Ethical leadership development and clichés

As the school year begins and scores of students (and teachers) experience both anxiety and excitement, let’s review some clichés and the applicability to ethical leadership development.  Clichés have a bad wrap.  They’re mainly regarded as shallow, trite and meaningless.  I believe the power of the cliché is that it contains a great deal of meaning in a nutshell.  Just as a shortened URL transports us to vast amounts of knowledge, the cliché should be viewed as the tip of the iceberg and gateway to a storehouse of potential wisdom. 

“Walk a mile in someone else’s shoes.”  This statement has a tremendous amount of emotion attached to it as I think about the millions of Syrians displaced from their homes trekking to other lands to escape war.  Often with little more than the clothes on their backs, makeshift shanty towns across borders serve as temporary homes.  The meaning of temporary in this case is anyone’s guess.  Those of us privileged enough to live in stable and peaceful countries should pause and be thankful.  Ethical leadership development is not only a personal endeavour but it also seeks to improve the lives of others.  When we take time to consider the perspective of our employees, spouses, family members, friends and colleagues, we make progress in meeting the needs of those around us.

I firmly believe that if our culture continues to promote self-interest, the very fabric of our communities will erode.  One way to reverse this is by walking a mile in your neighbour’s shoes.  

“A few bad apples ruin the bushel.”  I was reminded recently of how one employee with a negative attitude can influence others (and not in a good way).  Just as those bad apples will not remove themselves from the bushel, it is management’s responsibility to ensure staff embody the culture and vision necessary for success.  Petty in-fighting, jockeying for position and gossiping have no place in the workplace.  Ethical leaders must weed out the problem right away.  More and more evidence suggests that corporations are hiring just as much for attitude and values as abilities.  Corporations train staff to sharpen their abilities but attitude is almost impossible to change.  If you want to be part of a high-performing team, don’t be a bad apple.

“Honesty is the best policy.”  This could really replace a big chunk of an ethics course.  Although I suspect most would agree with this statement, most do not adhere to it religiously.  But isn’t this the point of a good policy?  Honesty is crucial for ethical leadership development.  We need those around us to be honest in assessing our strengths and weaknesses; we also need to be honest with those we mentor about developing their abilities.  Honesty must be demanded in corporate culture: It comes from the top down.  When Alan Mulally took the reigns at Ford Motor Company, he quickly fostered an environment of openness with his executives.  The existing culture did not give enough credence to serious concerns and the picture painted was far rosier than reality.   When Mulally was informed at a meeting with his top brass that the launch of the Edge would be postponed by a week to address a quality issue, he applauded.  The message was loud and clear: honesty is the best policy.  Other department heads followed suit and more issues arose to the surface where potential problems could be reviewed and fixed. 

The cliché itself merely scratches the surface of insight.  Like many things in life, it is vital to dig for the meaning and its applicability to developing oneself as an ethical leader.  As teachers prepare for a whole new academic year, let’s remember that ethical leadership development is a life-long pursuit.  As I remind college students that they’ll only get out of my courses what they put into them, it’s a good thing for all to acknowledge that learning doesn’t stop when formal education ends.  Each of us is responsible for getting out of life what we put into it.

Ethical leadership development and effective communication

Recently I was reminded of the importance of communication in team building and ethical leadership.  There is absolutely no excuse for verbally bullying staff, especially in the presence of customers and employees.  When one is promoted to manager, the title, new business cards and pay increase do not magically impart the ability to inspire and lead others.  One of the most important components of leadership is communication.  Although many take it for granted, effective communication is both art and science.  Individuals can develop it as a point of differentiation – for example, at sales presentations and interviews.  Organizations can use effective communication as a way of getting the team on the same page and pursuing the same mission.  Lee Iacacco, the former head of Chrysler and author of its turn-around plan in the 1980s said, “The most important thing I learned in school was how to communicate.”

Effective communication is purposeful.  Communication must be clear and understood in order to have its intended effect.  The goal of communication must be carefully considered and planned, even in situations that seem relatively innocuous.  Effective communication is essential for ethical leadership.  According to the Stanford Graduate School of Business, when Anne Mulcahy was appointed CEO of Xerox in 2001 as the company teetered with bankruptcy, she attributed effective communication as the most important element of the turn-around strategy.   "I feel like my title should be Chief Communication Officer, because that's really what I do," she said.  "When I became CEO, I spent the first 90 days on planes traveling to various offices and listening to anyone who had a perspective on what was wrong with the company.  I think if you spend as much time listening as talking, that's time well spent."

Effective communication “sweats the small stuff”.  Ethical leaders care about the fine details of communication.  If the communication does not contain the required information, it can confound the intended recipients of the message.  Every effort must be made to eliminate noise.  In the marketing research data collection business, it was crucial to the success of each project that we saw eye-to-eye with the client on objectives.  If these were not communicated effectively, the project’s end goal would be in jeopardy.   Dr. Gilbert Amelio, former CEO of National Semiconductor stated,

“Developing excellent communication skills is absolutely essential to effective leadership.  The leader must be able to share knowledge and ideas to transmit a sense of urgency and enthusiasm to others.  If a leader can’t get a message across clearly and motivate others to act on it, then having a message doesn’t even matter.”

