Challenges of Leadership in a Low Trust World

1. Challenges of Leadership in a Low Trust World

2. Today’s Focus

3. Ethics is examining moral standards of a person, a company or a society to decide whether these standards are reasonable andto apply them to contexts and issues. Morality refers to how individuals make judgments aboutright & wrong. Who decides what’s ethical? Business Ethics vsIndividual Morality

4. Society Decides What’s Ethical • (CSR) Corporate Social Responsibility Sustainability • Institutional integrity - do systems support stated values? • Do people understand values /codes and when to apply them? • Is the common good protected?

5. Where are you startingfrom? • An organization can only be as ethical as it’s employees • True or False • Leaders can have different personal and work standards • True or False • Every employee possesses ethical leadership qualities • True or False • Organizational culture is the lengthened shadow of the people at the top • True or False • Ethical people will behave unethically • True or False • Success without ethics... is failure • True or False

6. Bad Apple/Bad Barrel Cultural Checklist

7. Whistle-Blowing Ethics in Finance Discrimination Ethical Conduct in Marketing & Advertising Corporate Governance & CSR Occupational Health & Safety International Business Ethics Trade secrets and Conflict of Interest Worker’s Rights (Unjust Dismissal) Sexual Harassment & Family Issues Privacy Protection Ethical Conduct in the Information Age Product Safety Environmental Protection Ethical Behaviour Ethical Behaviour at Work 15

8. Business Ethics @ Work How good people find themselves doing unethical things ‘What is right in the corporation is not what is right in a man’s home or in his church. What is right in the corporation is what the guy above you wants from you. That’s what morality is in the corporation.’ - Robert Jackall, Moral Mazes

9. Circumvent the law; absence of ethical Principles and accountabilities Conforms to high standards of ethical behavior Intentional: does not consider ethical factors Unintentional: casual or careless about ethical factors Unethical/ImmoralManagement Ethical/MoralManagement AmoralManagement Models of Ethics Management

10. Conflict of Interest Stories from the Field • Conflicts of interest are inevitable. The people most suited to leadership have wide personal networks, so encounter situations where loyalty comes into conflict with truth eg. loyalty mates/family competes with duty of integrity to their position. • The goal is not to avoid conflicts of interest, but to manage these values clashes so they do no harm. • The last person to spot a conflict of interest is the person engaged in it. Conflicts that are perfectly obvious to colleagues, friends, and acquaintances remain shrouded from the view of the actor himself. • Conflicts of interest are actual and perceived. The perception of self-dealing can be just as damaging to a reputation as the real thing.

11. Know your time • In interconnected world anything you do in private can find its way into the public domain • Legislators around the world insist business leaders accept accountabilities for the types of organisational cultures and ethical risks that emerge under their stewardship • People listen with their eyes and take their lead from what gets rewarded • Newly enacted US and UK legislation makes business leaders (not employees) accountable for corrupt corporate behaviour • 2011 research amongst 144 global organizations found the top 3 challenges: • Getting employees to speak up about ongoing concerns • Getting leaders to demonstrate ethical leadership • Establishing an ethical culture

12. Learning from current reputational crisis –BP, Rio Tinto, Citibank, Siemens, HSB, Federal Reserve Bank; AWB, Goldman Sachs… • It can no longer be assumed that people know the right thing to do; a company’s reputation is too valuable to be left to chance • Strengthening your ethics infrastructure is an essential part of modern business success and is the collective responsibility of all leaders • Your brand value is as strong as the weakest link within your operations • What’s legal often falls short of what’s ethical and leaves reputations vulnerable

13. Decisions you make have a direct impact in two major areas: Social Capital Reputation/Trust Financial Capital Rates/Costs

14. What would you do? You are a senior manager with a reputation for fairness and being open minded. In amongst the dozens of emails you receive daily, you receive some that are humorous, which of course you ignore most of the time. However, you have just received an email that has pornographic images in it, albeit intended to be funny. You find this one offensive; you also know that the sender has a reputation for crude language and using inappropriate nicknames for his female colleagues. What do you do? • Delete the email. You are too busy and you expect these things in an industrial environment. • Ring the individual and tell him you don’t appreciate receiving material of this nature and to stop sending this stuff. • Go to the individual’s manager, a peer of yours, and tell him that he should speak to him. • Forward the email to the Director HR and make a formal complaint.

