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Monday, May 22, 2000
Some "Dot-Coms" Know Value of Stock but Put
No Stock in Values
By Gary Chapman
Copyright 2000, The Los Angeles Times, All Rights Reserved
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
"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?
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."
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.
Gary Chapman is director of the 21st Century Project
University of Texas at Austin. He can be reached at