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Ethics of Leadership

April 5, 2010

Not this weekend, but the previous weekend there was another Leadership Academy class.  I wasn’t particularly excited about going to this one, honestly – though of course I went.  Before the class, we were to read a case and a paper about ethical issues in business.

I wasn’t excited for a couple of reasons: first, in my undergrad program, I’d taken two classes on the legal and ethical environment of business.  I took both the required Core class plus the advanced class that explored ethical issues more deeply.  Additionally, as a religious person who think deeply both about  his religion and about the moral and ethical implications of what he believes, I felt I had a pretty firm grounding in ethical issues.  The final reason I was unexcited had to do with the way business ethics is usually taught to business students: putting them in the role of a business leader facing ethical dilemmas.

Ultimately, I think this class went better than expected, but one of the main reasons that was so was that I brought up some of the points above.  The class did start with a video case study of a high-level executive faced with an ethical dilemma: a Sales VP who felt that the CEO was misrepresenting sales prospects to the Board during a Board Meeting.  What was mildly insulting about this situation is that it was presented as though there was no clear right or wrong solution, no clear black and white. 

I say “insulting” because the insinuation that the situation was really “shades of grey” obfuscates the fact that those shades are a sharply contrasting light grey and dark grey with no middle-ground.  I, personally, thought it was fairly obvious that as a high-level executive, this VP’s fiduciary responsibility to both share-holders and the Board made the right answer fairly clear.  As a class, we were presented with 3 options: discuss the issue privately with the CEO, take the issue to the Board, or do nothing at all.  “Do nothing at all”, I reasoned, was clearly an unethical choice.  Taking the issue to the CEO was unlikely to be fruitful: if the CEO is aware that he is lying, he is unlikely to be amenable to gentle correction on the issue.  Still, for proprieties sake, this would have been the necessary first step.  But going into that, I would have the full expectation that I would likely have to escalate.  Ultimately, the actual VP did just that, but not until after he’d hemmed and hawed over the ethics of going to the Board, and waited until he was contacted by a Board Member directly.  That, in my mind, was an unethical lapse.

This is often the case with high-level executive decisions.  We like to pretend their decision make is full of shades-of-grey and nuance.  In the example above, for instance, what if he’d lost his job for challenging the CEO?  Certainly, that was a risk.  But what if he had?  At that level, most executive contracts include escape clauses and severance packages and golden parachutes.  The risk of getting fired, for him, was overall not a severe one.

Now, consider an ethical situation like that from a very different perspective: a mid-to-low-level support employee who has a young family.  That person’s moral and ethical obligation is first and foremost not to shareholders, but to his family; though he does have a responsibility to shareholders, that responsibility comes to him filtered through several layers of managerial oversight.  His responsibility to them is indirect, whereas his responsibility to his family is very direct.  This mid-to-low-level employee has no escape clause, and no guarantee of a sizeable severance if he loses his job.  So, if this employee is asked, for instance, to add to his forecast some amount of money to cover a meeting of the Board at some resort in a Caribbean Island, what does he do?  What’s ethical? 

Let’s say this employee doesn’t think that a meeting of the Board in a Caribbean resort is the best use of the shareholder’s investments – especially during a Recession, at a time when employee benefits have slowly been eroding away to cost-savings initiatives.  Does he meet privately with the CEO or with members of the Board?  No; the very idea is preposterous if there are multiple layers of management separating him from the Chief Executive.  Nor does he go to an outside agency: there is nothing illegal about this Board Meeting.  He might consider informing a shareholder’s rights watchdog, but his non-disclosure and confidentiality statements, signed at the moment of his employment, may make that option ethically dubious.  Ultimately, he does what he must to ensure continued good relations with his immediate supervisors, protecting his job.  He will probably warn his supervisor that this is not a good use of the business’s funds, but he knows nothing will come of this complaint – his boss has no more authority over this decision than he does!

These are the kinds of situations that involve real shades-of-grey and nuance in ethical decision making, where the obligation to employer, to family, and to self-consistent ethics collide, and where options are few.  This is the crucible where ethical leaders are either born or lose their way in the mire.  It’s easy to justify doing something a little grey when the personal stakes have very high personal risk.  And once you start down that path, it’s easy to lose all perspective.

But for those who will become principled, ethical leaders, these are they who considered deeply, before entering the fire, where they stand on their moral and ethical principles.  These are they who have drawn the line that they will not cross, who know where it lies, and know the warning signs of when they are coming close to it.

That’s why, ultimately, it’s important for people in my position to think deeply about where we stand on ethical issues.  But not only from a high, C-level perspective.  It’s hard to know how you’ll really react at a C-level until you’ve done your time in the mid-level mines.  So, our ethical education needs to start here, where we live, and examine the problems that we actually face in our day-to-day.

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