Ethical leadership

All posts tagged Ethical leadership

Mindfulness: A Closer Look

Published July 23, 2014 by Mayrbear's Lair

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Have you ever heard someone describe people that act without thinking as “being asleep at the wheel?” This is one way to identify individuals that are not mindful of their behavior or actions. In my eBook, Ethics in the Real World (2013), I point out that unlimited power without compassion encourages unlimited corruption (Berry, 2013). In other words, people who are not mindful of their actions or behave without regard for consequences typically find it easier to engage in unethical behavior. Mindfulness, on the other hand, is the act of behaving in a conscious manner. Plum Village founder Thich Nhat Hanh (2012), describes mindfulness as the act of bringing one’s full attention to what is happening in the present moment. He suggests that when we bring our minds back to our bodies, we are focused on the present moment (Hanh, 2012).

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Hanh further explains that mindfulness is a kind of energy that helps us to be fully present so that we can live our lives in the here and now. Students at Plum Village for instance, are educated and understand how to work with this energy. Individuals are trained in techniques that will help them focus on mindful awareness as a means to achieve successful outcomes. To begin the process, they learn the practice of in-and-out breathing exercises. What is appealing about this technique, is that in various ways, any one of us can easily engage in these tactics to generate our own energy of mindfulness. For example, when we center our attention on breathing in-and-out, we are focused on the air moving in and out of our body, putting other thoughts aside. Hanh refers to this technique as mindful breathing. Likewise, when we drink a glass of water or a cup of coffee and focus all our attention on nothing else but drinking, he calls this practice mindful drinking. When we walk and focus our awareness on our posture, our breathing, our legs, and the footsteps we take, this technique is called mindful walking. All of these examples illustrate strategies for practicing mindful awareness.

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When we focus our attention first on our breathing, Hanh asserts that we are able to unite the body with the mind, bringing our full attention to the present moment. From there, we can become more aware of everything that’s happening in that moment and observe it with a fresh perspective, without getting caught up in our past experiences or consumed by anxieties about the future. By applying these concepts, we can transform any ordinary behavior into an act of mindfulness, including brushing our hair, washing the dishes, walking the dog, eating, drinking, and even working.

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Incidentally, mindfulness is not just being mindful about positive things either. For example, when joy manifests, we practice mindfulness of joy. When anger manifests, however, we practice mindfulness of anger. Whatever strong emotion it is that arises, if we learn to practice mindfulness of that emotion, in other words, acknowledge it, not suppress or act on it, then transformation can occur which enables us to find more joy, peace, and awareness. These proven strategies have been effective for encouraging ethical behavior with successful outcomes at the Plum Village Community. The good news everyone, is that we don’t have to move to Plum Village to have these experiences. We can also learn how to incorporate mindful behavior to achieve positive changes that can also help us to develop more meaningful relationships. On Friday we will examine some of the techniques to achieve this and find out how one successful corporate executive fit this practice into his schedule. We will also learn more about how we can apply these techniques in our own lives, anywhere, anytime. Until then be mindful and stay organized!

References:

Berry, M. A. (2013). Ethics in the Real World. USA: Kindle Direct Publishing.

Hanh, T. N. (2012). Work: How to find joy and meaning in each hour of the day. Berkeley, CA: Parallax Press.

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Everything should be as simple as it is, but not simpler. – Albert Einstein

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Ethics and the Strategy of Lying

