Leaders in the 21st century are called upon to deal with a host of difficult challenges created by scandals, corruption, and violence.  Any organization's ability to endure over time is seriously undermined by the erosion of public trust caused by unethical conduct and litigation.  Conversely, a growing body of research indicates that organizations with a strong ethical culture outperform those without it.[1]   A recent study on leadership competencies conducted by the Institute for Corporate Productivity revealed that strong business ethics is a competency that will be required of upcoming leaders.[2]

Trust is earned over time, but it can be destroyed in an instant.  If an organization wants to truly earn and maintain the trust of its stakeholders, it needs to set a much higher standard for itself than mere regulatory compliance.  Surveys indicate that "between a third and two-thirds of the workforce believes that their leaders are lying to them - because in many cases, they are."[3]

After more than a decade of cataclysmic scandals, the need to teach ethics more effectively seems clear.  However, one potential roadblock is that the subject is often viewed from a negative perspective - i.e., the "stick" approach of threatened negative consequences, such as jail time for breaking specific legal rules.  This approach is limited for several reasons.  First, it squanders the enormous opportunity to motivate ethical conduct for positive reasons, including data which indicate that ethically-grounded organizations are ultimately more profitable.  Second, it is not possible to enumerate all the unethical practices that must be avoided.  Third, legal compliance sets a very low threshold for standards of ethical conduct.

Perhaps more importantly, there may be deeply entrenched misunderstandings about what ethical practices mean, particularly within the business context.  A college student recently commented to me that his definition of a successful business person has traditionally meant "leave your emotions at the door," because business decisions need to be free of personal feelings - sometimes a business executive must make ruthless decisions.  He believed that ethical concerns fall within the realm of personal feelings, and therefore shouldn't be included in business decision-making.  Later, I looked up the definition of ruthless.  "Having no pity:  Merciless, cruel, a ruthless tyrant."[4]   The student has an appealing personality that exudes sincerity and good character, by my standards.  How could such a decent person endorse ruthless conduct?

In truth, the student's misunderstanding of business ethics is understandable.  The 1980's ushered in an era that fervently endorsed the mindset of greed-as-good, and that ruthlessness is desirable in executives -- anything else is a weakness to be exploited.  In my opinion, we are just beginning a recovery process from the era of ruthless greed.

Teaching organizational ethics effectively will require unlearning the untruths.  For starters, ethics are principled values, not emotions.  Every individual, business, or other organization values something, whether those values have been consciously articulated or not.  Some of those values lead to ethical conduct, while others, such as valuing personal gain over all other considerations, do not.  Even more challenging is the fact that an individual or organization can hold conflicting values.  I may value profit, but I may also value my reputation as a decent human being.  There will likely be times when those two values collide, requiring that I either sacrifice one value or create an option that satisfies both.

Everyone makes mistakes.  Aren't ethical lapses human?  Yes, they are, and so is ruthless cruelty.  Since being human encompasses all potentials for good and evil behavior, it would be cowardly and misguided to excuse conduct which would predictably cause harm to others.

Making ethical decisions requires that I think through the potential impact my choices could have on others -- before I take action.  The same holds true for organizations.  If "mistake" means to blunder or to misunderstand, it requires the absence of knowledge that one's actions will be harmful.  The recorded statements of business professionals who clearly knew their actions would very likely have harmful impact remove any room for using "mistake" as an excuse.

In the end, our actions will be the yardstick by which our performance, both as human beings and as professionals, is measured.  One of the wisest actions a current or future executive can take in these times of rapid change may be to invest in ethics training, and to encourage it for other staff, as well.  Doing so will provide both a shield against potential harm and a foundation for long-term success, for individuals and for the sake of the organization at stake.  What is your integrity worth?

[1] Companies with a code of ethics generated significantly more Economic Value Added (EVA) and Market Value Added (MVA) in the years 1997-2000, than those without codes.  Webley and More, Does Business Ethics Pay?  Ethics and Financial Performance, Institute of Business Ethics, p. 14, 2003.  During a ten-year study ending in 2005, stocks from the five hundred largest public companies averaged a 10.8% pre-tax portfolio return, as compared with servant-led [ethically oriented] companies' returns which averaged 24.2%.  James Sipe and Don Frick, Seven Pillars of Servant Leadership:  Practicing the Wisdom of Leading by Serving, Paulist Press, 2009.

[2] Aparna Nancherla, "Future Leaders Expected to Wield Soft Power," Intelligence, December 2009.

[3] Jeffrey Pfeffer, "Truthiness" Can Make or Break a Corporation, BNet, May 20, 2010 http://www.bnet.com/blog/business-psychology/-8216truthiness-8217-can-make-or-break-a-corporation/198.

[4] http://www.merriam-webster.com/dictionary/ruthless.