Leadership & Ethics – Part 1

A call for greater ethical leadership

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Leaders spend 15% of their time addressing unethical behaviour

The impact of ethics, or the lack thereof, are evident in South Africa as seen by the reports circulating in the media. The power utility sector was and is not immune: nuclear deals, coal contracts, procurement irregularities, conflict of interest, postponement of signing IPP agreements … the list continues. It would be easy to point fingers only at the organisations and individuals that have been implicated and to demonize them or alternatively, to make a generalisation that everyone is corrupt.

South Africa is not the only country where ethics and governance are brought into the limelight. The Panama Papers, that was made public in April 2016, included 11.5 million documents containing information of individuals and organisations from more than 200 countries. (Not all the information indicated illegal activities, but many contained information where the ethics are questionable.)

The above-mentioned examples are part of the increased number of reported unethical behaviour. There has also been an increase in the number of business leaders, especially CEOs, that are charged and found guilty of unethical and in some cases illegal, behaviour. The increase noted is despite the increased emphasis on business ethics, the increased implementation of codes of conduct, stricter regulation and a call for greater accountability and social responsibility.

It has been estimated that 15% of business leaders’ time are being spent on addressing unethical behaviour within the organisation.

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Forced successions due to ethical lapses increased globally

PwC’s Strategy& reported that forced successions due to ethical lapses increased globally (as published in Strategy+Business). Statistics from the report has been summarised in the table.  Karlsson, Agurre & Rivera identified five reasons for the escalation of ethics-based dismissals of CEOs.

  1. Public Opinion: The public has become more sceptical of corporations and its leadership. The trust of corporations is at the lowest it has been in seventeen years. Thus the public is “more critical and less forgiving of corporate misbehaviour”.
  2. Governance and Regulation: More policies and regulations are implemented as scepticism increase, thus more proactive and more punitive measures have been put in place.
  3. Business Operating Environment: Leaders are exposed to greater levels of ethical risks when pursuing growth in emerging markets as there are higher levels of corruption and less mature governance structures.
  4. Digital Communication: Companies and executives are more exposed as digital communication provide a trial of evidence of unethical behaviour, that can be used by whistle-blowers and hackers.
  5. The 24/7 News Cycle: Web-based news cause news and information to spread quickly, magnifying negative opinions and resulting in companies having to act quickly.

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It would be easy and tempting to reduce the unethical behaviour of others to their “bad character” and thereby to exonerate ourselves from the possibility of being guilty of unethical behaviour. Philip Zamboro, psychologist and professor emirates at Stanford University said, “Decades of evidence show us that situations can persuade even the most ethical and compassionate people to betray their own values.”

“Decades of evidence show us that situations can persuade even the most ethical and compassionate people to betray their own values.”

- Philip Zamboro

Consequently, we must be aware of our own susceptibility to unethical behaviour even though we might label ourselves as good, moral and ethical.  Behaviour ethicists and social psychologists encourage us to look beyond whether a person is good or bad. Nicolas Epley, professor of Behaviour Science, consolidates this together with other misconceptions about ethics, with his “Four myths about morality”.

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Create ethical environments

Epley’s myths and truths highlights the vulnerability we, as individuals, have with regards to our personal morality and ethics. As leaders, we need to not only guard our own ethics but need to create ethical environments for those in our organisations.  We need to be ethical leaders.

“The line between good and evil cuts through the heart of every human being.”

- Alexandre Solzenitsyn

Brown, Treviño, and Harrison defined ethical leadership as a “demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement and decision making.”

There are two elements to this definition. The first aspect deals with the personal character of the leader who displays integrity, is trustworthy and lives socio-centrically. The second aspect deals with the ability of the leader to encourage and motivate their subordinates to make ethical decisions.

Professor Deon Rossouw, CEO of The Ethics Institute, noted that in the most recent King report, King IV, there is a move beyond ethics management towards ethical leadership. (The King Report provides guidelines for governance and operations in South Africa.) The King IV report highlights three challenges for leaders to generate an environment for corporate ethical behaviour:

  1. Being an ethical leader
  2. Creating an ethical organisational culture
  3. Operating as ethically responsible organisations (corporate citizenship)

Addressing the three leadership challenges is beyond the scope of this article and will be address in separate articles. However, the challenge is clear, there is a call to be ethical leaders.

Act Now

  1. Develop own ethical leadership framework.
  2. Develop an action plan to reduce the risk of own unethical behaviour.
  3. List the actions that you will take to motivate those you lead to make ethical decisions.
  4. We all have been in situations where our ethics were tested under pressure. Set time aside to reflect on a situation where your ethics were tested and were able to act ethically, as well as a situation where you feel you compromised your own ethics or values.
  • Describe the situation (without judging yourself).

  • Describe how you acted, what you felt and what motivated you.

  • Think of how you would act differently in if you had to be in the same situation.

Tools

Each day we are presented with new situations and opportunities. According to Zimbardo, there are three paths we can follow:

“Path 1: Become a perpetrator of evil
Path 2: Become guilty of passive inaction
Path 3: Become a hero”

- Philip Zimbardo

As leaders, we need to choose to become heroes: to be socio-centric, to act in fairness and integrity when others remain passive, to impact our environment where it become easier for others to act ethically and become heroes themselves and finally to run ethically responsible organisations.

Brown, M. E., Treviño, L. K. & Harrison, D. A. 2005. Ethical leadership: A social learning perspective for construct development and testing. Organizational Behavior and Human Decision Processes, 97: 117– 134.

Brown, M. E. & Treviño, L. K. 2006. Ethical leadership: A review and future directions. The Leadership Quarterly 17 (2006) 595–616.

Epley, N. 2016. Four Myths about Morality & Business at Ethics By Design. [Online] https://www.youtube.com/watch?v=bPhi0UAfuQg.

Karlsson, P., Agurre, D. & Rivera, K. 2017. Are CEOs less ethical than in the past? Strategy+Business. Issue 87, Summer 2017. [Online] https://www.strategy-business.com/feature/Are-CEOs-Less-Ethical-Than-in-the-Past?gko=50774

Rossouw, D. The prominence of ethics in the fourth King Report on Corporate Governance. The Ethics Institute. [Online] https://www.tei.org.za/index.php/resources/articles/ethics-opinions/7250-the-prominence-of-ethics-in-the-fourth-king-report-on-corporate-governance

Transparency International. [Online] https://www.transparency.org/news/feature/corruption_perceptions_index_2016

Zimbardo, P. 2008. The psychology of evil. TED. [Online] https://www.ted.com/talks/philip_zimbardo_on_the_psychology_of_evil

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