An Interview with Jack Koraleski, former CEO of Union Pacific
By Kristen Obermueller and Josh Stubbendick, Creighton University MBA students
Jack Koraleski, former CEO and Chairman of Union Pacific, sat down with Kristen Obermueller and Josh Stubbendick to describe his past and current experience with business ethics.
Tell us about your background – where were you raised, what is your education, and what was your career trajectory?
Jack was born and raised in South Omaha. He went to the University of Nebraska at Omaha for his undergraduate degree. He and his wife originally intended on moving out of state so he did not want a job at Union Pacific. However, UP made a great job offer to Jack and he took it. He spent his entire career, a total of 43 years, at UP, starting in finance, working his way up to CFO, then the marketing and sales department, then Chairman, President and CEO.
What do you like most about your work? Least?
Jack likes the people that he works with the most about working for UP. He enjoys the strong sense of history and culture that UP brings as a company that was signed into existence by Abraham Lincoln. The worst part of his job is picking up the telephone and hearing someone tell you that someone with UP died or was injured.
Can you define ethics and tell us what ethics means to you?
Jack follows Warren Buffett’s philosophy of not doing anything that you wouldn’t want your mother to see. He believes that your morals are demonstrated in your behavior; it is that straightforward. He believes ethics are an important part of business because your reputation for being ethical is everything.
Do you think there is a difference between “ethics” in general (personal) and “ethics in business”?
For Jack, there is no difference between practicing ethics in your personal life and practicing ethics in business. He believes that it is important to have a connection between ethics in your personal life and ethics in business because first impressions, your reputation, trustworthiness, and if you come across as genuine makes a difference.
Is there a formal ethics program at your firm?
Because Jack has been with Union Pacific for his entire career, he has seen the development of the ethics program over the years. At the beginning of his career, Jack felt the pressure to do more unethical business practices than he did as UP’s ethics program became more mature. At the start of his career, Jack always thought “If I ever get to run this place, I would try to change some practices.” As he worked his way up through UP, he began to implement changes that changed the ethical culture of UP. UP’s ethics program is called “The How Matters” which means that how you get results is just as important as getting the results – and if you can’t get the results the right way, you shouldn’t be doing at all. There are many resources on UP’s intranet such as brochures, contact information to report unethical actions, and annual refresher courses that employees take. Auditors also audit every single department to ensure that employees are acting ethically. If and when an employee violates a policy, an ethics committee is available to treat the issue and the employee fairly.
Talk about the ethical culture at your organization.
UP has strong policies that employees can rely on to make ethical decisions. To Jack, that means that everything is tolerated to the extent that it doesn’t violate the policies. There are policies in place for clients giving gifts to UP or vice versa. If the value of the gift is above $75 it needs to be logged into the system. This example shows that UP has many mechanisms that allow for ethical business practices to take place. Depending on the severity of the issue, there is a three strikes policy in place that allows for employees to make mistakes so long as they own up to it, but after three strikes they will no longer be with UP. Jack likes that the company wants employees to be respectful and clients and vendors are expected to behave the same way.
Have you always done business in Omaha? If not, where else have you done business?
While Jack has always worked in Omaha, he has experience working with other regions in the U.S. He believes that ethics aren’t regional. It truly is the company’s attitude towards ethics that influences a company’s ethical culture.
The Ethical Omaha Project of the Business Ethics Alliance has identified the Omaha business core values to be accountability, community responsibility, financial vitality, integrity, and moral courage. Can you elaborate how the above fit your organization and what do they mean to you?
Jack believes that UP can stand on its reputation to show how UP adheres to the Business Ethic’s Alliance’s core values. UP values high performance, ethical behavior, and teamwork from their employees to make them an outstanding company.
Describe an ethical situation in business you have faced that was relatively easy to handle?
Some ethical situations are very easy to handle for Jack. Even if he doesn’t like what’s going to happen, it’s very clear that there has been an ethical violation. The ones where the violation is clear are easier to determine what appropriate action needs to take place.
Describe an ethical situation in business you have faced that was hard to handle?
The more difficult ethical situations that Jack has had to deal with is if you really like the person but their unethical actions require the company to take action. At one point in his career, his boss was set on firing someone, not because of their performance but because he didn’t work well with him. Jack called the employee about to be fired the night before it was supposed to happen to warn him. The employee was very appreciative of the phone call because it gave him fair warning. Jack’s actions could have easily backfired on him because the employee could have told their boss what Jack had said but he felt it was right to tell the employee beforehand.
