Ethics: The Foundation of Sound Leadership?

A Forbes article “Ethics in Leadership: The 8 rules to Prevent Misuse of Corporate Power” recently caught my eye. The premise of the article is that unethical behavior by leaders was due to the circumstances that they were exposed to. In other words, unethical leadership was due to external factors and the individual leader would be a victim to the pressures of their complex work environment.Ethics

The article proposes that senior executives be warned about what they are being exposed to when promoted to a top position that would expose them to ethical challenges. That all executives are vulnerable to unethical behavior, that unethical tendencies are hidden when they serve in middle management positions, but fall prey to it when they have nearly or total absolute power.

Protective Ethics

The article proposes steps the organization should take to protect it and their respective executives by warning them, strengthening company practices and processes, tightening board governance and establishing watch guards for unethical behavior.  It overlooks, what I consider, a basic failing in many companies where the basic requirement for ethical behavior in all work positions is too low.

Companies learned a number of years ago that you cannot police quality into a product. Adopting a “policing” philosophy for world-class quality led to higher costs, workarounds, and unfortunately lower quality.  The ultimate solution for higher quality was embedding a quality attitude and approach at all levels of the organization and process.  The same is true for business ethics.

Ethical Behavior

Ethical behavior is based upon the values one adopts in how they conduct themselves not only under normal circumstances but, more importantly, when under stress and when no one is looking.  In society and business today, you can successfully argue that there are many examples where values are circumstantial.  What is truth on one day may not be accepted as truth on the next as circumstances would be different. Consequently, this leads to circumstantial ethics – what was once unethical under any conditions is now ethical only when the circumstances are favorable.

In the fast paced business environment of today, where windows of opportunity for success are measured in days and weeks versus months and years, there is tremendous pressure to hit the opportunity window under any circumstances.  Unethical or marginal measures used to take advantage of getting the project complete and into the market window and score success may be lost in the haste of the rapid development environment of the business.

Organizations have become skillful in assembling teams for short periods of time to produce great accomplishments but afterward they are quickly reassigned.  Consequently, the true measure of the ethical practices of the group, and more importantly the leader, can be difficult to measure.  Successful reputations can be built in this fast paced cycle but the true measure of ethical behavior can be disguised.

In slower moving markets where leaders spend months and years in a position, ethical compromises eventually surface in their ability to lead effectively, interact with peers and create a measurable ethical track record.

Ethics and Absolutes

Ethical behavior involves dealing with absolutes – not circumstantial conditions. What is true and right at one time is still true and right at another, regardless of the surrounding events. It is not the spin of the words but the measure of the action that determine the ethical compass of the individual and leader.  This can be difficult to accept by many, and where many organizations struggle, as ethical behavior carries a cost of compliance but creates great value.

Many find ethical behavior a straight jacket that is too narrow and inflexible where latitude for interpretation is not permitted.  Some would bend the rules to fit the circumstances and move on; the ethical road would involve transparency and honesty, doing the right thing, exposing faults where they occurred and publicly communicating corrective action to avoid the condition in the future.

Unfortunately, many companies do not place value on executives who take the ethical road. Is this not a root cause to their need to have to police or dial in “ethical behavior or practices” into their businesses with external measures?  Would it not be better to enforce the right behavior in every employee?

Implementing Ethics

Ethical behavior begins with defining the set of ethics that are core to how the company wants to operate internally and externally with customers, employees and shareholders.  All employees should be recruited with the company ethics statement in mind. The recruiting process should look for evidence of ethical behavior in the past of each employee hired.

Training programs and business practices should reinforce the ethics statement.  Examples and role-playing should be used to imprint how they should be applied to business situations.

Performance reviews should reinforce demonstrations of ethical performance where appropriate.

Employees targeted for advancement should be mentored. An important part of the mentoring process should  measure the ability of the mentored to apply ethical standards in difficult circumstances.

Ethics Case Study

The performance of the executive leadership team, owner, and CEO cannot be overlooked in how ethics are viewed within the company. In 1982 Johnson & Johnson was faced with a crisis where its products were tampered with causing deaths to customers. The dilemma was how to deal with it, not destroy the reputation of the company and its most important product. The reaction of the executive team is now a case study in ethical behavior.

  1. Although they were not responsible for the tampering the company formed a crisis management team.
  2. They reacted quickly and removed the product (31 million bottles/$100 million in sales) from store shelves.
  3. Reintroduced the product with a tamper resistant package and offered incentives to motivate customers to buy the product.
  4. Over 2,250 sales people made presentations to the medical community to restore confidence.

The basis for this positive and quick action originated from a line in the mission statement written in the mid-1940’s that it was essential to maintain the safety of the public. Johnson & Johnson successfully handled this crisis with ethical behavior risking the company in order to maintain the safety of the public.

Summary

While companies might want to establish an ethical cocoon around their executives, the solution to good ethical behavior lies within the individual. An executive who is ethically flawed will not be totally protected by measures to police in ethical behavior.  The flawed behavior will eventually leak out and the true person will emerge.

Unfortunately we have seen many public examples of poor ethical behavior by executives, politicians and sports stars. However, there are many more examples of consistent ethical behavior by many in those same professional fields. These ethical leaders, fortunately, have a strong ethical bearing and live their private and professional lives without relying on external policies to contain and shape their behavior.  They have an internal ethical compass that has been developed over time that guides their thoughts, behavior and actions. They walk their talk!

An ethical executive who inherently recognizes that there are weaknesses in the internal control of the business that they could abuse for personal gain, or that they can take advantage of the absolute power over their employees future, or take advantage of corporate resources for personal benefit would, on their own, establish personal and business practices that would isolate them from those temptations.

Seek out those who have a demonstrated track record of ethical behavior to work in your business. Look beyond the surface reputation and find out who the person really is.  Your business will prosper if your core employees, if not all of your employees, have a sound ethical compass.

Trackbacks

  1. […] tampered with on the shelf and they quickly removed $100M worth of product from store shelves (see Ethics: The Foundation of Sound Leadership?). The opposite example is how GM withheld the seriousness of defective ignition switches […]

Leave a Reply