Fair wages and generous tips

A waiter paid $2.13 an hour is as vulnerable as a salesperson who lives almost exclusively from commissions. Neither can earn a living without the tips or the commissions. In good times, that might not be a problem. In a downturn, that financial pressure will often lead them to engage in wrongdoing.

A recent study of “tipped service workers” show that many do not enforce COVID-19 safety measures at their bar or restaurant for fear of losing their tips (the study also shows in increase in harassment of such workers). In an economy where tip workers have lost half their income because fewer people go out to eat, workers cannot afford to lose their tips. Even if this means putting themselves and others at risk.

So when a patron gets up from their table to go to the bathroom and doesn’t wear their mask, the waiter reluctantly looks the other way. Or, worse, when a patron asks his server to take off her mask so he can decide how much to tip her (gasp!), she puts her health, and other people’s, at risk. According to the CDC, adults who had contracted COVID-19 were twice as likely as virus-free adults to have recently dined at a restaurant (source).

A big part of the solution is to pay employees a fair wage, so they don’t feel pressured to break the rules. A salesperson who can pay the rent is less likely to forge the signature of a customer on a fake contract to make his monthly commission. A waiter who can keep the heat on this winter is more likely to keep her mask on too.

And for goodness’ sake, let’s tip generously.

It’s gotta hurt

Major League Baseball has just severely punished one of its players.

The punishment is severe because the infraction was severe. Canó tested positive for a performance-enhancing drug and, as a result, has been suspended for an entire season. He will also forfeit his $24M salary.

Given that this was a repeated offense, I don’t understand why Canó wasn’t simply fired. He clearly demonstrated that he cannot be trusted. Perhaps it has something to do with his contract or with the union. In my company, if you survive one major violation, you won’t survive a second one.

That said, Corporate America might want to follow MLB’s lead and go after big bonuses more aggressively than it has in the past. An executive involved in serious wrongdoing, but not quite serious enough to get fired, should see their bonus disappear – completely. Perhaps the punishment should not be announced on Twitter, like the MLB did with Canó, but it should be shared with other executives, as a warning.

I’m sure Canó had plans for his $24M. And now he has time to reflect on why these plans won’t materialize.

Insider creativity

We have a rule preventing company insiders from trading their stocks on non-public material information.

This rule is frustrating to some insiders who otherwise could make millions of dollars. But what if there was a way around this rule?

Well, there is. Another SEC rule, Rule 10b5-1, allows company insiders to set up a predetermined plan to sell company stocks. The price, amount, and sales dates must be specified in advance. The rule assumes that insiders can’t possibly match these future trading dates with the release of material information. That’s an obviously wrong assumption in my opinion. Insiders are the very people who are most likely to be in a position to control when material information will be shared with the public.

And so, today, NPR reports that the Pfizer CEO implemented his 10b5-1 plan last August 19 and, the next day, announced positive news related to Pfizer’s work on a COVID vaccine. Pfizer stock soared. Then, this Monday, Pfizer announced that its vaccine candidate was found to be 90% effective. The stock soared again. Oh, and Monday was also the day that the CEO sold $5.6M worth of stock, as detailed in the plan filed in August.

Purely coincidental, right?

Of course we can expect the SEC to change the rule to prevent this type of abuse. And then we can look forward to the creativity of another insider.

Checkmate in three

Last night I finished watching the Netflix series The Queen’s Gambit.

The main character is a fictional female teenager from the ’60s. She’s a chess prodigy and climbs her way up the male-dominated chess world, eventually playing against chess grand masters. She goes on to beat several of them. Some gracefully shake her hand in admiration while others storm out of the room in embarrassment.

As the last episode concluded, I used my TV’s remote to switch from the Netflix app to ABC News, wanting an election result update. What I saw was a player realizing the inevitability of his loss, a player with no intention of gracefully resigning. Doing so would require civility and respect for the electorate, virtues he does not possess.

We’ll have to play this game to the end.