Effective communication speaks to the heart and mind, providing inspiration.  One of the greatest storytellers in the modern age was Sir Winston Churchill.  He instilled hope in the people of Britain through his emotional and patriotic messages.  Aristotle offers insight into effective communication through his discourse on logos, pathos and ethos. In order for communication to persuade, it must exhibit logos – reason and logic.  Secondly, the communication must resonate with the audience through pathos – an appeal on the emotional level.  Finally, these two elements will not have their intended impact without ethos – the credibility and ethical character of the communicator.  Unfortunately, in this day and age, it is not difficult to achieve the first two.  Doing so without a life of integrity reduces the potency of the communication.  Walking the talk is crucial and there are times when saying nothing at all, but modeling what one believes, is the most profound communication of all.  

Ethical leadership depends on effective communication.  In this technology-laden era of instant messages and social media relationships, a beneficial way to differentiate on both the individual and organizational levels depends on effective communication.  Destination and purpose, focusing on details and touching both the heart and mind are characteristics of effective communication.  Without ethical conduct and integrity, communication – no matter how poetic and logical – loses its effectiveness.  Ethical leaders understand that in order to ask for one’s allegiance, they must touch the heart.   No matter how much knowledge a leader possesses, it is not a substitute for a caring attitude.  Effective communication affords the opportunity to demonstrate compassion everyday.

India's Companies Bill and CSR

The Companies Bill recently passed in the upper house of India’s parliament mandating that the board of directors “shall ensure” 2% of net profits of larger firms be committed to CSR.  India is among the first countries to require CSR spending through legislation.  Although this appears to be a positive development, a key question to ask is whether Corporate Social Responsibility should be an organizational requirement.  Compelling companies to give – even to worthy causes – condones a well-known human character flaw: being forced to complete a task rarely produces the same result as willingly completing the task.

CSR is more than just spending.  CSR is a mindset seeking to benefit stakeholders within the organization’s sphere of influence.  Social responsibility is not borne from the pocket book.  It emerges from a sense of doing what is right for the greater community, creating a sense of purpose for the company.  The drawback to the legalized approach to CSR is that it leads organizations and business leaders to believe that social responsibility is simply a line item in the annual budget.  For CSR to be successfully implemented within an organization, it must be more than just an initiative but a way of doing business.  Simply spending does not capture the heart of CSR.   

Honeybees are a crucial part of the global food chain.  As the number of honeybee colonies dwindles, it affects the worldwide availability of strawberries, pears and raspberries.  Haagen-Dazs has partnered with researchers and donated to honey bee studies to help reverse the honey bee population decline.  The initiative not only helps Haagen-Dazs with the ongoing preservation of fruit for the company’s frozen novelties but other food companies and the environment.  If the company was ordered to create a CSR program, would it have a similar look and feel? 

Source: A. B. Carroll, "The Pyramid of Corporate Social Responsibility: Toward the Moral

Management of Organizational Stakeholders," Business Horizons (July-August

1991): 39-48.

CSR becomes less impactful when it’s a legal requirement.  Archie Carroll’s CSR pyramid is a helpful visual reminder of the different levels of Corporate Social Responsibility.  The pyramid, from bottom to top, is economic, legal, ethical and philanthropic.  A company must be economically viable before it can be a good corporate citizen.  In other words, a company must be engaged in a profitable business activity.  This is the foundation for all other levels.  After this, a company must hold to the legal requirements of business including but not limited to paying taxes, providing employees with a safe working environment and obeying all laws.  The economic and legal aspects of CSR (the bottom two layers of the pyramid) are required by society while the ethical aspect is expected and the philanthropic desired.  Legalizing CSR knocks the ethical component down a rung to a legal issue.  Some companies may be happy to tick a box by giving to a CSR initiative satisfying corporate obligations, but it could hinder germane progress in the social arena.  Social progress requires buy-in from management and the workforce alike, transforming the organization and making a positive impact on the community: It is certainly not an easy task.  The mandated CSR law will make it easier to spend without passion for the cause or purpose.  Will consumers be more sceptical of company efforts to be good corporate citizens when CSR is required?   

The Indian government is attempting to implement good corporate citizenship through legislation.  Only time will tell whether the new Companies Bill will truly benefit the mainstream Indian population.  While the intent of the law may be noble, it could have the opposite effect - companies donating to CSR activities out of obligation and behaving like scoundrels nonetheless.      

The decision to pursue ethical leadership development

A journey of 10,000 miles begins with one single step.  The saying may be a truism, but in reality, need not be a daunting prospect.  A purposeful journey requires two things: destination and desire.  After a decision is made to pursue ethical leadership development what should one do?  The first steps on the road to ethical leadership development include learning, leading by example and dreaming big to improve the lives of others.

