In the rush to and sheer scope of stabilizing first the financial system, and then key institutions in the financial system, and now jump-starting the U.S. economy, is the United States in danger of not correcting one other possible operational flaw?

One wise and successful CEO told yours truly that the nation might very well be doing just that. Full disclosure: the CEO is a friend of mine.

It starts at the top

The source problem: CEOs, the CEO said. In less than a decade, for reasons which are probably complex, the United States has produced a stunning array of CEOs whose actions have been, at minimum, selfish and unethical, and even fraudulent and illegal.

Now, in the context of a post-September 11 geopolitical world, the senior management flaws would appear to be minor. But from an American standpoint, certainly from a Protestant work ethic standpoint -- the genesis of the American system -- the errors/lapses have been gargantuan.

Beige book weakness, nationwide. Holiday retail sales tepid at best (so far). Business investment lackluster. And Friday yet another employment situation report from the good statisticians at the U.S. Department of Labor. Consensus: the U.S. economy probably shed another 300,000 jobs in November.

A decade of descent

One can't say we weren't warned about the recession that we're now in - - not with the increased concentration of wealth and concomitant increase in poverty, lack of job creation, and wage stagnation that accompanied the recent economic expansion, to go along with excessive leverage, system-wide.

New York Times (NYSE: NYT) columnist and Nobel Prize-winning economist Paul Krugman provides a little perspective on how we got here and also offers some hope, regarding these trying economic times.

On the signals, or signs, some in economics, corporate, and public policy circles are suggesting that we didn't have any signs of economic trouble ahead. "Why weren't we warned?"

Ah, but you were warned, Krugman said. And these warnings were ignored. Item: Clear signs of a housing bubble, after the dot-com bubble a decade earlier. Item: The implosion, and required dissolving of Long Term Capital Management in 1998 - - just one hedge fund, but one that nevertheless temporarily paralyzed credit markets, globally. Item: The near-universal belief in the market's ability to self-correct, self-police, and if need be, self-punish transgressors, when there was little case precedent to hold that mistaken notion. In sum, there were plenty of warnings, Krugman argues.

While you might argue that the book's very title is an oxymoron, The Ethical Executive, by Robert Hoyk and Paul Hersey, is instead a fabulous and practical text that may as well have been titled, "How Not to be Kenneth Lay," and its faithful application could have prevented our entire current economical crisis. Having dutifully passed my requirement of Ivy League MBA ethics coursework and been duly unimpressed by its ability to stop unethical behavior (as I learn from this book, even in my own generally honest self), I would recommend that business schools, university political science and marketing programs, and even small business owners and parents adopt this as the primary ethics text.

The problem, as authors describe in the introductory chapters, is that ethics aren't acquired from our education. Discussing a case study in class -- even if it's at Harvard Business School (especially if it is?) -- does not "teach" ethics. No, our parents teach us ethics. And as Hoyk and Hersey write, "what is most lacking in books on ethics is a major emphasis on the root causes of unethical behavior--psychological dynamics." In order for a typical person, with typical familial upbringing and core values, to behave ethically does not call for a strategy for thinking about an ethical problem (the approach taken by traditional ethics textbooks); no, the authors argue, it takes knowledge of the potential "ethical traps" you might encounter. Awareness equals ethical power. Managers (and parents, teachers, whomever) can "use their understanding to objectify what's happening to them."

Hoyk and Hersey lay out 45 ethical traps and give examples of psychological research and real-life ethical foulups, from Enron to Worldcom to Jim Jones. I recognized nearly every one from my life, both in business and in my relationships with my infamously principle-bereft in-laws. What's more, I recognized the traps in the behavior of the key figures in the financial meltdown.

What's the price of a blogger's soul? In some cases, it's as little as dinner with a guest at a nice restaurant.

According to The Wall Street Journal, "As online food sites become increasingly influential in the restaurant business, chefs and owners are plying bloggers with free meals to get good write-ups. Some are also posting favorable reviews about themselves on popular Web sites or becoming Internet scribes."

This is as clear a violation of journalistic ethics as you will find. Real food critics dine anonymously and pay their own bills -- a known critic is likely to receive special treatment, which of course could make their experience less than indicative of what their readers can expect.

And then there's another problem: Is it really possible to be objective in a review when you aren't feeling the sting of having paid for it?

