[Stoica] People look up the chain. For example, if they see their bosses doing something unethical,
they're more likely to do it themselves, or do something else that's unethical.
[Professor Robert Prentice] What does it mean to be an effective ethical leader?
It means at least two things.
First, effective ethical leaders act ethically as an inspiration to others.
No single factor has a bigger impact on the ethicality of firm culture than the
personal examples set by firm leaders.
Second, they communicate and manage their organization's
culture so as to promote ethical action by subordinates.
[Nikki] Most of my managers have always been very ethical, and I've always looked up to
their leadership, but one in particular stood out from the others in that she was always
looking for other people's perspectives and was really able to see like the entire spectrum
of ideas and diverse perspectives in a situation.
"How's this going to impact other people?
What are the downstream impacts of this decision that we're going to make, and is it truly
the right one for our company? For our stakeholders and our client teams?"
Professors Cropanzano and Walumbwa have observed that most adults do not have an adequate moral
compass and therefore "look outside themselves for guidance in moral dilemma situations."
It is the leaders of their organizations to whom they primarily look, and studies show
that few things impact the ethical climate of a firm more than the actions of their leaders.
Importantly, leaders' unethical actions are copied by subordinates even more readily than
their ethical actions.
When you have a non-ethical boss that is always
trying to bend the rules or even break them, that is creating a toxic environment for everybody in the
institution because the more and more people will try to do the same thing.
If it's a big institution and they set such a bad standard that can impact the community because those
people that work there will eventually leave and take their toxic culture to other institutions
and so on. It's going to spread like a virus.
Although it is especially important for leaders
to act ethically, they are often particularly vulnerable to acting unethically.
Professors Tenbrunsel and Bazerman note that it is clear that most people have high opinions of their
own character and do not realize the substantial gap between how ethical they think they are
and how ethical they truly are.
Like for example, I worked for a doctor in
a small practice, and um, he had a very colorful personality but he was also very unethical
about a lot of things because it was just him, and he was the boss. And, um, sometimes
he would disclose really personal information about patients to other patients, and to us.
You know, I would bring it up to him and I would get in arguments with him about it but
then would be so much pushback that it would be really, really hard for me to see it all the way through.
When you're working for somebody who's not concerned with ethics, or they
think that, I think that in some cases they think that they are overconfident that they're
ethical, and really they're not, or what they're doing is not wrong.
They rationalize themselves out of it anyways because, you know, for the doctor I worked for, "He was a doctor,
and so he did lots of good things, so it's okay that he did these things." Or, "He was more
educated than all of us, so he knew what he was talking about, and none of us knew."
Believing that we are moral people and will automatically do moral things, many of us
act with little self-reflection and thereby often make ethical mistakes.
Overconfidence renders leaders particularly vulnerable,
because they have typically had great success in their lives.
Leaders are often given uncritical support, which Professor Frances Milliken
found, leads them to be even more overconfident than the rest of us.
Think of Ken Lay,
former CEO of Enron - minister's son, noted philanthropist...
convicted felon.
Or, think of disgraced lobbyist Jack Abramoff
devout Jew, devoted family man...
convicted felon.
[Tony] You know, as a leadership person, I tended to make more decisions kind of instinctively.
Kind of more, on the fly, on impulse.
[Dillon] I had been put in charge of a group
of people who were very broken, and I had had a couple of good answers for a couple
very difficult problems that we were facing.
And so you get to thinking that you know what to do in every situation.
You know what's best, and you lose friendships over it.
You start telling people what to do, dictating, legislating from on high, I believe
I've heard it termed.
Another behavioral factor that particularly affects leaders is the "instant entitlement bias."
Studies show that if people are told that they are part of a team and that they
should divide up resources allocated to the team,
they tend to divide the resources equally among team members.
But if they are told that they have been selected as the "leader" of the team,
even if they have done nothing at all to deserve that title,
they tend to keep a much larger share of the resources for themselves.
In real life, leaders often fall victim to
the instant entitlement bias, as can be seen in the lavish lifestyles often lived by corporate bigwigs.
Think of former Tyco CEO Dennis Kozlowski, who spent $2 million of company money on his
wife's birthday party.
It's really easy to serve in one's self interest
when you're in a position of power.
It depends on how big a piece of the pie you have at stake.
I could envision a situation where I may be willing to let more things
slide knowing that I had some sort of financial stake.
And I don't like to admit that.
But then again,
you can't put a price on doing the right thing.
Studies show that leaders tend to be extroverts who are prone to impulsive behavior. Many
surround themselves with "yes" men (and women) to gain the self-validation that we all desire.
A study by Professors Flynn and Wiltermuth demonstrated that people at the center of
social networks, such as CEOs, are more likely than others to mistakenly believe that other
people agree with them regarding what is an ethical course of action.
If your decisions have always been supported and you've always been praised for being a
fantastic leader and increasing the value of the firm, it could feel like you can do
no wrong in the eyes of the firm.
"Everything that you've done is great, so keep doing what you're doing, and if it's not broken, don't fix it."
And I think that, if that's your
mentality then it's unlikely, it could be hard for you to slow down and think about
whether you could have made a better decision or whether the decisions you are making are
truly ethical and in the best interest of the firm and your own value structure, you
know, the culture of the company, and your own personal values.
It is often shocking how top corporate officers (like WorldCom's Bernie Ebbers) and high government
officials (like New York's Eliot Spitzer) come to the view that the rules that apply
to everyone else do not apply to them.
Often they do outrageous things with little or no
effort to hide their wrongdoing because they become so convinced of their importance to
their firm's mission, which somehow justifies their exempting themselves from legal and
ethical standards that apply to others.
For example, when Ken Lay was found to have violated
Enron's Code of Ethics by investing in a company that did more than 80% of its business with
Enron, he called suggestions of impropriety "form over substance."
Rules, he said, "are
important, but you should not be a slave to rules either."
When I was in high school and I was doing work with the NGOs back in my community in
Romania, I had a boss that would always try to embezzle money and also try to force a
number of young people, young volunteers in the institution to make loans with fake papers,
and to take the money and he would present everything as being done for the greater good for the organization.
The higher people go up the chain, the more likely they are to
do illegal stuff because they think no one is going to catch them
and they might think that
if they get some money now it's going to be better, but they don't realize that eventually they will
still be caught, or people will just refuse to work with them. They will build a nasty
reputation and it's all going to go down the drain sooner or later.
Professor Dacher Keltner of the University of California at Berkeley, who studies ethical leadership,
further finds that leaders are often tone deaf on ethical issues
and that they have "uniquely self-serving rationalizations for their own unethical actions that often
focus on their rights and crowd out any consideration" of others' rights.
As Professor Zak notes:
"Achieving high social status appears to make it not just lonely at the top but morally
perilous as well."
When people talk about power corrupting, it doesn't have to, only if you are not aware
that your actions have consequences, and networks around you, right?
[Carlos] Realize what's important, what's moral, and question your actions
to make sure that all the decisions you're making are leading to an objective that is ethical,
and along the way your actions are moral. Um, contributing to the greater good.
[Claire] I think if a leader sets a tone that they've never made a mistake, they don't struggle
with anything, they're perfect, then, I mean, that's not realistic, but then how can people
come to them when they're feeling less than perfect.
[Arthur] The best leaders are the ones who acknowledge their own shortcomings.
Acknowledge that they do not know everything, and ask those who they serve and ask those who work
for them just to fill them in on what's happening.
The best companies are the ones that create a culture where their employees
can voice their concerns to their bosses really.