Published July 16, 2014 by Mayrbear's Lair
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A top priority in today’s world is a firm’s ability to recognize and address complicated business ethics issues. This is due to the number of well-publicized incidents of corporations engaging in fraudulent and deceitful behavior.  In their book, Business Ethics (2013) Ferrell et al., revealed that once a firm loses the public’s trust after a highly visible business ethics scandal, it changes the climate and new regulations are implemented to make businesses more accountable (Ferrell, Ferrell, & Fraedrich, 2013). The fact is, we all face ethical decisions as a part of everyday life. This means that we rely on our own personal views of ethical responses as part of the decision-making process. Ethical decisions also influence our work conduct and a company’s management goals. Furthermore, ethics play a role in the development of company policies and helps with setting the parameters of what constitutes informal communications, which tend to reflect the firm’s code of ethics.
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However, when the media exposed that trusted, well-known companies like Countrywide Financial, AIG, and ENRON had engaged in fraudulent and illegal practices, the world realized that they had all done so while hiding behind images of highly ethical conglomerates. In other words, the stark reality was that these firms had incorporated organizational management strategies that supported a culture of lying and deceit and hid it well. This meant that the leaders of these firms were either: (a) unable to make good ethical decisions because they did not subscribe to a construct that many leaders do, which is that mastering ethical reasoning is a component that is just as important in the success of an organization as is mastering accounting, financial, and marketing decisions; or (b) the firm’s tunnel vision focus to achieve their outcomes was more significant than operating with ethical sensibility. Choice (b) is the most common reason why many leaders choose to engage in a strategy of lying. This is because the marketplace is highly competitive and leaders are typically under pressure from the firm’s stockholders to achieve higher profits. For example, when a company is actively promoting and saturating the market with a new brand, they can choose to report what the firm actually sold, or they can engage in a strategy of deception by reporting numbers shipped, but not sold. This is one way a company can make themselves seem more successful than they really are. However, when a firm engages in deceitful strategies, they always risk getting caught and can end up like Countrywide, AIG, and ENRON.
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Many people in leadership positions have dealt with and processed their own experiences of betrayal or being lied to. They can either choose to behave like those who hurt them, or they can become motivated to make different choices. I revealed in my eBook, Ethics in the Real World (2013), that as a result of the conditions of my upbringing and various life experiences, I, like many others, operate with a zero tolerance for lying policy in my both my business and personal life. In today’s highly competitive market place, we have seen, this is not an easy code to subscribe to. Business leaders however, can support this policy by communicating to staff members that they must be willing to work harder as a team to support and cultivate a culture that subscribes to a code of conduct based on everyone’s abilities to identify right and wrong behavior. It is the responsibility of the leaders of an organization to establish an ethical environment. They can do so by applying the golden rule model using compassion and understanding as an integral part of the decision making process. In addition, to help enforce these policies, the organization must be open to operating with transparency and oversight, clearly articulating the consequences for misconduct, poor outcomes, and the use of lying as a strategy. On Friday, we will take a closer look at when lying as a strategy can actually yield successful outcomes. Until then, stay organized!

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Information is not knowledge. – Albert Einstein

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References:

Berry, M. A. (2013). Ethics in the Real World. USA: Kindle Direct Publishing.

Ferrell, L., Ferrell, O., & Fraedrich, J. (2013). Business ethics: Ethical decision making and cases (9th ed.). Mason: South-Western.

 

How Emotional Intelligence Shapes Ethical Perceptions

Published June 4, 2014 by Mayrbear's Lair

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The demand for ethics in leadership is escalating. Yet it still remains low in the corporate arena as evidenced by the downfall of leaders, company scandals like AEI, and more recently General Motors who is battling to save the brand’s tarnished image of negligent behavior by selling autos with known defects.  For one thing, this generation of leaders seem more equipped to navigate, rather than inspire and guide. In my article, Ethics in the Real World (2013), I revealed that the ability to distinguish and administer information from perceptions, stimuli, and emotional cues, are the components that help define a person’s emotional intelligence (EQ). In addition, the EQ of a person plays a key role in the development of their ethical views in both their personal and business relationships (Berry 2013). For example, a person’s cognitive ability, or beliefs and perceptions about any given situation, can have a profound influence on the way they interpret and respond to their environment. It also plays an important role in how they deal with happiness in their lives as well as how they respond to their career experiences. In other words, emotional intelligence plays a role in determining a person’s values by identifying what they deem as acceptable and unacceptable behavior.

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Also, an individual’s attitude and values, can have an affect on their predispositions toward other people, objects, concepts and events. Baack (2012) suggests there are five key elements that reveal a person’s emotional intelligence: (a) self-awareness, (b) self-management, (c) self-motivation, (d) empathy, and (e) social skills (Baack, 2012).

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In the meantime, the ability to manage personal emotions and impulses is a defining component of self-management. This element helps a person solve issues without allowing emotions to govern the thinking and decision making process. An individual, without suitable self-management skills, may experience more challenges, for example, socializing and interacting with others. In short, without a level of self-awareness, they may be unable to pick up on the personal feelings and emotions of others. This makes it difficult for them to get along with others because there is a disconnect when relating to them. All of these are factors that play an important role in the development of a person’s emotional EQ which in turn, helps shape their perceptions of ethical behavior.

On Friday we will look at how self-esteem and self-efficacy play a role in the development of ethical behavior. Until then … stay organized!