Blogs are certainly giving the traditional media a run for their money. But in order for the coup to be successful, they will have to adopt some of the ethical standards of the traditional media. For what it's worth, this is the policy for all blogs in the Weblogs Inc. (owned by AOL; includes BloggingStocks) network:

• Bloggers do not receive free products or services from the companies they write about.
• Bloggers do accept review units (e.g., a new cell phone at Engadget, a video game at Joystiq, or a week-long car loan at Autoblog); however, when they're finished reviewing products, they return these items to the manufacturers. If the manufacturers do not take the items back, we give them to our readers. This is the same editorial policy as the New York Times or Wall Street Journal.

This post is part of our Money Face-Offs feature. Let us know who you think comes out ahead in this head-to-head match-up, and check out our other Money Face-Off posts.

Did you ever wonder what it would be like to slip into the world of the mega-famous? Right now I'm going to give you a chance to think about that. Imagine that you get to spend your days rubbing elbows with Hollywood's A-list elite. Now here's the angle, imagine that circumstances have caused you to be put in a serious dilemma, and you are now required to choose a female pop-star business partner. You have been given only two choices, either Britney Spears or Lindsay Lohan. The choice is yours and there are multimillions of dollars now riding on your decision.

A survey discussed on the Sox First blog raises questions about the effect that Sarbanes-Oxley has had on employee morale, five years into its career. It seems that many employees aren't so sure about their bosses' integrity. Here's how they graded them on "organization efforts to encourage integrity":

A – 35 percent

B – 34 percent

C – 18 percent

D – 10 percent

F – 4 percent

So 3/10 employees gave a grade of C or worse. More disturbingly, at public companies, "22 percent said results are rewarded even at the expense of unethical practices." Ethical concerns seemed to be most common at smaller companies, which is interesting.

While there is considerable discussion about the "need" to roll back Sarbox, the continued concern about ethics on the part of employees makes me think we need more work done on compliance, not less.

In the past, I've had a certain ambivalence about socially responsible investing. If it caught on, it could have the power to change the way that companies are run. But in its current manifestation, or so I thought, investors could very well sacrifice returns at the altar of the conscience. But I was mistaken and, after reading The SRI Advantage, I've jumped on the SRI bandwagon -- and now institutional investors are too.

According to Thomas Kostigen at Marketwatch, "Nearly 200 institutional investors representing some $9 trillion in assets say they are conducting at least some type of social shareholder engagement in their investment policies. This group of investors belongs to the Principles for Responsible Investment, part of a United Nations' program to institute ethical conduct among global corporations, and the findings of how they invest are being released for the first time in a new study."

It gets better: "For example, just over half of these institutional investors are using their significant clout to require the companies in their portfolio to use standardized environmental, social and governance reporting."

Some firms are pressuring companies to make more full disclosures about their environmental and social impact in their SEC filings. It seems that Wall Street may be getting ready to exercise its enormous power to push for corporations to be better citizens.

If you're interested in shifting a portion of your portfolio toward SRI principles, check out SocialFunds.com.

In March of this year, the office of New York Attorney General Andrew M. Cuomo entered into investigation of questionable practices involving institutions of higher learning and possible manipulations of lists of student loan issuers. The claim is that several well known schools and others are allegedly taking "incentives" from lenders for providing them preferential treatment.

Ellen Frishberg, director of student financial services at Johns Hopkins University, indicated that in her opinion the investigations of lender listing practices are something akin to a witch hunt. She maintained that some schools might be unfairly targeted for investigation by virtue of having put the work into screening to create lists of quality lenders. Frishberg made clear that Hopkins has indeed received solicitations for preferred list placement, which reveals the truth of the problem, but said that Hopkins turns a deaf ear to enticements of this kind.

In an article from The Baltimore Sun she stated, "We have ethics here." Since the time Ms. Frishberg issued that statement, she has resigned from her position with the university after investigation concluded she received some $67,000 in assorted grants and payments from companies she had coincidentally chosen to endorse. So much for ethics.

File this under Julie Roehm: avenger. The PR food fight between Wal-Mart Stores, Inc. (NYSE: WMT) and its former marketing communications chief just got more interesting. I don't know why she picked late Friday afternoon on a get-away-weekend to launch her latest missive but according to the Wall Street Journal, Julie Roehm is alleging that WMT executives violated its ethics policy by accepting discounts on yachts, diamonds and personal gifts from vendors.

