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The Cutting Edge: Focus on Technology | Digital Nation

Some 'Dot-Coms' Know Value of Stock but Put No Stock in Values

May 22, 2000|GARY CHAPMAN

Are we closing in on another era of business scandals and suspect ethics? Will the "new economy" wind up repeating the behavior of the notorious "Me Decade," the 1980s?

Fortune magazine, in a March cover story on business ethics in the new economy, said, "Questionable behavior is Silicon Valley's next big thing."

The money to be made in the new economy is not only creating great temptations, it is also creating some new ways of doing business that may skirt the edges of ethical behavior. The pace and novelty of the digital economy may prevent many businesspeople from even seeing these ethical issues.

"Let's face it: Some people think about ethics and other people think about money," says James Werbel, co-director of the Murray Bacon Center for Ethics and Business at Iowa State University. Werbel says that business ethics is a strong feature of nearly every business school curriculum, but that "training in ethics has minimal impact on people. What has a bigger impact on people is the leadership in organizations."

John Boatwright, executive director of the Society for Business Ethics and a professor of management at Loyola University Chicago, agrees. "The evidence is clear: It starts at the top. No course can overcome the culture. The key to business ethics is not getting to individuals but to the industry."

So what about the leadership in the new economy?

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A scathing assessment has come from an unexpected source. In an article last month titled "My View: Hollow.com," the chief executive of Forrester Research, George F. Colony, said he interviewed a lot of other CEOs, including "dot-com" executives, and concluded that they run "vapid, shallow and hollow companies." (The article is at http://www.forrester.com/ER/Marketing/0,1503,183,FF.html.)

"Many of the dot-com CEOs," Colony wrote, "lacked depth, experience and common business sense. Their commitment was short term--three years on the average. They talked about their highly fluid work force--a constantly changing cast of characters, washing in on the promise of more stock options and an IPO and then washing out, post-offering, in search of another pre-IPO company."

Colony was describing what has come to be known in Silicon Valley as "flip and flee," a term of irony and derision that people both inside and outside the industry are beginning to view as a serious ethical flaw.

Randy Komisar, former CEO of LucasArts Entertainment and WebTV, told Fortune, "People walk into a VC [venture capital] presentation and their first line is about exit strategy. They're not talking about the investors--they're talking about themselves. How will they cash out? And this raises a subtle point: These founders don't think of themselves as CEOs of operating companies. They think of themselves as investors."

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The point of "flip and flee" becomes how to raise money and then bail out at the peak of valuation, even if you've dragged the public into risky exposure. Then you move on somewhere else to do it again.

Of his interviews with dot-com CEOs, Colony also wrote: "There was a fanatical focus on valuation--getting public and liquid--while value--what the customer eventually gets--was a back-seat discussion."

Werbel says, "There are obviously major financial incentives that promote this kind of behavior." He adds, "Some of these people will be spending time in jail soon."

Another sign of ethical issues in the high-tech industry, for some people, has been the Microsoft antitrust trial. Despite all the talk about the trial and its outcome so far, there has been very little discussion in the industry about whether Microsoft has behaved ethically.

According to Jeffrey L. Seglin, a professor of literature at Emerson College in Boston and author of "The Good, the Bad and Your Business: Choosing Right When Ethical Dilemmas Pull You Apart," "Bill Gates appeared in court under oath and wasn't entirely truthful in the way he answered questions." Microsoft's explanations for the way its operating system, Windows, works with its Internet browser have changed several times during the antitrust case, depending on who is asking the question and what purpose the answer is meant to serve.

Paulina Borsook, author of the new book "Cyberselfish," says, "This culture is now so deforming, to the kind of people it favors and requires. If you're trying to survive in that world, you cannot have time to reflect. . . . In addition, these people have no exit strategy, no preparedness for doing anything else.

"This thinking is so pervasive," she says. "These are the rules now--what other rules are you going to play by?"

The image of the heroic frontiersman on the "electronic frontier" is how high-tech entrepreneurs describe and justify themselves, says Borsook. "This is so at odds with reality--they're really just enmeshed in power and finance. While they have the rhetoric left over from the early rise of the Internet, the information revolution and so on, their world is really a lot more like the 'Liar's Poker' era of Wall Street 15 years ago."

That's when newspapers and TV last showed masters of the business world being led off to jail in handcuffs.

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Gary Chapman is director of the 21st Century Project at the University of Texas at Austin. He can be reached at gary.chapman@mail.utexas.edu.

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