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Never do anything against conscience even if the state demands it. – Albert Einstein

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If you are looking to achieve your highest potential in more areas of your life, or want to enhance your leadership skills by learning more about ethics and mindful communication, click on the image below to find out how:

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References:

Baack, D. (2012). Organizational Behavior. San Diego: Bridgepoint Education, Inc.

Berry, M. A. (2013). Ethics in the Real World. USA: Kindle Direct Publishing.

Corporate Social Responsibility

Published July 22, 2013 by Mayrbear's Lair

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Companies are in the business of making a profit for the benefit of their stakeholders.  This in turn means they have a responsibility to the employees, customers, suppliers, communities and society at large. Boatright (2009) posits that most organizations are cognizant of their responsibilities. They seek strategies to reach desired outcomes and initiate directives that adhere to corporate social responsibility (CSR). In fact, evidence suggests it is becoming more difficult for companies to gain sufficient competitive advantage in today’s cut throat marketplace without CSR. Together with regulations that are in place, more corporations are engaged in practices that monitor such things as fair prices, fair labor conditions, direct trade, democratic and transparent organizational behavior, community development and environmental sustainability (Boatright, 2009).  Top managers, however, are not always in the best position to make ethical choices because of various components. In one case study for example, a manager was thrust into a situation that required decisions and judgments based upon the organizational culture. In addition, as an expectant parent, the leader’s financial status changed temporarily because his wife was on unpaid maternity leave. This now left him as the sole breadwinner. In short, the supervisor’s new situation made it difficult for him  to make the best choices that were in alignment with his personal moral views because of the external pressures from his job and the internal pressures of a husband and an expectant father. He was feeling stressed from being in a position where he had to contemplate choices that could ultimately result in his termination.

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The legal issue he contemplated were having to conform to new policies that lead to behavior in violation of federal trade commission laws and mandates. Upper management was pressuring him to engage in practices that encouraged using information from trusted clients to give them an advantage in the market. This in turn created unfair competition. In addition, he did not have the support of many of his departmental staff members. In fact, many voiced  loudly their objection to the new direction the firm was taking. Ferrell et al. (2012) suggest that a company’s history consists of the unwritten rules that become part of its culture. Leaders at the helm are considered responsible for their behavior as well as that of their subordinates.  Corporations that follow the guidelines set forth in the Sarbanes-Oxley Act define parameters that institutions are expected to comply with, which includes systems that monitor and assess the internal and external auditing of financial statements (Ferrell, Fraedrich, & Ferrell, 2013). By adopting these new practices proposed from upper management, their company was in a unique situation to utilize information from trusted client relationships in order to profit over other organizations. This is a serious offense that raises the alarm for stakeholders.

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There are advantages and disadvantages to the manager’s situation. The advantages are huge capital gains, status, recognition, and other enticing benefits. The disadvantage is conducting business unethically and illegally which can result in termination and incarceration. To incorporate these new practices, it encourages employees to chase monetary rewards based on commissions and fees on mutual funds that are risky, can go sour, and damage the credibility of the firm and its representatives. In short, chasing high profits unethically, will inevitably lead to the organization’s demise and the downfall of many respected careers. Because of the added pressures to provide for his expectant partner, the pressures from his superiors to engage in questionable practices, and the threat from one of his biggest clients, this leader had to face some very serious choices which could have long term negative outcomes. McGraw (2012) contends that surrounding yourself with the right people helps you learn the right actions to make the right decisions (McGraw, 2012). The financial industry tends to attract individuals that are drawn by power, which can turn to greed and corruption contingent upon personality traits. Many top executives find themselves in situations where they are called to participate in ethical misconduct from pressures like this leader faced. Their choices are: (a) comply and go with the directive of their superiors taking the risks that are involved with misconduct, (b) choose not to participate, which could ultimately cost them their job, or (c) find a solution that does not involve the exploitation of trusted client information to achieve similar positive outcomes. The last choice requires presenting a strong argument to upper management however, that supports changing the view of the superiors with reasons that urge them to engage in more ethical practices to achieve their goals. Ultimately it is up to each individual to come up with a strategy they can support and embrace with a healthy conscience.

References:

Boatright, J. (2009). Ethics and the Conduct of Business (Sixth ed.). Upper Saddle River, NJ: Pearson Education, Inc.

Ferrell, Fraedrich, & Ferrell. (2013). Business ethics and social responsibility (9th ed.). Mason, OH: Cengage Learning.

