Tag Archives: business_ethics

Feeling Morally Queasy at Work? Tips for Voicing Your Values

Tuesday, 05 February 2019 18:24
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I’d like to encircle the workplace with yellow safety tape. Long ribbons of it. “Caution! Do not enter!” That would give others an inkling of the dangers lurking within. I’m not talking about back pain, eyestrain, and paper cuts. I’m talking exploitation, harassment, and passive aggression.

I’d use safety tape to protect people from the risks that threaten their personal values. Since 1943, Norman Rockwell’s Rosie the Riveter has inspired workers with her power, ebullience, and obvious self-reliance. Today she’d be tweeting #metoo.

In an uncertain world, we can count on one thing: our personal values will be challenged in the workplace. They will be challenged by what we witness, experience, and are asked to do. Mine have, many times.

Concern over this problem was revealed in a 2001-2002 Aspen Institute  survey conducted on a group of MBA students. “When asked whether they expected they would have to make business decisions that conflicted with their personal values during their careers, half the respondents in 2002 (and more than half in 2001) believed they would. The vast majority of respondents both years reported it would be ‘very likely’ or ‘somewhat likely’ that they would experience this as stressful,” according to Professor Mary Gentile, author of a book, Giving Voice to Values: How to Speak Your Mind When You Know What’s Right.

Predictably, that issue spreads risks across the organization like foul air propelled by the wind. “In 2001, over half of respondents said their response to such a conflict would be to look for another job; in 2002 that number declined to 35 percent, still a significant number.”

Nearly two decades on, the Aspen Institute findings corroborate what I see today: employees are under-prepared for responding when their values are challenged at work. Most business schools don’t teach techniques or approaches, and the few that do present choices through a moral lens that defines or prescribes right and wrong. That turns people off.

Professional development in sales and marketing is no better. Aside from the ambiguous demand, “put customers at the center of everything you do,” practitioners ignore the issue altogether. “Don’t lie. Ever.” Huzzzzahh! Easy to say at the sales kickoff. Looks nifty on PowerPoint. But Job #1 for business developers is customer persuasion. Such admonishments are flimsy, and don’t penetrate the thorny dilemmas employees routinely encounter, like choosing between pressuring customers to buy and keeping their jobs another quarter.

During my career, I have repeatedly contrived rationalizations and reasons for not speaking up when my values have been confronted. I’ve learned I’m far from alone. As we endeavor to preserve a self-image of high integrity, we have cultivated a parallel talent for sweeping concerns and better judgement under the carpet.

Not that business development culture would have it any other way. Put aside that creative mantra for a moment. In my experience, marketing and sales organizations are hives for conformity and group think: “Quit giving excuses!” “I want to know how you are going to sell, not why you can’t!” “We’re not a problems focused group, we’re a solutions oriented group.” “You’re either on the team, or you’re not.” There’s a theme to these edicts: check your personal values at the door before you begin work. Little wonder so many marketing and sales professionals find it nauseating to rock the organizational boat.

Instead of thinking, “well, I’ve already slipped on that ethical slope, so I guess I’ll just continue the slide,” recognizing past imperfections in ethical decision making frees us to move in better directions. There’s nothing to be gained beating ourselves up over workplace decisions that we’d rather re-do. Wearing egg has never been fashionable, but as a practical matter, you can’t hold a conversation about ethical choices if the person leading the discussion cops an attitude of finger-wagging judgment. And I’ve yet to meet a colleague, client, or direct report who doesn’t wear symbolic egg.

Which values challenges do business developers experience?

Pressure from management:

  • “You must not share information with [Customer X] about this defect, because it will delay their purchase.”
  • “We won’t offer [Customer X] the lower market price because it will cause us to miss our revenue target. They’ll never know.”
  • “We can give our customers verbal commitments not to raise their prices, but that information must not be explicit in our contracts.”
  • “When you prospect a C-Level executive for the first time, always make it seem that you’ve had an earlier conversation with them.”
  • “This product has high potential for misuse, but it’s too important to our profits not to aggressively promote it.”

Pressure from prospects:

  • “We haven’t made a purchase decision yet, but if you can promise a better price, I will share [Competitor X’s] proprietary proposal.”
  • “I’m willing to award your company the order, but I need a personal favor . . .”
  • “We need your developers to modify the quality algorithm so the defect rate we report to the government appears lower.”

Since 2014, dozens of companies have been inducted into the Annual Sales Ethics Hall of Shame. Theranos, Wells Fargo, VW, Takada, and Purdue Pharmaceutical became notorious because their business strategies became deeply infected with nefarious intent.

In September, 2018, Theranos announced it was formally “dissolving”, which suggests its downfall was less ugly than it was. Its two senior executives, founder Elizabeth Holmes and Sunny Balwani, were indicted the same year, charged with engaging in schemes to defraud investors, doctors and patients. Takata filed for bankruptcy. Wells Fargo got spanked with onerous restrictions on its asset growth. And VW, well, I’ll never buy a car from a company that gleefully sacrificed my respiratory system to pad their profits.

For all these companies, the proximate cause for their bad fortune wasn’t a cliché risk like rabid competition. It wasn’t warp-speed market disruption. It wasn’t onerous government regulation or economic chaos. Instead, it was unchecked greed.

Opining greed in the C-Suite won’t make it go away. Nor will moaning about high pressure sales tactics. After all, sales forces are predominantly paid on revenue production, and as we know with incentive compensation, the goal is to get what you pay for.

Instead, risk mitigation for corporate malfeasance begins at the grass roots. Employees who are prepared and equipped to voice their values provide the most effective way to stem corporate misbehavior. Put another way, we have met the responsible party, and it is each of us. Time to take the bull by the horns and wrestle it to the ground.

Some tips for voicing your values:

  1. Know what your values are. Write them down – it doesn’t need to be a long or complicated list. Own them. This is essential, because they are yours, and that makes them unassailable.
  2. Believe that your values deserve to be taken seriously. It doesn’t matter whether you’re an intern or board chair.
  3. Prepare yourself for situations where you know you will need to draw the line. This means anticipating challenges such as the ones described earlier and developing a response ahead of time.
  4. Don’t judge the action of others or presume to understand them. If you assume a manager or colleague has malintent, you will come across that way, and will be less likely to change his or her mind.
  5. Invite conversation about the issue. For example, “This doesn’t work for me. I don’t think it’s right. Do you see it differently? Help me understand.” (reference Giving Voice to Values, page 157).
  6. “Frame choices in ways that align them with broad, widely-shared purpose.” (Giving Voice to Values page 159). It’s easier to redirect a problematic request when you can gain consensus on a larger goal.
  7. Craft a description that focuses on the advantages of your recommendation or role, rather than the disadvantages.
  8. Practice, practice, practice your responses to values challenges. Reflect on your experience and that of others, figure out what you’ve learned, hone your tactics, and practice some more.

