Demand Ethical Leadership
December 30, 2008 by ThoughtRocket
Mom passed away early Christmas morning. Her passing was a peaceful release from the body she was trapped in. Thank you for the kind expressions of concern you offered over the past weeks regarding my mother and mother-in-law’s death. At my age it’s strange to feel orphaned, but that’s my unshakeable feeling.
As I am preparing a eulogy for Mom, one of the things I most admire about her was her ability to somehow both forcefully and gently remind the strong men in her life to be virtuous. Mom was kind and empathetic. Living through a massive Depression followed by a World War that involved all her four brothers tends to amplify your compassion. Today we live in times that call each of us in the same way.
So this morning I am watching the news about thousands of layoffs being announced by various companies across many industries. Most of these layoffs are unethical acts of powerful leaders who think it’s responsible business. It’s not. It’s moral cowardice masquerading as a practical business decision. I’m not just ranting here. I am stating the most obvious flaw of financial capitalism that has emerged over the past 40 years. This flaw is that short-term actions can generate short-term financial gains while destroying long-term value. Business leaders are incented to cut jobs, investment, research, new technology and worse, pollute, mis-state earnings, corrupt lawmakers, and an endless list of shenanigans that hurt us all. All of this, whether it’s legal, is immoral. Here’s why.
The core standard of ethics is the mandate to never cause avoidable suffering. Period. Is it asking too much? Or does it ask us simply to be morally responsible for the consequences of our decisions?
One way to judge suffering caused by business decisions is something called switching costs. Ethics requires us to consider how much it costs to the person my decision impacts to switch to another company. So for investors the switching costs are very low. For instance, Toyota recently announced two things. They will likely lose money this next year, and they will continue their no-layoff policy for full-time employees. (They are doing extra employee training during their manufacturing slowdown.) So if an investor in Toyota doesn’t like this policy, they can sell their stock or “switch” to another one in 30 seconds online. Switching costs for investors are very low. Next to consider are customers. The cost of switching from one brand of product to another of equal value is also very low. There are so many substitute products today that consumers’ switching costs are nearly non-existent.
So what about employees? Consider your own situation. What if you involuntarily get laid off from a profitable business during an economic downturn? What are the “costs” of switching to a new job or industry? Huge. Gargantuan. Brutal. The American Psychological Association reports that the two biggest traumas that are the most difficult to overcome are loss of a spouse (death or divorce) and job loss. The suffering caused by these two events has severe long-term consequences not only on the individual directly involved but also their families. The U.S. Department of Labor reports that 40 percent of white-collar workers over 40 laid off in the past fifteen years never achieve their previous level of income. Illness, chronic pain, abuse, divorce, alcoholism, depression, and suicide are markedly higher among laid off workers. Is this the kind of society we want? If a company is making money or has ample resources to continue operating, is pleasing Wall Street the highest moral good?
Is this the best business leadership we can imagine? The much admired Jack Welch championed shareholders over all others also pioneered the mass firing of workers of GE’s profitable businesses to increase earning. Fortune Magazine honored him as manager of the century. Right. What’s hard about firing people and demanding everyone else work harder so we can make more money for shareholders who churn stock holdings faster than bank robbers running for their getaway car?
So if we can agree that willfully causing human suffering is immoral then profitable companies who layoff workers are by definition behaving immorally. Consider this. We just “donated” $350 billion to America’s banks without any oversight and they just laid off tens of thousands employees. Meanwhile they continue to hoard our money, choke off lending to other businesses and pay their executives for their outstanding performance. Is that okay? Is that just “aw shucks?” If a business leadership cannot find productive ways to use bright, loyal, hardworking employees, whose fault is that, the employee’s or the leader’s?
So how can we fix this? Not through laws. If we pass no-layoff regulation we’ll only succeed in making sure people don’t get hired at all. One of America’s great advantages is our fluid workforce that allows us to change jobs and careers whenever we choose. The difference, of course, is that when we have a well-led economy rich with job creation then employees have a playing field where we can bargain with our talent. When we have a corrupt leadership creating fake economic gains we have mass suffering.