McGraw, P. (2012). Life code. Los Angeles, CA, USA: Bird Street Books.

Ethical Competence in Leadership

Published December 28, 2012 by Mayrbear's Lair

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Executives and business thinkers believe that ethical competence in leadership simply translates as leaders having good character.  An ethical leader with the right values can set an example for others and resist temptations that may occur.  Recent portrayal of business executives however, is often viewed as greedy, competitive and only concerned with compensation.  Many of us agree that the basics of capitalism, which include personal gain associated with risk and rewards are ethically acceptable concepts.  Business leaders have become the focus of criticism however, through the revelations of numerous scandals, bad behaviors and outrageous compensation packages.  As a result, organizations are under extreme pressure and unparalleled scrutiny to reframe the criteria for what constitutes ethical leadership with emphasis on: (a) behavioral accountability, (b) decisions that affect the enterprise, and (c) establishing reasonable executive compensation – an intensely complex topic that in its simplest terms focuses on the alignment between executive pay and performance.  Adding to this is the pay gap between boss and workers that has stretched to such levels, that many find difficult to comprehend as ethical.  While incentives intrinsically motivate top executives, arguments and ethical controversies about high sums paid for executive salaries are rarely discussed.

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The Ethical Leadership Factor

The demand for ethics in leadership is rising, yet resources remain low as evidenced by the current global recsession.  This generation of leaders seem equipped to navigate rather than inspire and guide.  One such instance is former Home Depot CEO, Robert Nardelli who came under fire for his management style as well as for the emormity of his pay package.  His methods and actions during his reign at Home Depot were considered unorothodox which indicates a lack of emotional intelligence and ethical incompetence.  He was described as an individual who radiated enormous energy that always had a need to be front and center.  This attitude wore on the board and employees after a while (Grow, et al., 2007).  His specific job-centered and production-oriented militaristic approach reflected a leadership style identified as the behavioral theory which is based on production and task centered outcomes (Baack, 2012).  For example, Nardelli implemented systems of operation that concentrated on the technical aspects of production goals, keeping costs in line, following schedules and did so in a warmongering manner using fear and intimation as primary tactics for motivation.  Although this method of political intelligence can be effective, most would agree it is an old fashioned mode of leadership that wreaks havoc with employee motivation and participation.

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The former Home Depot CEO’s militaristic leadership style created a climate of anxiety and coercion as the norm.  It was a style he adopted as former head of General Electric that was enforced by hiring as many people from the military as possible to maintain this atmosphere.  Although this behavior is not considered unethical, his drill sergeant method of management and philosophy along with his command and control style was viewed by the company’s civilian subordinates as counterproductive in an era where collaboration trumped intimidation in getting the job done (Firms of Endearment, 2006).  According to insiders, Home Depot staffers never really embraced his leadership style and everyone’s eyebrows were raised by the staggering compensation package he received especially given the significant loss in profits Home Depot suffered after his taking the helm.

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The Incentive Factor

The emblematic philosophy of nearly every board in America states that executive performance and pay should be aligned.  The market for executive labor is highly compliant in paying more for an executive whose performance delivers great results over one who does not; naturally for these reasons incentives matter.  Top executives are intrinsically motivated by incentives because they serve as a powerful messaging and focusing device (Ferracone, 2010).  The inherent focus is whether there are too many instances when executive pay is high but performance is low.

For example, within six years of Robert Nardelli’s dynasty, anger stirred among shareholders who saw almost no gains in their share value.  Their frustrations were exacerbated by his compensation package that included more than $200 million in salary, bonuses, stock options, restricted stock, and other perks (Grow, et al., 2007).  Retired Exxon Chairman, Lee Raymond was reportedly paid $51.1 million in 2005; the equivalent of $141,000 a day, which translates to nearly $6,000 an hour.  His salary came with a generous retirement package of nearly $400 million including pension, stock options and other perks like a $1 million consulting contract, two years of home security, personal security, a car and driver, and the use of an Exxon corporate jet for professional purposes.  Exxon however, defended Raymond’s compensation as justified, noting that during the twelve years he ran the company, Exxon became the world’s largest oil company shooting their stock up 500% (Hall & Lipman, 2008).  Nevertheless, as a result of exuberant compensation packages, executive salaries are now being examined more thoroughly and ethical controversies about the high sums paid are being addressed.

