Entrepreneurs need to set ethics policy

I recently had dinner with a thriving entrepreneur who asked for advice on an ethical issue. His company has successfully moved into the entertainment industry and is now the leading supplier of a unique form of packaging. The problem: some of the products he is being asked to package run contrary to his personal belief and values system.

The company has nurtured this market for a number of years and is now reaping the benefits of its segmentation efforts. It has no other market that is as well-developed and therefore relies heavily on this particular segment to drive top-line revenue.

His company's packaging is so unique that customers view his product as a competitive advantage in the marketplace and feel that it helps drive demand. The CEO has turned down some key contracts due to the content of the product to be packaged. As a result, he has opened the door for potential competitors and, in one or two cases, has disappointed his customer.

We talked about several steps that he might take to develop a position that would reflect the company's values:

• The management team and owners of the company should openly address and discuss the ethical strategy for the firm. The key players MUST be in agreement on these issues.

• The company should create an ethics policy — when to say "yes" and when to decline a business relationship. Never allow the company or its employees to make a random decision on an ethics issue. Saying "no" to some requests and "yes" in other situations will cause the customer to view the firm suspiciously. The customer might even see your responses as a personal attack if you defend each decision on its own merits rather than relying on a consistent policy position.

• Hold periodic meetings with your management team and employees. Coach your team on what to say, how to handle sensitive situations and what to do if the problem escalates.

• Consult with counsel if you have any concerns about issues that may be viewed as discriminatory or prejudicial.

• Do not waver, even in the face of enticing revenue. I recall having to turn down a contract with a Fortune 100 client based upon a contract issue. Years earlier we had made the decision that we would not agree to a certain provision in our contracts. As a company, we hoped to either go public or be acquired at some future date and had decided that the issue would be viewed unfavorably by potential investors. The customer was told that we would not agree to the provision under any circumstance. Needless to say, we walked away from the contract and ultimately the relationship with the firm. In hindsight, it was the right decision.