Client & Partner Alerts

Have Ethics & Values Become Passé?

Top politicians are routinely considered not believable and are often viewed with contempt. Fact checkers are kept busy proving their assertions to be wrong. The favorability ratings of US leaders continue at low levels.

Imagine this scene where a teenager tries to cover his tracks about reports of his raucous behavior at a party:

“Mom, Dad—remember that I told you I went to a boring party last Saturday night? Well, I have to walk that story back a bit now and put a different spin on it. I want to clarify what I said earlier. I am in no way flip-flopping on my prior statements to you. This incident has been deliberately taken out of context by people in the mainstream who have their own agendas.”

This whiny rebuttal sounds silly—no matter what the excuse–and probably would not get very far with the teenager’s parents or guardians. Yet silly excuses like this one for bad behavior or judgment are routinely found in the public media and, most unfortunately, in the hallways and Boardrooms of organizations everywhere.

This month’s Alert will explore some of the reasons that ethical behavior and accountability are so elusive, and what organizations should be doing to promote more positive outcomes.

Values aren’t what they used to be

Most companies market 5 or 10 core values that they select from a short list. While “integrity” is typically among them, it is often no more than marketing hype. This was the theme of a recent article entitled “The Value of Corporate Culture.”* The authors showed that there is often little actual relationship between company behavior and professed values. They also concluded that private companies do a better job embedding values than public companies. What could be a root cause of this disconnect and sad state of affairs in many public companies?

We will look at a few possibilities: Leadership, Commitment, and Accountability.

Leadership is Often Lacking

When examples of excellent leadership begin to be harder to find, the standards also begin to erode. If leadership includes “doing the right thing,” then we are seeing fewer examples of truly effective leaders.

Every evening on the news programs, we view more examples of backtracking and whiny excuses. There seem to be no “facts” any more—just opinions, allegations, and assertions. As a result, company leaders are often resorting to similar posturing.

As we reported in our September 2015 Alert, Jeff Bezos, Amazon’s CEO, responded to a New York Times investigative report finding the Amazon culture to be rugged at best, by simply stating that it was not the culture he recognized. Other CEOs are hesitating to make ethical decisions, such as recalling faulty and unsafe products until forced to do so by the government or by court orders. These have now become routine standards of leadership behavior. Deny, deny, deny until that is no longer possible. Such behavior is recognized and lauded as being protective of the interests of some of the stakeholders, rather than the posturing that it really is.

Leadership excellence used to be multi-dimensional, including an element of stewardship toward all stakeholders. This would include the community as well as investors, employees, customers and suppliers. Today this multi-dimensional aspect of leadership seems to have eroded. Effective leaders must anticipate the impacts their actions will likely have on all stakeholders, and not just the short-term benefits to a more limited constituency.

The “tone at the top” is being subjected to big discounts. Nobody any longer accepts marketing material at face value. Leaders have to do much more to prove their worth and veracity. A big part of “integrity” is consistency and believability. This enables team members to be able to predict accurately the right course of action to take. Unless leaders behave consistently and predictably—and in line with company values, they are sending at best a confusing message.

Commitment can be Costly and Time-Consuming

Most companies and CEOs suffer from a form of attention deficit disorder. They have so many different strategies and programs on their “to do” lists that they fail to commit sufficient time and resources to important programs like ethics and values. It is indeed easy to think that 6 months or a year is sufficient to devote to a program; but this type of cavalier approach to program development is simply insufficient.

CEO Peter Löscher arrived at Siemens AG in 2007, after a bribery crisis that cost Siemens $1.6 billion in fines, and even more as the cost of corrective actions. In 6 years as CEO, Löscher rebuilt the Siemens compliance program, while emphasizing ethics and values. In a 2012 article he commented on one of his significant advantages:**
“[N]ever miss the opportunities that come from a good crisis—and we certainly didn’t miss ours. The scandal created a sense of urgency without which change would have been much more difficult to achieve, regardless of who was CEO.”

This is another way of saying that it is much easier to keep attention on key elements like ethics and values during a period of crisis. Löscher stepped down as Siemens’ CEO in 2013. It will be very interesting to see whether the company will be able keep its commitment to maintain an effective program.

Commitment takes leadership and stamina. We often build multi-year roadmaps for clients but with measurable milestones every 6 months or so. It is so easy for a company to get sidetracked with other activities. It is important to build in natural breathing or stopping points so that a program can be easily revived. Commitment is not easily sustained, yet it must be to have a viable program.

Accountability is Often Missing

Many companies market “accountability” as an important value. Yet we see consistently CEOs and other senior executives walking away from issues and blaming other people for their company’s problems. Take, for example, the recent issues with the auto manufacturers deemed “too big to fail.” Both the CEOs of General Motors and of Volkswagen denied knowledge of the problems and pointed their fingers at others.

This phenomenon seems to be commonplace in this era of politics real time, 24 hours a day. Every time we open a newspaper or turn to a news source, we witness leaders (or “wanna-be leaders”) denying another fact. With these kinds of examples constantly confronting us, it is easy to acquiesce in a wishy-washy standard for “accountability.”

Peter Löscher began his stint at Siemens by holding other Siemens executives accountable. For example, when he wanted to ensure that all high-level executives spent significant time with customers, he collected all of their calendars, calculated the time actually spent with customers, ranked the entire team, and displayed the results in a slide presentation to a group of the top 700 managers. After he did this for several years in a row, the senior team began taking him seriously; and the results he was looking for began to improve.

Without accountability, it is difficult to take any leader seriously.

Some Constructive Tips

Here are some constructive tips for those who care about building strong companies with effective principles of ethics and values, even in the hardest of times:

• Leaders need to be consistent and believable: they need to tell the truth and should not be reluctant to confirm the obvious. Whiny excuses are not a part of a leader’s credentials.
• Leaders need to represent the interests of all stakeholders—not just a segment of the stakeholders.
• Companies must assure that they consistently reflect the values they market. Revise the values if necessary.
• Treat “commitment” as a sacred duty and as a vital component of integrity. Follow through on commitments.
• View “accountability” as a necessary element of an ethical culture.

Concluding Thoughts

Ethics and values will never be passé. There are times, like now, which test whether we are committed to ethics and values as a fundamental principle of civilization and acceptable governance. The authors of “The Value of Corporate Culture.” pointed out that companies with values reflecting their actual culture were historically more successful in the long run.

Ethics and values are important components of long-term success—whether of a politician, a CEO or a company. They afford the “staying power” that is so vital in the long run.

*Guiso, Sapienza & Zingales, “The Value of Corporate Culture,” Journal of Financial Economics 117 (2015) pp. 60-76.
**Löscher, “The CEO of Siemens on Using a Scandal to Drive Change,” Harvard Business Review, November 2012.

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