15. What would you do? You are senior manager. The strength of your overseas expansion has been a network of agents who have facilitated the negotiation of contracts with overseas governments. You personally have found them to be strange beings with a different view of the world. As part of a routine review of accounting procedures, you come across a request from an agent for a large payment for what is termed ‘contract smoothing’. When you investigate further, the agent has requested that the amount be paid into an account in Labuan, on the island of Borneo, well known for its lax taxation laws. What do you do? • Let it pass. It’s not your business to question the business practices in overseas countries. • Inform the CEO and insist they launch an investigation into the dealings of this agent. • Inform the agent you can only pay legitimate sums into an account in the country in which he operates. • Ring the ethics hotline and seek advice.

16. What would you do? Tony is a senior project manager on one of your toughest projects. It’s a new process that the company hasn’t had much experience of in this country. Tony was recruited from overseas to run the project. As it’s a government project a lot of reputations are riding on it. There are other challenges, not least the industrial environment. Tony has a reputation for ‘doing things his way’ but also for getting results. One of your senior engineers, Ron, has spent 6 months seconded to the project and has just returned to your division. He is not too flattering about some of Tony’s methods and reports stories of widespread rorting of the procurement processes by supervisors and managers on Tony’s project but concedes that it is a closely knit unit. What do you do? • Tell Ron to stop gossiping • Thank Ron for his concerns but remind him that Tony has a tough task and may need to do things differently. You’re sure nothing illegal is going on. • Seek a meeting with the CEO to discuss Ron’s concerns and the potential effect on the company’s reputation. • Seek a meeting with Tony, tell him about what you’ve learned and ask him to look into it.

17. What would you do? In one of your important Asian markets, you are letting a contract for disposal of industrial waste for recycling and have sought quotes from local companies . One of the bids has come from a new company whose principal’s name is the same as that of the head of the Mines & Minerals department of the government. Your procurement manager now advises that the person is, in fact, the cousin of the head of the Mines & Minerals Department and that he runs a legitimate recycling business. The procurement manager adds that ‘it wouldn’t do any harm to our government relations to have him as a subcontractor.’ The bid is in line with the others on price and quality. What do you do? • Tell the procurement manager to accept the bid and evaluate according to the same criteria as the others. • Tell the manager to reject the bid and remove him from the list. • Ring your Head of Compliance and ask his advice. • Split the contract between two companies.

18. How do you currently rate in managing the ethical dimension? • Where is your company’s line in the sand? • How do your leaders model ethical behaviour and set the ethical tone? • Why might good people in your company do unethical things? • What do existing ethical challenges look like? • How do you protect the values associated with your company? • How are your values promoted, measured and rewarded?

19. Business Ethics Business Ethics involves learningwhat is right or wrong as defined by the organisation and then doing the right thing even when the ‘right thing’ costs. • How to resolve the issue / case? • How to justify the decision taken? • How to identify what is important?

20. Ways of defining our social reality The ‘Western’ way is individualistic & results-oriented. In this worldview we’re a big cause of what happens in our lives and organizations. We like to mould reality as if it were dough and prefer an internal locus of control. The ‘Eastern’ way accepts reality the way it is. This is ‘Tao’: observe nature and see that change is inherent in everything. Individuals are part of reality and ‘are changed’ with it; part of the dough that is being kneaded. The collective is more important than the individual and there is a preference for a more external locus of control; work smart. Calls for practice the difference between perceiving and judging; to practice to see what is and an observation of a fact - as opposed to what was our interpretation we’ve attached to someone else’s behaviour.

21. Heidenheimer

22. Global Standards and Accountabilities • The 1991 U. S. Federal Sentencing Guidelines for Corporations • UK Bribery Act • Companies signed to the UN Global Compact (over 3,700) Commits participating businesses of the Global Compact to “avoid bribery, extortion and other forms of corruption” and to “develop policies and concrete programs to address corruption”. • Australian Criminal Code 2004 states that a corporation can be held criminally responsible if it is established that "a corporate culture existed within the body corporate that directed, encouraged, tolerated or led to non-compliance with the relevant provision" or by showing that "the body corporate failed to create and maintain a corporate culture that required compliance with the relevant provision"

23. How do Ethics and Leadership Become One?

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25. Evaluating the Right Thing to Do Time Dimension Individual Perception Stakeholder Dimension Context Dimension

26. Ethical Decision Making Model Step 6. Make a decision and act