When U.K.-based publisher Pearson Education approached Jon M. Huntsman to write a book on ethics in business, he was hesitant. “I was taken aback by their request,” Huntsman says. “I suggested that other CEOs could probably do a better job.”
In the end, Pearson convinced Huntsman that, given his long history of philanthropy and fair dealing, he was the one to write Winners Never Cheat: Everyday Values We Learned as Children (But May Have Forgotten). The book, which includes chapter titles such as “Lessons from the Sandbox,” “Play by the Rules,” and “Keep Your Word,” provides an ethical outline that Huntsman believes is crucial to success.
“It’s a book that’s very basic and easy to read. It’s easily understood and employed in all languages and cultures,” Huntsman says. Its common sense principles, he explains, are meant to remind everyone to act according to his or her internal “moral compass.” It’s that compass that Huntsman believes will “keep us on the right track toward respect, dignity, and, at the end of the day, profitability in our businesses.”
Huntsman earned his BBA from The Wharton School at the University of Pennsylvania in Philadelphia and his MBA from the Marshall School of Business at the University of Southern California in Los Angeles. A mainstay in the chemical industry since 1970, Huntsman is the founder and chairman of Huntsman Corp., a petrochemical company based in Salt Lake City, Utah. He served as its CEO until 2000, when he named his son Peter as successor. Until its $1.3 billion initial public offering in February, his company was the largest family-owned business in the U.S., going from zero to $13 billion in annual revenues in its 35-year history. Huntsman, the man, has prevailed over the financial fallout of 2001, which almost led to bankruptcy for the company, and two bouts with cancer.
In his career, Huntsman has given nearly $500 million to charitable organizations, including millions to the country of Armenia to help it rebuild after a 1988 earthquake. He donated $50 million to The Wharton School, where a building has been named in his honor, as well as $225 million to the charity closest to his heart, the Huntsman Cancer Institute. He has been awarded Armenia’s Medal of Honor; and, in 2005, he was named a “Giant in Our City” by the Salt Lake City Chamber of Commerce. He is ranked 26th on BusinessWeek’s “50 Most Generous Philanthropists.”
Huntsman and his wife, Karen, are parents of nine children, including Utah’s newly elected governor, Jon M. Huntsman Jr., and grandparents of 52. Both define success as much by their family as by their philanthropic and business pursuits. However, Huntsman also implores every business school to teach students to safeguard their most precious asset and ultimate measure of success: their characters.
A student shouldn’t say, “Gosh, I think I’ll take a class on ethics.”
In Winners Never Cheat, you outline a simple, yet comprehensive, set of ethical guidelines: Be fair, share, don’t cheat, keep your word, tell the truth, treat others as you’d like to be treated. Why do you think so many in business seem to have forgotten these simple lessons of childhood?
I think far more people than we realize live in harmony with the rules in the book. We hear about the exceptions—the Enrons, the Tycos, the WorldComs. We often don’t hear about the hundreds of thousands of good firms and wonderful people playing by the rules every day of their lives.
You write that we all possess a moral compass, whether or not we follow it. Many schools have added ethics to their programs to help students heed that compass. Do you think these schools’ efforts can truly make students more ethical?
Business schools can be extremely helpful in pointing individuals in the correct direction and helping them understand that ethics and integrity are far more important than anything else they’ll learn in the classroom. Because of that, ethics shouldn’t be separated. A student shouldn’t say, “Gosh, I think I’ll take a class on ethics.” It should be a part of every course, not only in business schools, but in medical schools, law schools, and every type of professional or liberal arts institution.
This year, more than 200 business school applicants used a technological loophole to view their admissions status online before the information had been released. Some schools rejected those applicants outright; some rejected them after hearing their cases; one accepted a few, noting that while their actions were wrong, it would not deny otherwise worthy applicants admission. How would you have handled these applicants?
You’re asking me to be a judge!
These schools did have to be judges, to some extent. Given the message of Winners Never Cheat, I wondered what you would have done.
At our company, if people are in financial straits, we’ll help them. If they have health concerns, we’ll take care of them. But if they commit a serious ethical breach, they no longer have a job. It isn’t that we’re unforgiving, but at what point do those who committed this ethical breach and were admitted anyway say, “Well, I got away with this one. I wonder if I’ll get away with the next one”? I would say to those individuals, “Part of our admission policy is based on your integrity. If you participated in this, you have forfeited your right to gain admission. It’s that simple.”
Is it always so simple? If the ethical breach is small, is there room for a second chance?
The scandals at WorldCom, Tyco, and the rest of them were well-planned and well-executed by people who knew exactly what they were doing. These people probably started by cheating on their expense accounts 15 years ago. Over time, they built up little by little from very small infractions to those costing hundreds of millions of dollars. Some people continually test the system to see how much they can get away with.
