Bottom Line Ethics

It has been a painful week for me personally. Part of it was my own fault. I was trimming my lawn, when I managed to do something I had never done before—thoroughly weed whack my ankle. I am pretty sure that the scar left on my ankle is a gang symbol, though I’m not sure which one. I think it might be the Smurfs.

But the more painful event in my week was inflicted on me by the Texas State Board of Public Accountancy. June is my month to report continuing education and renew my license, and I generally benefit from the conferences and sessions that help me maintain my certification. But every other year CPAs in Texas are required to report a four-hour session from a small group of select courses approved by the Board. You might be surprised to know that what caused me so much pain was an ethics course.

There are a number of reasons why that ought not to be true. One relatively obvious one is that I happen to love the topic and teach it for a living. I care deeply about the ethical reasoning and behavior of CPAs, particularly of my students. I am also invigorated by my students when I am with them in the accounting ethics classroom. I cannot tell you how much I learned from my 138 students this past spring as they related to one another in ethics accountability groups, and put together some stunning and meaningful presentations. These students also each developed a set of principles to guide their professional lives. I was challenged and moved by the growth in students’ perspectives during the course.

Another major reason the Board-approved ethics course should not have been a problem for me is that I have a high tolerance for boredom. I am, after all, a CPA, and have been for almost 27 years. I am also a professor who has sat through innumerable commencement speeches and faculty meetings. I may have to pull the hair on my legs to stay awake, but I can usually manage to get through most sessions that normal people would find intolerable.

I had a couple of factors working against me. I had waited till the last minute and had no choice but to sit through the whole course at one time. In addition, I had decided to go the low cost route in selecting my course, insuring an online delivery method that was as interesting as reading the phone book.

You might think I was bored because I already know all this stuff. But the stuff I know was actually the interesting part of the course. The course also covered, but essentially never tested over, innumerable philosophers’ perspectives, a few of which were actually relevant to decisions we make in the accounting profession. And there were endless pages of minutiae to protect the public from such dangers as two CPAs using the same staff and incorrectly representing that they were a partnership. Wow! There oughta be a law! That will bring down the republic!

But it ought not to be this way. This course is a perfect example of why people look at me with a puzzled expression when I talk about how much I enjoy teaching ethics. The nice ones ask, “Can you teach ethics?” Of course, they mean, “Can you teach it up? Can you help people make better decisions?” Everybody knows that you can teach it down; my profession has plenty of examples.

In fact, perhaps the most painful experience of my week was an e-mail from a former student who related having to make an ethical decision at her CPA firm in a ten-minute window. She chose to tell the truth, and did what was right, and it got her fired. It made my blood boil.

She told me that she remembered what I had said in class about having to make hard decisions. And she was writing to say thanks, to say that she was content and her conscience was clear, when she could easily have been writing to tell me I was wrong, and how could she have ever listened to me?

I’m sure there are better ethics continuing education courses that I can take, and maybe two years from now I will open my pockets wider and hope for the best. But I know the best hope for changing the profession is not in this futile biennial requirement.

It is in that classroom I will return to, where hearts and lives are shaped and changed. I have the chance to fan the flame of moral courage in a remarkable group of students from a variety of backgrounds. The accounting profession may not like what they get sometimes. But as long as I have breath, and as long as I prepare Aggies, people like my student are what I am going to send them.

I was going to write a shallow column this week about what a low life Seattle Seahawks head coach Pete Carroll is for jumping from USC and leaving them on probation and banned from postseason play. And then reality interrupted—I lost a dear friend to a brain aneurysm. And suddenly college football, and its unlimited number of self-centered numskulls, just did not matter all that much any more.

Ann was a person who lit up a room with her energy and raised, along with her husband Rick, three of the kindest children you could ever hope to meet. By an act of God’s grace, one of those children married my precious daughter, and they have given me the gift of my beautiful granddaughter, Avery.