“Once we identify the common challenges in our particular line of work, it is especially useful to look for and note any examples of individuals who have effectively voiced and acted on their values in this type of situation,” Professor Gentile writes. Examples are abundant online. It’s also important to familiarize ourselves with common rationales for not resisting. The top four, according to Giving Voice to Values,

 

Expected or standard practice: “Everyone does this, so it’s really standard practice. It’s even expected.”

 Antidote question: “If the practice is accepted, why are there often rules, laws, and policies proscribing it?”

 

Materiality: “the impact of this action is not material. It doesn’t really hurt anyone.”

 Antidote question: “Does the apparent small size of this infraction make it any less fraudulent?”

 

Locus of responsibility: “This is not my responsibility; I’m just following orders here.”

 Antidote question: “Is the issue likely to cause significant harm, and are there few (or no) others able to act to prevent it?”

 

Locus of loyalty: “I know this isn’t quite fair to the customer but I don’t want to hurt my reports/team/boss/company.”

 Antidote question: “Am I being truly loyal to the company if I perform this task/operation/process and it undermines trust and credibility?”

Paraphrasing the immortal words of Glenda, the Good Witch from The Wizard of Oz, “You’ve always had the power to act on your values, my dear. You just had to learn it for yourself.”

“We are beginning from the position that we want to act.” Professor Gentile writes. “Therefore we are trying to answer the question: “How can we do so most effectively?”

Revenue: MiMedx Shows How to Fake It Till You Make It

Monday, 30 July 2018 02:31
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Suppose your company pioneered a product able to improve the health of millions of people. Suppose that over the past five years, you reported at least 50% year-to-year revenue growth. To cap it off, suppose Fortune recognized your company as the fifth-fastest growing public company in the US. How might your company’s revenue prospects appear to investors, and what would be the impact on its stock?

If you were prone to making understatements, you’d say the share price would increase. And that’s exactly what happened for MiMedx , a company that makes human skin grafts for surgical use, and whose market value once reached $2 billion. Then, in June, 2018, a load of financial poop went airborne, and traveled into the company’s twirling fan.

That’s when “the company said an internal investigation had shown that its reported financial results going back to 2012 were no longer reliable and would have to be restated,” according to a Wall Street Journal article, Highflying Medical Firm Falls to Earth, Its Sales Questioned (July 24, 2018). As of this writing (July 27), the market cap for MiMedx was under of $464 million. MiMedx’s president, Parker “Pete” Petit has resigned, and an interim executive now runs the company. His specialty: “restructuring troubled businesses.” I’m reminded of Icarus, yet again. Those ancient Greeks – they sure understood human foibles. Somehow, they did it without the benefit of social media, AI, predictive analytics, and all. Amazing.

Stories about companies that tanked after achieving soaring revenue seem commonplace. Often, it’s the result of scrappy competitors who saw an opportunity, and seized a cash cow that a company was contentedly milking. Sometimes, it’s the result of self-satisfied, complacent management, who paid little heed to oncoming trains that demolished their business strategy. “We’re going to get flattened? . . . I thought you said ‘fattened!’”

MiMedx suffered from none of these mistakes, and that’s part of the tragedy. “No one has suggested that MiMedx’s products are faulty,” the Journal says. According to a company statement, “[MiMedx] is operating its business as usual as it continues to grow, invest in its product pipeline, and focus on serving healthcare providers and their patients.”

“Business as usual.” A sound bite that analysts, customers, and prospective employees sometimes like to hear. But it turns out that there was a bit of revenue hanky-panky going on.

Well, a lot of hanky-panky – if the allegations are true. “A Wall Street Journal review of company emails, court documents and internal complaints, plus interviews with current and former employees paint a picture of a company seeking to grow at almost any cost.” Where have I heard this before? Sounds so familiar . . . Bells Cargo? . . . Fells Wargo? Help me out . . .

In the Wall Street Journal article, employees describe a potpourri of revenue inflation tactics. I can’t call them innovative – some have been around for decades – but what makes MiMedx especially disturbing is what happened to employees who blew the whistle. Among the techniques former employees described in The Wall Street Journal article:

  1. Channel stuffing. “MiMedx sometimes shipped more skin grafts than had been ordered, and booked them as sales . . . MiMedx sales records show the company recorded a shipment of 135 oversized skin grafts to a Las Vegas plastic surgeon’s office, which former employees said is way beyond the 10 or so smaller pieces in a typical physician order. The shipment was recorded at 8:00 pm on September 29, 2016, just before the end of a quarter. No one in the surgeon’s office had ordered the goods, according to a former employee of the office.””
  2. Browbeating the sales force. “What else can u ship by end of month?” read one message to a rep, which continued, “Need all u can put in today up to $100k if possible.”
  3. Booking consignment inventory shipments as sales. “Several former employees said that at times, near the end of a quarter, the company would book as sales some of the goods sent to hospitals on consignment but not yet used.”
  4. Mislabeling products for medical uses that receive higher reimbursement from insurance companies.
  5. Providing advisory services to physicians on how to maximize reimbursement for the company’s products.

Customers have the unfortunate habit of directing their ire about bad selling behavior toward salespeople. I understand. The front-line rep is a conspicuous target. Most customers never meet the Sales VP who hatched an incentive plan that encourages revenue production over anything else. They don’t hobnob with the VP of Human Resources who carries out heavy-handed sales management policies, especially the punitive firing part. If they did, they’d learn about the high-pressure manipulation under which salespeople work, and how that penetrates their customer conversations. They would understand that the objectionable behaviors salespeople display are almost always result from what management encourages, and ultimately, what employers pay salespeople to do.

But many salespeople are principled and resist adopting practices that compromise their morals and ethics. Or, violate the law.  But for some, pushback comes at a cost.  With MiMedx and Wells Fargo, management concocted penalties to ensure employees kept quiet, which allowed their devious machinery to continue operating. Both companies eventually poisoned themselves. Time will tell whether the dosage was lethal.

It would be easy to attribute the transgressions at MiMedx to good old fashioned greed, and leave it at that. Why attempt to fix what you can’t change?

But MiMedx illustrates a preventable problem. Four root causes:

  1. Flawed proxies. In the case of MiMedX, the flawed proxy was revenue growth, which investors often confuse as a sign that other things they covet are present: talented management making smart decisions, fast-growing industry or market, killer business strategy, great products, rapid customer adoption, loyal repeat customers. MiMedX demonstrates that revenue is a weak proxy because a growing company can be infected with problems, and revenue is easy to spoof.
  2. Misplaced and outsized financial rewards. As with Wells Fargo, when executive compensation plans put heavy emphasis on stock price increases, nobody needs to guess how managers will direct their energies.
  3. Ethics absent from corporate culture. Tom Tierney, a former MiMedx Regional Sales Director, described the company’s culture as “a mind-boggling level of sales and accounting irregularities,” which he characterized as a “win at all cost” company culture.
  4. Lack of safety for employees when reporting fraud and abuse. “MiMedx provided employees with a way to report issues that troubled them. Eight ex-employees said they were fired after they spoke up,” according to The Wall Street Journal.

