A week after Wall Street was forced to change its  “evil ways”  the first law suit was filed by broker-dealer Ameriprise Financial Services Inc. against mutual fund manager Reserve Fund for allegedly alerting institutional investors that Reserve Fund was holding close to $800 million of Lehman Brothers Holdings Inc. debt.

According to an article penned by Matt Miller, the tip-offs were made the same day Lehman filed for bankruptcy and Ameriprise now claims those tip-offs led to par-value redemptions while other investors were left holding the bag.

Statistic show that law suits tend to increase during tough economic times.  It doesn’t take a bankruptcy for the finger pointing to start and your business does not need to be circling the Wall Street drain before it too could be affected. 

Skyrocketing fuel costs, for example, may cause a supplier to pass along the increases even though there is no provision in the contract to do so.  A disagreement ensues, leading to a contract default that later escalates into a suit.  Falling orders, for example, can lead to employee layoffs that if not done properly can result in claims of age discrimination or wrongful discharge.  A bad economy can boomerang in a number of ways.

Unfortunately, tough times encourage people to look for someone to blame and sue.  Leveraging foresight and anticipating problems before they happen will therefore help protect your backside.

This morning I heard my husband complain about his English muffins.  “When they pop up in the toaster I need something to pull them out with,” he moaned.  “Could they make them any smaller?”

What a coincidence.  Today, I read a great article by Patricia J. Harned, President of Ethics Resource Center.  It’s in the current edition of their newsletter (click here to get a free subscription).  The article discusses the downsizing of consumer products, or the “grocery shrink ray.”  Like my husband, you’ve probably noticed this phenomenon yourself.

A bag of potato chips doesn’t go as far as it used to.  Cereal boxes hold less cereal and a pound of coffee has become lighter.  Things are not the way they used to be and it has nothing to do with us getting older and the good old days.

Product size really has shrunk in response to cost control measures.  Ingredients have also been substituted.  Harned notes that Hershey is using vegetable oil in some of its chocolates instead of the more costly cocoa butter and that General Mills is using walnuts instead of pecans in its turtle cookies.

Now if the companies were to print 16 ounces on packaging or advertising and deliver less than the claimed amount they would have a legal problem.  It would be viewed as a misrepresentation and a suit could be crafted along the lines of false advertising or some type of consumer fraud.

Yet if you look carefully at these new packages you’ll see that the legal ducks are probably in a row.  You may be expecting a pound, but the package says 13.5 ounces.  That’s what they advertise and that’s they deliver.  They’re legally safe.

Despite the legalities, consumers are still angry.  They’ve come to expect a 16 ounce pound of coffee and that presents an ethical problem.  Why?  Because when products are improved or increased in size you can count on those benefits being promoted in various types of consumer communications.  Downsizing is not.  It’s done behind the scenes with new artwork that nobody notices until they’ve already felt cheated.

Managing consumer expectations well requires more than technical legal accuracy, although that’s a vital part because without that accuracy, or compliance, you’ve breached a legal duty and given consumers a cause of action and reason to sue.

No, keeping consumers happy takes more than that.  People want to trust their brands.  Gamesmanship with product quality or quantity in the hope that no one will notice and if they do you can blame them for not reading the package is not a good thing.  The lack of transparency pisses people off. 

Legal compliance and ethics may overlap, but they are not interchangable.  They are not the same thing.  Compliance represents a minimal performance baseline.  Ethics takes performance and accountability to a higher level. 

What plane does your company operate on?  Is there room for improvement?  If so, what step should be taken and what’s stopping you?