So what’s the best thing we can do?
Make noise. Buy from ethical companies. Demand ethical leadership. A revolution is happening right now. Employees and consumers worldwide are demanding that Corporate Social Responsibility be more than cosmetic. We are seeing major strides in the reduction of waste and increasing sustainability. This is all due to yours and my demands for a better future.
Now is the time to demand that Corporate Social Responsibility begins with responsibility to employees. If Toyota and Honda can keep their employees when the car business has collapsed then so can nearly every other business if they have a will to.
I once had a large client who was going through a massive financial implosion during the dot-com era. Their woman President didn’t layoff a soul. She instead sponsored huge strategy workshops involving every employee in creating either cost saving or income increasing strategies. The entire process was led by a senior maintenance man. Yes, crazy, idealistic….well it worked. Within 12 months the company was minting money and growing faster than ever. Do you know why this visionary leader did this when her board was encouraging her to slash and burn? She told me, “Our problems came from bad leadership decisions. Firing our employees would have been immoral.”
It’s time for a new kind of leadership.
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Will,
My heart goes out to you over the loss of your mother and mother-in-law. I know what it feels like to be an orphan since 2001 when my father died a year after my mother. I felt the same way as you though that they were being released from the prison of their bodies to return home. That is what my mother kept say before she died – “I have to go home. They’re going to have a party for me.” She was the youngest of fourteen children so I’m sure it was quite a party.
I have enjoyed reading your blogs because you have so much common sense which is needed today in leadership. What is your vision for 2009? Can you even imagine a shift in consciousness that takes us from a fear-based ego reality to a heart-centered soulful way of living? That is the vision I am supporting and I know you have the leadership skills to help turn that vision into reality. Thank you for all the wisdom you share as a thought rocketeer!
Blessings,
Carol
Celebrate your Mom’s life, Will. It is quite obvious that she celebrated you. II am sure you will.
Sadly, the term ethical businesses has become an oxymoron. And, that is a real shame because there are so many that operate with the highest standards of ethical conduct and corporate social responsibility.
It would be helpful to me if I knew how to identify ethical businesses, Will. What criterial can I use? How do I know when I go into any particular store to purchase a product or service if that store operates ethically? Is there an ethical review somewhere… you know, a Consumer Reports of Ethical Companies?
Hear here, Will. All I can add is that things have actually been worse than many of us have thought and we have been duped for a long time by those at the top. Sure, it has gotten to the point of total excess and therefore even the uninformed are starting to get the picture. But to really get an idea how much and how long we have been duped check out http://www.zeitgeistmovie.com. View the movies (free) and also print out the transcripts. If this doesn’t open your eyes and incite you to take action, nothing will and you better check your pulse to see if you are alive.
Dear Will,
May your abundant store of good memories cradle your heart as you move through the grieving for and celebrating of your mother. There is no loss like the loss of our mother.
Peace and blessings of all good things to you in the New Year.
Jana
“All is Well.”
I have to address this matter. When i graduated from college in 1980, one of the term papers I had selected to write was on “ethics”. Interesting enough, many of the “hot shot” marketing stars at the time told me there was no such thing as ethics when it comes to business. Based on what we’ve seen in the last 2 decades, they may be right, and more importantly at the time I wrote the paper there was very little about ethics I could find.
One of the hot shots was later recognized by the university as an outstanding alumni. He was the VP of the Beverly Hills Reators Association, and later became the Sr. VP of a large Commercial Real Estate Development Company. I’m sure he lined his pockets nicely with commissions over the years, and settled in the land of rich and famous.
The issue we have in America today is that we are turning into a nation of “haves, and have nots”. The haves seem to justify their compensation as just, and the suffering they have imposed on others who now have nothing, they consider “unfortunate”. They will never admit that their own personal grandisement has been a source for redistribution of wealth that we have not seen in decades.
There is a line I saw in the recent Batman movie that I think sums up things pretty well. The Joker near the end of his demise tells Batman that “people are only as bad as we allow them to be”. That certainly is revelent in today’s society.