There are plenty of sound reasons to pursue rapid revenue or market share growth. For companies that are first to market with an innovation, rapid revenue growth enables them to establish platform or production standards for an industry. It helps them build economies of scale, which raises barriers to entry. It gives them bragging rights as the market leader. All of these have positive strategic consequences. With MiMedx, the quest for rapid revenue growth appears to have backfired because its primary purpose became apparent: to line the pockets of the company’s owners.

I blame analysts and investors. We have better, deeper metrics than revenue growth to assess the future vitality of a company. It’s time to start trusting those numbers, because as we’ve learned by now, revenue is wicked-easy to fake.

Long-term Revenue Success Depends on Moral Leadership and Sound Ethical Conduct

Wednesday, 25 July 2018 23:19
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Elizabeth Holmes, CEO of Theranos, and John Zimmer, CEO of Lyft, have much in common. They are the same age – born less than two months apart in 1984. Both were accepted into prestigious universities. Holmes attended Stanford, and Zimmer went to Cornell. As undergraduate students, they were recognized with high academic honors. Holmes was a Stanford President’s Scholar, and Zimmer graduated first in his class at Cornell. (Holmes did not graduate.) Both hatched promising startups in Silicon Valley. Both became well known for their entrepreneurial talents, and for a time, both were well regarded by their peers.

But the difference in their results couldn’t be starker. Fortune named Holmes one of the World’s Most Disappointing Leaders. In 2016, US regulators banned her from owning, operating, or directing a diagnostic lab for two years.  And in June, 2018, a federal grand jury indicted her on nine counts of wire fraud and two counts of conspiracy to commit wire fraud. You can find her bio under Leadership for Theranos, minus the stink. After all, there are only so many words you can fit onto a web page.

Zimmer, on the other hand, received the Cornell Hospitality Innovator Award in 2017, and his company’s market valuation reached $15.1 billion in June, 2018. Not bad for a company that began operating in 2012.

You can say that scruples in the C-Suite isn’t a prerequisite for generating profit and solid financial returns in a given year. And you can tell me that to be revered in business, a person doesn’t have to be a good human being. I’m inclined to agree. My argument is that the cataclysmic event that foreshadows business failure is the moment the CEO embeds deceit into corporate strategy. And when complicity becomes a condition for employment, the company’s fate is sealed. In this regard, you cannot find two more contrasting leaders than Holmes and Zimmer.

There’s a lot of digital ink devoted to “killer startup strategies,” and “must have’s” for revenue success. But too many articles concentrate on right now tactics. It’s fluffy marketing cotton candy engineered to induce a revenue sugar high, or simply to provide an adrenaline rush for the reader. A rarer find online is insight intended to benefit those with a planning horizon longer than Bryce Harper’s remaining time as a Washington National.

CXO’s can’t credibly plan beyond next quarter if moral and ethical conduct isn’t woven into their company’s cultural fabric. Yet, there’s a dearth of recognition regarding the business value of good ethics. I don’t understand why, given the hard landings we’ve seen. Wells Fargo, HealthSouth, Enron, Premier Cru, Pilot Flying J, Takata. Since I authored my first Sales Ethics Hall of Shame in 2013, over forty different companies have been inducted. Among those, many are defunct.

I see no end to the wreckage. Absent moral integrity, the revenue-now mania that infects the blogosphere, B-School curricula, leadership development courses, and popular culture compares to the Titanic crew getting finicky about how to position their deck chairs, and worrying about whether red wine will be available past April 15th. If business leaders intentionally incubate – or don’t avoid – ethical catastrophes, their strategic cleverness will plummet from on high, forming a deep crater on the revenue chart. Except unlike the Titanic, there’s no value in its recovery.

For long-term revenue success, integrate sound ethical conduct into the business. Here are eight characteristics of an ethical organization:

  1. An ongoing ethical premise for the enterprise. For what not to do, see Swanluv, or the Fyre Festival.
  2. Leadership that models ethical behavior.
  3. Audit controls that are rigorous, consistent, visible, and independent.
  4. Risk identification and mitigation, inside and outside the organization. A red flag: an executive who cops immunity by saying, “that type of thing could never happen here . . .” or, “we don’t hire those types of people . . .”
  5. Communications with staff about ethics that are clear, credible, bilateral, and ongoing.
  6. Safety for employees to report fraud, abuse, and ethical concerns.
  7. Processes for resolving problems exposed through evidence of ethical violations.
  8. Timely and effective action.

Holmes and Zimmer are both bright, ambitious business leaders, who hew to different moral interpretations. Holmes drove her company into the ground. Zimmer continues to create value for his employees, customers, and investors. The outcomes speak for themselves. A culture of sound ethical conduct is crucial for long-term success.

Why Companies Must Care about How They Achieve Revenue

Monday, 15 May 2017 17:06
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Search online for the phrases crush your quota and rapid revenue growth, and you’ll get about 4,400 and 49,000 results, respectively. As a society, we not only adore revenue, we covet its fast and furious capture. As my district manager used to say to me, “I don’t care how you make your number, as long as you make it!” His comment reflected the culture that permeated the organization.

I could have taken his comment as license to embark on devious pathways. If he had any concerns, he didn’t share them. He should have. Dishonesty, heavy-handed persuasion, and customer harm are common problems in sales execution. It’s never wrong to discuss them. If you have worked inside a sales organization even a short time, you can probably relate an incident or two.

At my company at the time, sales reps pursued a single objective: make quota. Almost three decades later you’ll still find make quota as a top priority in most sales organizations. For many sales reps, quota shortfalls mean losing your job.  That creates other problems. When you wake up every day with a knife-sharp pink slip suspended above your neck, ethical scruples can interfere with job security. The ethical dissonance salespeople experience over their careers would stun outsiders. You would think that ethical conundrums would be a major topic at sales meetings. But over many years as a sales rep, I logged countless hours in meetings dedicated to “quota-busting tips and tricks”, but I don’t recall a single conversation where ethics, honesty, integrity, or moral conduct were even discussed.

That doesn’t prevent people from pointing the finger at “aggressive, manipulative sales reps” whenever a news story breaks about a company’s systemic deceit. The blame is often misplaced. Unethical business development practices are often a leadership issue that can be traced to the top of the org chart.

