In Pursuit of Profit

A company had a client overseas who was purchasing a large number of a certain product. As the product delivery date approached, the company leaders realized that they were not going to make the contractual deadline. The client was not ready for the products yet and was planning to store the items for a few months before using them. The company leaders met to discuss what to do. The chief operating officer (COO) ultimately decided to ship incorrect equipment in order to meet the delivery deadline because the penalty for missing the deadline was severe. The COO also noted that because the products would not be used for a few months, the company could ship the correct products to the client later, once they were ready. The company would make more profit by shipping the wrong product across the ocean and back again than it would if it suffered the penalties stated in the contract.

ASCE Code of Ethics Fundamental Canon 4 states, “Engineers shall act in professional matters for each employer or client as faithful agents or trustees, and shall avoid conflicts of interests” (ASCE 2009). In this situation, however, the company did not serve as a faithful agent of its client. Canon 6 states, “Engineers shall act in such a manner as to uphold and enhance the honor, integrity, and dignity of the engineering profession and shall act with zero tolerance for bribery, fraud, and corruption” (ASCE 2009). The guidelines for Canon 6 add, “Engineers shall not knowingly engage in business or professional practices of a fraudulent, dishonest or unethical nature” (ASCE 2009). By shipping the wrong product, the company in this situation violated Canon 6 in order to increase its profit margin. An engineer who learned of this situation after the fact wished that he could have prevented the shipment. He would have told the COO, “That sounds unethical and possibly illegal. It clearly violates Canon 6 of the engineers’ code of ethics, and we obviously can’t do it.”

A company had a significant contract with a client for a large item. Like most companies, this one had monthly shipping goals and incentives to meet those goals. The end of the month was close, and the company needed this big item to ship in order to meet the monthly goal. So, middle management decided to ship the item without proper shipping authorization from the customer, which was clearly required in the contract. The contract also stated that the item would be shipped directly to the customer. Management decided to ship the item to a distributor/sales agent so that the customer would not know that the item had shipped without authorization.

Initially, everything seemed to have worked out: the shipping goals were met and the product was on its way to the distributor. The item, however, was significantly damaged during shipping. The cost of repairs was 40% of the original internal cost of the product and, if paid all at once, would require an executive corrective action or investigation. So, middle management paid for repairs in two purchase orders in order to prevent the red flag from being raised.

The engineer who told me about this situation was involved with the repairs of the large item. He was shocked that this type of conduct, which violated ASCE’s Code of Ethics, had occurred at his company. He thought that there should have been other preferable solutions available. For example, middle management could have communicated with the customer and requested authorization to ship the item.

A company engineer was a longtime member of a trade organization. He would often attend the organization’s annual conference, and he enjoyed the opportunity to learn from others who worked in his industry. One year he attended the main banquet for the conference, during which the past president described the accomplishments of the previous year and the new president discussed his goals and direction for the upcoming year. Midway into his speech, the new president started talking about how products were being sold at too low a price. Prices needed to be higher; raising prices would improve all of the participants’ businesses and make for a better profession.

Guideline C under Canon 6 of ASCE’s Code of Ethics states, “Engineers shall act with zero-tolerance for bribery, fraud and corruption in all engineering or construction activities in which they are engaged” (ASCE 2009). The engineer was appalled at what the new president was saying. So, he stood up and interrupted the speech, stating that raising prices in this manner was unethical and illegal. After the conference, he wrote a detailed letter to the organization. This engineers’ vocal disapproval prompted the organization to create an official antitrust statement. The statement is now read before every annual meeting and declares that collusion among organizational members will not be tolerated.

A young engineer was working on a project, and his supervisor stopped by his office to talk about it. The supervisor recommended significantly reducing the spacing of structural members in the floors to 2 ft (0.6 m). The young engineer stated that he had checked and double-checked the spacing and 3 ft (0.9 m) easily met code requirements. The supervisor then mentioned that because the engineering fee was based on a percentage of the construction costs, by increasing the project costs (by reducing the spacing) the firm would be paid more money. The young engineer did not like this conversation. He knew taking his supervisor’s advice violated the “act as a faithful agent” obligation of being an engineer but thought he was in no position to argue with him, a P.E. and leader in the consulting company.

Some engineering projects require that a certain amount of work be performed by a certified disadvantaged business enterprise (DBE). DBE companies employ individuals from socially and economically disadvantaged backgrounds. The owners of DBEs are also required to have socially and economically disadvantaged backgrounds. One engineering consulting firm created a DBE so that it could fulfill DBE contract requirements. Although paperwork indicated that the DBE was legitimate, in reality its owners were not from disadvantaged backgrounds.

An engineer was working on a federal project that was funded by the American Act. The contract required that only American-made products be used in the project. As the facility was being built, a contractor informed the engineer that some of the large valves used had engraved labels that read, “Made in China.” The contractor said that he could grind off the labels and no one would ever know. The engineer knew that an inspection was quickly approaching, and there was no way to order and install new American-made valves before the inspection. The Chinese valves were equal in quality to the American valves.

The ethics of this situation are relatively clear: I think everyone would agree that to hide the identity of the Chinese valves would be dishonest, and being dishonest violates ASCE’s Code of Ethics. The impact of the Chinese valves on the engineering of the project was zero. Replacing the valves, however, would require additional resources and time. Many would argue that this additional cost would be wasteful. The contract requirements were clear, however; only “Made in USA” products could be used.

The contractor who proposed the deceptive act had no problem with grinding off the labels. He thought the requirement was foolish in the first place. In the end, the engineer told the contractor to go ahead and grind off the labels. Many years have passed since this project was completed, and the engineer still feels bad, because this was the wrong decision.

The National Society of Professional Engineers (NSPE) Code of Ethics Fundamental Canon 5 states, “Avoid deceptive acts” (NSPE 2007). Both the ASCE and NSPE Codes of Ethics have as canons “act as a faithful agent or trustee for both your employer and client,” “make truthful statements,” and “act to enhance the profession.” The engineers in the preceding six situations were asked to balance maximizing profit and conducting an honest business, that is, adhering to a code of ethics.

Following are several questions you might ask yourself when you face a profit-related ethical dilemma:

I encourage you to be directly involved in your company’s financial decisions and to use your engineering problem-solving skills to help company leaders take the ethical path.