Will,
It seems that once more we are aligned in thinking. I have been struggling as of late to make sense of a business world in which lack of ethics and respect is acceptable. It is getting harder and harder to maintain an ethical business when you are competing with companies that lie outright and offer inferior products/services but get the work by charging “less.” Sadly, the client ends up paying more in the end…that is if they can even recover from the detrimental impact.
My question to you is this: How can businesses succeed in the short term when clients can’t tell the difference between an ethical and non-ethical vendor?
My deepest sympathies for your recent loss…
Ethical leadership – yes – I just blogged about that and I’d have to agree that a monumental change is necessary if our planet is to survive. I do remember a story a few years ago about the Polartec company. Seems a huge fire destroyed the Massachusettes factory but instead of laying off the workers the CEO at the time kept paying their salaries until the factory was up and running again. What a concept! I hope we all will have the courage and endurance to make the changes that are so vital to our planet’s health and well-being. The rallying cry for 2009 is “Change” – and change we must – all the way down to our very social core.
Will, I had expressed my sympathies for your mother in law before, but my same exact sentiments for your mother as well.
On the rest of it, AMEN. I couldn’t express it any better. What I do know is this; the leadership doesn’t care about you or me. They simply don’t.
We need to do mass demonstrations and boycotts to unethical companies. If they lay off, and slam the business, then slam them back. NOBODY gets paid then.
How about the great business change in paying the CEO’s 40x more then the next highest paid worker. That is absolutely insane. I’m sorry, but CEO’s don’t deserve that kind of money, NO ONE does.
I’m sick and tired and PISSED. Plain and simple. Our country is WAY better then this. We can evolve, we can progress, BUT, WE HAVE TO DO IT. There are so many people that are so brainwashed, walking through life like zombies, and watching FOX news for their “news”. LOL. It’s absolutely ridiculous.
The PEOPLE need to take this country back !
“….never cause avoidable suffering” Wow. I couldn’t agree more! My condolences to all. Fondly, Suzanne
My heart goes out to you over the loss of your mother and mother-in-law. I too have enjoyed reading your blogs and believe that your common sense in leadership is desperately needed today more than ever. I look forward to reading more in 2009. Ethics in business today? Does it still exist? Makes me sad to see what is happening today and to feel like it is not getting better only worse. Also makes me sad to think that this is what my children believe is normal and that we can’t do better. But I know we can and I hope that we can get back to ethical values of caring and concern for people over profits and bottom line accounting. And like Carol, I would love to see a shift in consciousness that takes us from a fear-based ego reality to a heart-centered soulful way of living? Thank you for all that you share and for being you.
Peace and comfort to you as we bring in a new Year.
Best, Kathy
2009 – The Year of Transformation and Action
The world has entered 2009 with a spirit of transformation. This transformation has necessitated crisis on many fronts to shake society to its roots in order to grow a new global attitude about what the role of human beings on planet Earth is all about.
There are huge sugar cane plantations in the state of Pernanbuco, Brazil. When the cane is ready to be harvested the fields are set on fire. The cane is burned so that it can be cut because the burning destroys some of the razor sharp edges to the sugar cane leaves making it less dangerous and easier for the workers to manually cut. The growth of the cane must be burned in order to cut it and renew the fields for more planting.
Similarly, the worldwide economic system is being burned to the ground in order to create a new one… one that can be sustainable and renewable. The sharp edges of greed, corruption, short-term profit, disregard for social welfare, destruction of natural resources with no plan for renewal, and the disregard for ethical principles to guide the beauty of capitalism are being burned.
If this transformational crisis is to succeed it will mean that leaders everywhere must now become the antithesis of the system that is in crisis. Leaders have emerged because people have become disgusted with the leadership that has attempted to control them through principles that were built on control to ensure power, military might, corruption, and disregard for human rights.
These disastrous actions have become transparent to the world because the Internet has provided unprecedented access to information. The success of this new transformation depends on worldwide Internet access to all people in all countries. People will not tolerate being denied this access and those leaders who try to control or restrict it will be immediately identified as totalitarian leaders afraid of the truth and they will they will be overthrown.