Consider the way companies hype their revenue machismo, while sweeping their ethical dirt under the rug. In its 2016 annual report, 21st Century Fox, parent company of Fox News, wrote,

“The Fox News Channel, under new leadership, is stronger than ever, and is on track to have its highest rated year in its 20-year history. There has been some speculation that Fox News’ unique voice and positioning will change. It will not.”

and,

“Selling, general and administrative expenses decreased 3% for fiscal 2016, as compared to fiscal 2015, primarily due to the sale of the DBS businesses and Shine Group partially offset by higher selling, general and administrative expenses at the Cable Network Programming segment.”

VW’s 2014 annual report reported revenue this way:

“The Volkswagen Group continued its successful course in fiscal year 2014, again generating record sales revenue and operating profit in an ongoing difficult market environment . . . The Volkswagen Group generated sales revenue of €202.5 billion in fiscal year 2014, 2.8% higher than in the previous year. The clearly negative exchange rate effects seen in the first half of the year in particular were offset by higher volumes and improvements in the mix. At 80.6% (80.9%), a large majority of sales revenue was recorded outside of Germany.”

At the very moment these self-congratulatory passages were crafted, 21st Century Fox was paying hush money to victims of Bill O’Reilly’s predations, and VW was violating regulations by rolling carbon-spewing vehicles off their assembly lines. That’s a truckload of eeeeeeewwwwwww fluffing up the financial reports for investors. These companies could write a how-to for converting their operational stench into the sweet-smelling perfume of ka-ching. They’re far from alone.

A more transparent 21st Century Fox would have written,

“Revenue and profits were up this year at Fox News due to lower than expected payouts to silence Bill O’Reilly’s sexual harassment victims. Legal costs decreased as well. As a result, SG&A expenses as a percent of revenue achieved its biggest decrease in five years. We expect that trend to continue, despite the obvious risks from Mr. O’Reilly’s unchecked predilections.”

And VW would have shared, “While our vehicle portfolio has achieved dramatic improvements in average mileage, VW has not reduced fleet CO2 emissions. However, the company has developed technology to circumvent environmental standards enforcement worldwide, resulting in unhindered sales, and significantly higher profits than could be achieved with legally-compliant vehicles.”

Fat chance! The excerpted passages are lies by omission. But we’re reminded of the intoxicating power of the word revenue. By itself, revenue commands gravitas and respect. Pad it with punchy words like “Achieve geometric revenue growth . . .” and readers willingly downplay ethical concerns – if they had them in the first place.

Don’t look for a change anytime soon. FASB guidelines don’t require companies to differentiate ethical revenue from unethical. We anoint it with a catchy catch-all: “The Top Line.” Not everyone realizes that some bucks are toxic, though I’m certain that the CFO’s at 21st Century and VW have since shared that epiphany with their successors.

On April 3, 2017, Forbes published an editorial stating that O’Reilly’s job was “safe” at Fox News. The reason? Money. The writer presented what he believed were forceful facts: “The O’Reilly Factor generated $446 million in advertising revenue for the network from 2014 through 2016, according to Kantar Media. Last year, the show brought in an estimated $110.8 million in ad revenue, according to iSpot.tv. That compares to the 2016 of $20.7 million in advertising for MSNBC’s biggest star, Rachel Maddow, who is on an hour later. Fox News makes up about 10% of its parent company 21st Century Fox’s revenue and about 25% of its operating income.” Given this adulation, it’s little wonder that O’Reilly felt unassailable. I’ve seen the same pattern within other organizations. The indiscretions of “top rainmakers” are tolerated – so long as they’re making rain.

Yesterday, the New York Times reported that Douglas Greenberg, among Morgan Stanley’s top 2% of brokers by revenue produced, continued to work at the company, despite four women in Lake Oswego, Oregon reporting that his violent behavior drove them to seek police protection. “For years, Morgan Stanley executives knew about his alleged conduct, according to seven former Morgan Stanley employees.” (Morgan Stanley Knew of a Star’s Alleged Abuse. He Still Works There, New York Times, March 28, 2018).

“’21st Century Fox certainly has an economic incentive to keep Bill O’Reilly on air,’ said Brett Harriss, an analyst at Gabelli & Company, adding that any backlash the company faces from advertisers would be temporary.” Just 16 days after the Forbes column published, Fox fired O’Reilly. Apparently, in his smug surety that revenue is king, Mr. Harriss forgot that preventing a valuable brand from winding up in the dumpster is an important economic issue, too. Poignantly, we should remind ourselves that no matter what, this debate brings no solace to O’Reilley’s victims.

The US Equal Employment Opportunity Commission (EEOC) reported that since 2010, employers have paid $699 million to employees who have alleged they were harassed in the workplace. The report “cited an estimate of settlements and court judgments in 2012 that racked up more than $356 million in costs. These don’t include indirect costs such as lower productivity or higher turnover,” according to reporter Jena McGregor of The Washington Post. The EEOC report didn’t distinguish how much of those fines costs were attributed to top revenue producers, but I’m willing to wager based on this evidence, it was a sizable chunk.

Here’s what “I don’t care how you make your number as long as you make it” looks like when it reaches the headlines:

  • We don’t care if our employees are grievously harmed. (Wells Fargo)
  • We don’t care if innocent people are sickened using our products. (Peanut Corporation of America)
  • We don’t care if our exploding airbags make people die. (Takata)
  • We don’t care if preserving our profit margins endangers the lives of our customers. (GM)
  • We don’t care if our pharmaceutical price hikes make life-saving medications unaffordable (Turing)
  • We don’t care if our customers are harmed in the boarding process. (United Airlines)
  • We don’t care if we deceive our customers. (Trump University)

What’s the remedy?

  1. Care. “I don’t care how you make your number, as long as you make it” should never be a sales mantra.
  2. Stop rewarding executives, marketing professionals, and sales staff exclusively for revenue achievement. Instead, compensate on value delivered. That’s more difficult, but it’s safer.
  3. Stop obsessing over maximizing shareholder value. One reason that many strategic decisions ultimately cause harm. According to Professor Bobby Parmer of the University of Virginia’s Darden Graduate School of Business, “Shareholders don’t own the corporation. Public companies own themselves. Shareholders own a contract called a share. There is no legal reason to put shareholder interests above anyone else. It’s a choice, but not mandated. There is no legal duty to maximize profit. As long as executives aren’t violating the law, the courts won’t interfere with their decision making . . . Across hundreds of studies, there is no evidence that companies that maximize shareholder value are more profitable.”

Would these changes eliminate all harm that corporations create? That’s unlikely. But we need to stop our fawning rhetoric about revenue. We need to redirect our infatuation, and instead honor and reward outcomes that provide more equitable and sustainable outcomes. We will always have good revenue and bad revenue. It’s important that we stop turning a blind eye to the difference.

