Warren Buffett on Ethics

In an article entitled Buffett on Backdating and Other Bad Behavior, the Wall Street Journal reported on a short memo Warren Buffett sent to his managers regarding the recent scandals involving stock-options backdating and H-P’s leak probe. Buffett wrote, “The five most dangerous words in business may be ‘Everybody else is doing it,’”

On backdating, Buffett wrote, “My guess is that a great many of the people involved would not have behaved in the manner they did except for the fact that they felt others were doing so as well.”

He added: “So, at Berkshire, let’s start with what is legal, but always go on to what we would feel comfortable about being printed on the front page of our local paper, and never proceed forward simply on the basis of the fact that other people are doing it.”

This once again underscores the point that there is most often a difference between what is legal and what is right or ethical. Legally we may be allowed to behave in ways that are not ethical. We are allowed to conduct ourselves in ways that we would not like to see others doing to us. Legal is about what we can get away with. Ethical is about what is right. The spirit of the law sometimes looks very different than the letter of the law.