How to Avoid Unethical Behavior
Most CEOs now say they want to lead ethically. They post the firm’s purpose and value statement on their website. But in too many firms their behavior is not aligned with their aspiration. Why?
For-profit firms are susceptible to choosing profits over ethical considerations as well as employee wellbeing. Consider a recent example in a for-profit nursing home company (70 % of all nursing homes are for profit).
When Kimberly Jackson was quoted in the New York Times about nursing homes’ illegal, and I might add uncaring and inhumane, practice of dumping unprofitable patients at emergency rooms and psychiatric hospitals and not readmitting them, she was fired.
Ms. Jackson said she had to speak out about nursing homes’ routine practice of sending less profitable patients (ones on Medicaid that reimburse at a lower rate) out and then not readmitting them – essentially evicting elderly and disabled patients with dementia in the name of profit.
You can bet that a statement of higher purpose and values (“we care about our patients”) was posted on the company’s website and used to sell their services to unwitting customers. But sadly, even authentic, high-purpose CEOs and their companies can succumb to short-term pressures for profits.
Consider the case of top management of an ethical company that failed to see that their practice of quarterly channel-stuffing (shipping large amounts of unrequested products to distributers) was inconsistent with their values and purpose, and was damaging distributer and employee trust, loyalty and commitment. The lower-level staff could not speak truth to power about channel stuffing nor the introduction of a new IT enterprise system that was going badly. Would you be able to tell your CEO about concerns about the firm’s practices or problems without negative blowback on you or your team? The answer of people in most companies, according to others and my research, would be no.[1]
A new purpose-driven CEO in this company learned about channel stuffing and other problems when he enabled lower-level employees to speak truth to power – to tell him the whole truth about how well the company’s behavior was aligned with its purpose, values and strategy. Channel stuffing and other problems were made openly discussible through the structured method they employed called the Strategic Fitness Process. It ensured a safe and productive conversation (no blaming or defensiveness) that brought channel stuffing and other issues into the open (see my recent book Fit to Compete for details about this method). It enabled senior management to learn how deeply frustrated, demotivated and concerned distributors and key managers below them were and moved them to act.
Channel stuffing was suspended immediately despite the fact that quarterly earnings for the year would not match Wall Street expectations and the stock price would suffer a decline (that’s the power of honest conversations). Moreover, it stopped a practice that later became illegal and for which a company in the same industry was fined $800 million. Honest conversations motivate these kinds of changes.
Consider what the nursing home company’s CEO might have learned if he wanted to. He would have had the chance to change the cruel and illegal practices that will undoubtedly lead to financial fines and reputational damage.
CEOs who aspire to lead ethically and with high purpose should consider the following lessons:
The drive to meet shareholder expectations will at some point derail your aspiration to lead with a higher purpose and values unless you enable truth to speak to power about barriers to alignment with your aspiration. Research shows that there is an inevitable gap between what we humans espouse and what we actually do.[2] The same is true for CEOs and their companies. Authenticity is assured only when we are willing to put what we espouse to the test of an honest conversation about our and our organization’s alignment with our lofty aspirations.
The top management of Boeing, Wells Fargo, Volkswagen and so many other good companies with lofty aspirations did not find out about the gap until the crisis hit.The road to your higher ethical and purpose ambition starts with personal reflection about your values and purpose in life. That, in turn, will give you the courage to advocate your higher ambition to do well by doing good to your board of directors who may see shareholder values as the only legitimate goal for a corporation. Consider that many of the 181 CEOs who signed the Business Roundtable’s statement redefining the obligation of corporations to serve all their stakeholders, not just the shareholder, did not share this with their board or discuss its implications for decisions when quarterly earning goals are threatened. Have you discussed your or your organization’s higher ambition and its implications for long-term investments with those to whom you are accountable – the board or the CEO?
Your aspiration must become that of your whole senior team. This requires a deep discussion with your senior team members. What are their aspirations for the kind of company they want to create? That discussion will allow you, the leader, to test your own advocacy, and then must lead to a consensus statement. Only such deep and authentic discussions can lead to an emotional commitment – one that the senior team owns. Consider how one CEO went about developing his company’s statement of purpose:
In one of my first meetings with the senior team, we talked about what kind of legacy we wanted to leave. The team had a lot of energy for this. Everyone had something to say about it and we put all the ideas up on the wall. We then looked for commonalities around what kind of difference we wanted to make. All of the ideas had to do with people, touching people in a positive way, and giving people a chance to grow. Today, we don’t talk about vision, but about the legacy we are trying to build.
Living to one’s personal or organization’s aspiration will require you to put them to the test of reality. Are pressures for profits undermining higher purpose aspirations you and your team espoused publically? That, as I have already said, requires you to lead organizational-wide, honest, collective, and internally public conversations about gaps. Public, because unless lower levels are told what senior management actually heard and what they plan to change, trust and commitment will not increase sustainably.
Such conversations can be threatening and could lead to unproductive behavior such as blaming and defensiveness. That is why they require clearly defined steps that separate advocacy from inquiry as well as rules for engagement. If you think this will undercut your power, you would be wrong. The leaders who did this gained moral power, the only type of power that can change a company’s culture rapidly and successfully Don’t’ wait for the whistle to blow. Enable truth to speak to power and lead an honest conversation about the inevitable gaps between your aspirations and reality.
[1] Deter, J. & Edmondson, A. (2011) “Implicit voice theories: Taken for granted rules for self-censorship at work,” Academy of Management Journal”; Beer, M. & Eisenstat, R. (2000) “The silent killers of strategy implementation and learning,” Sloan Management Review.
[2] Argyris, C. (1990) Overcoming Defensive Routines: Facilitating Organizational Learning, Boston, Allyn Bacon