 

Announcing the 2016 Sales Ethics Hall of Shame

Thursday, 17 November 2016 22:10
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I’ve never bumped into a live Ouroboros, but if I did, the sight would stop me in my tracks. “OMG! I didn’t think an animal could do that!”

The mythical creature, often depicted as a snake or dragon, has a strange epicurean craving: itself. Some representations show the animal chowing down on its tail, and I assume the meal continues from there. Historians believe the Ouroboros first appeared around 1600 BC. For ancient people, the Ouroboros symbolized harmony in opposites and renewal. Life from death, sustenance from hunger. Hopeful themes that we needed at a time when there were no scientific explanations for geological disasters, famine, floods, and plagues.

But for me, the Ouroboros is a metaphor for self-destruction. A risk plaguing every Sales Ethics Hall of Shame inductee since I began the award in 2013. As with prior years, the stories you’re about to read reveal the calamitous outcomes that occur when corporate managers are so ravenous for cash, they engage in deceitful behaviors and practices. Like the Ouroboros, their companies are sometimes consumed in the process.

Just beyond the edges of honesty and truth lies an open cesspool of malfeasance. An enticing spot for executives who are unfettered by the deliberate shackles of corporate governance. First, get your shoes a tiny bit wet. Then, jump in, hands and feet, and splash around. Even though the environment is putrid, it’s a formula for driving short-term revenue results.

“Integrity in combination with brains technically and efficiently trained is the highest priced, best paid product in the world. It is a rare and most valuable combination,” James Samuel Knox wrote almost 100 years ago in his 1922 book, Salesmanship and Business Efficiency.

Right now, Jim Knox is twirling in his grave at around 3,000 RPM.

For induction into the Sales Ethics Hall of Shame, companies must satisfy three criteria:

1. The primary purpose of the enterprise cannot be to sell an illegal product or service, like crystal meth or human trafficking.

2. More than one employee must be involved in unethical activity. Scams involving a single, rogue employee do not qualify for consideration.

3. Any chicanery must be repeatable and scalable—in other words, embedded in the company’s business process.

Presenting this year’s Sales Ethics Hall of Shame inductees:

Anheuser India. The beer’s on ice. So is the whistleblower.

Anheuser-Busch InBev NV, the Indian unit of Anheuser used third party sales promoters to make illegal payments to Indian government officials. “Anheuser-Busch recorded improper payments by its sales promoters in India as legitimate expenses in its financial accounting, and then exacerbated the problem by including language in a separation agreement that chilled an employee from communicating with the SEC,” Kara Brockmeyer, chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit, said.

“AB InBev is the fourth company in the past 18 months penalized by the SEC for its restriction of would-be whistleblowers,” according to a September 16 Wall Street Journal article, SEC Says Anheuser-Busch InBev Indian Unit Made Improper Payments to Officials.

Anheuser won’t feel much pain. The scam cost the company about $6 million in penalties and fines. Last year, Anheuser’s global operations earned $9.22 billion in profit alone.

Premier Cru Wines. “May I suggest the 2015 Ponzi?”

Premier Cru had a reputation for offering great deals on “future arrivals” of the finest vintage wines, and many of the world’s wealthiest people bought into the idea. One connoisseur, Lawrence Wai-Man Hui, was so enthralled that he allegedly paid the company $981,000 for 1,591 bottles. Alas, he received fewer than 100. This year, Premier Cru’s founder, John Fox, faced up to 20 years in prison for wire fraud, but a plea deal reduced his sentence to just 6.5 years.

“The Oakland-based U.S. Attorney charges that Fox conducted a fraudulent scheme, offering wines he didn’t have and using customers’ money to secure wines he owed other clients, wrote Peter Hellman in an August 19, 2016 article in Wine Spectator, Owner of Premier Cru Will Plead Guilty. If this sounds like Madoff, it is – just with wine.

Prosecutors allege Premier Cru’s scheme was in full operation from about 2009 to 2015, when the company went belly up. “In its bankruptcy petition, the firm declared $70 million in debt, mostly unfulfilled orders paid for by almost 9,000 customers in 45 states and 18 countries. It had less than $7 million in assets, mainly wine in its warehouse space.”

The prosecution’s case against Fox ultimately focused on a single fraudulent wire transaction: an undated transfer of $102,271 from H.W.M.L. – the same initials as Lawrence Wai-Man Hui.

Vitamin Water. Faulty math.

“Vitamins + water = all you need.” In 2009, the Center for Science in the Public Interest (CSPI) found this equation hard to swallow, and filed a class-action lawsuit against Coca Cola, Vitamin Water’s parent. The lawsuit cited other sketchy Vitamin Water claims, including “this combination of zinc and fortifying vitamins can . . . keep you healthy as a horse,” and that the drink could reduce the risk of eye disease, promote healthy joints, induce feelings of relaxation, or otherwise bring about a “healthy state of physical and mental being.” One nutritional tidbit that Vitamin Water’s marketers thoughtfully omitted: each bottle contains about 32 grams of sugar, just 9 grams less than a can of Coke.

The lawsuit was settled in April, 2016. “We’re pleased to have a resolution that improves the labeling and marketing of Vitamin Water and will help consumers recognize that the drink contains eight teaspoons of sugar,” said CSPI litigation director Maia Kats. In addition to dropping the false advertising claims, Vitamin Water’s packaging will now include the words, “with sweeteners.”

Lumosity. “Science”: make it part of your sales toolkit!

“Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “But Lumosity simply did not have the science to back up its ads.”

Lumosity hawked their claims through TV, radio, and social media. The company used “TV and radio advertisements on networks including CNN, Fox News, the History Channel, National Public Radio, Pandora, Sirius XM, and Spotify. The defendants also marketed through emails, blog posts, social media, and on their website, Lumosity.com, and used Google AdWords to drive traffic to their website, purchasing hundreds of keywords related to memory, cognition, dementia, and Alzheimer’s disease,” according to the FTC complaint.

But wait, there’s more. Lumosity also exploited its customers by offering incentives for providing recommendations. “The [FTC] complaint also charges the defendants with failing to disclose that some consumer testimonials featured on the website had been solicited through contests that promised significant prizes, including a free iPad, a lifetime Lumosity subscription, and a round-trip to San Francisco.” In biz-dev, we have a euphemism for this: loyalty incentives.

SwanLuv. Dude! I have this awesome idea for a startup: a “casino for marriage.”

In December, 2015, startup SwanLuv offered aspiring newlyweds a unique opportunity: up to $10,000 toward a dream ceremony. How? Sign up and stay married. Thousands of people bit the bait. But the company’s business model depended on failed marriages to fund new ones, and Swanluv up to 25 years to claw back their initial investment – with interest! It was all in the fine print, not that SwanLuv’s glassy-eyed prospects took the time to read it, let alone consider the risks.

