Author: Michael Pinchera

FM Issue: Leadership and Operations 2014

In the 27 years since Scott Williams, CFE, began teaching ethics to venue management professionals, he’s seen the industry consistently clean itself up more and more, in defiance of the holdouts. The good-old-boy system of determining who gets to travel, who gets special treatment or gifts, and who gets raises or bonuses is just about dead.

“Is it there? Sure. But it’s totally different than it used to be,” Williams said. “They don’t want to set up rules that they’re not willing to live, and that still goes on, but not as rampant as it used to be. I think if we have any chance of bringing about significant change, it has to start with the individual.”

The ethical transformation, however, hasn’t been driven simply by the desire of industry professionals to do the right thing—although that’s surely helped. Williams believes the situation has gotten better because people are afraid. From politicians and sports league leaders to venue owners and managers, there’s the fear of potential legal liability and negative public perception should an ethical lapse reach the front page. As a result, some facilities are being forced to change, or at least codify and document, their practices.

“I think policy-making boards, city councils, mayors, university presidents, etc., have said, ‘Hey, I’m responsible for my employees, I have to get this cleaned up or I’m going to be pulled in.’ Because if you know what’s going on and you don’t deal with it, guess what? You’re the problem,” Williams said.

You can see this trend in professional sports league rules, he said, noting how teams are adding policies that reach past the athletes and into the front office.

“I think they’re asking players and front-office managers to do better in a lot of ways because [ethics problems] could bring down the whole league,” Williams said.

Venue management professionals are increasingly being taught business ethics, acting in accordance with ethics policies, and training staff on the subject. This often culminates in managers and staff signing ethics statements as evidence of their awareness and understanding.

“That protects the employer,” Williams said, in cases of liability should an employee violate the company’s known ethics policies and, for instance, damage property or cause injury. “A judge may ask, ‘Did you train your people and can you show me?’ You can say, ‘Yes, your honor, on this date, Jimmy Johnson was trained not to do these, and he did so on his own. Here are the dates we trained him, here’s the date he signed that he was trained. And we did what we could. We can’t live these people’s lives for them but we can train them.’ But then managers have to live it. It’s very simple: You’ve got to walk the talk. And managers are getting better, primarily because they’ve seen a lot of their fellow managers get in trouble.”

Speaking in July about his recently released Ethics, Risk and Governance: a board briefing paper, Peter Montagnon, association director of London-based Institute of Business Ethics, made an important distinction between how ethics problems are managed in the U.S. and how they should be approached.

“This is not a simple compliance exercise. In the U.S., the approach has been influenced by Federal Sentencing Guidelines, which has resulted in a legalistic attempt to control behavior,” Montagnon said. “However, values and cultures are a necessary part of the equation—these are about the way a business operates. This is defined by the business model, which, to be sound, needs to be based on values.”

In essence, a business can’t just skip to the bottom line in search for a resolution—ethics must be hardwired into its culture.

Williams said that ethics problems appear to be most common at smaller venues based in tertiary destinations where there might not be much, if any, competition.

“There seems to be more of a good-old-boy environment in those facilities than there are the major buildings,” he said. “The big sports teams, the big concert venues, the big convention center properties—they can’t afford to have a blemish on their record. But a little building out in the middle of nowhere that nobody knows about, where the good-old-boys have been doing business [a certain] way for 50 years…you just have to wait for that to turn over.”

Despite being in a market the size and location of which could feasibly fit into the good-old-boy system cited by Williams, the Clay County Regional Events Center in Spencer, Iowa, runs clean. General Manager Scott Hallgren credits this to a combination of the Midwestern work ethic and hospitality and the fact that VenuWorks, a private management company responsible for 40 facilities nationwide, operates the center.

“If something negative was to happen at [VenuWorks’] brand new building in Houston and hits the national news, well, I’ve got my owner here in Spencer, Iowa, reading about it,” Hallgren said. “And he’s asking, ‘Boy, your company really screwed up down in Houston, what are you guys doing here in Spencer?’ So if anything breaks in our company, whatever market, that’s a concern for my local owner.”

