Trust Your Gut

I enjoy reading “The Ethicist” column in the New York Times each Sunday. People ask the columnist, currently Chuck Klosterman, questions like “Should I get a flu shot so others don’t get sick?” and “Do I have an ethical obligation to stop patronizing a business that has been in trouble for employing undocumented workers?”

Some of the questions are tough and I’m glad I don’t have to answer ones that address issues like problems with cat custody and which of two brothers should donate a kidney to their dad.

url-1Fortunately, in my business, I’m rarely faced with what I’d call ethical dilemmas. While I do see plenty of questionable ethics, for me they are rarely dilemmas because the answer is invariably clear on what course of action to take.

I mentioned in my most recent column, “Trust Your Gut,” that I turn down work if I am asked to do something unethical. I have never regretted it.

When you consider what is at stake in involving yourself in something wrong, it’s an easy choice. First, it’s wrong. And secondly, why would I risk my reputation for a short-term salary, no matter how large?

I subscribe to what a former client, Henry Kravis, once said, “If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing.”

In one case I was interviewed to take over as president of a large healthcare business. The previous president had been fired when the board found out that they had overbilled Medicare and Medicaid to the tune of several million dollars.

I knew I had the job, as I was the only person they were talking to and I knew people on the board. The position would pay a lot of money.

My advice was that they had to be up front about the overbilling and develop a plan to pay it back. When I asked how long it would take to pay the money back, they said they had estimated two to three years.

I said, “Go to Medicare and Medicaid, tell them what has happened and that you have fired the president and hired me and then present the plan on how we will pay them back.”

Their response? No. They had decided that the downside of admitting the problem was too great, so they did not want to notify anyone and weren’t planning on paying the money back. But they would bill correctly going forward.

I was stunned. My initial response, which I may or may not have uttered aloud was, “Are you crazy?!”

They said, “This is what we are going to do. We want you to start Monday and we need your commitment that you will follow our plan.”

While they saw a path out of their troubles that allowed them to keep millions of dollars of stolen taxpayer money, I saw a group of people taking a very bad situation and making it much, much worse.

Beyond the ethics of the situation, had I been president of that company when the government found out, I would have been held responsible. The choice was an easy one.

In the ensuing years I kept up with what happened to the company. It wasn’t pretty. The government found out about the overbillings and sued the board of directors, CEO and the CFO. They also lost their licenses.

It’s a sad story, but hardly an uncommon one. And I didn’t need to write to “The Ethicist” column at the New York Times for an opinion on what to do.

All in the Family: Succession at The New York Times

The publishers of The New York Times, from left to right: Adolph S. Ochs (who ran the newspaper from 1896 to 1935); Arthur Hays Sulzberger (1935–61); Orvil E. Dryfoos (1961–63); Arthur Ochs Sulzberger (1963–92); and Arthur Ochs Sulzberger Jr. (1992–present). The photo appeared in an article in Vanity Fair. *

When a family member died unexpectedly, he was given the reins to the family business, the third generation to run it. He was just 37, and although he had been an exec at the company, he described his position as “vice president in charge of nothing.”

Arthur Ochs Sulzberger, former publisher of the New York Times, died this week at the age of 86.

The “newspaper of record” won 31 Pulitzer Prizes during his tenure. Punch, as he was known, is remembered for being a staunch defender of freedom of the press, no more so than when he made the controversial move to publish the infamous Pentagon Papers on the front page in 1971 about the U.S. involvement in the Vietnam War.

That got the New York Times involved in a skirmish of its own — the lawsuit for libel landmark New York Times vs. Sullivan, which became a landmark First Amendment decision by the Supreme Court.

Punch’s death brings to mind a topic that I deal with often in my work as a turnaround specialist: succession in family businesses. As I mentioned in my last post in this series on family businesses, the greatest threat to a family business is the failure to plan and manage succession well.

There were no emergency family meetings called when Punch died, no anxious creditors waiting at the door, wondering who would be running the company. No sibling infighting, lock changing or festering family feuds.

Arthur Sulzberger had turned the reins over 20 years prior. In 1992, his then 40-year-old son Arthur Ochs Sulzberger Jr., became publisher.

Punch’s transition to the top post wasn’t as easy. Although he was working at the Times, he thought he had several more years before he’d take over from his brother-in-law, Orvil Dryfoos, who had become publisher in 1961.

Then Orvil died suddenly just two years later from heart failure at the age of 50. And Arthur’s time had come. From vice president in charge of nothing to publisher of the New York Times. Not exactly an optimal situation for the continued smooth running of a company.

It worked out in his case. During his tenure revenues of the Times’ corporate parent rose from $100 million to $1.7 billion, and circulation for the Old Gray Lady soared from 714,000 to 1.1 million.

But it doesn’t always go so well. That’s when I get hired.

The Times in now being run by a member of the fifth generation, with a sixth on his way up. Punch’s grandson, Arthur Gregg Sulzberger, joined the Times in 2009 as a reporter and was promoted earlier this year to editor on the Times metro desk, and is reported to be in line to take over one day.

Joseph Astrachan, a professor of management and entrepreneurship at Kennesaw State University in Georgia who studies family businesses, said in an article in USA Today that the odds of a family business surviving to the sixth generation are 500 to 1.

The New York Times may beat those odds. Wouldn’t you like your family business to as well? Do you have a family succession plan in place?

* Photo Illustration by Chris Mueller; Digital Colorization by Lorna Clark. Photographs, From Left: From The Museum of the City Of New York/Getty Images; From Bettmann/Corbis (3); By Andrea Renault/Globe Photos; From Granger Collection (Background Headlines). All Other Newspapers: From Bettmann/Corbis.