Threading the Ethics Line

Early in my career, I happened to discuss business ethics with the CEO of the company where I worked after a meeting got over. In that meeting we had talked about the CEO of one of our competitors who was being jailed for his company's unethical behavior- offering bribes. Our CEO was one of the founders of the company, and was highly revered by everyone in the industry for his contributions and ethics. His message to me was that we all know the line that separates right from wrong. His advice to me was not to come close to the line or try to push the envelope. Stay far away from it, was his advice.

I have come across some stories recently that illustrate the importance of this principle. Companies and people who run them are still doing 'funny' things to try to evade legal obligations, or are trying to push the envelope.

Story # 1: Amazon.com
Under current law, online retailers like Amazon need not collect state sales tax in states where they don't have any 'physical' presence. But they are required to do so in states where they have physical facilities. These facilities could include stores, warehouses, and distribution centers.
Amazon has not collected sales tax in states like Pennsylvania and Texas even though it has warehouses or distribution centers in those states. These facilities are technically not owned by Amazon, but by wholly-owned subsidiaries of Amazon. The company is arguing that 'it' does not have physical presence in those states.

More details here.

Story # 2: Pharmaceutical Industry Lobbying
The Center for Public Integrity published an ulcer-inducing article titled "A Record Year for the Pharmaceutical Lobby in '07 - Washington's largest lobby racks up another banner year on Capitol Hill" on June 24, 2008. In that report it states that "Washington's largest lobby, the pharmaceutical industry, racked up another banner year on Capitol Hill in 2007, backed by a record $168 million lobbying effort..... Among the industry's successes: getting two controversial laws extended and thwarting congressional efforts to restrict media ads for prescription drugs."
Apparently "among the industry's top achievements:

• blocking the importation of inexpensive drugs from other countries;
• protecting pharmaceutical patents both within the United States and abroad; and
• ensuring greater market access for pharmaceutical companies in international free trade agreements. "

But the best pill of all is the "Best Pharmaceuticals for Children Act" that was signed into law in 2007. This law grants additional patent protection for six months to drug makers to encourage testing appropriate medicines in children. The Center reports that "A joint investigation by the Center and HDNet's Dan Rather Reports last year found that half of the top 20 blockbuster drugs in 2006 were given six month extensions under this law. Included were drugs not usually associated with children's health, among them two top-selling anti-cholesterol drugs, Pfizer's Lipitor and Merck's Zocor, and Sanofi-Aventis's popular sleep inducer Ambien."

Story # 3: Countrywide CEO Mazullo: What's a friend for? A friend in need is a friend in'deed.'

The WSJ, in an article titled "Countrywide CEO Helped Many Get Loans" reports that Mr. Angelo Mozilo, when he was the chief executive of Countrywide Financial Corp., helped his "Friends" get mortgage loans even when some of them would have been disqualified under standard company policies. These "friends" include the daughter of a casino manager and her fiancé, Indiana Pacers center Rik Smits, San Francisco 49ers offensive lineman Harris Barton, two senators and two former CEOs of mortgage buyer Fannie Mae. Hey, it is "someone else's money, isn't it?"