The following is an actual occurrence, but we have changed the names to ensure confidentiality:
Bill McCloud, the director of credit for a national electronics manufacturer, encountered a problem with the confidentiality of credit group information. He took Fred, another credit manager from a subsidiary, to his regular credit group meeting. During the meeting, some very negative information about one of their major customers was discussed.
The next day, Fred sent e-mail to several of the company's regional sales managers, a divisional sales manager, and the vice president of sales, providing the confidential details of the credit group's discussion of the customer. He detailed the names of the companies at the meeting that reported the information in the group discussion, along with their experiences. Immediately upon seeing Fred's correspondence, McCloud realized he had a problem. The group contract is in McCloud's name, with Fred as a secondary contact. Fred is a longtime credit professional, with 30 years of experience in the field.
How should McCloud handle this situation?
Make your decision and then click on the link below for the answers and analysis from our panel of experts!
We polled three experienced credit veterans and a creditor attorney for their take. Here's what they told us:
Few people outside our profession recognize the rather unique position of the credit manager within a business organization. Not only do we represent our companies in the exchange of credit information, the outcome of our participation in groups follows us should we move to a new employer and/or industry. The experience and previous history of a credit manager in his group involvements is a factor in his acceptance in new groups in new industries. Therefore, although we are, for the most part, simply employees and not entrepreneurs, we carry around our own "shingle" and are held to high ethical standards.
McCloud should immediately counsel with Fred regarding his transmission of information to the sales department, stressing the serious nature of exposing the confidential information (as well as the impact, based on the points above). The affront crossed two boundaries, that of the customer and that of the group. That is, not only was the customer's confidentiality violated, so was the existence of the group and its composition.
McCloud should also immediately e-mail the sales force and stress the private nature of the communication, pointing out the potential damage to McCloud's company should there be a "leak" (potential legal action, withdrawal of access to important credit sources, etc.). McCloud should also seek the endorsement of the vice president of sales in containing the information.
Finally, McCloud should contact the board of directors of the credit group, explain what happened, how it was addressed to prevent leakage of the information, and the steps taken to make sure the error will not recur. All of this points out the urgency that exists, upon hiring new credit employees (although Fred is a long-term credit manager), to explain the basic ethics of the profession and the legal guidelines which we follow. All too often, there is a tendency to assume such knowledge, which of course is dangerous. Some good guidelines appear in the following article: Does Your Staff Know What Customer Information They Can Discuss With Other Creditors?, as well as in the NACM publication Principles of Business Credit.
- Norman Taylor, Order to Cash Process Manager, Recently Retired from Club Car, Augusta, GA
Bill, has a major problem on his hands. A credit professional with 30 years experience who conducts himself in the manner in which Fred operates is a problem. Responses should include the following:
- Letter of Reprimand to Fred and his personnel file. (Termination with any reoccurrence.)
- Credit Department meeting with all credit department employees in attendance, spelling out a clear policy in which the confidentiality of credit group discussions is made clear to all, along with the repercussions to the company and the individual.
I believe it's that simple.
Unfortunately, Fred probably feels pretty secure with his experience and will be upset at being held accountable for his actions. However, this type of conduct cannot be tolerated under any circumstances.
Bill is responsible for the actions of his subordinates. Why in the world doesn't Fred know better? What type of training does Bill provide for this subordinates? How is it that Bill does not know that Fred has this sort of problem?
The good news is that Bill McCloud recognizes the problem today. The bad news is that the problem was not recognized before the unfortunate action. I am concerned that there are other Freds running around the universe today that we do not know about. A good trade credit group can be a life saver to the credit professional. Each of us must be on guard to protect the credibility and confidentiality of the group.
Someone like Fred could potentially put the group at risk legally. Fred's actions are a clear indication of a lack of ethics. What else has he done that has not been uncovered? Has he lied about his trade experiences with customers so that his competitors would, one, ship into troubled accounts Fred is trying to work out of or, two, not ship into accounts Fred and his sales team want to keep the competition out of? Can Fred be trusted to maintain the credibility of the credit function within his organization? Or, is his relationship with the sales team too cozy? It seems to me that loose lips and lack of ethics in one area are a good indication of potential problems in other areas.
Unfortunately, the Freds of the world have crossed all of our paths from time to time.
- Dave Uranga, Director of Credit, Synnex Corporation, Greeneville, SC
After 30 years of credit experience, Fred should certainly know better than to break the confidentiality of credit group information.
Bill McCloud should immediately contact Fred and advise him of the misconduct. He should have Fred immediately e-mail all parties that received the original e-mail and advise them of the confidentiality breach and request that the information be kept confidential. Bill McCloud might follow with an e-mail of his own, reinforcing the importance of this issue. He should request phone calls if there are any questions or if this information has been passed on to others. They should also advise the secretary of the credit group and take his or her lead as to what else needs to be done. The group may have bylaws that deal with this type of situation. Fred may be barred from attending meetings for a period of time or the company may be suspended from membership. Breaking the confidentiality of a credit group hurts all members and the very integrity of the group.
- Tom Shimko, Credit Management consulting and seminar leader. Shimko Credit Consulting.
Dating back to 1925, the Supreme Court (Maple Flooring Mfgrs. v. U.S.) has recognized the right of members of a trade association to share information, as the mere exchange of information does not in itself require the association members to adopt a particular pricing policy which may restrain trade. However, sharing information by trade members that restrains trade may run afoul of the federal anti-trust laws, such as the Sherman Act and the Robinson-Patman Act.
That said, Fred's sharing of information with others in his company may not run afoul of anti-trust laws, but his actions likely violate the industry group's bylaws governing the confidentiality of the group's communications, even though Fred is but visiting the meeting. Significantly, Fred's sharing of information undermines the integrity and free-flow of information that is a cornerstone of a trade association. The Supreme Court decades ago recognized the value a trade association brings to its members by sharing information. But members must abide by the group's bylaws and keep shared information confidential, or the purpose of the industry group is lost.
- Scott Blakeley, Esq., Blakeley & Blakeley, Irvine, CA
What are your thoughts on this?
