Former Federal Trade Commission chairman Lewis A. Engman yesterday proposed a "Washington Post rule" to govern corporate ethics.

Speaking to business and civic leaders at a Catholic University conference, Engman warned that questionable practices "are worse than just being bad for business - in the end that kind of conduct invites governmental action which threatens the very framework in which business operates in a free market system.

One approach for business executives to follow in making decisions, he suggested, is asking themselves a single question:

"Would you take that particular course of action even if you knew that The Washington Post was going to print the details - all the details of the situation - on page one tomorrow morning?"

"Would you feel at ease defending your course of action?"

If business leaders really believe that high ethical standards are good business and are willing to speak out more and be candid, he continued, the public "will become more receptive to what we are trying to say."

But the business community today lacks credibility with the public, Engman said. He criticized the absence of public business criticism of questionable practices by large corporations and noted appeals by companies and industries over recent years for special protectaion, subsidies and regulation.

"The public simply will not assign one ounce of credibility to community which claims to be interested in the free enterprise system on one day and on the next is arguing before a government regulatory commision that no new competitors should be allowed into an industry," he told a conference luncheon meeting.

The absence of credibility should encourage business leaders not to ignore wrongdoing in their own community. "Why does there seem to be a conspiracy of silence over even the most flagrant situations?" asked the former FTC chief, now a Washington lawyer.

To many people, such silence translates into " a very cynical philosophy of 'you scratch my back and I'll scratch yours,'" he added.

In addition to applying "The Washington Post rule," which Engman said he tried to follow during six years of government service, he suggested that corporate executives are wrong to excuse payments to foreign officials because overseas sales may otherwise be lost.

Engman's speech came on the second day of a conference scheduled to end today - the first of a series of regional meetings on corporate behavior co-sponsored by the American Assembly of Columbia University and Catholic University.

More than 50 professional and business leaders and members of the clergy have been discussing corporate behavior co-sponsored by the American Assembly of Columbia University and Catholic University.

More than 50 professional and business leaders and members of the clergy have been discussing corporate governance, ethics and questions of relations with various publics.

According to Clarence C. Walton, CU's president, an immediate objective is agreement on a set of recommendations today about whether a code of conduct can be developed for the corporate world. Other meetings on the subject are planned next year at Tulane, Southern Methodist and the University of California at Los Angeles.

The CU gathering is the first activity of the school's Center of Organizational Ethics, founded by Walton this year and funded with a $15,000 planning grant from the National Endowment for the Humanities.

In an address to the meeting Thursday night, General Motors Corp. vice president and general counsel Otis M. Smith declared that the real issue about corporate governance "is not so much one of honesty or of ethics, but one of power."

A lot of people seem to believe, he added, "that even scrupulously honest corporate managers have too much of it (power)."