Is it always easy to tell when the ethical code has been violated? Can you give an example?
No, sometimes it is clear and sometimes it isn’t. At one time there was a gift given to an employee by a customer that the employee thought was worth a couple hundred dollars that turned out to be worth four or five thousand dollars. The ethics committee was going to come down pretty hard on the employee for not reporting it to the company however since the employee had no idea what the true value of the gift was Jack felt that the employee was not totally at fault and a compromise could be met.
Are there ethical behaviors that give companies a competitive advantage?
Jack feels that by being ethical people want to do business with your company and want to do business with your people. If people know they will be treated honestly and fairly even when there is a problem, they want to do business with you because of that.
At one time UP had a very competitive contract they were bidding. When it was all said and done UP was able to keep their current contract and even expand that contract. The customer told them that it would cost them $125M more over 5 years than if they had accepted another company’s offer. The reason they chose UP was because they liked doing business with them, they felt that UP cared about their business as much as their own, and they felt that UP knew what they needed for logistics and transportation even better than they did. They knew they would be treated fairly if a problem arose.
Are there unethical behaviors that give companies a competitive advantage?
Jack believes that companies can gain some advantages by not being ethical but it is important for your own team to identify those and handle them appropriately. He said unethical behavior may give people a short term advantage but in the long run they will not as people learn how you operate.
Are you comfortable talking about ethical situations with other people? At work?
UP has a monthly ethics bulletin on the UP website for employees only, started 4-5 years ago, that shows example of situations in the company that can cause ethical dilemmas. It is a good way for employees to see real life examples of situations that can arise. Jack feels that UP does a good job of talking about ethics and making employees comfortable talking about it.
At one point there was an employee that made a mistake and made it public. The employee ended up volunteering to go to staff meetings and do presentations on the mistake he made and talk about why it was a bad idea and how it could be prevented.
UP wants employees to be comfortable talking about ethics so that they can be aware of real ethical situations and be watching for them.
Have you had any ethical mentors in the past?
There have been several mentors in Jack’s life including the leadership at UP. Strong leadership on ethical behaviors is important. Jack feels that he and his predecessor, Jim Young, were good for each other. They both had similar ethical codes so they could be accountable for each other.
How did your upbringing and ethical values play into your ethical code?
Jack’s upbringing plays into his ethical code very strongly. He was brought up in a hardworking family and you were expected to be accountable for your actions. Whenever you did something wrong if it was involving a neighbor you were expected to go to that neighbor and explain the problem and fix it. Jack believes your ethical upbringing really starts with your family and is enhanced by education. A good education can help to cement strong ethical values, knowing that people care about you makes a difference.
How have your ethics played into your decision making as you moved up through your career?
Jack does not think his ethics have changed over his career but as he moves up in the organization you begin to think more about how your actions will be perceived and what your employees will think of your decision.
He believes it is important to make the right ethical decisions even if it is not the most profitable decision. Those actions get carried throughout the whole organization and are an example of making the right decision. Leading by example is very important to Jack, by taking opportunities to explain why you made the decision and what things you were thinking about when you made the decisions are great ways to do that. You are able to convey your expectations to your employees on how you want them to act. He feels it is important for the company to know that ethical decisions are difficult and be transparent about how to make those difficult decisions.
UP encourages employees to be involved in the community and they support them by giving them time off to do those things or they contribute financially. They like to make the company aware of the community involvement going on within the company.
What do you think the biggest ethical challenges are for young professionals like ourselves?
Jack doesn’t think they are any more difficult now than they were 40 years ago. He believes that companies are more enlightened to ethical decision making. He says the interesting challenge for young professionals today is finding a place where you fit in and where the ethical values match yours. Another challenge is making a decision to leave a company if you find that they do not fit your ethical code.
Do you think ethical courses are beneficial to business students?
Jack feels that those classes are beneficial because they get you to think about ethics and make students aware of ethical decision making. It doesn’t have to be a formal educational class; it can just be a discussion with coworkers. Jack says you learn something from everyone you meet and those experiences help to shape your ethics and they stick with you. He believes that by taking ethics courses you are aware of ethical situations and that gives young professionals a competitive advantage.