Decide to learn today.   Ethical leaders are lifelong learners.  They are passionate about new developments in their industry and how these changes can positively impact their business.  No matter how well you know your discipline, there are always new things to learn and trends to observe.  Management guru Peter Drucker directs us to “identity the future that has already happened.”  The only way to accomplish this is by adopting a continuous learning approach.  For example, in Canada the baby boomers are approaching retirement which will not only create job vacancies but vast potential opportunities for delivering solutions to this market segment.  As advances in health care increase life expectancy, it is not uncommon for individuals to work until 65 and still have 20 years of living ahead.  Learning the values, beliefs and attitudes of this demographic group can open doors to fulfill unmet needs in the marketplace.

Decide to lead by example today.  “I serve with honor on and off the battlefield…I lead by example in all situations” is the Navy SEAL creed.  One of the most powerful statements any leader can make is leading by example.  Navy SEAL combat veteran and internet marketing professional, Brent Gleeson states that people will only truly follow leaders they trust.  Imagine a situation requiring more trust from your team than a combat unit on the front line.  One of the main reasons the Navy SEALs are successful is because each soldier is trained to earn trust no matter age or rank.  An organization with the same attitude can truly outperform.  Each time an ethical leader promises and follows through, a deposit is made in the trust account of team members.  A long-term disposition to lead by example fosters an environment of loyalty and respect.  Although I didn’t necessarily enjoy performing every job function at our marketing research company, I learned the value of never asking an employee to do something I wouldn’t do myself.  The message communicates that the leader is willing to get his hands dirty and support the team for a common purpose.

Decide to dream big today.  The ethical leader is responsible for championing a shared vision benefiting others.  If one is to create a dream, it might as well be big.  In many parts of the world today, access to education is restricted.  Malala Yousufzai, the Pakistani girl fighting for the right to learn, was violently targeted by the Taliban because she supports education for girls.  She miraculously survived the attack and continues to advocate against extremism.  No one would have blamed Malala or her family had she disappeared from the public eye after her recovery from hospital.  Malala’s actions demonstrate what it means to chase a dream that will ultimately benefit others. 

Ethical leadership development can be your reality today.  The lifelong journey begins with taking deliberate steps each day to improve self and community.  The decision to become an ethical leader begins now.  Deliberately decide to adopt an attitude of learning.  No matter what your profession, decide to become an expert in your field by learning of the new developments in your industry and the competitive landscape.  Deliberately decide to lead by example.  Ensure your words and actions match.  You may not notice, but people are watching and it won’t take them long to figure out if you’re “walking the talk”.  Finally, deliberately decide to dream big.  Most of us won’t be speaking to the UN about improving access to education for girls, but we can still make a difference in the lives of our families and communities by adopting a big dream.  No matter where you are in life today, you can decide to take the first step on the path to becoming an ethical leader.                 

The road to ethical leadership development

The journey of ethical leadership development is a lifelong pursuit and the final destination is always further down the road.  The last two posts discussed some of the characteristics of the ethical leader and the daily focus of the ethical business leader.  To discuss leadership implies a destination.  Where will we be a year from now as we continue to focus on our regular endeavours?  The ethical leader must establish and impart a long-term vision, take others along the journey and gauge whether goals are being achieved.

Ethical leaders establish a vision.   Ethical leaders must constantly remind the team of the company’s worthy vision or its raison d'être.  Employees will toil when they know their contribution is adding to the greater good.  The ethical leader serves as the champion for the vision, charged with keeping the lofty goals as “top of mind” with its stakeholders.  Any company or board of directors can create a vision statement strewn with the latest buzz words and catch phrases.  The ethical leader not only believes in the vision but acts in a manner consistent with fulfilling the vision.  Savitz and Weber conducted research with Ohio-based energy provider AEP.  The company’s vision was to provide a safe environment for workers through a “zero harm” policy.  Savitz and Weber outline Edgar Schein’s three components of organizational culture: Artefacts (“what we do”), Espoused Values (“what we say”) and Underlying Assumptions (“what we believe”).  If all three are not aligned, it is difficult to pursue organizational goals.  For example, if the company states that safety is important but does very little aside from posting the obligatory signage to promote safety, a conflicting message will demoralize and confuse employees.  Ethical leaders establish and maintain the vision, taking the necessary steps for success.

Ethical leaders take others on the journey.  Ethical leaders are not lone wolves.  They work in an ecosystem that depends on multiple layers of responsibility, employees with varying degrees of knowledge and expertise and numerous other obligations.  No leader can do everything.  This was probably one of the most difficult things for me to learn.  When entrepreneurs start a venture, they are typically doing all sorts of things as chief cook and bottle washer.  In order to scale the business, this immature attitude must change.  And there is no room for ego.  A common theme with entrepreneurs who grow businesses is entrusting certain aspects of the company to individuals who are much more capable.  Continue hiring folks who are smarter and better in certain areas, and focus on the business of ethically leading the business.  Hiring and retaining top talent is facilitated by the organization’s worthy vision.  People want to be part of something special, and as an ethical leader, it is important to groom others to fulfill the vision.

