Ethics and the deal: when disaster creates opportunity

This blog originally appeared on July 16, 2015 on IowaBiz.com.

In 2008, the International Economic Development Council [IEDC] established a practitioner Code of Ethics ‘to ensure a high ethical standard for those involved in economic development’.  Several years later, IEDC moved to require ethics training as a condition for all candidates for its industry certification and re-certification program, where it still stands as a certification condition.

It was an industry first.  Modern professional economic development is a fairly young industry- most point to the founding of local industrial recruitment organizations in response to a contraction of manufacturing expansion in the 1970s and the rolling bank savings and loan crises of the mid-1980s as the industry’s jumping off points.  For a couple of decades, economic development was defined almost exclusively as a cutthroat industrial recruitment endeavor- the aggressive courting of external capital and jobs into a defined local or regional jurisdiction.  From where that capital and those jobs came- whether across the globe or in a neighboring community, and the corresponding ethical underpinnings of how the deal was done- was less a topic of concern than today.


Today, most states, Iowa included, maintain policies for access to state economic development financial assistance which typically require that a project originate from outside the state or be an expansion of an existing facility in a home community- the state is fundamentally not interested in incentivizing relocations from one Iowa community to another.  This is extremely sound and extremely necessary policy. 

The state’s policy position has begun to trickle down to local incentives policy- a handful of regions, including the Des Moines region, maintain some level of anti-piracy agreement which typically requires the sign-off of the home community prior to any other regional community’s economic development organization approving of local assistance to a company considering a relocation from one regional community to another.  The One Corridor Agreement by and between the Cerro Gordo County, City of Clear Lake and City of Mason City- communities which once considered themselves deep rivals for economic development projects despite their immediate geographic proximity to each other, now provides for a clear and cooperative project management process for any project considering both communities or one involving a potential relocation from one community to the other.  In another instance, leaders in Iowa’s Creative Corridor are working to craft an agreement by and between the communities in the Cedar Rapids-Iowa City region.

While intra-state competition is often governed by cooperative piracy policy in Iowa, at any level above inside one’s state, you had better believe competition is as fierce and ruthless as ever; and it should be. 

But where does an economic development organization or practitioner draw the line, particularly as it relates to preying on weakened game?  The IEDC ethics code conspicuously avoids any mention of competitive behavior between local organizations or states- and probably for good reason; the dynamics and decision-making triggers for any multi-site project are so varied so as to be virtually infinite; accounting for them all and providing behavior guidance would be virtually impossible.  The closest IEDC gets to wading into competition ethics is a disclaimer attached to the Code: “There may be circumstances where the board may choose to interpret and apply this code to a particular event such as a man-made or natural disaster.” 

So where is the line drawn?  Am I within the boundaries of professional decorum if I make an enquiry to pitch my region to a company in a state currently under natural duress, like a hurricane, based on the impact such trauma has created on that state or region’s near- and mid-term competitiveness?  No, probably not; acts of God to a competitive community are generally treated with a great deal of forbearance by economic developers.   Am I within those same boundaries of decorum if I embark on such an enquiry with a company in a state under man-made duress, like a debt or political crisis?  Yes, usually. 

Our friends in Illinois, Indiana, Michigan, Arkansas and South Carolina, to name a few, have created for themselves a handful of major man-made disasters of late- and managed them in remarkably contrastingly effective and ineffective ways as it relates to the eventual impact on a state’s reputation for business-friendliness for the job creation projects and investments every state in the union is chasing.  Illinois?  Fiscal basketcase with a dash of corruption.  States like Iowa and regions like Central Iowa love to compete with Illinois, and it is perfectly within the boundaries of professional competition to demonstrate to our clients considering the Land of Lincoln that the crushing debt load the state currently acknowledges and the unfunded liability load several orders of magnitude higher they don’t as a pronounced competitive disadvantage- more debt means more taxes, particularly corporate taxes, in the future- ought to be considered a tremendous competitive disadvantage when compared to Iowa’s historically sound fiscal [and low, low debt per capita ranking] position.  And that’s before we even start talking about political corruption [four of the last seven [!] Illinois Governors have gone to prison].

But what to do when the man-made disaster isn’t as cut and dry from an ethical perspective as a preventable state budget calamity?  Indiana, Michigan and Arkansas have all come under intense criticism from their own state’s businesses for social policies and policy proposals related how same sex couples may or may not be treated both by the state tax code and by their fellow citizens [IEDC Ethics Code item #9: Professional economic developers shall assure that all economic development activities are conducted with equality of opportunity for all segments of the community without regard to race, religion, sex, sexual orientation, national origin, political affiliation, disability, age, marital status, or socioeconomic status].  In perhaps the most high-profile move, e-commerce giant Angie’s List announced in March it would shelve plans for a major expansion Indianapolis over its opposition to an Indiana ‘religious freedom’ law which many interpreted to permit discrimination against LGBT individuals and couples [after a national uproar, the law has been largely repealed, but Angie’s List has maintained that it will not expand in Indianapolis].  Governors and legislative leaders in Michigan and Arkansas have also in recent months taken up controversial legislation relating to the treatment of same-sex individuals and couples, been lambasted by their business lobbies for it, and largely retreated with plenty of damage done to their state’s relationship with some of its largest employers. 

What’s an economic developer in another state to do in a case like this?  [Hypothetically] pick up the phone to Angie’s List and those like it?  Probably so.  Political disasters are by definition man-made, and almost always by definition avoidable.  While in most cases it is largely unproductive to craft a pitch to a company focused on a narrow piece of state social policy, controversy over such a policy does create an opening for a broader conversation calling into question one state’s responsiveness to the needs of its business community and its ability to manage its national and global reputation as a place to live and work when compared to my state. 

Occasionally, man-made political disasters which hold the potential to affect investment and job creation decision-making in another state demand a wait and see approach.  Take, for example, the controversy leaders in South Carolina are currently embroiled in over the display of the Confederate battle flag on the grounds of that state’s Capitol.  Certainly, were this a confined issue founded on a purely political grounds, it would be ripe for inclusion in a state-to-state social/cultural comparison.  But it isn’t; while controversy has swirled around South Carolina’s Confederate flag for years [in 2000, the was moved from flying atop the Capitol to a war memorial on its grounds- something only a superlegislative majority can compel], the current controversy has at its basis the unthinkable mass shooting at Emmanuel AME Church in Charleston.  Any decent economic developer- or human being- wouldn’t fathom exploiting a controversy with such a tragedy at its nexus. 

And so, as in most industries, gray area abounds for economic developers all over the country and the world as it relates to capitalizing on the competition’s weakness.  With so much at stake- jobs, capital, tax base, community pride- the actions of a local, regional or state-level economic developer in navigating complex ethical challenges are pronounced and are broadly relevant to the community he or she represents.

Source: http://www.iowabiz.com/2015/07/ethics-and-...