Montrone Seminar Series Launched

Montrone Seminar Series Launched

By Julius Kalcevich ’05, Bottom Line, Thursday April 15, 2004

On April 6th, the Integrity Board successfully launched the Paul Montrone Seminar Series with a luncheon that featured guest speaker Arnold Chavkin ’77, Chief Investment Officer of JP Morgan Partners. Made possible with a donation from Paul Montrone ’66, the series of roundtable lunches are designed to allow students to focus on real-life ethical issues and the consequences of decisions. The size of each event (limited to 12 students) is intended to allow the speaker to engage in an open dialogue about decisions made and challenges faced during their careers; the event gives students the opportunity to ask questions and hear the personal insights of business leaders.

As the Chief Investment Officer at JP Morgan Partners (“JPMP”), Mr. Chavkin is responsible for overseeing the “big picture” distribution of JP Morgan Chase & Co.’s $25 billion global private equity fund. JPMP participates in venture capital rounds, management buyouts, recapitalizations, and industry roll-ups. Mr. Chavkin participates in the general management of the firm, as well as having specific responsibility for overseeing the International and Industrial Growth activities and certain other investment focus areas for JPMP.

With Professor David Beim of the Finance & Economics Department moderating, Mr. Chavkin discussed his career and his own ethical code with a group of twelve students who hail from seven different countries. Mr. Chavkin was especially interested in hearing the thoughts of Chinese students as China’s industrial structure creates specific ethical issues for many private equity investors. Mr. Chavkin’s own ethical compass stems from an early decision to totally avoid questionable actions, however small, that can be the start of a “slippery downward slope” of compromised conduct. Most corporations are “amoral” in that they are (and should be) solely focused on shareholder return, which does not leave much scope for the personal ethics of an employee. However, Mr. Chavkin believes young corporate citizens need to quickly determine their own relative ethical boundaries and make decisions within these margins. He used the example Enron and its former CFO Andy Fastow; Mr. Chavkin opined that Andy Fastow did not start out as an unethical or corrupt executive, but rather, over time Fastow made decisions that incrementally strayed further and further from his ethical “comfort zone.”

Mr. Chavkin emphasized that a long term focus is critical, especially with respect to ethics. As soon as a company or individual crosses their own ethical line, they are beholden to someone else who can always try to leverage or manipulate future decision-making. In the long-run, this makes for a weak business strategy as companies become constrained and encumbered by their own tangled web of lies, omissions and shady alliances. Entire corporations (as evidenced by the collapse of Arthur Andersen) can be destroyed by the flawed judgment of just a few individuals who fail to consider the long term consequences of their decisions. Mr. Chavkin also highlighted the benefit of having a strong global brand when presented with ethical dilemmas, in that many foreign businesses are respectful of the whistle-blowing power of a company with JP Morgan’s stature. In contrast, he believed that smaller companies or individuals are more susceptible to pressure to bend the rules in order to win business.

On a positive note, Mr. Chavkin believes that the tide is changing in business ethics. The consequences of breaking various ethical regulations - for example the penalties for bribery - are now so severe that most companies are reluctant to stray from the “straight and narrow.” The United States is spearheading this effort, with European countries quickly following suit. A recent item in the press reported that Lucent Technologies dismissed four executives in its Chinese operations for bribe-taking which suggests that companies are adopting zero-tolerance policies for illegal and unethical behavior.

Note: The Paul M. Montrone Seminar Series on Ethics is now organized by Leadership and Ethics Board of the Sanford C. Bernstein & Co. Center for Leadership and Ethics