Ethical leaders gauge success.  Ethical leaders must keep the ship on course and constantly monitor whether goals are met.  The ethical leader is responsible for establishing the proper steps to fulfill the vision.  In our example concerning AEP and its “zero harm” policy, how this is to be accomplished must be clearly outlined.  A good rule for all leaders when establishing objectives that further an organization’s vision is to follow S.M.A.R.T.  (There seems to be some uncertainty as to who is responsible for coining the acronym.)  A “smart” objective is specific, measurable, attainable, realistic and timely.  For example, a person stating that they want to get healthier is not using the “smart” guideline.  On the other hand, a person claiming that they want to get healthier by losing 10 pounds in three months through a combination of diet and regular exercise is using the “smart” approach.  The only way ethical leaders can realistically pursue success is by creating tangible bit-sized morsels from the company’s long-term vision.  These objectives can be gauged by the ethical leader to monitor whether the ship is headed to the right destination.

Ethical leaders create a worthy vision, take others along for the ride and constantly monitor results.  Without the vision, leaders are not leaders at all because leaders are on a journey to a specific place.  One of the main duties of the ethical leader is to champion the vision and help others understand its significance.  Without vision, it is impossible to hire and retain the best talent since human beings have an innate desire to be part of something that contributes to the greater good.  Gauging success is a fool’s errand without vision: If your destination is nowhere in particular, you’ll certainly get there.      

Ethical leadership development in action

Last week’s post discussed the qualities of ethical leaders including integrity, compassion and skilful communication.  The current issue discusses the focus of the ethical leader.  In which specific areas should the ethical leader devote time and energy in a world of ever-growing demands?  There are many tasks an ethical leader can accomplish which may be good, but what should be pursued?  It goes without saying that the ethical leader’s time is valuable.  I was reminded recently by Adam Bryant’s post on LinkedIn that it is imperative to distinguish between action and activity.  The latter may offer a sense of accomplishment and enjoyment but does not necessarily lead to the desired destination.  The former is purposeful, goal-driven and pursues the long-term agenda.  Ethical leaders should focus their time equally on the following: self, company and employees.

Ethical leaders invest in personal development.  Ethical leaders are learners.  They love to learn new concepts benefiting themselves and others.  Tim Sanders describes this type of person as a love cat.  The most important transformation that occurs when one loves to learn is that they are open to change.  Even after 20 years on the job, it is possible to continue learning.  This should seem obvious because the business landscape changes over the years but there are still far too many people who think they know everything there is to know about their industry.  Ethical leaders passionate about knowledge often become great teachers who seek to help others.  Dee Hock, founder and CEO Emeritus at Visa states:

“Here is the very heart and soul of the matter. If you look to lead, invest at least 40% of your time managing yourself -- your ethics, character, principles, purpose, motivation, and conduct. Invest at least 30% managing those with authority over you, and 15% managing your peers. Use the remainder to induce those you ‘work for’ to understand and practice the theory. I use the terms ‘work for’ advisedly, for if you don't understand that you should be working for your mislabeled ‘subordinates,’ you haven't understood anything. Lead yourself, lead your superiors, lead your peers, and free your people to do the same.  All else is trivia.”

Ethical leaders invest in the company.  Ethical leaders find ways to benefit the company.  The result may be new growth opportunities, marketing plans or products, but the driving force is always leadership.  Ethical leaders must make time to lead.  Leadership is not management.  Both are important and the roles may intertwine; however, it is only leadership that blazes a new path and ventures into previously unknown territory.  Most global companies perform management functions exceptionally well, but fewer are led exceptionally well.  As global PC shipments fall, and sales of the new Surface tablet position the product on the brink of irrelevance, Microsoft’s future depends on leadership not management.  It is natural for a company that developed the most popular operating system in the world to continue focusing on business as usual.  Ethical leaders invest in organizations to produce the unusual.

Ethical leaders invest in employees.  The stakeholder concept includes employees, society, government, suppliers, competition and clients.  Business does not grow in a vacuum, and to varying degrees, depends on stakeholders for vitality and sustained growth.  Employees are arguably the most important stakeholder in any organization.  Countless businesses understand the cliché but do not demonstrate how employees are valuable.  The perfunctory holiday party does not cover a multitude of ills during the course of the year.  Ethical leaders invest in employees by rewarding a job well done (a very simple “thank you” note which any ethical leader can afford regardless of financial circumstances).  Ethical leaders understand that the company is like a second family and employees are more than the job titles on business cards.  It’s been shown time and again that financial earnings are not the most important part of the job.  Ethical leaders invest in employees by rewarding workers.  Gratitude is a form of reward and reaffirms that a job was performed well and sends a positive signal to engage in more of the same. 

