Common Sense Ethics Needed

July 2008

Ethics and common sense are essential components of long term business success.  You can do all kinds of things to produce big short term gains but in the long term bad business practices will come home to roost. It is that simple.  Short cuts may look enticing but solid long term decisions yield long term success.

You only have to look at the current credit crisis to see how short term decisions wreak havoc on our economy.  For years it has been easy for folks with marginal jobs to buy expensive houses with no money down paying artificially low interest rates and often not paying off any of the principal.  Cars can also be purchased with no money down and college students with no source of income regularly get credit cards.
 
We all knew or, certainly suspected, where all this would wind up.  The current soap opera of credit crises plays out for all of us to see as we read about big financial institutions reporting huge credit losses in numbers so large that most of us can barely comprehend.  Foreclosures are guaranteed.  Ethics and common sense seem to have disappeared.

Providing credit to those who obviously cannot pay or will have great difficulty in repayment is simply reprehensible. In many cases providing excess credit does irreparable harm to those affected.  I can’t imagine owning a house or a car and realizing that there is simply no way to handle my financial obligation.  We deserve better leadership and stronger ethics in the banking community.

The CEOs of many of the big banking institutions who have financed this mess have lost their jobs and most have left with sizeable, some would say outrageous, compensation packages. The sad fact is that those CEOs would have been way better off financially had they stuck to sound business practices in the first place.  Another five years in the CEO role and their compensation packages would dwarf what they recently received, and even more important to them personally, they would be proud of their accomplishments.

A number of the big banks have had the foresight and just plain “common sense” to avoid the losses.  The leaders of these financial institutions took the high road. They looked into the future and opted for the long term while sacrificing potential short term gains.  

America is the world leader in business and, as such, we expect high ethical standards and a liberal application of common sense from our leaders.   “Hats Off” to the bankers who took the “high road.”


Joe Scarlett is the retired chairman of Tractor Supply Company and the founder of the Scarlett Leadership Institute. He can be reached at
joe@scarlettleadership.com.

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