Ethics@Work: Private general

The leading local business ethics scandal this week is undoubtedly the revelation by Maariv that IDF Chief of General Staff Dan Halutz sold off his stock investments a few hours after the kidnapping of two soldiers by a Hizbullah force last month. Halutz's defense is that this was a routine activity he had already planned, and that he can't desist from all his civilian activities just because he is an army officer. I'm always willing to give a person the benefit of the doubt and allow him to explain accusations of bizarre behavior, but I have to say that if that's the best Halutz has to say in his defense then his actions were very grave from an ethical point of view. From the point of view of business ethics, the main accusation against Halutz would be insider trading. Law and ethics forbid making trades on the basis of information a person has access to by virtue of a relationship of trust. If a corporate executive knows that his company is about to be bought out, that information doesn't belong to him - it belongs to the shareholders. The company entrusts him with this information to be used on its behalf. If the executive then buys shares from a shareholder in order to benefit from the buyout, then he is using information effectively owned by the shareholder in order to gain at the shareholder's own expense. Taking advantage of proprietary information is particularly serious if the trader has, not merely knowledge, but also power. In this case, there is a conflict of interest where there may be a temptation to use authority in order to advance personal interest. Halutz's actions would make him suspect of insider trading since he has both knowledge and authority in the making of policies - namely, waging war - which have significant impact on the markets. If some minor functionary in the General Staff took advantage of information he had to make money in the markets, like selling off stocks knowing that a war was planned, then there would be only the problem of inside information. If such a functionary then claimed that, in fact, he did not have any special knowledge about the likelihood of war, only the news of the kidnapping which by then was public, then this would be a legitimate defense. But Halutz's claim that he "didn't know" there was going to be a war is bizarre. Halutz is a leading decision maker, and his opinion about whether a war is called for is likely to have a critical impact. But the problem does not stop there. Halutz's claim that it is normal for him to continue ordinary civilian activities is in itself a bit jarring. Suppose that Maariv had revealed that rather than selling off stocks, which is likely to avert a loss from the anticipated fall in the markets, Halutz had been brushing his teeth that mid-day. Now, it might be that our Chief of Staff customarily brushes his teeth at noon, but somehow I would expect that in the midst of such a grave crisis, which soon after plunged Israel into a major conflict that still threatens to ignite the entire Middle East, the importance of oral hygiene would just slip his mind. I sometimes forgot to call my bank in the midst of far smaller emergencies - like an approaching deadline for my Jerusalem Post column. Even if it is true that Halutz can prove he already already planned to make this investment step, in my opinion, he should have desisted. Selling off stocks in a crisis is like a vote of no confidence in the country's ability to weather a crisis. The Bible tells us that the prophet Jeremiah consoled the people that the exile would be temporary and that the Jewish people would return to the land; Jeremiah then put his portfolio where his mouth was and went out and bought a choice tract of Israeli real estate. However, there is one saving grace. Reports put the entire sell-off at only about 120,000 shekels. Since the most the market went down about 8 percent and then rebounded to just about 2% below pre-war levels, the entire saving was very small. From a pure greed point of view, Halutz likely would have recognized that it was just not worth the risk. So, in the end, there is not really good evidence that our highest officer is corrupt; probably, he merely has poor judgment. But when the most complimentary thing you can say about someone is that he exercises bad judgment, I wonder if this is the person we want commanding our armed forces. The writer is research director at the Business Ethics Center of Jerusalem (, an independent institute in the Jerusalem College of Technology. He also is a rabbi.