VenuWorks’ Founder and President Steven Peters, CFE, is keenly aware of the potential impact on his portfolio of facilities should ethical problems manifest at even one of them, Hallgren said. Accordingly, Peters has high expectations for his staff.

“[He] instills that morality, just being a good person, and that all ties back to doing the right thing,” Hallgren said. “[Peters] has built a very family-oriented, solid culture. That’s come down to me, and I’ve passed it to my staff. But that’s why I’ve enjoyed working here for 10 years.”

As Montagnon explained in July: “Ethics is not anti-business. Senior people often get defensive at the mention of ethics. The discussion should not be framed in terms of individual morals…It is instead about how a collective works together, what expectations are placed on staff as to what they should achieve, and how they should achieve it.”

CHALLENGES AND POLICIES

A subject of great potential for abuse, throughout the history of the industry, is the Pandora’s box that comes with event tickets.

“Tickets are a big thing,” Williams said. “People do anything for tickets—they’re a real commodity, especially in the concert business, with backstage passes.”

In August, it was revealed that pop scrotum Justin Bieber allegedly bribed a Canada Border Services Agency (CBSA) officer at the U.S.-Canada Niagara Falls border crossing with CDN$10,000 worth of backstage passes in exchange for issuing two U.S. members of his posse (both allegedly with criminal records) temporary resident permits.

Esme Baily, a CBSA spokesperson, confirmed to Toronto’s NOW magazine that there was an incident with allegations including “accepting gifts, hospitality and other benefits; acceptances of travel offer from a third party and misuse of government electronic networks; abuse of authority; and, engaging in preferential treatment.”

The unnamed officer was terminated for her actions, as they were a direct violation of policies detailed in Values and Ethics Code for the Public Sector and the CBSA Code of Conduct.

“It would be fair to say that most of the ethical issues we encounter are with arena concerts,” said Kevin J. Twohig, CFE, CEO of the Spokane Public Facilities District. “Likely the size of the events and the amount of notoriety and money involved in arena concerts are an influence.”

In recent years, his district has seen ethics violations including “walking friends in the door/giving tickets away to an event for personal gain,” “hiding/changing numbers at settlement between parties,” and “utilizing charitable contributions in order to avoid paying taxes.” These ethics problems are always introduced to the ecosystem by third parties—especially concert promoters, he said.

Although such actions are often counter to contract verbiage (or outright illegal), Twohig and his staff still encounter them. How does he handle these situations?

“Carefully,” he said. “But I advise my team never to do anything that would embarrass them or the district later, and never do anything they think is inappropriate.”

That discussion acts as a reminder for staff, supported by an eight-point “Ethical Conduct Expectations” section in the district’s employee handbook.

Lana Cordes, CMP, manager of Bellco Theatre at the Colorado Convention Center, said that not only does her employer have a business ethics policy, but also a philosophy, credo, and code of conduct.

“These all go hand-in-hand. Each piece is integral and supports the others,” she said. “In this industry there can be a lot of perks; some of which are meant to be enjoyed, and some are meant to be politely declined. Knowing where to draw the line can be tricky.”

A challenge when it comes to effective ethics policies exists ironically because of a beautiful component of the venue management industry—the diversity of tasks, roles, responsibilities, and situations that vary from position-to-position and venue-to-venue.

“Relationships also run deep in this business, and it can be difficult to remain unbiased when dealing with clients, suppliers, or employees that are more than business acquaintances,” Cordes said. “There are an infinite number of scenarios that present themselves in the world of entertainment, meetings, and events. It’s just not possible to have a clear-cut policy on each of them. However, it is important to present succinct guidelines that can help employees navigate these waters.”

She underscores that it’s critical for management to set a leading example and practice what they preach to staff—policies and rules must apply equally to everyone.