Then, all of SwanLuv’s intentions crumbled. On Monday, February 15, 2016, SwanLuv announced that “actually, no – it would not pay for a single ceremony. Instead, it would let friends and relatives pay for it, providing a crowdfunding platform similar to GoFundMe,” The Washington Post reported (A Website Offered to Pay for Weddings. Then It Came Time to Write the Check).

Some pundits, like Jeff Reid, Founding Director of the Georgetown University Entrepreneurship Initiative, saw SwanLuv’s failure as tactical problem. He said that SwanLuv could have launched with good intentions, and that it collapsed before it could deliver on the promises. “There’s a line you don’t want to cross,” he said, “in terms of over-promising.”

But Reid should know better. This wasn’t over-promising. SwanLuv was a horrible premise for a startup that unfortunately got launched.

Wounded Warrior Project (WWP). Tug on the heartstrings of others, and live large.

WWP, the largest US veteran’s charity, accepted $350 million in donations last year alone. But according to a CBS News report, only 54% of WWP’s funds provided direct benefits to veterans. The rest went to overhead. “Spending on conferences and meetings skyrocketed from $1.7 million in 2010—the year after [Steven] Nardizzi became CEO—to $26 million in 2014,” according to a Fortune report. Nardizzi and WWP COO Al Giordano were fired by WWP’s board of directors in March.

Former WWP employees spoke up about the charity’s extravagant spending that apparently began when Nardizzi became CEO. At a 2014 annual conference at a luxury resort in Colorado, one employee recounted that Nardizzi “rappelled down the side of a building. He’s come in on a Segway. He’s come in on a horse.”

“More than 40 former employees told CBS News that spending by the charity was out of control. Two former employees were so fearful of retaliation they asked us not to show their faces,” according to the CBS report. “It was extremely extravagant. Dinners and alcohol and just total excess,” one said. “I mean, it’s what the military calls fraud, waste and abuse.”

Youi. The company’s tagline: “We get you.” Ain’t that the truth!

Youi, a large insurance provider based in Australia, had a unique selling model. Imagine you wanted a quote for car insurance. So you visit Youi’s website, but find no option to receive this information online. Instead, you’re informed that you must talk directly with one of Youi’s sales reps. That’s when trouble starts.

This year, five internal whistleblowers stepped forward to expose Youi’s sales practices. They describe a “company culture [that] encouraged sales staff to defraud potential customers on a large scale by billing them for policies they never signed up for. The whistleblowers also say customers are having claims rejected due to a cult-like corporate culture that drives staff to falsify insurance documents to make sales. Youi’s customers are left paying for policies that don’t actually cover them,” according to an article, Does Youi Owe You? Insurer Accused of Billing without Consent. Youi’s tactic for direct rep involvement with prospects is key for perpetrating the scam, and it has propelled the company’s growth.

“On the phone, customers are often told they can’t be provided with a quote until credit card numbers are handed over. Once the credit card details are secured, some of Youi’s sales representatives put them through as a sale, no matter what the customer asked for.” According to one rep, “They would say they needed to get credit card details to [email] a quote. Then they would activate the policy without telling the client.” Youi’s revenue was $654 million in 2015, up from $71 million in 2011.

“Even if a customer tells the sales representative they don’t want the policy, their credit card details will often be billed. ‘If I wanted a sale, what I would say is OK, that’s your quote, just to hold the price, if you give me your credit card details we can put it in the system,’ says another whistleblower.” Said a third, ‘Quite often a client would ring within a cooling off period and want to cancel that policy – and it would not be done.’” You can read additional complaints by clicking here.

How do customers perceive this experience? One described it as “probably one of the worst I’ve ever had in my life.”

In August, Youi’s senior management announced their intention to plead guilty to misconduct charges filed by the New Zealand Commerce Commission. “We have made some mistakes and acknowledge that even one is simply one too many, said Danie Matthee, Youi’s CEO. “I would like to apologise to every affected customer personally and provide each one with the assurance of our commitment to achieving only the best customer outcomes.”

Trump University. No BS degrees here. Just degrees in BS.

Trump “University” (I am compelled to add quotes) began in 2005, and ceased operations in 2010. The company made this year’s Hall of Shame because litigation against the company is still pending and . . . because . . . well, by now, you know.

In Trumpian fashion, the ad claims were yuuuuggggge. “He’s the most celebrated entrepreneur on earth . . . And now he’s ready to share—with Americans like you—the Trump process for investing in today’s once-in-a-lifetime real estate market.” The ad shared that Trump had “hand-picked” his instructors, and ended with a backhanded compliment for prospective students: “I can turn anyone into a successful real estate investor, including you.”

But the New York State Attorney General’s (AG’s) office considered Trump U a sham, in part because the term University did not conform to state requirements. The AG filed a complaint against the Trump University. Among the allegations, “no specific Donald Trump techniques or strategies were taught during the seminars, Donald Trump ‘never’ reviewed any of Trump University’s curricula or programming materials, nor did he review any of the content for the free seminars or the three-day seminars.”

Instead, the attendees were served motivational Pablum. “The contents and material presented by Trump University were developed in large part by a third-party company that creates and develops materials for an array of motivational speakers and seminar and timeshare rental companies.” As for Trump’s physical presence at Trump University? The closest the attendees got to Trump was standing next to a life-sized photo of The Donald – for a Tweetable photo op, of course.

The Trump U Sales Playbook that would work well at your local used car lot. “If they can afford the gold elite don’t allow them to think about doing anything besides the gold elite,” one paragraph advised. Such high-pressure selling tactics were cited in the AG’s complaint:

“This bait and switch was laid out in the Trump University Playbook (“Playbook”), which provided step-to-step directions to Trump University instructors on what to tell students during the seminars. . . . Trump University instructors and staff were given detailed guidance as to how to build rapport and approach consumers one-on-one to encourage further purchases. Trump University representatives were explicitly instructed to push the highest priced Elite programs. Even when students hesitated to purchase the expensive programs, Trump representatives were provided stock responses to encourage purchases, including encouraging students to go into debt to pay for the Elite programs.”

Trump University exploited and abused its salespeople, too. According to a 2016 article in the New Yorker, Trump University: It’s Worse Than You Think, former Trump University salesperson Ronald Schackenberg recounted working with one couple which included a man who was on disability. He explained, “After the hard-sell sales presentation, they were considering purchasing the $35,000 Elite program. I did not feel it was an appropriate program for them because of their precarious financial condition.” Schnackenberg said that his bosses reprimanded him for advising the couple to select a lower-cost alternative. Another salesperson then “talked [the couple] into buying the $35,000 program after I refused to sell this program to them,” he testified. “I was disgusted by this conduct and decided to resign.”

