Corporate Eye

Once Again It’s Leadership Integrity

Despite Sarbanes/Oxley, business schools ramping up Business Ethics courses and lofty Corporate Codes Of Ethics, the Mortgage Market crisis indicates that we still have problems with integrity and ethics. While the mortgage crisis focuses on financial services companies, it is yet another wake-up call.

Leadership integrity and ethics continue to be lacking. For example in The 2007 ETHICS RESOURCE CENTER’S NATIONAL BUSINESS ETHICS SURVEY® (registration needed but worth it) indicates —

  • Ethical misconduct in general is very high and back at pre-Enron levels – during the past year, more than half of employees saw ethical misconduct of some kind.
  • The number of companies that are successful in incorporating a strong enterprisewide ethical culture into their business has declined since 2005. Only nine percent of companies have strong ethical cultures.
  • Many employees do not report what they observe – they are fearful about retaliation and skeptical that their reporting will make a difference. In fact, one in eight employees experiences some form of retaliation for reporting misconduct.

In the report the Center indicates “The Ethics Landscape Is Treacherous – Corporate America Is at Great Risk.” This is very sobering, however since 2002 and Sarbanes-Oxley, there have been similar cautionary tales apparently with little effect. Some may indicate a need for more regulation. But this is not the answer since rogues will always find ways to get around these. The solution must be a serious effort from senior leadership tobuild an organization wide ethical culture.

The Ethics Resource Center offers some useful suggestions.

Consider these additional suggestions as you build integrity within your leadership team. They are aimed at integrating Integrity within the organizational culture. You must address “the way we do things here in company x”, or the norms governing how people make decisions each day.

  • Integrity starts with the Board of Directors who develops an ethical practices statement and demand adherence. Violators must be publicly admonished similar to what Jack Welch did at GE
  • Ensure these practices flow easily throughout the culture and embedded in the formal and informal company practices
  • Stop the scoundrels at the gate – when recruiting leadership positions, use new approaches to reviews and assessments designed to surface integrity issues. Bristol-Myers, Pfizer and smaller companies such as Spartan Stores are using innovative approaches to filter out candidates with Integrity issues. Yes it is possible to interview for integrity see “Can You Interview For Integrity?”
  • Put Integrity components in compensation/incentives programs for all not just executives.
  • Communication between leaders and people in the organization deteriorated despite polished multimedia techniques. Your message may be lost in the technology. Tell stories about authentic leaders at company meetings, publish them in company newsletters. Tell them about company performance. Avoid fancy slides, just tell them the facts.
  • Leader development programs must include a first course/seminar in Integrity.
  • Be seen by your people. Let them see and talk with you in a relaxed place. If you “hide” in your office, it’s difficult to build Integrity.
  • Turn bureaucracy on its head.
  • Tough decisions always challenge Integrity. Such times require courage to do the right things. Don’t waste time over analyzing. Embrace integrity and you’ll know what to do.
  • No more “yes men/women”. Surround yourself with trusted people with diverse viewpoints who tell you what they really think about your ideas. Building Integrity takes time and continuous vigilance to maintain.

I will be interested to see what, if anything, will happen to improve corporate ethics after this latest scandal.

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Ed Konczal has an MBA from New York University's Stern School of Business (with distinction). He has spent the last 10 years as an executive consultant focusing on human resources, leadership, market research, and business planning. Ed has over 10 years of top-level experience from AT&T in the areas of new ventures and business planning. He is co-author of the book "Simple Stories for Leadership Insight," published by University Press of America.