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A discouraging word...

Week of 17 Mar 08

I often speak of corruption in our industry as a thing of the past. Unfortunately, this is apparently not so. A few weeks ago, I happened to run into several people within a period of a few days that told me stories of relatively contemporary corruption problems which apparently continue to this day. Surprisingly, I was not seeking out these stories; they were volunteered to me in independent settings by people that don't even know each other.

Unfortunately, but perhaps not unexpectedly, these problems seem to center around the purchasing department. I say that recognizing most purchasing agents are hard working, honest people. The reasons I perceive these problems center in this area are because this is where decisions are made causing money to change hands. It is the circumstances that bring out the character flaws in the few bad apples.

I'll not dwell on the gory details of the transgressions--that is not important to the larger purpose. Instead, let us spend our time on why corruption is bad--a concept you may think is obvious, but one seldom discussed.

First, and foremost, it is theft. It robs an entity of funds which rightfully belong to it. The excuse, "they are so big they won't miss it" doesn't fly. It is plain and simple theft, whether it is a small amount or a large amount.

Second, the hidden costs may be significant. If a corrupt salesperson and a corrupt purchasing agent collude resulting in delivery of inferior goods, there may be failures, bodily injury, large lawsuits and so forth. All because out of specification materials or services were purchased.

Third, corrupt practices drag the performance of the entire organization down. There are the direct results--people possibly having to use less than optimum goods or services. Then there are the indirect results--the employees on the bubble of doing good work or poor work that are tilted towards a "don't care" attitude when they see corruption go unpunished.

Fourth, it can destroy companies and communities. There are famous corruption cases such as Enron. But in our industry, there are mills in the hinterlands that entire communities depend upon. The closure of these mills destroys thousands of livelihoods. This is not theoretical--it has happened before and it most likely will happen again--permanent closures caused by corruption.

So, what to do. As individuals, we must put our honesty and integrity above our jobs. Yes, even if this causes us to lose our job, uproot our family and start a new life elsewhere. There is no location, no job, more important than your honesty and integrity. This is important and serious stuff.

As managers, especially corporate managers, we must understand that the standard annual accounting audit will not root out such corruption. Neither will the use of overarching software programs that are supposed to keep an eye on everything. Corrupt individuals spend all day thwarting these watchdog systems. Such audits and systems will not even detect offline shakedown schemes.

Quick story illustrating the false security of the accounting audit. Years ago, when I was in the engineering department of a large mill, I would annually receive a call from onsite administration asking me to escort an auditor to view capital installations of the past year. The routine was the same. I would drive our pickup truck over to the admin building, pick up a fresh-faced kid in a new suit and wingtips. The kid would say, let's go see ________ (some project we had completed in the past year). I would drive to the installation, and ask if they wanted to get out and examine it. Seldom did they, especially if it was raining or it was inside some forbidding looking building (such as the pulp mill). Audit over. I could have showed them a mound of peanut butter, they wouldn't know the difference. Corrupt employees are way more sophisticated than this.

Some large mills have had (and I suspect still do have) rings of criminals. There is the famous case in Green Bay, Wisconsin many years ago of the gang that killed their fellow employee because he turned them in for stealing an extension cord. Again, this is important and serious stuff.

Leadership in supplier companies can and should help stop corruption, too. Get close to your sales people. Do not tolerate graft, even if it cost you business. Reports of the size of gifts given to secure business indicate that they must be approved at a fairly high level in the seller's organization (it is hard to hide a bass boat or a bespoke shotgun on an expense report). If you think no harm is being done to your business, consider this: if I were in a purchasing role and I knew you were doing business in certain mills, I would not do business with you, for I know the only way you could do business in such mills is through payoffs. You would not have a chance at my business and you would not even know why. I suspect there are other managers out there that think exactly this way.

If you are an executive in a paper company or an executive with a supplier, the only thing to do is be a bit paranoid and assume there is corruption in your organization. Go after it with all the tools you have at your disposal. In the end, you will run a better, more profitable enterprise.

I hope I didn't sound like a preacher this week, but this is a very serious matter. It has the potential of killing our people and our industry. We must be vigilant all the time.

And, of course, we must be vigilant in safety all the time, too. Look over your safety gear--is it of the best quality? If not, replace it with that that is.

Be safe and we will talk next week.


I had most of the above written in my head this past Monday afternoon. It was a nice day, so I decided to take my motorcycle out for a spin and clear my head on this topic. When I came back, I flipped on the news and saw for the first time Governor Spitzer's little surprise. How appropriate. It does make me say this. I speak the above not from a high and mighty self-righteous perch. I have made my mistakes and have my enemies, justified and unjustified. However, I do speak from experience, and although no one has seen fit to give me a bespoke shotgun in return for a favor, I have been to some ball games for free. In the whole matter of Mr. Spitzer, it is not an issue of right and wrong, legal or illegal, it is a matter of trust, which is the same as with you as an employee. It is like a discussion I had one time about the Judeo-Christian "Ten Commandments." One can get all tied up worrying about whether they are "holy" or not. I say forget that. If you want to stay on a secular plane, that is fine--if nothing else they (the big 10) are good advice--you mess up in one of these areas and you are almost guaranteed to have problems, serious problems. By the way, I played golf on a course at a seminary one time and they had 21 rules prominently posted in their club house. I guess golf is more difficult than life!


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