Corporate Eye

The Financial Crisis and Ethics

In my post Subprime Mortgage Crisis Musings, I mentioned that “There may be a chance that corporate ethics will finally get serious attention”. Well it seems this prediction may be happening.

First there’s the Edelman Trust Barometer Report —

Access the full Report.

OK, the USA has a serious problem with Corporate Ethics and Integrity. Let’s see what others are saying.

A US News Opinion article says

Failed Leadership Caused the Financial Crisis

We need to do more than fix the crisis; we need to fix the mindset that got us into it

1. They should be authentic leaders, focused on serving their clients and all the institution’s constituents, rather than charismatic leaders seeking money, fame, and power for themselves.

Then there is a Darden Business School faculty panel (this link has an audio of the discussion) —

“… during their discussion it seemed obvious that the complex, cause-and-effect interplay of terrorist activity, Federal Reserve policy, relaxed regulation and creative mortgage financing in the last nine years created a climate of poor business leadership and loose ethics that fed a consuming desire for wealth.”

Next Harvard Business School leadership guru Bill George (watch the video) says —

How important is leadership? Without it, you get the worse US financial crisis since the Great Depression.

“This is not a crisis caused by the failure of complex financial instruments,” he writes in a recent Time magazine op-ed. “This is a crisis caused by the failure of leaders on Wall Street.”

There is more similar commentary but I think you get the point.

Once again there is an overarching need for tone and actions from the top of the organization.

For example there is the case of GE when CEO Welsh publicly honored a manager who did not reach his sales targets because he refused to offer a bribe that would get sales for engines to a foreign airline.

Here is an excellent example of “Tone from the TOP”. This from Canadian based Manulife CEO Dominic D’Alessandro when he received the Ivey Business Leader Award —

Another – and perhaps – the most important quality that a good leader must possess is integrity. I’ve been fortunate, as I said, to work with people of a very high caliber. All of them always conducted themselves to the highest possible moral standards.

As I get older, I realize more and more that integrity is the foundation on which everything else depends. Without it, you may still get to the top; but, it’s almost certain that your stay there will not be successful, nor will it last long. More than ever people today want leaders they can trust, who stand for something and who can be relied upon to do the right thing.

We have worked very hard to make integrity the cornerstone of our fine company. At the same time that we articulated our aspiration of being the best in the world, we also developed a statement of values, summarized by the acronym PRIDE. Our values are non-negotiable beliefs that guide everything that we do. They, as much as anything else, represent our culture. There isn’t an employee anywhere in the world who couldn’t explain what the acronym means.

The “I” in Pride stands for Integrity. It means that all of our dealings are characterized by the highest levels of honesty and fairness; that we develop trust by maintaining the highest ethical practices.

This is the Integrity factor that must overlay every action within the organization.  Lacking this factor puts the entire organization and now the world economy at great peril.

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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.