The Importance of Business Ethics

Business Brain the Show for entrepreneurs episode 435 for Wednesday, March 29, 2023. Greetings folks and welcome to Business Brain, the show for entrepreneurs where really it's for anybody. But we are entrepreneurs. And what we've found is that when we take our business brains, that way of looking at things and apply it to all kinds of things in our lives, our businesses, our personal lives, whatever it might be, get a better perspective, a different perspective, a good perspective. So that's what we do here at BusinessBrain. Show sponsors for this episode include Notion, which now has added Notion AI that lets you skip to the good part because it's gonna do the hard work of creating your brainstor and your rough drafts for you. You can try it for free visiting notion.com businessbrain we'll talk more in depth about that in a little bit. For now here in Durham, New Hampshire, happily still here in Durham, New Hampshire.

I'm Dave Hamilton and out, still out in Lafayette, California. Wet, windy weather patterns again, which is awesome. But I'm about ready for this to be over. But I'm happy to be here.

And you are Shannon Jean.

I am Shannon Jean.

I forgot, I'm just happy not to be traveling anywhere. It's, I, like I had an entire week where I didn't, like, I, I, I was just a quote unquote normal schedule. I don't know what normal is anymore. But you know, like, it was nice to, I, I, it's been very productive. That's good, that's good.

That's awesome.

Yeah. Yeah.

Hey, I, I want to share stories with you and all right. And maybe, maybe dig deeper into it because it kind of, it got my hackles up and it started kind of innocuous, but yeah. So I, I'm gonna keep it anonymous to protect. Sure. Innocent and all that stuff.

Or the guilty.

Yeah, yeah, the guilty. Whatever. So I was out, I was, we were out to lunch with some friends this weekend and one of the people is a woman who's very successful, high powered salesperson. Yeah. You know, very, very successful. 100% commission by her, by her choice.

Yep.

So she has a much higher, you know, opportunity there.

Yeah.

And she said, yeah, you know, it's really weird company that, that she had or that she work works for got purchased I guess about a year or so ago. So they're dealing with a bunch of changes and different things and on I guess Thursday or Friday, the, one of the, one of the new owners, privately held company, I guess, but part of a much bigger company One of the new owners sent an email, said, hey, we're going to hold everybody's commission checks until the 3rd of April because we have a bank meeting and we want to. How do you phrase it? Let me be careful how I. I'm going to paraphrase, of course, but it doesn't really matter. You don't know him anyway.

No, it.

In, in essence, we're having this meeting. Sales are down. The economy's, you know, sales are down.

That's correct. Across the board, many things.

Yes, yes. We want to show a bigger bank balance to keep the bank happy. And I went, you know, these like, alerts went off into my, in my head and I was like, hey. I said, that's. That's really problematic. Not only. I mean, there's a bunch of things to unpack about how you would alert if you would do this. First and foremost, ethically. Is this an ethical thing to do or are you committing some sort of fraud? I'd love to talk about it. And secondly, if it's not, if it's like, okay, that kind of stuff happens, yada, yada, yada, how do you go about doing it other than emailing your employees 48 hours before they're about to get paid and pushing them out for a week? So it's. I really would like to take a dive into this and see if I'm wrong or if it's something worth if I'm right.

Oh, that sound means I get to tell you about our sponsor. Our sponsor today is Notion AI. Notion by itself is this amazing engine that combines your notes and your docs into one space. That's simple, collaborative, beautifully designed, and now, thanks to AI, more powerful than ever. Notion AI helps you work faster, write better, and think bigger, doing tasks that normally take you hours in just seconds. And this is because you can now leverage the power of AI right inside of notion across all your notes and docs without the need to jump between whatever you're working on and some separate AI powered tool. Notion AI lets you skip to the good part. You get to save time and write faster by letting Notion AI handle those brainstorms of the first draft or to take your messy notes into something polished, which is something I have really become enamored with doing. It's amazing. I just like throw together thoughts and then say, make this sound better. Break it up into, you know, three paragraphs or whatever I want it to do. It's going to make it sound better. Heck, I can make it. Give me my notes in iambic pentameter I don't know if that's going to be relevant for your use case, but this is the kind of thing that you can do. You just tell Notion AI what to do. The more details the better. And just go in, select text, click Ask AI and boom. Increase your productivity like never before. And for a limited time, try Notion AI for free when you go to notion.combusinessbrain that's all lowercase letters. Notion.com businessbrain to try out the incredible power of Notion AI today. And when you use our link, you're supporting our show. We appreciate that. That's good for you. That's good for us. This is a limited time offer. Try Notion AI for free right now@notion.com businessbrain and our thanks to Notion and Notion AI for sponsoring this episode. All right, so. Holy ethical gymnastics, Batman. Yeah, like, okay, this is fascinating because we had a. I do, I do several podcasts, and one of them is for musicians. It's called Gig Gab. And we had a conversation last night about ethics and we titled the episode Ethical Gymnastics. And boy, if I hadn't used that title yesterday, it might be the right title for this episode. Like, it might even be a better title for this episode. But it wasn't a wrong one for the git gap. This is crazy.

It is crazy. So now I get the idea of, oh, we want to show good bank balances, meeting with the bank. I mean, I get that.

But don't you, like, the bank's going to see that you played a game with them if they pay close attention, which banks often do. I mean, you're not the first business owner. Not you. But, you know, I'm speaking to this person who I don't know either. Like Shannon. Shannon is the only one here that knows who this actually is. So I'm.

No, I don't know the business owner.