Time is certainly a valuable and irreplaceable commodity.  It cannot be horded or manufactured, so it is vital that time spent by ethical leaders propels the business closer to the desired destination.  I spent years on activity – managing projects, teams, budgets, vendors – but not enough time on goal-oriented action items.  Keeping busy felt good and I enjoyed various aspects of the work, but my time was not being used effectively.  I learned that establishing a vision, empowering a capable team, delegating tasks and practicing ethical leadership are vital to the long-term success of any company.  Ethical leaders invest in self, company and employees by deliberately focusing on ways to improve each area on a daily basis.

Elements of ethical leadership development

Ethical leadership is crucial for the realization of socially responsible goals benefiting society.  Good business leaders are concerned about more than profit.  They are equally concerned about the impact of the business on stakeholders and the environment.  What are the key components of ethical leadership development?  Integrity, compassion and communication are important characteristics of ethical leaders.

Ethical leadership includes integrity.  Integrity is derived from the Latin and means whole or complete.  An individual with integrity does the right thing because it’s the right thing to do – not because the boss or clients are watching.  A culture of intergrity is a game-changer for any organization.  After the initial training and the corporate value statements are distant memories, employees do what they see.  If the manager decides to bend the rules, the rest of the team is likely to follow.  In the wake of the 9/11 tragedy, with the airline industry reeling, few would have blamed Southwest Airlines if they decided to abandon their no lay-offs policy.  The company stuck together during the tough stretch.  As CEO James Parker stated, "We are willing to suffer some damage, even to our stock price, to protect the jobs of our people."

Ethical leadership includes compassion.  Employees and even soldiers are willing to follow a leader who cares for them into the great unknown.  I’ve heard several times lately – and this rings true – that people don’t care about what you know until they know you care.  Employees are people first.  Although we've all heard the clichés about treating customers/students/employees (fill in the blank) like humans and not numbers, it takes diligence and effort to execute.  It is easy for any leader to consider those in their charge as commodities, but the discerning ones understand the power of compassion.  Roman historian Curtius described a sliver of time with Alexander the Great thusly, “Riding to the front line he named the soldiers and they responded from spot to spot where they were lined up.  The Macedonians who had won so many battles in Europe and set off to invade Asia…got encouragement from him – he reminded them of their permanent values.”

Ethical leadership includes communication.  It’s impossible to be an ethical leader without mastering the art of effective communication.  Skilful speech is just one aspect of communication; arguably, the more important part is listening which helps develop insight and understanding.  Leaders are in contact with various stakeholders on a regular basis: Communication is vital to the role.  James Humes states, “Every time you have to speak, you are auditioning for leadership.”  A leader’s speech establishes the vision which is used to motivate and inspire the team.  When energy levels wane, a leader’s words encourage and help keep things on the right path. 

Ethical leaders exude integrity, compassion and effective communication.  I've certainly learned a great deal about leading through my professional life as entrepreneur and educator.  A promising business idea may bring success if executed properly, but it speaks nothing of the moral fibre of corporate leadership.  Ethical leadership development is a journey, not a destination.  As with every journey, steps must be taken everyday to ensure progress.    

Creating competitive advantage through the ethical treatment of employees

The well-known adage states a business should take care of its employees first and foremost.  If it does, the employees will treat customers well.  There is certainly some good sense to it, but we need to dig deeper for some meaningful understanding and application.  The treatment of employees is one of the biggest ethical concerns facing any business.  Small businesses are especially vulnerable as resources may be lacking in training, human resources and formal grievance procedures.  Satisfied employees are beneficial in a number of ways and add value to business.

1.       Empowerment produces competitive advantage.  One of the first questions asked at a typical gathering involving new introductions is “What do you do?”  Especially prevalent in Western society, one’s work has a tendency to overshadow one’s value as a person.  Transcending culture is the need to be accepted, valued and appreciated.  Workers are more than job titles.  When employers understand and implement this important principle, employees respond positively.  The motto at the Ritz-Carlton is “We are Ladies and Gentlemen serving Ladies and Gentlemen.”  The service at the upscale hotel chain is legendary and it begins with treating workers the right way.

2.       Engagement produces competitive advantage.  An intriguing study by Savitz and Weber discusses sustainability at a quick-service chain.  Research suggests that customers of the chain did not really care about sustainability issues like water conservation, eco-packaging and reducing waste.  Instead of filing the report and carrying on as usual, the management focused on the key stakeholder group that cared about sustainability – employees.  The results at this particular chain are compelling: customer satisfaction increased as employee engagement levels rose, employee turnover decreased as employee engagement increased and the company saved significantly by implementing some basic principles of conservation.