Ann invested her life in people. She loved kids with all that was in her. Besides her own kids, she shaped the lives of countless children in her elementary school classrooms. She would speak of those children with exasperated affection, of her deep desire to help those who most needed it, of how hard the task had sometimes become. And then she would go and have a wonderful year, one in which she made a difference. Many, many young people bear her mark.

She had recently retired from teaching and, along with Rick, she was serving kids at a Lutheran camp in Colorado this summer when she was stricken. It was no surprise that she was serving because, in fact, that is who Ann was. The vacations of retirement could wait for another day. There was work to be done, and people to be changed, in a Colorado setting that had known decades of life-changing summers.

And her pattern of life has fallen to her children. Her oldest is my son-in-law, and he models for me how a man ought to treat his wife, even though I’m the one who is supposed to be setting the pace. He learned a lot from watching his Dad, and he has built on those lessons to become a husband and father of integrity and faith.

Her youngest daughter is an Aggie, bleeds maroon and Fish Camp and all the traditions. The middle son is a Tech grad, creative and artistic, but with an obvious undercurrent of entrepreneurism like his father. I mostly admire these three from afar, evidence of the fruit of two well-invested lives joined in a lifetime commitment.

But that lifetime was too brief, and for no reason that I can explain. I cling to an eternal hope, but it does not always bring clarity, at least now. Nor should it, perhaps. Clarity will be for another time.

Today we are standing with Rick and his children in the midst of their pain. I have lost a Mom and a brother of my own, but I do not have the right words to comfort them. But I can see the circle of those they love closing around them, surrounding them, keeping them from despair. They will be—we will be—with them for as long as it takes, even if it takes forever.

Few of the people I write about in these columns will have as sweet, and as simple, and as momentous an impact as Ann had in her too few years. She energized, she ennobled, she blessed, she loved the people she touched, including me.

And I thought I ought to tell you.

I am not the only one to notice that we seem as a nation, and as a world, to be reeling from one catastrophe to another. I have seldom seen a period of pessimism like the one that envelops us right now. The last time I can remember this type of feeling in the U. S. was in the late 1970’s and early 1980’s. I am generally an optimist about our nation, because we have always been a country whose people learned from its mistakes and made better decisions when encountering similar circumstances. We have made gradual progress over the last 234 years with respect to issues of racial equality, and caring for the poor, and providing justice. It comes in fits and starts, but it comes. We have had a history of growing wiser, and learning from our mistakes.

But I cannot remember a time when we have been more shortsighted. People like to blame the media because of the short news cycle and the immediacy that comes with internet coverage of every minor glitch, along with the need to endlessly feed news consumers. Long-term thinking is boring. But, as Tufts University’s Robert Sternberg would say, wisdom requires both dialogical and dialectical thinking. Dialogical thinking involves interacting with others and actively considering their perspectives. Dialectical thinking requires a focus on the long-term, rather than just considering short-term outcomes. These two seem to go hand-in-hand; rarely do you see one without the other.

I see evidences of these failures in thinking in all the major issues in the headlines, and perhaps worse on the horizon. We are not just drilling in depths we have never drilled before. One of the reasons that energy prices remain stable is the vast expansion of natural gas reserves, mostly in shale formations. Exploration and production companies are producing this natural gas in close proximity to homes and schools in bedroom communities around Dallas/Ft. Worth. Many homeowners have suddenly become royalty owners. But there have also been interesting impacts on neighborhoods, and no one really knows what the seismic effects will be long-term. They have stopped drilling in Flower Mound because of concerns. Earthquakes anyone?

Our country, like others, is taking on precipitous debt, playing fast and loose with our credit standing. There has been no serious discussion about whether it is worthwhile as a strategy. There is a dearth of long-term thinking, and people mostly shout past each other. The borrowers are in the majority, so we dig the national debt to depths no one could have imagined twenty years ago. Those financial tremors you feel in Greece and Spain are real.