To put this into perspective, here's a recap of the rounds so far:

1. Wal-Mart fires Roehm alleging she accepted gifts from an advertising agency that was later chosen to handle WMT's ad account (12/06).
2. Roehm countersues WMT for breach of contract (12/06).
3. In a countersuit, WMT releases salacious details about an alleged affair Roehm had with a subordinate -- Sean Womack -- accusing her of misusing WMT travel funds on business trips with him. The suit cites one e-mail purportedly sent to Womack by Roehm as saying: "I think about us together all of the time. Little moments like watching your face when you kiss me." (3/07).

And today's round goes to Roehm, who alleges that WMT CEO H. Lee Scott, received "preferential prices" on yachts and "a large pink diamond for his wife" through his relationship with Irwin Jacobs. One of Jacobs's companies, Jacobs Trading, has the exclusive right to buy unsold WMT merchandise.

Today's New York Times takes an interesting look at some recent cases of corporate executives losing their jobs over perceived moral and ethical failings. HBO CEO Chris Albrecht was asked to resign after he was accused of assaulting his girlfriend, and the head of Citigroup's global wealth management group left after questions were raised about his relationship with CNBC anchor Maria Bartiromo. And the most interesting and scandalous case by far was that of Julie Roehm, the Wal-Mart ad executive fired for incidents surrounding her affair with a colleague.

According to some, the swift firings are motivated by fear of lawsuits and political correctness. While that may be part of it, I think there may be a better reason for dumping executives involved in questionable behavior: A person who behaves unethically is one area of his life is more likely to be unethical in other areas. How likely is it that a man who assaults his girlfriend treats his colleagues with respect? While some people are able to compartmentalize their lives exceptionally well, I just don't think a company needs to keep employees who have displayed huge moral and ethical shortcomings.

I was privileged to read an article in my latest Forbes newsletter which addresses honesty in business practice. Most especially, the article points out the inherent value that clear, honest book keeping and deliberate management transparency impart upon any business. To illustrate its point, Forbes utilized the analysis of Audit Integrity, an independent Los Angeles firm that does research on corporate governance best practice (and which is a data supplier to Forbes.com). Audit Integrity developed its first list of 100 companies which exhibit the highest degree of ethical and business standards when dealing with their investors.

What brings the value of Audit Integrity's analysis closer to home is the cross reference of stock performance as relates to inclusion on the integrity list. Forbes reports that the group of 100 companies that made Audit Integrity's list of good guys provided an overall return of 33% on shares, double the return of the market on average. Forbes cites higher equity growth, reduced litigation costs and a reduction in regulatory interference as some of the reasons why the wonderful one hundred out performed their peers.

So, if you want to simplify your hunt for stock value and reduce your research burden, you might want to give the Audit Integrity list of 100 do gooders a long hard look. In this game of stock picking there are a lot of angles to consider. If Audit Integrity is willing and able to provide a clear pre-assessment of business integrity in such a comprehensive and easy to understand format, I think you owe it to yourself to consider the data. Investment based on information devoid of even a cursory view of honesty in business practice is investment made blind.

It's hard to imagine a worse PR move than ditching the Better Business Bureau to avoid expulsion, but that is exactly what Eastman Kodak Company (NYSE:EK) is doing. The BBB had commenced expulsion proceedings against the company, accusing the Kodak of failing to provide data regarding the resolution of consumer complaints filed with the Bureau. According to the USA Today:

During the last three years, Kodak customers have logged 183 complaints for problems ranging from repairs to digital cameras to difficulties communicating with customer service representatives, said David Polino, head of the regional Better Business Bureau.

While characterizing that number as "small for a large, multinational company," Polino said Kodak's response has been a corporate headache. Instead of revealing how the firm processed the complaints, he said Kodak's response has been to say ... nothing.

While the camera company may have valid complaints about the way that the BBB was handling issues, this just doesn't make sense to me. Polaroid and other competitors will now be able to advertise "Unlike our number 1 competitor, we are a member of the Better Business Bureau."

It sure seems like Kodak would have been better to bite the bullet and do what they had to do to appease the Bureau, because this does not look good from a PR perspective: The fact that it's being picked up in major newspapers could hurt the brand's reputation and sales.