The Trump Network / Ideal Health. 2,187 people X $20 = A Lot of Money.

“The Trump Network was a marketing company that sold vitamins and beauty products. Within a few years, the company fell on hard times, leaving some salespeople in tough financial straits,” The Washington Post reported on March 24 (Some say Trump Network let them down). Trump “became involved in an industry that consumer advocates had long criticized as promising financial independence to sales recruits but rarely delivering it.”

When Donald Trump licensed his name to Ideal Health, salespeople were thrilled. “Oh, my God, people cried when they heard it was him,” said Jenna Knudsen, who was a top producer at Ideal Health at the time. “They cried and looked at each other and said, ‘We’re going to be millionaires!’”

That didn’t work out, exactly. “In one complaint to the FTC, obtained through a Freedom of Information Act request by The Washington Post, one former sales representative recounted spending $1,887.75 on starter kits and other materials. ‘They kept tricking me into believing that I will make money just by selling more products and inviting more people, but the rate of return is so low,’ wrote the consumer who is not identified. ‘In other words, they are scamming and deceiving people, making them believe that if they ‘just hang in there’ they will make money.’”

Another rep, Sara Harper, said “A picture was painted that [Trump] was involved at a level of business decision-making that I don’t think he really was.” As sales representative Yvonne Zook explained, “With Trump coming in, they hyped it up to make us believe, oh, it’s not going to take us long now; we’re going to make money so much faster.”

Most of the controversy comes from how sales representatives were rewarded and recruited. Many were wowed by a de-facto pyramid scheme: “2,187 people X $20 = A Lot of Money.” Multi-level marketing companies are legal, but the FTC prohibits pyramid schemes.

“A Trump Network compensation plan shows that those in sales were promised big rewards for recruitment. A hypothetical example presented by the company showed that salespeople could build ‘levels’ of salespeople under them and would earn commissions of $100, $25 or $20 each time a new recruit bought a business starter kit for $497.”

“Extraordinary growth on Level 7.” – Sounds like a Trumped-up promise.

Mitsubishi. How many miles per gallon would you like this vehicle to get?

When car makers release mileage ratings for their vehicles, they are assumed to be honest. But in lieu of tests, Mitsubishi took shortcuts by using rudimentary desktop calculations. And when tests were conducted, Mitsubishi manipulated resistance ratings to produce better mileage results. In April, Mitsubishi admitted to falsifying data on four models, including mini-cars sold only in Japan, and others sold under Nissan Motor Company’s brand name. It’s not hard to understand why: higher mileage ratings help sell vehicles. And this year, Mitsubishi disclosed that it has been engaging in such deception for 25 years.

“Investors responded by pushing Mitsubishi shares down by 10%. The fuel test scandal has now erased half of the company’s market value, and its shares are sitting at a record low,” according to the website, KTLA.com. At the time the article was published, Mitsubishi stock sold for $3.40 per share, well below its December 1, 2015 high of $8.42. Since then, the stock has rebounded slightly to $4.46 (11/13).

The scam forced Mitsubishi to book a one-time loss of $479.5 million in 2016, more than triple the original estimate. Mitsubishi will use part of the funds to pay owners of the affected vehicles. Each mini-car owner will receive $960, while owners of other models will receive $290.

When news of the scandal broke, Mitsubishi Motors said its management created an “environment for fraud.” In May, Mitsubishi President Tetsuro Aikawa and Executive Vice President Ryugo Nakao announced they will leave their positions effective June 24. “The Japanese government called the situation ‘extremely serious,’ noting Mitsubishi violated the trust of its customers,” according to a UPI report, Mitsubishi Offices Raided after CEO After CEO Admits Fuel Economy Deception .

The incident marks the first time a Japanese carmaker has admitted misconduct in reporting fuel efficiency.

Mylan. Outcry? I don’t hear any outcry. Do you hear any outcry?

Adults and children at risk of severe allergic reactions carry EpiPen injectors, a Mylan product, in the event of emergencies. “After acquiring the injectors in late 2007, Mylan has raised the price 17 times by a total of 548%,” according to a report in The Wall Street Journal, CEO of EpiPen Maker Defends Price (September 22). That leap calls into question whether the company’s costs have escalated in tandem.

Mylan’s CEO, Heather Bresch, cited rising costs for sales, marketing, and disease-awareness efforts. Really? And stratospheric price hikes are only part of the shenanigans. The US Government has accused the company of overcharging the federal-state Medicaid program. “Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services, said Mylan wrongly classified the emergency epinepherine product as a generic when it should have been classified as a brand-name product . . . In doing so, Mylan paid a smaller rebate of 13% or about $163 million when it should have been paying a rebate of 23.1% or more,” according to a Wall Street Journal article, US Disputes EpiPen Fees. Seems the company wants things both ways: Mylan has received significant protection from the FDA, which has limited its competition.

Second, to ameliorate concerns from a congressional committee investigating the company’s pricing strategy, Mylan performed creative profit calculations. Bresch said Mylan’s profit was a paltry $100 for a two-pack of injectors, on a list price of $608. But in response to questions from The Wall Street Journal, “Mylan said that the profit figure presented by Ms. Bresch included taxes, [a fact that] the company didn’t clearly convey to congress. The company substantially reduced its calculation of EpiPen profits by applying the statutory US corporate tax rate of 37.5% – five times Mylan’s overall tax rate last year. Without the tax-related reduction, Mylan’s profits on the EpiPen two-pack were about 60% higher than the figure given to Congress . . .”

In September, representative Elijah Cummings of the House Oversight committee said, “We didn’t believe Mylan’s numbers last week during their CEO’s testimony, and we don’t believe them this week, either.” Last year, Mylan moved its headquarters to the Netherlands for tax purposes.

Theranos. First, we must become billionaires. Then we’ll worry about test accuracy and quality control.

“In Arizona, Theranos successfully lobbied for a law allowing laboratories to provide blood tests directly to patients without involvement by doctors, who are trained to question unusual results,” The Wall Street Journal reported in October (Flawed Theranos Tests Hurt Patients). That effort provides a clue about the company’s motivation: less oversight means greater profit. Arizona Governor Doug Ducey bought the company’s lobbying rational, and signed a law that granted the company its wish. He prematurely lauded the company’s CEO, Elizabeth Holmes, citing her “devotion to serving and empowering patients with new and improved technology.”

Clueless about the technology, Ducey passed a bad law, and jeopardized the health of thousands of Arizona residents. According to the Wall Street Journal article, Theranos “left a trail of agonized patients who had been drawn to Theranos by its claims of convenience, low cost and reliability . . . Theranos failed to maintain basic safeguards to ensure consistent results, according to regulators, independent lab directors and quality control experts.” Bypassing physicians in the information chain removed a crucial safeguard for patient care.