But one good thing that failure brings is the opportunity to change, to acknowledge our failures in thinking. Sternberg says that the five fallacies of thinking are egocentrism, omnipotence, omniscience, invulnerability, and unrealistic optimism. Disasters that are in your face every day tend to mute these fallacies. Not too many people at BP believe they are all powerful to stop disasters, or know everything about how to make a well a mile deep in the Gulf stop spewing out oil, or that they are invulnerable to the anger and financial consequences that will wash over them as surely as the crude washes up on the shores of the Gulf Coast. An unrealistic optimist now hopes the damage is contained to this summer, and that ecosystems largely recover in a decade or two.

We are creative and intelligent. We know how to drill deep into formations we could never reach, to produce gas in places we never thought we would, to temporarily wash away crises with floods of money. But we are not wise. We think about now, and we refuse to seriously engage one another about the future. We are neither dialogical nor dialectical.

We have a chance, if we grab it, to throw aside the fallacies of thinking and admit that there are real risks that accompany what we are trying to do, and that some of them are not worth taking. It will take humility and teachability. But the best time for something like that to happen is when we get it really wrong.

Now is that time.

One of the major problems with capitalism is the outsourcing of externalities, expected or unexpected events that have broader effects beyond the company causing them. Transocean’s Deepwater Horizon problem, with the thousands of gallons of oil pouring into the Gulf, is a classic example of an externality, and it provides an interesting example of how regulation can actually increase the costs to the populace when a disaster of this nature takes place.

People are understandably infuriated at the outcomes from the well explosion. They are reacting by fleeing companies connected to the event. BP alone has lost $17 billion of its market capitalization, according to The Wall Street Journal. BP representatives have made regular comments about accepting responsibility for legitimate claims. The well’s operator, Transocean, has sought protection from unlimited liability under an 1851 law, the Shipowner’s Limitation of Liability Act. According to the Associated Press, this would limit the company’s liability to $27 million. This seems wrong on its face to most people, and it has enraged Senator Chuck Schumer, who wants the law repealed. Admittedly, Senator Schumer has been known to get apoplectic over a lot less; he seems to have a propensity for getting excited. But this is an easy opportunity for him to capitalize on public anger over the spill.

What he does not mention is that this 1851 regulation had its own externalities, its own unforeseen consequences. If Transocean’s liability is, in fact, limited, the Shipowner’s Act is explicitly the cause of Transocean’s ability to outsource the externality to American taxpayers (or other unfortunate parties involved who may be held to greater levels of liability under joint and several liability laws). I am doubting that Congress, almost a decade before the French developed the first ironclad battleship, had floating oil rigs in mind. Who can blame them? But Congress in recent years has shown a penchant for demonstrating far less foresight, and they are on a roll.

Sending attorney general Eric Holder to Louisiana to threaten criminal prosecution is not the kind of action that leads to good legislation either. There are significant ethical issues involved in this problem, as there are in all externality situations. The environment needs to be protected in a time when unemployment is high. There needs to be strategic thinking about how to address justice concerns and allocation of liability, as well as addressing how to minimize the probability of these “black swan” unexpected events happening.

Shutting down new drilling in the Gulf for six months, as ordered by the president, will do this to some extent. It will also insure that rigs are sent elsewhere in the world, and with them American jobs. These issues are joined at the hip, and when anger causes sudden swerves in a deliberate problem-solving track, you rarely get better ethical decisions. What you get is short-term solutions, and the externalities that go with them.

But I am well aware that as long as the public is watching the BP camera showing oil pouring into the Gulf, deliberate decision making is unlikely. We are witnessing a risk management failure at BP of enormous proportions. I just returned from a Gulf coast vacation, and I wonder if I will be able to go on another one in the near future. I shake my head thinking of the damage to wildlife. What has happened is devastating.

I do not expect to be listened to on this issue, because populist anger is all the rage (pun intended). But we must carefully discern what must be done to minimize harm from what seems just to do in the moment to eliminate all risk and get revenge on those we blame. If not, we should not be surprised at the externalities we outsource to future generations.