Flexible corporate ethics and diminished trust

In an article on 5 October, eWeek analyzes whether PeopleSoft would consider a takeover by Oracle at the right price and raises questions about PeopleSoft ex-CEO Craig Conway’s integrity.

Consider this comment from the article:

The [PeopleSoft] board decided to fire CEO Craig Conway because it was dismayed by his display of “situational ethics” when he made misleading statements to analysts that Oracle’s hostile-buyout bid wouldn’t cut into sales, when the company already knew that it would.

Such statements by Conway could result in disciplinary actions by the US Securities and Exchange Commission or shareholder lawsuits on the grounds that he was deliberately deceiving the market, eWeek says, adding: “The PeopleSoft board became particularly troubled when Conway acknowledged in a videotaped deposition that he made the statement to downplay the potential damage to PeopleSoft sales.”

As the eWeek article states, more than sales have been damaged: PeopleSoft’s credibility in the market has also been tarnished by this testimony.

Last month, I posted commentary on Oracle’s tarnished reputation citing published market research that said positive opinion of Oracle continues to decline significantly, as does trust in Oracle, as a result of the drawn-out battle for PeopleSoft and some alleged questionable behaviour by Oracle CEO Larry Ellison and other senior executives: in September, a US appeals court reinstated a class action lawsuit filed by angry shareholders against Oracle and top executives (including CEO Ellison), citing suspicious insider stock sales, public boasting by executives and highly optimistic financial forecasts.

What this illustrates is situations that seem to be all too common in business these days – flexible corporate ethics: behaviour by executive leaders that shifts with the sands and bends in the wind to suit the occasion, which results in diminished trust by everyone – especially customers, shareholders and employees. There’s clearly no comparison with scandals such as Enron or Worldcom, but you do tend to think of the leaders of those companies when you read about how PeopleSoft’s and Oracle’s leaders are found to have behaved.

I’m all for free markets, but tales like this make you see why regulatory oversight as embodied in Sarbanes-Oxley, for example, is a real necessity.

eWeek Enterprise Apps | PeopleSoft Running Short on Options, Credibility