The abject failure in the United States of the Bush administration in just about every activity it tried to influence has been visibly documented by the journalist in Iraq who threw his shoes at the leader who thought he would be a savior to the Iraqi people. Throughout history the Bush administration’s legacy will always be that image of ultimate insult.
The people of the United States have thrown their shoes by electing Barak Obama to lead their country for at least the next four years. Four years is not a lot of time to burn the world’s sugar cane and renew that which is ethical for the world. It is enough time however to carry the torch to other leaders and inspire them to burn their own cane so that we can create a global society of people who care about sustainable growth in all sectors of society.
Burn that cane, baby… burn that cane.
Harrison R. Greene
January 4, 2009
Guadalupe, Brazil
Let me add my condolences to the many already offered to you on your double-barreled loss. Unless you’re unusually positive in your outlook (which clearly you are), such loss can certainly dampen your holiday spirits.
It’s been my experience that when times are hard or someone is about to go under, ethics is usually one of the first things jettisoned. I’ve been through it more than once in my career. Without going into the details, I was recruited for several months by a CEO to provide leadership to his floundering operation. After turning it around, I was the first to be let go in order to inflate profits for the upcoming sale. This after every assurance that this “will be the last job you’ll ever have.” Oh, and by the way, I was told the company was up for sale the DAY AFTER returning from the east coast where I took a huge loss on the sale of my home.
Clearly then, I would agree with your assessment of lack of leadership at the top. However, without exonerating any of the greedy business and political leaders, we must remember that this is the symptom, not the origin of the problem.
When you observed in your blog that “business leaders are incented” to make decisions irrespective of morality and the impact on others, you touched upon where the greed originates. I probably sound like a flaming “demand-sider” but their incentive, indeed their JOB is to maximize shareholder value, not necessarily the long term good of the company, its customers, or employees. Why is it, do you think, that when layoffs are announced, the stock price usually does UP???
The greed starts with the owners, and the C-level mercenaries are charged with maximizing returns measured in the Wall Street casino, rather than in dividends or earnings. In fact, during the 90’s, average returns for mutual funds frequently topped 30%. Do you think anyone was investing in a company because the leadership was ethical, the company had a long-term outlook or the employees were treated fairly? The majority of investment advisors were under pressure to keep those unbelievable returns coming. I doubt many of the investors were reading 10Q’s to make sure the company was ethical and had the long term health of the company in mind.
In fact, is it not common practice for investors to make sure there is a timely exit strategy to generate returns? I doubt many investors were plunking their money down for $2 dividends. Just let there be an inkling of a sale, hostile takeover bid or “reorganization” (the whole being worth less than the sum of the parts), and watch the saliva dripping from the market’s collective frenzy.
Similarly, politicians offer what the voters want: promises of milk and honey or in the battle cry of Obama’s campaign….HOPE! I dare say he beat that drum so well, few demanded any details of HOW he was going to deliver on all those promises, until after the election. Only now is there any hand-wringing about actual plans. I watched in amazement as he dazzled the crowds by enumerating his goals: fix economy, end the war, fix social security, fix health care, eliminate the lobbyists and special interests, fix education…hell, even fix all of Washington.
I don’t blame him or the other leaders. No one would get elected dog-catcher these days by telling the truth. The voters sell their votes for rosy promises, so that’s what they get. Can you recall the last president who was popular at the end of their terms? They all fail, and only years later, some become legends a la Reagan.
So yes Will, it’s up to us. Only when the public remembers the value of ethics, is less greedy and selfish and demands real leadership, will the leaders do so. The country can support the American Auto industry but they BUY Japanese. Wal-mart kills local companies and there’s a community uprising where-ever they go, but where do the customers shop? Everybody hates the military until the local base is closed down.
There are not enough people like your mom who remember the sacrifices necessary during the depression and the war. My dad didn’t own a credit card till he was 70 and needed one to rent a car in Hawaii, and he couldn’t wait to pay off his 5% mortgage even in the 70’s when CD’s were earning 15%.
I fear for this generation. They know nothing of restraint or sacrifice. They will learn the hard way. We’ve seen to that.
Keep up the good fight.
Werner
San Diego