CEO's Story: Integrity Not For Sale

Stephen Baum

One of my close friends was the newly hired CEO of a F200 company – a distributor of industrial products. Customers were king and the unwritten rules of the industry at that time were to say “yes” to customer requests for special handling, inspection, or packaging, even if it degraded product quality or violate the manufacturer’s warranty terms. In actuality, the industry practice was to play “rope a dope,” paying lip service to the harmful customer requirements, but ignoring them on a daily basis.

Toward the end of his first year, my friend was faced with a major contract renewal with special inspection requirements so severe and wrong-headed that he would have to play rope-a-dope in a major way. The contract was worth high single digit percentage of his sales. Even after being told of the quality and warranty risks of the special requirements the customer’s purchasing executive insisted the terms remain in the formal contract, but gave the VP of Sales a “wink-wink” to indicate he understood what would really be happening day-to-day. The VP of Sales told the CEO that the company would lose the business if he refused to sign the contract as written and urged that it be signed, as it always had been. But the CEO believed he would never be able to promote a culture of integrity in his far-flung company if he signed a contract everyone knew they couldn’t or wouldn’t adhere to.

He refused. He lost the business. The division in charge of that customer lost almost 25% of its sales. However, it was a signal act to his entire company and swept like wildfire on the grapevine.

That’s not the end of the story. A year later, he met with the CEO of the customer company and laid out the facts. Initially in denial, that CEO checked out the story, found it to be true, reprimanded the purchasing executive in his own company, changed the requirements and ordered a renewal of business between the two companies. A win? Not exactly. The humiliated purchasing executive made life very difficult for my friend’s company, practicing “malicious compliance” by putting them back on as a supplier but only for very small quantities of the most difficult and unattractive orders, until he finally retired four years later.

I admire CEOs who do the right thing when the stakes are high, who consider what the deed teaches all the leaders (established and aspiring) in their organizations and take a long term view. I am aware of more than a few such instances. If you know of one, please send in the story and we will publish it.

I wish there were so many examples that those of more faint heart would be inspired. There are far too many in the press who put profit above principle.

That’s just my view. What’s your

Stephen Baum has been an adviser and coach to CEOs for more than twenty years. Copyright 2012, author retains ownership. All Rights Reserved.

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