Friday, February 4, 2011

David fights Goliath Thales on bad ethics

Should I be flattered or concerned ? I came accross an interesting (unintended?) use for the the Expert CSR Report Reviews that I regularly publish on This was a review I wrote about the Thales aerospace and defense company Sustainability Report of 2008 (read it here). My review was critical of the Thales report, referencing the lack of transparency and highlighting  the greenwashy language used in the report. As with all my report reviews, which I write on a voluntary and unpaid basis, of companies with whom I have no personal or commercial relationship. I base my assessment on what I find in the report itself, plus additional review of material in the public domain - company website, previous reports, online news. My reviews are my own independent professional assessment, as a general stakeholder of all companies, and include my impressions of the reports and the way they deliver on content, communication and credibility. Whilst I know my reviews are used in academic curricula, it was quite a surprise to find one being quoted in private disputes between companies and their suppliers. However, this has happened in the case of "DataSonic versus Thales".

A company, DataSonic Ltd UK, which was established with the support of Thales to supply proprietary specialist training systems, was allegedly forced to cease trading as a result of a personal vendetta by a Thales Purchasing Manager who cancelled partially-fulfilled orders, reneged on agreements worth quite a lot of money to a small supplier and claimed rights to designs owned by the supplier. Allegedly, complaints to Thales did not yield any reasonable conclusion of this issue and Thales continued doing their stuff whilst this small supplier went out of business and the owners suffered significant personal financial hardship. The former directors of DataSonic, David Giles and Matthew Pitt, have published a website called EthicalThales which describes the story in all its gruesome details and personal profiles of all the Thales people involved, accusing the company of stealing, lying and cheating.

Hmm. My thoughts on this:

The ethical behaviour of corporations almost always comes down to the individual behaviour of a single person in the organisation. Any unethical process or practice can always be traced back to one person. One person, therefore, has the power to make or break the ethical reputation of any company. In this story, one person is cited as being responible for a series of unethical practices which have now become public. Whether this will make a big hole in Thales' reputation or not remains to be seen, but it's certainly something that investors, managers, employees and other suppliers will not relish reading. The value of embedding ethical behaviour right down to the last employee, and ensuring that ethical practices are positively unpeld in the business by all employees, is  critical, as this sad story shows. 

The ethical behaviour of big businesses can often be measured by the way it treats small suppliers. Small suppliers have few options to ensure they are treated ethically by big customers if the big customers themselves do not behave ethically. Payment terms, timeliness of payments , ordering procedures, complaints handling, dialogue, behaviour around price tenders, confidentiality of information, rights to intellectual property and more are issues which can make or break small suppliers, who do not have the bandwith to fight court battles on each of these issues. As a small supplier myself, I know only too well how cashflow management can be nightmarish if large customers so not pay on time, or how price-squeezing by multi-million $ companies can force us into agonizing decisions about whether or not to offer suicide prices just to get the business, or how non-negotiable payment terms means we are funding our large customers with our own (expensive) credit  (one large client, who I now do not do business with, unilaterally advised me of payment terms "current month plus 94 days", after accepting our offer based on regular current plus 30 days terms, and after the work had been done - meaing work that we did in Month 1 was actually paid in Month 5!), or how we are given the runaround, attending several meetings and discussions in the course of providing offers for our services, only to find that subsequent decisions are made based on non-commercial factors, such as personal relationships. As a small business, when this happens, we learn and move on, refusing to do business with suppliers who are unethical, and trying to ensure our exposure is never such that one big company can bankrupt us. However, this is a lesson some learn the hard way. DataSonic was apparently very dependent on the Thales business  and was not able to recover from a major change in policy and alleged defaults on commitments. In this case, I can understand a small supplier who has been burned resorting to the internet to publicise an ethical issue which apparently no-one else takes any interest in, and the accused company refuses to engage. Purchasing process is a key element of CSR and ethical purchasing practices are a very telling aspect of corporate behaviour. All companies must ensure Purchasing Managers behave in accordance with ethical standards. The boomerang is never too far from returning home.   

No issue is a small issue in CSR terms. Everything counts. A small issue can be symptomatic of bigger issues. Or a small issue can grow into a big issue. Therefore CSR-minded companies cannot afford to leave small issues to fester. Things need to be resolved to adequate solutions. As a qualified mediator, I have often found that mediation can be a very positive tool in disputes such as these. Refusing to engage, without closing out issues in a respectful way, can only place strain on an organisation in ways it might not fully anticipate.  

Should my report review be "evidence" supporting the case of the small supplier against the big customer? At one level, I am flattered to see that my reviews are being read and quoted. At another level, I am a little concerned that my review is quoted in this context. The anti-Thales website states:

We are not alone in questioning the validity of Thales 'ethical credentials'.  Written in 2010 and without our first hand experience, an article by Elaine Cohen of BeyondBusiness Ltd suggests "there is little evidence, beyond rhetoric, of embedded processes and practices".  This reflects our direct experience precisely; read the full text here. 
I must point out that I did not question the validity of Thales "ethical credentials". I  criticized the quality of their Sustainability Report. This is not the same thing. I am not sure I am happy with my reviews being used in this way which I feel is a touch misleading.

Things are not always what they seem. There are two (or more)  sides to every story . The anti-Thales website tells one side of this painful issue (though a letter from a former Purchasing Manager at Thales appears to give DataSonic's claim some legitimacy). Whilst the alleged facts and figures are presented from the point of view of DataSonic, in rather emotional style, what actually went on may be a combination of other factors as well. I do have sympathy with a small supplier who is obviously suffering significant pain and can undertand how such situations come about. It will certainly be interesting to know if the EthicalThales website generates any response from the company and what action ensues.    

I will continue, of course, to write my report reviews. I just hope I don't get hit with a subpoena one of these days :)

elaine cohen, CSR consultant, Sustainabilty Reporter, HR Professional, Ice Cream Addict. Author of CSR for HR: A necessary partnership for advancing responsible business practices   Contact me via on Twitter or via my business website (BeyondBusiness, an inspired CSR consulting and Sustainability Reporting firm)


Aleksandra Dobkowski-Joy said...

Elaine, what an interesting turn of events!
I especially agree with your assessment: "The ethical behaviour of big businesses can often be measured by the way it treats small suppliers."

In our experience as a small business, we've found that the procurement process is a telling predictor of how a future business relationship will work, and whether the relationship will be based on mutual respect, professionalism, and fair dealing-- or the reverse.

We're learned to heed red flags and excuse ourselves from bid processes. See our recent blogpost Procurement Lament: A Ballad in Three Parts and let us know of your own experiences!

elaine said...

thanks for this Aleksandra. Yes, we have also declined to tender when terms have been impossible. We have also been invited to tender, tendered (after a lot of hard work) and then told we are not elligible to tender because we are not in Europe (this was by a UN agency)!

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