Ethics: Cultural is a Powerful Factor

When it comes to ethics, former Arthur Andersen consultant Barbara Toffler says culture is more powerful than individuals

Harvard Business School professor and business ethicist Barbara Toffler became a partner at Arthur Andersen in 1995 when the auditing and consulting firm’s profits were rising and its ethics were heading the other way. Toffler was brought in to build an ethics consulting practice and soon found herself acquiescing to her bosses’ edicts to inflate bills and sell clients work they didn’t need.

Toffler left Andersen in 1999, well before the Enron and Global Crossing scandals destroyed the company. Her book, Final Accounting: Ambition, Greed, and the Fall of Arthur Andersen (Random House/Broadway Books, 2003), describes the process of ethical erosion in grim detail.

CIO Executive Editor Christopher Koch asked Toffler to explain Andersen’s actions—and her own—and to offer CIOs advice for dealing with their own ethical conundrums.

CIO: In your book you say that Andersen had a history of good ethics, and then something went wrong. What was it?

Barbara Toffler: At one time auditing was a good, solid profession that would provide a good life but wouldn’t make you rich. But then the partners’ desire for personal wealth led to the mantra of “keep the client happy,” which meant not upsetting and not challenging them. In the meantime, they were building up these consulting services. They thought the way to sell the services was to do what the client wanted [on the audit side].

CIOs have a big dilemma. Lack of funding and time pressures create the temptation to cut corners. Do you have advice for them?

I don’t have any easy advice. The problem at Andersen was that there was punishment for “eating time,” putting work into a project beyond the allotted budget. It seems that this should just be common sense: Everything should not be driven by that last penny you can squeeze.

Is the culture more unethical than the individuals?

Culture shapes behavior. There are plenty of perfectly decent people who go astray because they’re in a culture that creates an environment in which they can’t get their jobs done unless they engage in unethical activities.

Andersen became powerful by developing a consistent process for auditing and consulting. Many companies are trying to standardize processes, to come up with one way of doing things. Are they heading for an ethical trap?

I was invited to do a seminar with some technology people. I asked, If you install technology in a standardized fashion, are you responsible for outcomes that might be less than positive? And they said no. I quoted a line from a song by Tom Lehrer about Wernher von Braun. It said, “Once the rockets go up who cares where they come down? That’s not my department.” I asked, Are you essentially taking the same position? And everyone got very upset. But I thought they were saying, We develop these models and then it’s out of our hands.

Ethics right now is a hot topic. Is this focus sustainable?

I don’t think so. It’s in the headlines, but people I talk to say not all that much is being done.

When you were at Arthur Andersen, you knowingly sold clients work they didn’t need and overcharged them. Isn’t that hypocritical?

Sure. And let me tell you, I wasn’t the only one who was doing it. But yes, it’s the height of hypocrisy. It was a miserable time for me. I know I didn’t do anything that was illegal. I rationalized it, as people do. But I was getting so stressed at not being able to meet the targets that were set for me. And this is what happens to so many people—you just slip into doing things that don’t feel very good.