“Is the management team in your venue absolutely on the same page when it comes to business ethics?” she asks. “If they’re not, you should fix that. If you don’t know, you need to find out. Nothing can muddy the waters more than a management team who sends mixed signals; and, of course, management should be provided no exception to the rule.”

A REPUTATION IS FOREVER

Another observation brought forth by the Institute of Business Ethics’ Montagnon in July is a valuable reminder: “Profit is a reward for bearing risk. However, it must be fairly derived and not achieved through exploitation.”

When in doubt, remember, it’s best to sacrifice sketchy short-term profits in order to stay true to and protect the values and reputation of your company and yourself.

VenuWorks partnered on a venue with one company, Hallgren said, that turned out to be less than sound ethically.

“That relationship lasted probably six months or less once some of those unethical issues got brought up,” he said.

Not wanting to be associated with the unethical partner, VenuWorks subsequently withdrew from the contract.

“Even though [VenuWorks] probably took a short-term financial loss, I’m fairly confident that it’s resulted in a longer-term financial gain for company,” Hallgren said. “But it was the right thing to do. All you have is your reputation, your own credibility. And that’s what you need to own and that’s what you need to build. That’s who you are.”

Keep in mind the exploitation for profit Montagnon mentioned isn’t limited to direct human-on-human actions. The environment and indirect impact on generations of people not yet born, too, come into play.

“The underlying principles of ethical dilemmas, for the most part, remain unchanged. They simply present themselves under a variety of circumstances that transform with the times,” Cordes said. “One such dilemma that has always existed but has only recently come to the forefront is the ethics of our environmental impact. We’re seeing a lot of change in certain types of venues, such as convention centers, because some of our clients are demanding it. However, the vast majority of entertainment venues are still far behind in their sustainability efforts. It’s not always favorable to the bottom line, especially the initial investment. But don’t we have an ethical responsibility to our communities, to our planet, to our great grandkids?”

WHY DO THESE PROBLEMS PERSIST?

“Because people won’t talk about them,” Williams said. “I really believe that if you can get it out and talk about it, you can solve it. Sometimes management doesn’t want to talk about it because they’re part of the problem.”

It’s important, Cordes contends, that management encourages a policy of open discussion.

“We are fortunate to have great resources in our industry to help gather and disseminate information,” she said. “IAVM, for example, does a great job of bringing all pertinent topics to the attention of its members to encourage honest discussion. Ethics, albeit a potentially touchy subject, should be no different.”

Considering how ethics education and action have advanced in the industry, it’s certain no one is ignoring the topic, even if they aren’t talking about it as much as many would hope.

Despite most prominent business schools mandating ethics education as part of their MBA programs, the efforts don’t always contribute to an ethical business climate, according to author and educator Deborrah Himsel.

In an August Bloomberg Businessweek column titled “Business Schools Aren’t Producing Ethical Graduates,” Himsel wrote: “In the classroom, teachers implore students to resist improprieties or even to blow the whistle when they spot corrupt practices. Try repeating this admonition to an MBA who has just landed a job after months of searching, to an experienced manager struggling to make numbers, or to professionals who have learned to do as they’re told in a hierarchical culture. Good luck.”

Williams recognizes this battle between business education and business reality.

“This generation has been through some training, but [the ethics displayed by] the older generation aren’t what they read in a textbook,” he said. “And they’re still going to take the job that’s best for them even though they don’t know what’s going on ethically in the company until they start working.”

Yet, it’s clear that education and awareness on ethics in the venue management industry is aiding the future—even if only preparing new entrants into the field—and must continue. And perhaps the next major advancement in ethics won’t occur until the remaining good old boys exit the workforce.

“It’s nowhere near as bad as it used to be,” Williams said. “And I’m glad it’s getting better, but I think if we don’t keep talking about it, training it, and asking, ‘What is ethical? What isn’t ethical?’ it’ll go back. It’s just human nature.” FM