Where Are the Values?

As a dedicated bargain hunter, I concentrate a lot on values. Financial value, that is. Unfortunately, the past couple of days have me wondering whether I need to pay a little more attention to those other kinds of values. You know, the ones we ought to have learned in kindergarten: Don't lie. Don't steal. Play nice with others.

The more I read about the behavior of some of our best-known corporate managers, the more I wonder whether they need a few weeks back in the romper room to learn the basics.

Missile man's missive
One of the first things I read yesterday was the New York Timesstory describing the hubbub about Raytheon (NYSE: RTN  ) CEO William Swanson's increasingly infamous booklet, "Swanson's Unwritten Rules of Management." The trouble with that title? Some of "Swanson's" stuff seems to have been written before, by someone else. The title bears a striking resemblance to a 1940s book called The Unwritten Rules of Engineering, by W.J. King, and according to the Times article, so do at least half of the rules.

What's perhaps more disagreeable than the alleged plagiarism is Raytheon's response. According to the Times, "Pamela A. Wickham, a spokeswoman for Raytheon, acknowledged that some of the rules were 'absolutely on track' with those in the 1944 book, but she said that the final booklet had been shaped by Mr. Swanson's own experiences."

Uh-huh. I know other places where borrowing too much of other people's words, "shaped" by your own experience or not, gets you an F on your term paper, tossed out of school, or fired from your job. But I guess the rules are different when you're drawing a multimillion-dollar salary, or trying to soften the image of your defense-contracting powerhouse by promoting your top exec to the national press as a humble and down-to-earth management guru.

Today, Raytheon's website contains a statement from Swanson, in which he acknowledges the similarities between his rules and King's. Still, the statement leaves me wondering whether Swanson's learned anything more than how much it stings to get caught. Although he says he regrets not crediting King, he points out that he believes his booklet is unique for his own spin on the rules, and he finishes with a "new rule #34: Regarding the truisms of human behavior, there are no original rules."

Maybe he should add rule #35. "Managers who are convinced of their special wisdom and humility deliver unsatisfying apologies."

GM can't buy a friend
Speaking of companies getting bad press, there may be a whole new kind of image problem for GM (NYSE: GM  ) . I've written a lot about that firm's troubles, so I can understand management's urge to try to reverse the public spin. But if a recent description of one of GM's efforts is true, I'd say the automaker's suffering from a bit of an ethics breach.

According to a recent Robert Reich commentary on National Public Radio's Marketplace, a GM PR firm tried to get Reich to write a fluff piece on the company's employee buyout program, offering to pay him some amount of money "as a show of respect." (I first read about the situation in a biting, but to my mind, spot-on editorial at The Truth about Cars. Reich's original commentary is here.)

The former Clinton advisor and noted economist summed up his thoughts on the matter with the hope that this attempted "integrity buyout" was an exception, and not the rule. I wish I could be so sanguine. Whether or not there's an undercurrent of paid reporting out there, I can't comment. I've never received so much as a single offer (sniffle). But then, I'm no Robert Reich.

But it's easy enough to see that even without alleged attempts to purchase high-profile "journalism" (GM's PR chief has apparently denied authorizing such offers), the company is waging a very public PR campaign that's got little to do with cars. CEO Rick Wagoner's famous it-ain't-our-fault-honest-I-swear-it's-the-dang-Japanese commentary in The Wall Street Journal is just one example. The overly optimistic bullet-points atop the company's latest (but not greatest) earnings release are another.

Of course, we expect company releases to be slanted. Do we now have to wonder about the rest of the commentary out there as well?

The Jeffy and Ken show
According to more than a few CEOs out there, you do have to wonder -- at least, in their opinion -- when someone's saying something bad about their companies. This brings us to the greatest show in Texas, the trial of former Enron Chairman Ken Lay and CEO Jeff Skilling, who blame the press -- in cahoots with short sellers -- for the collapse of Enron. (OK, they also put some of the blame on confessed Enron fraudster Andy Fastow.)

The press is the problem? Do these guys remember just how much they were enriched by the rock-star type status awarded them by the compliant, adoring press before the spit hit the fan? They were widely feted, showered with awards, and upheld as the new paradigms of American business smarts -- and maybe even the prime examples of boardroom manliness. Enron's front-page reckoning arrived late in the game, only after it became abundantly clear that in Houston, they had a problem.

Never mind that Enron's fancified bookkeeping caused a complete loss of investor confidence. Jeff Skilling and Ken Lay would have us all believe that this was a simple "run on the bank," fomented by bad press.

Costanzaon values
To me, Skilling and Lay represent the extreme edge of the dearth of values atop certain corporate ladders. But their continued denials have me wondering whether Seinfeld's George Costanza doesn't have a lesson for us here. He once told Jerry, "It's not a lie if you believe it."

Every time I hear Skilling or Lay defending their behavior, that phrase pops into my head. I've come to think that these two guys believe they did nothing wrong, despite all evidence to the contrary. You borrow a little from here to there; you move stuff from one ledger to another; you find another penny the day before earnings; you create some off balance-sheet entities to tidy up the books. Is that so bad? Is it improper? Is it a lie?

Obviously, it depends on whom you ask. And therein lies the problem.

Foolish bottom line
My years of offbeat bicycle-wrenching have given me my own engineering maxim -- and I'd be surprised if someone hasn't already written this one down. It goes something like this: "Little failures don't always get big. But big failures always start with little ones."

I believe it applies just as well to investing.

Let's face it, there's no shortage of hubris in the executive suites across the U.S., and we've seen little problems mushroom to become major losers for stockholders. To the above examples, we can lump in the recent CEO controversy at RadioShack (NYSE: RSH  ) , the cavalcade of problems at Boeing (NYSE: BA  ) a few years back, Lord Black's crumbling empire at Hollinger International (NYSE: HLR  ) , the Koz's glory days at Tyco International (NYSE: TYC  ) , the Computer Associates (NYSE: CA  ) revenue debacle, and many others.

I make it a point to dig deep into the fine print before I invest, because I believe that certain, shall we say, "personality traits," may reveal themselves in the filings before they're exposed in a courtroom. I want to find the little failures before they bloom.

But this is an imperfect science at best. Can you ever really judge a CEO's character before it's too late? What sort of behavior do you ignore, and what do you consider an important indication of a manager's credibility, character, and ability to ultimately succeed? Is it better to be safe than sorry?

You might want to ponder questions like these before you invest in Wall Street's management heroes du jour.

Now that it's kicked out the Koz, Tyco is aMotley Fool Inside Valuepick. For more solid, underpriced stocks with value you can truly believe in, try our newsletter service for free with a 30-day guest pass.

Seth Jayson doesn't trust his retirement money to people he wouldn't trust with his car keys. At the time of publication, he had no positions in any company mentioned. View his stock holdings and Fool profile here. Fool rules are here.


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