The second rule of the game

In today’s post, Seth Godin reminds us that the first rule of any game should be “All players must agree to not cheat.”

It’s a metaphor for workers, companies, governments and regulators. When only one of them cheats, the others can often contain the damage. When all of them cheat (think 737 MAX), you get a human catastrophe.

Thus, the second rule of the game should be “If a player cheats, no other player will tolerate it.”

Magic

The recent tropical storm Isaias left me without power for more than 3 days. It just came back at 2 AM this morning.

During the last 24 hours, I often thought of how my parents lived 3 weeks without power after an ice storm in 1997. For 40 miles in any direction, businesses were closed. No ATMs, no gas stations, no restaurants. No hot water, no heat. In the middle of winter.

I recall my dad telling me that after the power was restored, it felt like magic when he flipped a switch and a light went on. He felt gratitude every time. It was almost as if electricity had just been invented.

Imagine a world where we lose our ability to make ethical decisions for 3 weeks. Or even just 3 days. A relatively short period where everyone cheats, lies and steals. A time when you can’t trust anyone. You can’t trust your family members, or your neighbors, or your boss, or the press, or the government. Then imagine trust is suddenly restored and when you ask a question you can trust the answer.

It would be like magic.


This is my 700th post. Coincidentally, I also wrote about magic on my 600th post. You can find all my milestone posts here.

Frequent and short

Some scientists believe that we should start using COVID-19 tests that are far less sensitive but fast and cheap. They argue that if the low cost and speed of the test allows us to screen a person every few days, we will be better off than screening that person only once each month with a more accurate test.

This idea reminded me of the value of short and frequent messages about the importance of ethics and compliance in an organization. With every message, a manager is inviting her team to ask a question or raise a concern. An annual ethics stand-down day, complete with speakers and videos and games, can certainly send a strong message. But these events will catch most employees on a day when they don’t have a concern to raise, and leave the others unsure about whether they should speak up. How serious can a company be about ethics if they only discuss it once a year?

In almost everything we do at work, every day, there is an opportunity to cheat, steal or lie. You know that, your employees know that. Make it easy for them to ask question and raise concerns. And do so every day.

Hitting back

A Houston Astros player was deliberately hit by a pitcher yesterday. It happened during the team’s first Spring training game following their cheating scandal.

Many say the player had it coming. Many still expect the team will suffer such revenge throughout the season. The anger is understandable. But with 30 teams in the league, the way to distinguish yourself as a team this season is to be the one that doesn’t pick on the Astros.

This event reminded me of a situation I faced early in my career. The company I worked for imposed “austerity measures” to weather through some difficult times. Employees were upset about the measures and vowed to strike back at management by doing nothing more than the absolute minimum. My supervisor called for a special team meeting and explained that this was our time to shine. We would be the only department that didn’t complain or strike back. In fact, we would now go beyond the call of duty. I’ll spare you the details, but it worked out really well for all of us, in both the short and long term.

The companies we work for operate in industries with competitors. Some competitors play fair, some don’t. We should not compromise our business ethics simply because a competitor cheated us.

If you pay peanuts, you’ll get monkeys

I recently returned from the latest ECI Fellows meeting, which focused on behavioral ethics. This post is part of a series where I share my insights and lessons from the meeting.


If you grossly underpay someone, don’t expect superior performance.

Or ethical performance.

Of course, a small percentage of people will perform ethically and flawlessly no matter how little you pay them. Similarly, a small percentage of people will perform miserably and unethically no matter how much you pay them. But, eventually, the first will quit and the other will be fired (after costing you dearly).

The vast majority falls in the middle. The danger with underpaying someone, or with treating them unfairly in any way, is that it allows them to rationalize their bad behavior. They steal company property, they cheat on their expense report, they lie to a customer – all because they feel financial pressure and injustice. It’s the classic manifestation of the fraud triangle.

So unless you lead a volunteer organization, treat your employees fairly and pay them a decent wage. It will directly and positively affect their business and ethical performance.