Don’t be tempted to cross the line and intentionally break the law. Not even a little. It’s just not worth the risk, and it’s wrong as well. I know you already know this, but when cash is tight and it feels like disaster is impending, many an executive has succumbed to temptation.
Here is the way the “slide to the dark side” often happens.
A business faces a challenge—like being about to miss a bank covenant—and falsifies, just a little, the statements. Maybe it’s booking some sales that haven’t quite shipped yet. Nothing bad happens, and then another challenge arises. Soon, with some frequency, a pattern emerges.
Losing peace of mind
The first cost is loss of peace of mind. Each time the bank calls, the CEO worries he’ll be caught. Each request for records creates worry. It is an occasional energy drain – a distraction. The loss of peace of mind is no different in the case of tampering with the financial statements than if you’re playing with OSHA regulations, borrowed someone else’s patented secrets, or crossed the line from tax avoidance to tax evasion.
Then your purchasing person or bookkeeper starts underperforming (or sneaking an occasional $20 out of petty cash). But you realize that if you get tough on them or dismiss them, they could turn you in. You grin and bear the employee problems.
But then, you’re discovered! Immediately, your daily focus shifts from growing your business, or making production capacity rise, or maximizing profits. Instead, you’re plotting your defense, talking to your lawyer and worrying, or being angry. You’ve lost your focus, and your time is being drained away.
Meanwhile, you get to pay your lawyer $400 per hour. And you know that if you lose, you may well pay the other side’s legal bill too. The plaintiffs know this, and spend freely, not only to win the case, but to drain your time and resources.
Word travels fast
But of course, in your industry word travels fast. Not only are you and your employees really, REALLY embarrassed, but your competitors gleefully tell your customers the REAL reason that you can’t perform and show a copy of the complaint that was filed against you (it’s a matter of public record). They explain that you are a “bad guy” and exaggerate the matter as much as they can. You avoid going to the next trade show. You hide from your own customers. You have begun to lose your standing in your community – your industry.
Any of your employees that hope to have a career path in the industry figure out quickly that you may have already hurt their chances for future employment elsewhere, and the sooner they quit and distance themselves from you, the better. They begin looking. But you may not notice – you’re busy paying legal fees and calling your lawyer.
Then you lose, or settle for a large cash payment. If you really blew it, a criminal investigation follows.
When it’s all over, you try to pick up the pieces of your business and your life.
Play the game by the rules
With so many ways to generate revenue and cut costs, why risk bringing all this headache and trouble to your door by crossing the line? It is easier and simpler to play the game by the rules.
The sorry string of events I’ve described is typical of businesses that break the law or otherwise earn the disdain of their community. Just look at Martha Stewart. And in your own home town, you can probably think of several cases where someone got caught hiring illegal aliens, or evading taxes, embezzling funds from clients, forcing workers to operate in unsafe conditions, or the owner got caught with an underage employee in the bedroom. It’s the same story, just with different details.
Many of us feel the pull to the dark side. The urge to make a few extra bucks or the need to keep the business afloat may push us to accept unreasonable price demands from customers, and then the pressure to illegally shave costs and cut corners beckons to us.
But the risks and consequences are not worth it. And it’s wrong. Resist the slide to the dark side. And if some day you feel your resolve is floundering, pull out this article and re-read it.
- Illegal activities always start out with small breeches during a challenging time, but then grow quickly.
- Even before you are caught, the worry and “management” of the secrets drains energy and distracts.
- Once caught, the battle will be expensive, embarrassing and destructive. Stay legal and fight your business challenges early and honestly.