“A federal inspection report said a Theranos laboratory ran an important blood test on 81 patients in a six-month period despite erratic results from quality-control checks meant to ensure the test’s accuracy.” The test measured how long it takes blood to clot, an important indicator for patients who are at risk for having strokes or blood disorders. For patients taking blood thinners, such as warfarin, inaccurate measurements can have fatal consequences. “Too much warfarin can cause fatal bleeding, while too little can leave patients vulnerable to clots and strokes, according to medical experts.” Inspectors allege that Theranos released test results to patients even when the results violated the company’s own quality assurance requirements. Patients have filed at least ten lawsuits against Theranos in Arizona and California.

Holmes has admitted her company’s technology was a fraud, and she relied on secrecy to perpetuate the scheme. According to an article in Vanity Fair, “When employees questioned the accuracy of the company’s blood-testing technology, it was [COO Sunny] Balwani who would chastise them in e-mails (or in person), sternly telling staffers, “This must stop,” The Wall Street Journal reported. [Balwani resigned in May.] He ensured that scientists and engineers at Theranos did not talk to one another about their work. Applicants who came for job interviews were told that they wouldn’t know what the actual job was unless they were hired. Employees who spoke publicly about the company were met with legal threats. On LinkedIn, one former employee noted next to his job description, “I worked here, but every time I say what I did I get a letter from a lawyer. I probably will get a letter from a lawyer for writing this.” If people visited any of Theranos’s offices and refused to sign the company’s lengthy non-disclosure agreement, they were not allowed inside.

Tyler Shultz, grandson of former Secretary of State George Shultz, worked for Theranos and is currently embroiled in a legal battle with the company for exposing their internal testing discrepancies. “Fraud is not a trade secret,” Tyler Shultz said. “I refuse to allow bullying, intimidation and threat of legal action to take away my First Amendment right to speak out against wrongdoing.”

Update: In October, 2016, Theranos shuttered its blood-testing facilities and its management has decided to refocus its efforts on developing products for outside labs, hospitals, and doctors offices. Federal regulators have proposed banning CEO Holmes from being involved in any blood-testing company for at least two years.

Honest Company. Our supply chain will cleanse all those bad ingredients from our products.

Honest Company became a valuable marketer of household cleaning supplies and diapers partly by bragging about ingredients that were absent from its products – namely, SLS or sodium lauryl sulfate. SLS, in case you didn’t know, is common to popular products like Colgate toothpaste and Tide laundry detergent. But Honest Company told consumers that SLS irritates skin, and placed it at the top of its Honestly Free Of . . . label. The company achieved $1.7 billion in market valuation in less than four years.

In 2016, the Wall Street Journal commissioned two independent laboratories to verify Honest Company’s SLS-free claim. And . . . “our findings support that there is a significant amount of sodium lauryl sulfate in Honest’s detergent,” said Barbara Pavan, a chemist at Impact Analytical, one of the testing labs. The second lab corroborated those results.

Honest Company disagreed with the findings. “We do not make our products with sodium lauryl sulfate,” said Kevin Ewell, Honest Company’s manager of R&D. Confused?

Hang in there, because there’s more: “Honest said its manufacturing partners and suppliers have provided assurances that its products don’t contain SLS beyond trace amounts. Honest provided the Wall Street Journal with a document it said was from its detergent manufacturer, Earth Friendly Products LLC, that stated there was zero “SLS content” in the product. Earth Friendly, in turn, said the document came from its own chemical supplier, a company called Trichromatic West Inc, which it relied on to test and certify that there was no SLS,” according to the Wall Street Journal article, Laundry Detergent from Jessica Alba’s Honest Co. Contains Ingredient It Pledged to Avoid (March 10). And Trichromatic sources its products from India-based Galaxy Surfactants (emphasis, mine).

Still with me? Good . . . “Trichromatic told the Wall Street Journal the certificate wasn’t based on any testing and there was a ‘misunderstanding’ with the detergent maker. It said the ‘SLS content’ was listed as zero because it didn’t add any SLS to the material it provided to Earth Friendly and ‘there would be no reason to test specifically for SLS.’” (italics, mine)

Clear as mud. This finger pointing and semantic obfuscation isn’t helpful to customers. But what about the claims that SLS is dangerous in the first place? “In its pure form SLS can cause skin rashes, but many consumer products companies including P&G, Colgate-Palmolive Co. and Seventh Generation Inc. have vouched for its safety when used in their products.” That doesn’t matter. Jessica Alba, co-founder of Honest Company, describes SLS as a “toxin” in her 2013 book, The Honest Life.

The Wall Street Journal’s investigation caused Honest Company to revise its Honestly Free Guarantee. Before, the company described its products as “honestly free of” dozens of ingredients, including SLS. Then, it tweaked the semantics ever so slightly to say its products are “honestly made without” those ingredients. And statements that the ingredients the company eschews are “risky” or “toxic”? Scrubbed clean off the website.

Verizon. Free Supercookies! But we’re not telling whether we just gave one to you.

Every digital native knows that the non-edible kind of cookie tracks what people do online. We live with these cookies, and we’ve devised clever ways to defeat them. Mostly, we know cookies exist, even though we don’t pay specific attention to their presence. But supercookies are different “because they create unique identifiers that cannot be deleted by users,” according to a Wall Street Journal article, Verizon Fined in ‘Supercookie’ Investigation (March 8).

And sometimes, consumers don’t know their privacy has been invaded. The FCC investigated Verizon following complaints that supercookies were used to deliver ads from 1-800-FLOWERS.com to a rich, vulnerable target demographic: male Android smartphone users ages 25-44 with incomes higher than $75,000 prior to Valentine’s Day, 2014. Ka-ching!

Such demographic targeting occurs all the time. The ethical issue is that Verizon used supercookies without disclosure and consumer consent. “Consumers care about privacy and should have a say in how their personal information is used, especially when it comes to who knows what they’re doing online,” said FCC Enforcement Bureau Chief Travis LeBlanc. Verizon will pay $1.35 million to settle the case.

Among this year’s Sales Ethics Hall of Shame inductees, Premier Cru, SwanLuv, Trump University, and Trump Network were all consumed a la the Ouroboros. The others have survived, but I have no doubt they lost some vital pieces and parts. In particular, customer trust.

President-elect Trump, who is directly connected to two companies in 2016’s Hall of Shame, has pledged to cut business regulation. Que sera, sera. I expect a very healthy crop of candidates for 2017’s Sales Ethics Hall of Shame.

Author’s note: some readers might wonder why Wells Fargo didn’t make this year’s list. The company was inducted into the 2015 Hall of Shame.

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