3.       Excellence produces competitive advantage.  Employees motivated by excellence share a number of common traits including integrity, compassion and diligence.  The job isn’t just a set of rules and functions but a way to make a difference – whether undertaking the role of janitor or president.   Tim Sanders discusses how sharing kind words, knowledge and business contacts builds success in Love is the Killer App: How to Win Business and Influence Friends.   Going above and beyond creates bonds and differentiates from the competition.  When my wife and I stayed at a W Hotel in Chicago several years ago, this excellence was on display.  After Jacquie offered some painting tips to a member of the housekeeping team, we discovered a bottle of champagne in our room later that same day as a gesture of gratitude.  We were, of course, thrilled and although I don’t normally gush over brands (even the ones I appreciate on a daily basis), this experience I won’t soon forget. 

Businesses face ethical quandaries everyday.  The potential challenges are opportunities to add value and build brand equity.  Whether heading a company with an employee count of two or two thousand, competitive advantage is found in treating employees fairly and humanely.  Added value comes from empowering, engaging and encouraging employees to excel in their roles.

Leadership, effective communication foster ethical outcomes

Some lessons are gained over the long haul – others are hard and fast.  This one is in the latter category.  What seems like a lifetime ago, when my professional time was expended as co-owner of a marketing research company, we were targeted by scammers.  Our company name and logo was used without our knowledge or consent to dupe unsuspecting consumers in North America.  The phone calls started pouring in.  Most heeded our pleas to contact their local police department and avoid these criminals altogether.  Others were frantic.  I learned a lesson in human nature as I was trying to convince a woman from Chicago not to deposit a forged cheque and wire money to a third party.  The woman, like many, was clinging to some hope that the deception could be true.  Although we didn't talk in great length, it was apparent she desperately needed the cash.  Unfortunately, these scams continue and often target the most vulnerable in society – elderly, young, ill, financially strapped people who are searching for a life line.  The story captures the reason behind my commitment to business ethics.

How does one pursue a right or ethical course of action?  I believe it is not enough to know what’s right – most folks know what they should do but often take the opposite road.  Just talk to the average smoker: they understand that cigarettes cause negative medical issues but continue regardless.  Doing the right thing is often hard, especially when it is unpopular.  For this reason, ethical outcomes require ethical leadership.  This type of leadership isn’t just concerned about profit or personal gain but carefully considers stakeholders such as employees, suppliers, shareholders, government, competition and the community.  Massive flooding forced Idomo owner Gerrit De Boer to close his Toronto store for months in 2002.  He continued paying employees during this challenging stretch even though the furniture retailer wasn't open to the buying public.  Without the ethical leadership exercised, more than just wages would have been lost by workers. 

The second part of the equation for the pursuit of ethical action is effective communication.  Doing the right thing is seldom an affair conducted in a sterile laboratory-type environment.  It involves jobs, people, emotions, red tape, money and competing interests.  Open and honest communication is imperative for realizing successful ethical results.  The goal is not to convince everyone – disagreement and divergent opinions are facts of business (and life) – but to create an environment of transparency and respect.  Before De Beers began mining on new land in northern Ontario, they communicated with local communities through dozens of town hall meetings.  The effective communication was credited with moving the process forward and creating a foundation for success benefiting multiple stakeholders.  An absence of effective communication can foster distrust and misunderstanding.  A truly ethical company engages and understands important stakeholder matters – not because of the positive PR, but because it’s the right thing. 

Producing ethical outcomes involves leadership since it’s often challenging to go against the flow.  Effective communication includes listening and understanding views from the other side of the table, not just dictating from a rehearsed script.  Business has an obligation to behave ethically because there’s more on the line than the bottom line.

G8, tax avoidance and sustainability

The G8 summit recently concluded in the UK, and one of the key action items supported by some of the world’s leading economies is reducing corporate tax evasion and avoidance.  Before you stop reading, let me assure you that this post will not be an experience akin to having lunch with your accountant – and being stuck with the bill.  The global economic climate of so-called austerity coupled with increased public perception and involvement are, at the very least, giving a platform for this important issue to be voiced.  Why does tax compliance matter?  It matters because governments cannot continue to pay for education, healthcare and infrastructure without corporate contributions.  It matters because developing nations often suffer a great deal more, and have fewer resources to collect than more advanced economies.  It matters because Starbucks voluntarily paid more tax in the UK due to the public outcry, even though it was legally obligated to pay a lesser amount.  Oh, the double-edged sword of fickle social media relationships.  Marketers strive to build engaging brands with emotional appeal only to have consumers tell them how to run their businesses.  That’s enough ranting for now.

If global governments do not address the legal loopholes in the current corporate taxation system, the effects will multiply on the ground with cutbacks to important government programs.  In other words, corporate tax avoidance is not sustainable.  Google, Amazon and Starbucks have been in the news recently for taxation issues.  The hard-working finance departments of global companies are paid handsomely to minimize tax exposure within the established legal framework.  Perhaps some of those wages should be used to pay a company’s fair share of taxes.  The responsibility rests with governments and business to work together, streamline the corporate tax system and eliminate global tax havens.

