Fannie, Freddie and Deming

Given the seemingly endless stream of news about accounting scandals, policy abuse and illegal activities at the top levels of organizations, the term “corporate ethics” has become almost an oxymoron.

Lately, these sordid tales aren’t just about publicly traded companies; the abuse has spread to quasi-governmental agencies such as mortgage giants Fannie Mae and Freddie Mac and private organizations such as Yale Uni-
versity’s School of Management. According to a Jan. 10 Wall Street Journal article, the head of the school’s International Institute for Corporate Govern-
ance—yes, the irony is sad—is leaving over major expense account abuse.

For publicly traded companies, the Sarbanes-Oxley Act of 2002 (SOX) is intended to prevent such abuse by requiring stricter controls on how financial data are managed and reported. (Look to the March issue of QP for an article by William A. Stimson on how ISO 9001 can provide a framework for companies to achieve compliance to SOX.)

You could surmise publicly traded corporations have almost a built-in risk for problems; the constant pressure to hit short-term goals and please shareholders and investors too often tempts executives to “cook the books.” But scandal and unethical behavior can arise in any organization—public, private or nonprofit.

On p. 67 of this issue, Stimson shares another proposal for ensuring proper behavior no matter what the type of organization: a corporate code of ethics based on some of W. Edwards Deming’s 14 points. Stimson argues that because quality has always been about providing good value to customers and has been largely independent of market forces, it seems a natural field for spelling out right vs. wrong in a business environment.

For this purpose, he finds shortcomings in most quality methodologies, such as ISO 9000 and Six Sigma. But from Deming’s work, Stimson crafts a proposed code (see p. 72) that provides much food for thought.

For example, while Stimson aims his proposal at for-profit enterprises, his code shares many themes with ASQ’s code of ethics for members (see www.asq.org/join/about/ethics.html, plus www.asq.org/members/leadership/pnp/g6.pdf for policies and procedures). Stimson’s code addresses customers in almost every item, as does ASQ’s—though the Society uses terms such as “the profession,” “the public,” “employers” and “clients.” Regardless of terminology, the focus is on the people being served by the organization and, ultimately, on society as a whole.

Perhaps you can use Stimson’s ideas to create or improve a code of ethics for your organization, making your role even more valuable and relevant. At the very least, you can know and abide by ASQ’s code. If you’re a member, you automatically agreed to do so just by joining.

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