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Then and Now: A Fox in Charge of the Ethical Henhouse

This is the part of a series of posts featuring earlier content from the Vital Integrities Blog along with updated information and opinions.

Here's an excerpts from a March 2005 post:
Fifteen months ago, Boeing's board fired its CEO after two highly publicized scandals. Hoping to repair its ethical image, the board lured former Boeing president Harry Stonecipher out of retirement and gave him the CEO position. Said Stonecipher at the time, "We need to strengthen our reputation with our customers, employees, investors and the communities in which we operate." On Monday, the board acted again, this time tossing out Stonecipher for having an extramarital affair with a company office manager.

"The Board concluded that the facts reflected poorly on Harry's judgment and would impair his ability to lead the company," said Boeing's Chairman Lew Platt. That goes without saying. But now the board should turn its attention to its own poor judgment.

Stonecipher retired from Boeing in June 2002. Four months later, Boeing's chief financial officer Michael Sears had illegal discussions with Air Force acquisitions official Darleen Druyun. The discussions, which centered on Boeing potentially hiring Druyun, took place while she was awarding billions of dollars worth of Pentagon contracts to Boeing. A year after Stonecipher's departure, a federal grand jury indicted two former Boeing officials for illegally acquiring proprietary documents from competitor Lockheed Martin and using them to win a government rocket-launch contract in 1998.

While Stonecipher and Boeing's board would like us to believe the affair was a one-time act of poor judgment by an otherwise ethical leader, we can't ignore that Stonecipher oversaw the company during and immediately before the uncovered illegal activities took place. It would be naïve to discount a correlation between his recent bad behavior and his leadership of a company prone to unethical business practices. By allowing an old fox to guard the chickens, Boeing's board undermined any effort to restore leadership credibility.
A few months after that post, student-loan lender First Marblehead's board fired CEO Daniel Meyers for giving expensive gifts to a Bank of America executive. BofA was a major client of First Marblehead and Meyers appeared to be enticing one of its decision makers to send more business his way with a pricey watch and other lavish gifts totaling $32,000. Meyers claimed that he purchased the gifts with his own money; nevertheless, the board concluded at the time that he had violated a company ethics policy and sent him packing.

Last week, First Marblehead rehired Meyers as chief executive, asserting that Meyers is the best person to lead the company out of its current financial crisis. Explaining the board's change of heart, a company spokesperson described Meyers' gift-giving transgression as a judgment lapse, rather than a policy violation.

Is First Marblehead's board putting financial results before ethics? Maybe. If the recent wave of corporate scandals has taught us anything, it's that a leader's lack of judgment is what causes ethical missteps and, eventually, financial meltdowns. When you already know a fox makes bad moral decisions, why give him a second chance to guard the hens?

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