When discussing sustainability, it helps referring to John Elkington’s “triple bottom line”: People, Planet and Profits.  It’s not enough for organizations to pursue profit – although it’s certainly a vital goal since most businesses cannot exist if unprofitable in the long-run.  Corporate strategy must also consider what’s best in the environmental and social realms.  The environment, of course, rightly receives immense media attention but the focus of this post is on the social or people category of sustainability.  Since taxes contribute to helping communities through government social programs like healthcare, education and support for new entrepreneurs, it is imperative for the ongoing viability of these programs that corporations pay their fair share of taxes.  Corporations in Canada, and globally, benefit from a well-educated workforce with access to healthcare and a plethora of other programs.  But these come at a cost, and we all need to contribute.

It is not an easy road ahead for world governments.  The challenge begins as delegates return home from the G8 summit in Northern Ireland.  Most countries have complex tax systems with distinct regional discrepancies – just ask anyone registering a corporation in the state of Delaware.  Pressure from business lobbyists to maintain the status quo will certainly be immense.  

Just because you can legally do something, doesn’t mean you should.  Dr. Sue Bridgewater, a marketing expert at Warwick Business School states (as reported by the BBC), “The issue arises when we feel that a company has crossed a line and what it does to be tax efficient is morally, if not legally, inappropriate."  As government lawmakers look to the future, and individuals keep governments and business accountable, there is hope on the horizon that global tax avoidance is quickly becoming taboo.

Supply chain responsibility in a global economy

A compelling debate raged in my international marketing class this past week: lines were drawn in the sand concerning the responsibility of global brands in the Rana Plaza travesty in Bangladesh.  One student took the Milton Friedman route and stated emphatically that business is not liable – the responsibility rests with the Bangladeshi government.  The only purpose of a corporation is to make a profit within the prescribed rules and regulations.  If it plays within the rules, all is well.  The other side of the debate states that a company must be accountable for activity within its supply chain.  Action driven by consumers, demanded by big business and implemented, monitored and enforced through third-party audits has the best chance of survival.  Although supply chain reform is desirable to savvy consumers, the ethics of the situation must be separated from corporate PR-spin. 

Are corporations responsible for their supply chains?  It’s helpful to refer to Archie Carroll’s CSR pyramid in answering the complex question.  Each layer of the pyramid depends on the foundational layers for support.  At the bottom of the pyramid is the economic component: business must generate economic value by meeting the needs of customers and providing jobs.  Second to the bottom is the legal aspect.  Business must follow the rules, pay taxes and treat employees according to codified regulations established by law.  Both of these are requirements.  The ethical aspect is second from the top – treating suppliers fairly, doing what is right over and above the law – and expected by society.  The apex is the philanthropic component which includes raising awareness and funds for worthy causes.  Although this is not required or expected of a company, it is desired by the community.  The fair treatment of the supply chain (including workers and factory conditions abroad) certainly falls under the ethical imperative of Corporate Social Responsibility.  Pursuing safe working conditions in the supply chain is not only expected by society, but it’s the right thing to do.

The influence of big brands can foster positive change.  Galen Weston expressed remorse during a meeting with Loblaw shareholders to address the tragedy.  Joe Fresh clothing was manufactured at Rana Plaza.  Loblaw pledges to compensate the families of workers and implement directives to help avoid future calamities.  In a nation where only 6 of the approximately 20,000 buildings, according to New Age, created in the past 10 years had all the necessary approvals, it will be an enormous feat.

The situation in Bangladesh is complicated: factory owners hold public office, corruption is widespread and the garment industry accounts for 80% of the nation’s exports according to Ethical Corporation.  Although the wages are miserly and the situation has been described as Dickensian, the factories provide millions of jobs to women in Bangladesh who may otherwise be unemployed.  The fashion retailers must work within the Bangladeshi framework and demand ethical reform.  It’s not enough to passively review factory safety certificates and blindly accept audit results about the state of buildings.  Brutally honest dialogue must begin because lives depend on it.  It won’t be quick and easy.  But nothing worth doing ever is. 

The ethics of RBC's outsourcing decision

RBC, Canada’s largest bank, has been under fire recently for planning to outsource 45 IT jobs through a vendor, thereby eliminating full-time Canadian positions.  India-based iGate is part of RBC’s supply chain and responsible for hiring the foreign workers.  All of this was accomplished through the proper legal and governmental channels – although Human Resources and Skills Development Canada is reviewing the matter.  As an ethics practitioner, it is the ethical territory outside the legal boundary that is the subject of scrutiny, analysis and interest.  RBC’s decision in this matter is legal, but is it ethical? 

First, let’s examine the components of an ethical decision.  According to Crane and Matten, the following three elements shed light on whether a decision is ethical in nature (as opposed to the numerous decisions made each day that are not necessarily ethically-charged: buying lunch out or brown-bagging it, black or brown shoes, jazz or salsa, mild or spicy):

1.   The decision has a significant impact on others.  Since a number of workers would lose their positions, we can conclude this decision affects others substantially.  RBC stated that the employees would be re-assigned within the organization, but it’s still a major change either way.

