Ethics in leadership is something that has been brought up into the limelight in the light of the 2008 financial crisis.
However, before we decide that this issue is something new to the world, let us think again in the light of what happened in 2001; the Enron and Authur Andersen case.
The top management of Enron managed to hide their losses amidst many layers of accounting practices that the world could not really decipher what was Enron really doing.
The accounting firm, Arthur Andersen had a conflict in interest because they were the consultant to the company, i.e they received cheques from Enron for their services and at the same time were their auditors.
This incident was one of the largest cases of fraud in corporate America in history. Enron grew from $10 billion to $65 billion in a matter of 3-4 years and in 24 days, went bankrupt. They left thousands of employees in the streets and the management took off with millions themselves.
8 years later, we find a similar thing happening in Wall Street. Because of the subprime crisis, many people had to default on their loans and it revealed a gaping hole in the business model of the banks.
They had been investing in products that were made up of nothing and a series of defaults caused the whole financial system to crumble, sending the world into a downward spiral.
Never before have we seen a need for ethics in leadership today. We need to see morally upright, righteous individuals that will lead a corporation well, building it upon values of integrity and truth.
If we ever doubt the need for ethics in leadership in our world, I think whatever has happened over the past year has probably changed your mind.
Notes About Ethics in LeadershipIf you are a leader in an organization, it is essential that you don’t just preach about meeting the bottom line, but also preach about values that drive the organization.
1.Values are like the foundation of any organization
The values that an organization is built upon are like a foundation for a house. It is these values that will provide a direction for the organization and a basis for their decisions on top of the bottom line.
A foundation may not be observed from the outside, but it is the foundation that keeps a house standing. When a storm comes, it is the house’s foundation that will keep it from collapsing.
Building your organization on purely the bottom line is like trying to build a house without foundation. While everything is going fine, it almost appears that the foundation is not necessary. But when the storms come, everything is revealed when the house falls down like a house of cards.
In fact, that’s what happened in the financial crisis of 2008. Greed was built upon greed of the financial institutions.
Eventually, it only took one trigger event to cause the whole meltdown. When you build your house upon strong values like truth, honesty, prudence and due diligence, it will be able to withstand the storm when it comes.
This was observed in this crisis as well. Some of banks which built their business models upon these values stood firm in the face of the meltdown.
2.Define the values that your organization stands by
Therefore as a leader, you have to clearly define what values your organization stands by. These could be values like courage, truth, common sense, or any of these values. One exercise you could possibly do is to go to the Values Definition exercise in my website and do it with your team.
These values will be the basis for all your decisions. They are like a Magna Carta for your company. The 10 Commandments of your Business.
They are even greater than your bottom line, because it is upon them that your bottom line is created. If the organization violates its own values, then it has basically shot itself in the foot;it would then really be a matter of time before whole house collapses.
A simple example: If you were confronted with the chance of doing business either with someone who charges a low rate because the goods were stolen, or with a company in good standing who charges a higher rate, your values of Truth and Integrity would force you to choose the latter.
It didn’t matter that you would make a bigger margin with the first choice. What mattered more to you was the keeping in line with your organization values.
3. What are your values?
Above all else, as the leader of a team or an organization, your personal values are bound to show themselves in the course of your leadership.
If you really value truth, it will show in the way you behave toward the act of lying and dealing with unrighteous business partners. If you really value prudence, it will show in the way you do your due diligences before you make any major decisions for the company.
The converse is true as well.
That is why it is important to ask yourself about your personal values before you start preaching it to your whole team. A disjoint between what you believe in and what you say you believe in will affect your creditability as a leader as well.
Therefore, it is all the more important that you question and evaluate your personal values.
Ethics in leadership is never as necessary as before as in our day and age; you need to be strong in the face of such corruption and greed in the world today. It helps you know who you are, and what your values are, and above all, helps you to lead your team through to long term, sustainable growth for your organization.
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