Oh, there you go. That works. You know what the company is? I have no idea. But. But you, sir, business owner, like, you're not the first one to think about fudging the. The cash flow. I don't want to say fudging the numbers, because they're not actually fudging the numbers. They're just fudging the cash flow. And this is something that most business owners do, if you run on a cash basis, might do at the end of the fiscal year to massage things and make sure that you get as close to a break even as you can. So, like, this is a thing. And, and within reason or the other.

Way, you spend a bunch of money at the end of the fiscal year. So you can lower your tax, take.

A loss if you've got, if you've got gains somewhere else. Right? Yeah, exactly. Yeah. And all of that within reason is perfectly acceptable. This is, I mean, I don't think it feels. At best, yeah, it might be bank fraud. I don't know.

It feels like it to me. If that. Because I guess you'd ask yourself if you were on the phone or you were in a room with the bankers and you explained what you were going to do, would they make a different decision? And I would have to argue that, wow, you know, if you're playing these kinds of games, maybe that this is the red flag, but there's other stuff going on as well.

Yeah, well, that's the thing is. So first of all, it's how would the bankers feel if they knew everything that was going on? Right. Okay, fine. Like, that's one question to answer and I think to take a minute, a minute more on that, I think you are 100% right. If the bankers knew what was going on, they would probably worry about you more than they would if they, if they just saw the natural cash flow that would have normally happened.

Yeah.

And you could explain that. Right. You could say, hey, look, just take a look.

Paid a ton of commissions.

Yeah. A week ago, cash flow, you know, our cash balance was X. You can see today that it's, you know, X minus a large sum. And that's because we just paid commissions and got it right. Like, I think that's a better way to handle it. So that's how the bank would feel.

That's an ethical way to handle it and perhaps legal, perhaps legally. Right. I don't know. I'm not an attorney. But you are. Feedback at Businessbrain Show. Tell us if we are. If it's much ado about nothing. And this kind of stuff happens all the time and banks don't care or tell us if, oh, wow, this is a big problem and, you know, you should watch out.

But to me, the even bigger problem is how does your, how do your employees feel? And we already know that.

Tell you. Yep.

Yeah. So. So like this woman explained this scenario to you. What. I have some predictions about what you're about to say. But what was her feeling on this?

Well, it made her feel concerned about the company as a whole.

Yep.

It made her feel not as confident in the company as a whole and in leadership of the company that would think it was okay to, to just send out a random email. Now these Are like high paying folks. I mean, this is a, these are big commissions. Like, this is big municipality stuff. 30,000, $50,000 a month.

Sure.

People are getting. Sure. So. And it. She you know, commented, well, who are they to assume that you're not going to be in some problem? Maybe you're. You have some huge bill that's due on the first and you're not going to be. Or you did something based on the fact that. Oh, I know my commission.

I know. Yep.

And now I'm going to be, you know, 72 hours late or something like that. And it. Yeah. So there's the ethical and legal question, which I think is crazy. And it really made me feel itchy and itchy is the right word.

Yeah, yeah.

And I said, wow, you know, not only is this problematic and I think it may be bank fraud. Makes me wonder what else they're doing that they're not telling anybody about. And, and then you could break it down. Okay. How if, let's say you had to do. You felt compelled to do something like that.

Yes. There's approach it. Yeah. There's times when you have to do those sorts of things. To me, messing with my employees, cash flow is the last thing I ever want to do. But it has happened. I've been there. I don't like it. I think I was only ever there once and I hated it so much that it stuck with me. Like, I'm pretty sure it's never happened again. I think I would remember it.

I had it once too, and I feel the same way. It was with a partner. We merged with another company and it was at a time when people were getting checks, actually paper checks, and the accounting department just. Oh, we just didn't get them out in time. And I hit the ceiling saying, that's unacceptable. It can never happen.

Right.

You know, if you don't want to pay somebody, don't pay me. But these kinds of things.

Oh, always I don't pay myself first.

Of course.

Right.

When it comes to employees, you have to pay them first.

And if you are in a scenario and I've been there where I have to pay myself first, then I let an employee go. I eat it that way. It's like, okay, look, if it's that bad that you have to pay yourself and there's not enough money to continue paying the employee for what you owe them. Absolutely. And let them go so that you don't keep owing them money and then deal with the fallout from that. So, yeah, I had to play games once. I did not like it. Like you. It was with a partner where I didn't have full control. Like it wasn't entirely my decision and I hated it. And. And I.

Sounds like we've only. Both of us have only made that mistake once, right?

Yeah.

And didn't we just do a show about not relying on just one bank? Didn't we just talk about having multiple banks?

Yeah, we did.

Because perhaps if you had another bank and you had a credit line or something else there, you could. You could bridge this. There are different ways do this.

Well, that's true. Pay your employees from the other bank. Yeah.

Of course. That are ethically. Take the money out of your own bank account personally and loan it to your company to pay the employees. Fund it yourself.

Even that, though, starts to become ethically questionable.

You got to be careful.

Yeah, it's. But at least it's better to your employees. Like there.

Yeah.

There are two separate problems, but related problems here. Yeah. Let us know how you feel, folks. I'd love to feedback at BusinessBrain Show. We want to. Yeah. Yeah. And is it bank fraud? Like, I'm. That's just curiosity. Thankfully, I'm not asking that. I am asking that for a guy I don't know. Definitely not for me. Oh, that was the intro of the show. I played. I played the wrong thing.

Play it out again.

I'm playing it again. There we go.

There we.

I hit the wrong button. I was so excited about this topic. Thanks for hanging out with us, folks. As we said, feedbackusinessbrain show. And listen, if your email is featured in an episode, then you're entered to win a MacBook Air in 2023. So let us know what you think. And keep living that charmed life, huh? We'll see you next time.