Editor’s Note: This is the second of a three-part series of real-life stories from business leaders facing ethical dilemmas.

A number of years ago, the Division Vice President at a very large financial services firm had to make a difficult decision. During the normal course of business, it was discovered that one of his sales advisors had misled a client while selling securities.

This advisor was one of the firm’s best; a top producer with high-value clients. The advisor hadn’t done anything illegal, but during the selling process he had deceived the client. The deception was discovered by the sales manager, who reported it to the Division Vice President. However, the firm’s compliance department found no fault with the marginal behavior of this particular sales advisor.

The incident was in an undefined gray zone --- maybe the sales technique was questionable, but on the other hand, it wasn’t illegal either. The sales advisor was well-liked and had a long history of success with the firm. And if the executive made a big deal about this incident and offended the sales advisor, he might leave the firm, taking his customers with him. This would mean significant lost revenue for the firm, making it difficult to meet sales goals for the year. By the way, that meant the executive’s annual bonus would be diminished. The easy thing to do would be to just look the other way. After all, everyone makes a mistake now and then, right?

But it occurred to the executive that the sales advisor’s deception might be a pattern, not just a single incident. He knew he needed more information before he could put the matter out of his mind. The executive wanted to know where the boundary was; he needed to eliminate the gray. So he asked a compliance officer to conduct an investigation into all recent sales by the advisor in question.

When the findings of the investigation came back, the executive felt like he had been punched in the gut. It was exactly what he had hoped wasn’t true: the deception had been a pattern with many clients, not simply a one-time accidental oversight. But technically the behavior still wasn’t illegal either, and the compliance officer was seeking direction from the executive on what to do --- look the other way or punish the sales advisor?

Taking the Fall
This is a real-life dilemma faced by my friend Doug Lennick, currently CEO and co-founder of the Lennick Aberman Group, an executive and organizational advisory firm.  He is also a professional keynote speaker who co-authored the internationally acclaimed “Moral Intelligence”, which has been published in ten languages, as well as the recently released “Moral Intelligence 2.0: Enhancing Business Performance and Leadership Success in Turbulent Times”. And recently he also released the popular “Financial Intelligence: How to Make Smart, Values-Based Decisions with Your Money and Your Life.”

Lennick shared this story with me recently, explaining that at the time he was leading the top division in the sales organization. He later went on to lead the entire sales organization of 17,000 field and corporate associates. Although the investigation was not public, nothing is ever kept secret and people in the firm had probably caught wind of it. In other words, his decision was not going to impact just this one sales advisor, but send a message throughout the organization.

That’s why he decided to punish the sales advisor with censure and a fine of a substantial amount of money. But he didn’t stop there. He also fined the manager and himself.

“I took the position that I should take my share of the ownership,” said Lennick.  “As a result, the message to everyone in the office was that first of all, our standard for integrity was very high, and second, that I would be responsible for what others in my organization did. It was important that they knew I would not assign the blame to someone else.”

As a result, the bar of the level of trust between the sales and compliance departments (not always the most comfortable of relationships) was raised significantly. “The compliance department knew I was really trying to develop a culture of compliance, and that I wanted to be preventive rather than working to catch people doing something wrong,” said Lennick.

By not only fining the sales advisor but also himself, Lennick says, he also proved to his sales organization that he was establishing the boundary between right and wrong, and that he wasn’t going to go near the edge.

“When you are in the moment, it is easy to get caught up in your emotions and get distracted from the right thing to do,” he advises. “In this incident, I had some anxiety because I didn’t want to offend the sales advisor and make him leave the organization, but I was also upset about his behavior. Luckily, I separated myself from my emotions and realized the best way to handle it was to punish myself too. It wasn’t just about the sales advisor; I believed that the manager and I were also guilty because his behavior had happened under our watch.”

 Defining Integrity
By taking responsibility, Lennick proved with his behavior that he would stand up for what was right, an action of integrity. “Integrity is more than just not lying,” he notes, but it’s also making decisions consistent with your values, keeping promises, and behaving in a trustworthy manner.

Lennick's actions also proved to the organization that he had compassion. “I showed that I cared about the sales advisor, the manager, and the client,” he says, which was important to continue to be an effective leader. He also demonstrated forgiveness by not firing the sales advisor. “My actions showed that I believed that we should correct mistakes, but then let go and move on,” he said.

Altogether, responsibility, integrity, compassion, and forgiveness create a relationship of trust, Lennick says. And when there is a high level of trust in an organization, “you end up with a committed, engaged, high-performing workforce.”. He explains that with a high level of trust, employees know they can do their work consistently with their own personal moral values, and tend to deliver their best efforts.

This incident taught my friend that even “the stuff on the edge that you can rationalize” matters. “I know that I am not perfect, and I suspect that most humans aren’t,” Lennick says. “So the best we can do is to try to be committed to aligning the real with the ideal, which means I work hard at behaving in a way that is trustworthy.”

Trusted vs. Trustworthy
Is there a difference between being trusted and being trustworthy? I asked. Lennick brought up the poster child for unethical behavior: Bernie Madoff.  ”He was trusted, but he was not trustworthy. It’s about aligning your behavior with your values,” says Lennick.

I asked Lennick what happened to the sales advisor who was fined, and he said that he eventually left the firm of his own accord. I wondered what happened to the firm’s sales? Actually, he said, the firm was more successful than ever following this incident.

That confirmed to me that when leaders build a culture of responsibility, integrity, compassion and forgiveness --- the foundations of trust --- the end result is a highly engaged, committed group of people who, when they work together can achieve the company’s goals.