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Ethics, Economics, and Efficiency

Why should you care if government, corporations, or your neighbors are dishonest or corrupt?  It seems that we, as a society, set the bar awfully low these days in terms of our expectations for our elected officials, business ethics, and corporate governance.  Sadly, we are no longer surprised when we hear stories of theft or corruption.  But we should be outraged and that outrage should cause us to demand change.  Corruption leads to economic inefficiencies which, in turn, lower our standard of living.
Corporate Corruption
Enron is an extreme example of what happens when senior corporate executives toss ethics out the window.  The simplest way to look at the Enron debacle is that Enron executives told the shareholders and employees that the company was earning more money than it was.  Then they rewarded themselves by taking disproportionately large salaries, kickbacks, and bonuses.  Some of the executives also created dummy companies that Enron Corporation paid for services that these fake companies did not provide.  Enron is an extreme example of corporate greed and theft.  But what about mid-level managers who overstate their expenses or charge personal expenses to the company?  Or company executives with responsibility for purchasing who spend company funds purchasing goods or services from companies in which they own an interest? Should we care?  The answer is "yes" because all the little thefts add up to big ones.  If we tolerate the little conflicts of interest, minor thefts, or misappropriation of funds it becomes easier to tolerate the big ones. We should have learned from Enron about the tragedies that can happen when there is little corporate governance and when we become tolerant of lapses in corporate ethics.
Government Corruption
I lived in Chicago for nearly 20 years.  Chicago is a fantastic city but it is known for its history of government corruption.  A few years ago, there was a scandal called "The Hired Truck" scandal.  The Hired Truck Scandal broke when a reporter noticed that most of the city's snow plows were sitting idle during a snowstorm and the snow plows that were actually plowing the streets were rented from a company whose CEO had high ranking connections at City Hall.  In effect, elected officials were stealing money from the taxpayers to line the pockets of the CEO of one particular company.  While sometimes government corruption isn't as egregious as the Hired Truck Scandal, government corruption amounts to an increase in our taxes.  In the case of Chicagoans, a portion of their taxes pay for city snow plows.  But if the city doesn't run those plows and, instead, rents private snow plows, the taxpayers are being charged twice for a service they should only pay for once.  Chicago has become an extremely expensive city in which to live. Property taxes, in particular, are so high that many families have to move to distant suburbs in order to be able to afford decent housing and schools.  No single scandal is to blame for high taxes but the societal resignation to government corruption, payoffs, and kickbacks are strong contributors to the rising cost of living in Chicago.
Corruption is economically inefficient.  When we as a society become so jaded that we don't really demand honesty from ourselves, our co-workers, senior executives, or elected officials we are effectively lowering our standard of living.  Don't put up with dishonesty, theft, or ethical lapses. You may live to regret it.
Liz Handlin, Ultimate Resumes LLC, © Copyright 2006
Liz Handlin
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