"To educate a man in mind and not in morals is to educate a menace to society." -Teddy Roosevelt

A recent Wall Street Journal article asks the question, "Can we teach ethics in our business schools?" Here in Cleveland, regulators have liquidated three credit unions in the past two years-all related to embezzlements and fraud. One credit union manager is an FBI fugitive.

While we read about high rollers on Wall Street, we have a few rollers on Main Street and our credit unions aren't immune from the damage. Huge sums of money, reputations, relationships, and employees are at risk when ethics are forsaken, and we all pay for these missteps.

Let's review a few lapses of ethics affecting us all and the related costs:

* 2008 banking crisis and subprime lending

The stats speak for themselves: 3.4 million foreclosures since September 2008; 2010 averaged a foreclosure every 13 seconds (that's 6,000 per day). Unemployment peaked at 9.6% in 2010 and the recession claimed 8 million jobs, leaving 15 million unemployed.

* Bernie Madoff's Ponzi scheme

Madoff pleaded guilty to 11 felonies after more than $18 billion was lost, with only $9 billion recovered and $5 billion returned to investors. Adding to the loss, one of Madoff's sons committed suicide.

* The London Whale and JPMorgan Chase

The firm that supersized its bets lost $6B although initially Jamie Dimon's assessment is that it was a "tempest in a teapot," you know-no big deal. The chief investment officer, a woman, took the fall.

And the lapses continue. Three European banks are tied up in Libor rigging cases, two prominent traders landed in jail and Chase just won't leave the headlines. It's currently under investigation for a credit card identity theft program, its method of collecting overdue accounts from customers, its troubled mortgages, and oh by the way, the Whale was just beached in Spain.


What to Teach: Where to Begin?

Beyond the societal costs, all these cases have underlying causes and commonalities. The question remains: What can we learn from these examples that we can teach not only in our schools, but in our credit union communities? Let's take a look at how business schools are responding.

As reported in the Wall Street Journal, when business schools are asked about teaching ethics, the response is "we are tapping into their 'soft' side." "It's a continuing push to teach the 'soft skills'-such as accepting feedback with grace and speaking respectfully to subordinates-that companies say are most important in molding future business leaders."

Columbia University requires first-year students to take a class on determining their leadership style, teamwork and "self-awareness." At the Wharton School of Business, the financial crisis has fostered a greater emphasis on social ethics and responsibility. At Harvard University, "there is a feeling that we want our lives to mean something more and to run organizations for the greater good." Researchers ponder "moral beliefs" in order to gain an understanding of our "moral behavior."


Building Better People

The team building retreat we've developed for credit union management and boards focuses on these very ideas. Returning to the classroom, Clayton Christensen in the Harvard Business Review confronts us with the question of "How will you measure your life?" and three questions: "First, how can I be sure I will be happy in my career? Second, how can I be sure that my relationships with my family become an enduring source of happiness? Third, how can I be sure I will stay out of jail?"

While teaching a class on humility at Harvard, he asked students to describe the most humble people they knew. "One characteristic stood out: they had a high level of self-esteem. They knew who they were, and they felt good about who they were. We also decided that humility was defined not by self-deprecating behavior or attitudes but by the esteem with which you regard others. Good behavior flows naturally from that kind of humility. For example, you would never steal from someone, because you respect that person too much. You'd never lie to someone either." He concludes, "Don't worry about the level of individual prominence you have achieved; worry about the individuals you have helped become better people."


Finding a Competitive Advantage

Perhaps our credit union communities should focus on helping our people become better people. How? The question is what do you want to be remembered for? What model do you want to display for your colleagues? What values do you want to teach your children? Which "role models" would you choose for your kids?

In our communities maybe it's time to explore "ethical thought and behavior" in board planning and staff training. This could yield results and give our communities a competitive advantage helping us provide trustworthy answers to the everyday questions our members desire. And maybe it's time to ensure the values of your organization reflect the values of your members and employees.



Ron Schmidt, CPA, is with CBS Certified Public Accountants, Solon, Ohio. He can be reached at 440-542-1536 ext.28, or rschmidt@cbscpasllc.com.