Archives for posts with tag: Ethics

Crain’s Chicago Business wrote several months ago about how big companies are putting increased pressure on their much smaller trade creditors to extend their payment terms. A small Chicago stamping plant with $10 million in annual revenue, makes parts for Honeywell whose revenues are $39 billion and whose free cash flow is about $5 billion. Until recently Honeywell paid this firm slowly, by most manufacturing measures, at 60 days. Now they have asked for 120 days. This makes the smaller firm their Banker.

Chicago based Boeing, whose sales are even larger at $100 billion last year, recently asked suppliers for 120 day terms as well, according to the same article.

Both Boeing and Honeywell have an “A” credit rating, the best in corporate America.   This means they can borrow money pretty much whenever and from whoever they want and, in today’s financial world, very cheaply. So why do these giant companies penalize  very small suppliers by not paying their bills in a timely fashion? Because they can. Today there are plenty of small suppliers willing to accept these credit terms just for the chance to sell to a giant customer. At least for awhile or until it crushes the small firm’s own credit situation.

Is this a new phenomenon you might ask? Of course not. This has gone on forever in business. What is new is who is doing this and why.

Years ago, my wife Tricia sold office furniture to the then giant telecommunication firm MCI which became Worldcom which became Verizon. Standard terms from small furniture distribution firms were 30 days. One day MCI just decided to take 60 days. As a commissioned sales person, Tricia was charged a financing charge by her own firm which reduced her, already small, commission. At the time, MCI was just starting to have  financial problems, a falling stock price and eventually declared bankruptcy.  So, in the past, large firms often leaned on trade creditors to try to buy time to restructure their business.

My old firm USG Corporation went through its own financial restructuring due to excess debt taken on to avoid a hostile takeover. One of the many things we did to survive was to maximize our days outstanding with our trade creditors. But we did this after talking to the creditors and sometimes making special accommodations with them.

But what is going on today is totally different. Honeywell, Boeing and I am sure a host of other very large and very financially solid firms are unilaterally and without much communication or rationale just stretching out their credit terms to the severe detriment of a lot of small and struggling suppliers. A former USG Corporation financial colleague of mine was concerned that by not paying our bills according to their standard terms we were being “immoral and unethical”.  I never agreed with that characterization at the time or in our circumstances.  But what is going on today I do consider bad business practices that border on unethical.

Business like life relies on relationships. This credit practice is very bad for relationships and karma. And it will likely lead to more failures of small firms which are so critical for our economy.

I Won’t Cheat!  is the official motto of the Little League, whose annual World Series is on TV each August, from Williamsport, PA. The words are on a patch on each uniform. If you’ve ever watched the Little League World Series, you might agree that it is far superior to watching the multi millionaire divas who play most of our professional sports. This past year, Uganda became the first African team to qualify even though most of the boys had only played baseball for two years- usually without shoes until they had to wear them in the tournament!  With no family able to afford to come with them, the Uganda team became the favorite of all the other players and fans. That’s sportsmanship. You can also sense how much all these kids just love playing the game. True they are only 10-12 (or 13 before May 1), but I really believe most of the Little Leaguers would never cheat.

Yet every few years, there is a major scandal at the LLWS, as its called, about the age of a player or something. Almost all of these scandals can be traced to the kid’s parents or coaches. The kids just love to play.

So when and how do we go from non cheating kids to adults with issues?

Especially adults in business (including sports) with issues on morality and ethics?

When I left the  corporate world for the second time, I had an interesting conversation with a very astute, retired guy in Florida. Upon asking what I had done, I replied “I was a Chief Financial Officer for two big public firms” then I playfully added, “and I am proud to say I was never investigated, charged or convicted of any crimes by the Securities Exchange Commission or any state Attorney Generals!”

The older, astute, long time business guy, then smiled and not as jokingly said, “ Then you must have gotten out in time.”  What a sad commentary. But ethics and morality should matter in business, sports and life and not just in the Little League.

So what about Lance. His “interview” with Oprah speaks for itself. He stated he did not feel he was cheating at the time. Yet he also sued or denounced many sources and fellow competitors who dared to suggest he had cheated.

In my forthcoming book, The Business Zoo, we look at ethics, morality and fraud using both actual stories from my career and today’s headlines. Then we summarize some lessons we can learn from them.

It’s never too late in business, sports or life to learn something!