2.   The decision has viable options available.  In other words, did RBC have a choice in the matter?  On this point, we can agree RBC had a variety of different options concerning their IT staff – outsource (where and to what extent) or keep jobs in-house.  It wasn’t a financial deal breaker – RBC wouldn’t be forced into bankruptcy for not outsourcing.

3.   The decision is viewed as ethical by one or more parties.  Even if RBC did not initially believe the situation to be ethical, it does not automatically mean it’s not.  Certainly, the IT staff, unions, and the Canadian public perceived RBC’s decision as containing an ethical component.

The last point, of course is what makes this story media-worthy.  This case is generating publicity for a number of reasons: RBC’s profits are enormous, RBC’s employees were slated to train their replacements (an unsavoury proposition) and RBC, to put it bluntly, is a bank.  It’s important to cut through some of the emotionally-charged banter to achieve a balanced discussion.  RBC is not alone in outsourcing.  It’s a growing trend and will continue despite public uproar.  The major banks outsource as do major retailers and service-providers.  Classical economists argue that countries with a comparative advantage in a particular industry should produce those goods and trade with other nations.  If India and China produce goods or services of acceptable quality at a cheaper cost, Canada should produce other goods and trade with India and China.  If manufacturing or call centre jobs are lost in Canada, re-training in growth industries will provide new opportunities (a worthy goal, but does it work?).

I hope it’s apparent that ethical outcomes are complex and rarely a straight-forward proposition.  Is it ethical to outsource jobs when company survival or competitiveness is not at stake?  RBC answered the question on whether the original outsourcing decision in this particular case was ethical by introducing a new supplier code of conduct (http://www.rbc.com/sourcing/supplier_code_of_conduct.html).   “RBC will not offshore work where salary savings is the primary reason and will make every effort to source in Canada,” the financial institution states.  This flies in the face of the original mandate and is a complete change of direction.  RBC’s PR machine says they value Canadian jobs above cost-cutting, but only time will tell if the new policy is ethical.  If RBC respects Canadian jobs, why did this revelation emerge only after major media coverage?  Unravelling motives is another subject altogether: Would RBC have introduced this Code without the public outcry or government prodding?  RBC claims the Code is the first of its kind in Canada.  The Canadian public helped produce this outcome and it’s a step in the right direction regardless of motive.

What's the environmental skinny at Timmy's?

I was impressed while reading the 2012 Tim Hortons Sustainability and Responsibility Summary Report (http://sustainabilityreport.timhortons.com/pdf/2012_summary_report_30pages.pdf).  It isn't just the pretty layout: a lot of time and effort was devoted to generating a report of this magnitude.  The plans are both unexpected and welcome.

My original thinking was I’d find a few token lines about sustainability and CSR on the corporate site - some broad promises and wishful thinking with no follow-through or commitment.  Let’s nod and smile for the cameras, answer a few questions at the press conference and then it’s business as usual.  This is certainly not the case with Tim Hortons, and I applaud the organization. 

Tim Hortons’ sustainability and responsibility initiatives are housed under three pillars: individuals, communities, the planet.  Third party guidelines by the Global Reporting Initiative are used for the Sustainability and Responsibility Report.  Tim Hortons is also part of the Dow Jones Sustainability Indexes.  As explained in the report, “The DJSI North America tracks the performance of the top 20% of the 600 largest companies from Canada and the United States in the Dow Jones Global Total Stock Market Index that lead the field in terms of sustainability.”

Many wonderful things are happening at Tim Hortons: waste to landfill is diverted at some stores for recycling into take-out trays, a few newer stores have LEED certification, less sodium is used in food preparation, underprivileged kids are going to camp and small-scale coffee farmers are receiving help for their businesses.  Some of these things I was aware of and some I wasn't.  Even supply chain proposals are included for the humane treatment of animals, but some of the poor pigs will have to wait until 2022 for roomier housing.

Despite all these efforts, ignoring major environmental and community issues won’t make them disappear.  Although I'm a Tim Hortons customer and respect the iconic Canadian brand, there is room for a bolder environmental stance.  The elephant in the report was the lack of solutions addressing the drive-through idling problem.  Unfortunately, all the other worthy initiatives do not stop cars from idling, polluting and sometimes just getting in the way. Idling a 3-litre car for 10 minutes burns a quarter litre of gas as noted by Natural Resources Canada.  According to a 2012 Globe and Mail report, the residents of Markham, Ontario waste enough gas in drive-through line-ups annually to drive 85 cars around the world.  I’m not picking on Markham; this could easily be Oakville, Mississauga or Brampton – don’t even mention Toronto.

 

At the end of the day, Tim Hortons is a business and responsible to shareholders, franchisees and customers.   A 30-page report on all the positive things under way with no mention of drive-through related emissions is not fair to any stakeholder group.  Even a “we know this is a problem and we’re working on it” would indicate the key issue is on management’s radar.  All the professional graphics and charts cannot hide the elephant in the report.  I know Tim Hortons can do better.