Could it often be a matter of courage? That is, how many people at Enron knew what was going on before Sherron Watkins finally blew the whistle, but were too scared to speak out? How can business schools instill in students the courage required to step forward?
I don’t believe it’s a matter of courage. Throughout my career, I’ve lost millions of dollars playing by the rules. I think millions of people out there have done exactly the same thing. So, if people know something dishonest, illegal, or unethical is going on, but don’t report it, I wouldn’t want them working for me.
There’s going to be a time in their lives when they say to themselves, “I knew what was happening and I could have stopped it, but I didn’t.” So what if they have to find another job; so what if they have to go out and restructure their lives again. Who wants to work for a company that’s cheating? They only do themselves a favor by leaving an unethical organization.
It should be a part of every course, not only in business schools, but in medical schools, law schools, and every type of professional or liberal arts institution.
Now that Huntsman Corp. has gone public, it is subject to Sarbanes-Oxley. Do you think Sarbanes-Oxley is an antidote to corporate wrongdoing or merely a kneejerk reaction?
Sarbanes-Oxley is so new, we’re still trying to understand it. I think it’s a reasonable and probably healthy law, but it puts enormous pressure on the CEO to know everything about everything. At Huntsman, we’re just passing the $13 billion mark for annual revenues and have operations in 43 countries. Now that my son is the CEO, I just hope he can understand the thousands of issues he’s signing off on.
I think Sarbanes-Oxley is on the right track, but the pendulum may have swung too far to one side. I don’t know that one person can be mentally and physically able to sign off on every single thing that’s gone on in a corporation operating in 30 or 40 countries with 16,000 to 20,000 employees and know that what he’s saying is accurate. It may be more than the human mind can absorb.
I also think it derails a lot of potential CEOs from seeking that position. They know in the back of their minds that they can’t possibly know every single thing in every single facility regarding every single individual. Because of that, they don’t want to run the risk of going to jail.
How is Huntsman Corp. dealing with Section 404 of Sarbanes-Oxley?
Our board decided to draw a line where we said, “To be fair to our CEO, we’re really talking about issues of a certain degree of magnitude.” One individual can’t possibly know the intimate details of everything, but perhaps he can know everything that involves more than, say, $5 million or $10 million. So, we’re trying to enforce Sarbanes-Oxley with some sense of reason.
As one of the country’s top ten philanthropists, you and your company have given nearly a half-billion dollars to charities. Why do you think philanthropy should be a standard practice for all businesses?
In America, the cost of doing business is A, paying taxes and B, contributing above and beyond taxes to charitable or humanitarian interests. I think between one and three percent of every corporation’s annual budget should be directed toward philanthropy.
The companies people respect the most over time are those that continually give some part of their profits for the benefit of those in need. These contributions allow not only the company but all its employees to feel that they’re doing something for others. There’s a broader, more meaningful basis for their existence when they do their part in helping others.
During the economic downturn in 2001, you actually took out loans to fulfill your charitable obligations. Not many in business would go that far.
My object was to give as much as I could, whether it came out of my pocket or the corporation’s pocket. When the economy gets tough, that’s when people need you most. And yet that’s when most people renege on their charitable contributions because they have less money to give. It’s a Catch-22 situation. But I feel that once you’ve made a commitment, you’re honor-bound to complete those obligations even if you have to sell your house or assets, or whatever it is you have to do.
Huntsman Corp.’s history seems to illustrate that “what comes around goes around.” If you hadn’t been so generous in the past, many companies might not have been willing to support the company financially during its own tough times.
That’s definitely true. In the 35 years I’ve owned the business, we only had these difficult years from 2001 to 2003 when the perfect storm hit: Energy prices were out of sync, there was a recession, and we had overcapacity. Everything that could go wrong did go wrong, and there wasn’t a thing we could do about it. But we received tremendous support, with many suppliers giving us double and triple the credit they normally would have given us. That was their way of saying, “Thank you.” Our charitable involvement over many years was critical in helping us stave off bankruptcy and move ahead in a profitable manner.
What else do you think made the difference in Huntsman’s turnaround?
Well, 2001 to 2003 was a difficult period, particularly for a father and son. Peter and I had to check our egos at the door, and we had to be better listeners than talkers. Even so, I think our biggest mistake would have been to listen to the consultants and lawyers who were telling us how to run our business. The worst advisors I’ve ever had were lawyers. If they’re interpreting the law, that’s one thing; but basic business decisions should be left to those who have been in the business all their lives.
True leaders are teachable. They practice what they preach, stand up for charity, treat employees with respect and dignity, and interact with employees constantly.
When a company gets in trouble, people often lose self-confidence and think the consultants and lawyers can run the business for them. But if these folks were really experts at running a business, they’d all be multimillionaires and billionaires. They wouldn’t be charging by the hour.
Huntsman Corp. has gone through many transitions, including its recent IPO. If students were studying Huntsman Corp.’s history, what would be the most important thing they’d learn?