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Close Examination of Compensation Plans

When establishing pay plans, experts ask the following questions to help determine the best executive compensation practices: (a) what is considered fair pay; (b) how much is enough; (c) how much is too much, or too little; (d) what constitutes good performance; (e) how much is good performance worth; and (f) how to maintain a fair relationship between performance and pay, particularly when the market for executive talent is tight.  According to Robin Ferracone (2010) in her book Fair Pay Fair Pay, median executive compensation is not an issue.  Her analysis takes into account inflation and the increase in median company size over a period of time and concludes that real size and performance adjusted CEO pay, has increased approximately 1.6 times since 1995.  This implies a compound annual increase in real performance-adjusted CEO pay of 3.6% (Ferracone, 2010).  However, as more executive pay packages like Raymond and Nardelli are exposed, executive compensation practices are under the radar from activist shareholders, corporate governance rating groups, the media, and lawmakers for active change and reformation.

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Recommendations for Pay Reform

The public controversy over executive pay has resulted from the failure of compensation committes to use better practices in establishing CEO recompense.  It also constitutes a failure to adequately explain to shareholders both the methodology used and the growing competition for executive talent with private equity funds (Hall & Lipman, 2008).  To bring balance to this subject, board of director compensation committees for both profit and nonprofit organizations, are formulating executive compensation reformation plans that provide comprehensive compensation guidance for all board members.

Restoration in equity to the system is imperative.  Some strategists believe that better practice tactics should include thorough strategic plans of the company as well as the year-to-year budget policies as factors in the routine operations of compensation committees to help establish goals and objectives for ideal executive performance.  Many theorists believe problems with compensation are symptoms of a larger issue of ethics.  If leaders are to be encouraged to perform the role of company stewards, then ethics and ethical leadership skills belong at the heart of compensation discussions.  Organizations that are recognized and established as ethical institutions set the stage for effective compensation plans.

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Conclusion

The political intelligence displayed by Home Depot’s former CEO limits worker freedom in the workplace and creates an atmosphere that lacks joy and pleasure.  As a linking pin to employees at lower levels, this style of leadership encourages a certain disconnect within the organizational troops.  Although a method that adheres to strict codes of conduct is an excellent discipline, in today’s American society, Nardelli’s outmoded approach left an unethical impression on many who worked for him.

I have a deep appreciation and respect for those who enroll in the military where a strict disciplinary code is required especially in combat situations however, as a civilian that enjoys a more relaxed environment, I would not be an organizational fit in an institution spearheaded by a leader with militaristic qualities like those of Nardelli.  I prefer management whose leadership skills are more in line with the great man and characteristic trait theories approach which center on five basic personality traits: (a) extroversion, (b) agreeableness, (c) conscientiousness, (d) emotional stability, and (e) openness (Baack, 2012).  Nardelli’s leadership style side stepped the situational and contingency theories as he was not the touchy-feely type, open to evolving from task oriented to relationship oriented tactics.  He either was unable or unwilling to adapt and match his leadership characteristics to the atmosphere of the Home Depot arena.

In conclusion, while high salaries and incentives intrinsically motivate top executives, CEO behaviors are closely being examined for leadership styles that lack ethical qualities and emotional intelligence.  Although a militaristic approach to leadership is not considered unethical, Nardelli’s governance style was ultimately a model that did not work successfully for the home improvement industry.  In addition, the fairness of his compensation package was highly criticized in light that under his leadership the company yielded considerably lower profits.  His inability to self-examine, reassess and make changes in his leadership style to blend with his new environment ultimately brought forth an untimely end to his reign at Home Depot.  In the meantime, the jury is still out on what constitutes ethical compensation and the parameters that define it.

References

Baack, D. (2012). Organizational behavior. San Diego: Bridgepoint Education, Inc.

Endearment, F. o. (2006, March 29). Home depot CEO Bob Nardelli’s militaristic management style out of date. Retrieved from Firms of Endearment: http://firmsofendearment.typepad.com/srm/2006/03/home_depot_ceo_.html

Ferracone, R. (2010). Fair pay fair play (1st ed.). San Francisco, CA: Jossey-Bass Publishing.

Hall, F. L. (2008). Executive compensation best practices (1st ed.). Hoboken, NJ: John Wiley & Sons, Inc., Publishing.

Multiple. (2007, January 14). Out at home depot. Retrieved November 28, 2012, from Business Week: http://www.businessweek.com/stories/2007-01-14/out-at-home-depot