Ethics impacts a leader’s credibility
Jon Huntsman (Huntsman Chemical) wrote in Winners Never Cheat Even in Difficult Times (Wharton School Publishing, Upper Saddle River, New Jersey, 2008):
“Gray is not a substitute for black and white. You don’t bump into people without saying you’re sorry. When you shake hands, it’s supposed to mean something. If someone is in trouble, you reach out. Values aren’t to be conveniently molded to fit particular situations. They are indelibly itched in our very beings as natural impulses that never go stale or find themselves out of style.”
In the truest sense, ethics are black or white. Either leaders have them, or they do not. They obviously impact a leader’s credibility. More problematic is the ethically neutral leader, who prefers to operate in areas of gray.
Prime examples of ethically neutral leaders include J.P. Morgan (J.P. Morgan Bank) and John D. Rockefeller (Standard Oil). Both were known to overlook ethical practices to advance their goals, although they both considered themselves to be highly ethical.
Morgan was known to take advantage of financial crisis to acquire weak companies to grow his empire. During the 1907 Financial Panic, Morgan manipulated the circumstances and seized control of Westinghouse Electric, due to the acrimony created between the two by Westinghouse’s convictions.
Rockefeller continually skirted ethical issues as he used his manufacturing power to price competition out of the market.
Corporate leaders are placed under tremendous pressure by stockholders to produce a quick and steady stream of profits. Under this pressure, many ethically neutral leaders will make risky financial decisions to placate them, but place the organization at risk. The collective ethically neutral actions of many prominent leaders contributed to the financial collapse of 2007.
Jon Huntsman also observed in his book,
“Compensation has replaced ethics as a governing principle. Wall Street has but two objectives: How much money can I make? And how fast can I make it? The markets and traditional values don’t always mix well. Wall Street thinks there is nothing wrong with this sort of behavior because everyone does it, but the lack of a sense of integrity also produces a lack of respect. WorldCom, Tyco, Enron, and other giant companies had leaders who failed to play fair. Because they cheated, they lost. Accumulation of power and wealth became a driving force to these executives. They forgot the golden rule of integrity: Trust is a greater compliment than affection. With integrity comes respect.”
Ethics and ethical practices have an impact. Ethical actions flow downhill. Ethical practices within an organization are dictated from the top. Highly ethical practices are either enforced, ultimately cleansing the organization, or ignored. Unenforced ones poison the culture and lead to problems and unintended consequences, which can have severe financial reverberations to the organization.
The Deloitte LLP 2010 Ethics & Workplace Survey disclosed that 65% of executives surveyed reported that an employee’s loss of trust in a company contributed to increased voluntary turnover as the economy improves.
This increases the costs associated with hiring and training new employees, while reducing productivity and efficiency until new hires are brought up to speed. The Deloitte Survey notes,
“Business leaders should be mindful of the significant impact that trust in the workplace… can have… A values-based culture… can cultivate the trust necessary to reduce turnover and mitigate unethical behavior… Ultimately, an organization’s most senior leaders should set a clear and decisive tone at the top.”
Timothy F. Bednarz, Ph.D. | Author | Publisher | Majorium Business Press
Author of Great! What Makes Leaders Great: What They Did, How They Did It and What You Can Learn From It (Finalist – 2011 Foreword Reviews‘ Book of the Year)
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Adapted from article published on the Examiner.com on October 19, 2012.
Copyright © 2012 Timothy F. Bednarz, All Rights Reserved