I think they’d learn that it takes a different type of individual to run a company at different stages. When we took the company from zero sales to $100 million, we had one set of senior managers. As we approached the $100 million mark, however, people began to fall out because the pressures were too great, the numbers were too high, and the workload was too heavy. We almost had to start over. As we went from $100 million to $1 billion, I began to surround myself with different people with broader vision, more experience, more self-confidence, and the ability to deal with more diverse geographic areas.
When we surpassed $1 billion, I noticed that we were wearing down some of these folks, stretching their limits. So I recruited people who were more experienced in billion-dollar companies and the global marketplace, with its heavy travel and more sophisticated financial variations of equity and debt. I’m now on my third set of managers, and I’ve been able to adjust myself reasonably well through it all. Some entrepreneurs can do this; others can’t.
How did you prepare to pass the CEO position to your son Peter?
I have always been fascinated by the questions surrounding family businesses: What are the ingredients for success? What are the ingredients for failure? When is the right time to pass the baton? I’ve studied just about every major family business in America. I’ve seen very few successes, and I’ve seen hundreds that have languished in lawsuits and failure. You learn as much from the families that have been failures as you do from the successes. If you ever see their problems creeping into your own organization, you immediately eject those practices. Then you look at those who have been successful, whether it’s the Marriotts or Charles Butt at HEB in Texas, and try to build on their platforms.
In Winners Never Cheat, you note that the marketplace has many leaders, but not enough leadership. Why do you think leadership is such a rare commodity in business today?
There are very few true leaders at corporations today. I was in the Navy, and in the military, anybody who’s an officer is considered a leader. Similarly, people consider anyone in a corporation who is a vice president or above to be, by definition, a leader. That doesn’t mean that person provides great leadership skills.
Leadership is the capacity to ascertain all the facts, make timely decisions, and surround yourself with people who have different opinions, who will say, “No, I don’t think that’s a good idea.” Leadership is the ability to hear the people around you and hear all sides of an issue. It’s the ability to change your mind if you honestly feel that your original thoughts were inaccurate. True leaders are teachable. They practice what they preach, stand up for charity, treat employees with respect and dignity, and interact with employees constantly.
Very few entrepreneurs are going to reach your level of success, but what do you think entrepreneurs most need to do to make their businesses as successful as possible?
I think it’s so important that they first get some experience. I always wanted to go out on my own, but I also knew I needed to make my mistakes on somebody else’s nickel. I worked for ten years for another firm and didn’t enjoy it very much, but I rose from trainee to president of the company. By the time I went out on my own, the banks had confidence in me. Better yet, I was in my early thirties, still young enough to have a lifetime ahead of me to build my business.
Successful entrepreneurs I know start small, like we did. They don’t establish five-year plans when they’re just starting out. They establish one-month plans, three-month plans, or six-month plans at the most. They learn to adapt very quickly. And when entrepreneurs are starting from scratch, they’ve also got to understand that a certain amount of capital is required. Most companies fail because they’re undercapitalized. It doesn’t mean they need hundreds of millions of dollars, but they have to analyze their financial needs and make sure they have that money available in cash or credit. Finally, they have to be able to recognize their own weaknesses and surround themselves with people adept in areas where they have weaknesses.
Very few entrepreneurs allow themselves these luxuries. I’ve seen nine out of ten go broke—I can tell they’re going to go broke before they even start. Over my lifetime, hundreds of them have talked to me about their ideas and programs, but they have no game plan. They’ve come up with a new mousetrap, but they’re not financed. They have a convoluted new idea, but they have no experts who are going to help them. You know they’re not going to last in business.
You’ve built a powerful legacy inside and outside Huntsman Corp. As business students strive to build careers, how important is it that they focus also on building legacies they’ll be proud of?
A legacy is multifaceted—it’s a process of one’s life. It includes not only business, but also family, charity, and outreach to employees, suppliers, and customers. A legacy centers around two areas. The first is character. A person’s character— his ethics, integrity, sense of loyalty, sense of graciousness— is as much a factor in success as financial dividends. The second is philanthropy. We know how you made your money because you’re a successful entrepreneur. But how did you spend it? How gracious were you in giving it away, how sensitive to the needs of others?
I’d say 90 percent of wealthy people in America are not respected because they would rather make money than give it away. They’ve spent their lives building great empires, but they don’t have the joy of seeing the twinkle in somebody’s eye when they give someone a scholarship or assist someone who’s homeless. As a result, they lose 50 percent of the value of building a business. They’re only half a person, only half a legacy.
Those people tend to be forgotten very quickly. But we don’t forget, for example, Andrew Carnegie—people like him will be remembered for hundreds of years because they understand how important it is to give as well as receive. Carnegie once said that we’re all temporary trustees of our wealth and that the greatest attribute we have is giving what we have to others. At the end of the day, that’s what it’s all about.