA Foundation Anton T. Vanek, Jr. Black & Decker Brad P. McMullen Bridgestone Firestone Robert L. Nichols The Duke Energy Foundation Stephen P. Schultz GE Foundation James Nuttall Walter Peters Laura Salma Deborah Wight Donald Wrhel The Glenmede Trust Company, NA Steven Point Houghton Mifflin Harcourt Thomas E. Deming Diane McGinn Intuit Foundation William B. Hollis JP Morgan Chase Foundation Iris Altilio John Brkljacic The Minneapolis Foundation Shawn Cheesman Morgan Stanley Paul J. Beaske Pfizer Foundation E. Thomas Thurber Verizon Foundation Stanley C. Kuenn Arthur Schmidt Washington Mutual Amy C. Stanton
Thank You!
FOR YOUR GENEROUS SUPPORT
The Mission of the International Honor Society Beta Gamma Sigma is to encourage and honor academic achievement in the study of business, to foster personal and professional excellence, to advance the values of the Society, and to serve its lifelong members. Your generous gifts help Beta Gamma Sigma fulfill its mission by funding the Society’s programs and services, including: • BGS Scholarships • Alumni Chapter Program • Student Leadership Forum • BGS International Exchange • BGS CareerCentral • Collegiate Chapter Training • Ethical Business Leadership • And many, many more!
Help your Society fulfill its mission:
www.betagammasigma.org/ donate.htm
BGS CareerCentral is the only job search site exclusive to Beta Gamma Sigma members. It’s the place the world’s top businesses go when they are looking to hire the “Best in Business.”
bgs international exchange SPRING 2009 www.betagammasigma.org 13
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SPRING 2009
The Beta Gamma Sigma Center for Ethical Business Leadership is now open See story on page 4