CEOs as Ethical Role Models

for the Business and Economic Review

Most CEOs and business owners want to do the right thing. Here are some tips that will help you do just that—and "grow" your business at the same time.

In the wake of Enron and other corporate scandals, there is an increasingly common perception that many CEOs and business owners put profit ahead of people and community. But most CEOs and business owners are ethical, and they’re also concerned about their communities. Like most people, the vast majority of business leaders want to do the right thing.

What can you, as CEO or business owner, do to change that perception—and help your company’s growth at the same time? Consider these key decisions and practical steps that you can take.

A Hiring Decision

When a company is aligned comfortably, decisions are easier to make.

The line gets drawn every day. Recently, a CEO and part-owner of a Midwestern services firm (call him Joe) drew that line.1 In a series of presentations to his employees, Joe emphasized the value of bringing integrity into the workplace. Joe made it clear that everyone needed to do what it takes to win, but that it should be done ethically. Joe bought books about ethical competition for each of his employees, each of his key suppliers, and some of his customers and acquaintances.

A month later, one of Joe’s vice-presidents posed a question. The VP had several qualified candidates to fill a key senior sales management post. The leading prospect had a wonderful pedigree, great previous results, and worked for a key rival of Joe’s company. In the last interview, the candidate had offered to bring a list of the competitor’s customers if he got the job.

“Two months ago,” the VP explained, “I would have asked you to interview this guy, and we’d hire hi

m. Now, I still want you to interview him, but how right is it for us to hire him?” The dilemma was clear to all: take a great candidate and get the list, or live by Joe’s words and not hire the candidate. It was Joe’s call. He hired the candidate.

The CEO's Impact

What effect did this have on the company? In the short term, it was positive. The list worked, and the sales team improved revenues as the company’s market share grew. The stock value ticked up a little, and many people made money.

A little later, however, some subtle issues arose. For one, Joe lost some personal credibility. That deficit was not terribly important; personal credibility is like a bank account, and most CEOs are good at keeping that account current. Joe had some credibility he could afford to spend, and his hiring decision was made with that in mind.

The less obvious loss, however, was in organizational effectiveness. When team members saw the CEO’s action as running counter to the values of the rest of the company, they were less able to identify the right thing to do. Joe’s hiring decision acted as a brake on employee effectiveness.

When a company is aligned comfortably, decisions are easier to make. And when the people who make those decisions feel that they are contributing to a good cause, they put more energy into the effort. Conversely, when they are not sure how good the cause may be, that energy dissipates.

As CEO, don’t expect to hear if there is a problem. In a different situation, a respected executive VP heard about his CEO doing something similar to what Joe did. “I was disappointed,” the VP admitted, “but I didn’t call him on it. I am not sure that he would have understood.”2 That CEO lost organizational effectiveness, and he didn't know why. Who was at fault? It doesn’t matter.

The basic assumption is that owners, general managers, employees, and families all prefer to do the right thing. Doing good, no matter how you define it, is more comfortable and natural than not doing good.

Accordingly, most employees shun acquaintances and bosses about whom they feel less than good. They avoid purchasing from businesses that fail this very personal standard. Even worse for Joe, the best people tend to leave companies that seem to them to be acting less than responsibly. Or, if they stay, these employees tend to disassociate psychologically from the company. No business can excel when too many of its workers become disconnected. Responsibility is important. And as the owner or CEO, promoting and demonstrating responsibility is your job.

Who Made YOU a Deity?

But what gives you, as CEO or owner, the right to take on that job, to set standards of responsibility? Who made you a deity?

The answer is that the deity badge comes with the job. One definition of a deity is “one who is cause.” Many people think, incorrectly, that the owner or CEO is a cause agent for employees, suppliers, customers, and partners. As CEO or owner, you can only be the cause agent for your business and yourself.

Still, most successful business owners value independence in thought and action on the part of their employees, customers, partners, and suppliers. Few CEOs want to exert thought and action control. But a CEO can still be a very powerful role model.

Practical Steps

As a role model, you can both talk and act. Joe talked one way and acted another. Talk without action to support it can do your business more harm than good, and Joe experienced the results ("What Happened to Joe?" at end of article).

You can also decide whether you will invest more in time, people, or money in order to make a difference. Your choice of which resource to emphasize is important. Time is the most valuable resource you have, and it’s the one that shows the greatest impact. You can, and should, invest your own time in acting responsibly. Here are three proven steps:

Step 1 - Ask
Start with visibly inspecting what you consider to be important. When you look at updates from your team, do you request and measure responsible activity and social involvement? You can’t dictate corporate or social responsibility, to be sure. But you can make it a point to ask—frequently—how your team members are applying or not applying the principles. At first, the answers may be “nothing to report,” but over time you will have the opportunity to promote responsible behavior in a way that will be highly visible to the people in your business.

Step 2 - Do
Your actions speak louder than words or dollars. You can talk about corporate citizenship, and you can give money to charity, but your strongest statement will be taking a half-day and going to work at a charity. What does this mean? It can mean spending eight hours every month with Habitat for Humanity, helping to build a house.3 Or you could donate a few hours each week dropping off food for the local AIDS project. Many local schools and institutions use business people to guest-teach every week or two. Some CEOs sponsor a local run or bike ride with the proceeds going to charity, then work the event as a volunteer. Most local charities need help getting mailings out the door. 4 Do something that any of your employees could also do. The point is to do something regularly, and do it visibly!

Being visible does not mean simply attending charity board meetings occasionally, but rolling up your sleeves and helping others. Being visible does not mean grabbing press attention. It does mean you tell your team that you will be unavailable every second Wednesday from 1 to 5 p.m. because you are helping to build a home for a family that can’t afford to buy one. If people need to contact you, suggest they bring a hammer and level and come out to help at the work site.

Acting with responsibility does not, in any way, replace requirements for performance. When you take a half-day, as CEO, to per-form work for the community, your work does not cease, nor should any of your team’s. Employees should be given support if they need to reschedule their work in order to do community service, but this does not replace the work of your business. Your business policy should be that community responsibility is the right thing to do. You have time for both.

Step 3 - Encourage
When you see people doing responsible things for the community, thank them. A personal note on your stationery (or even on the back of an envelope) will be much more appreciated than a company program or an award. Don’t ask Human Resources to handle rewards for you. Take the time to do it yourself. Nothing speaks louder than a personal thank-you.

Mantle of Deity

Employees and customers judge their deities and their leaders by similar criteria. Those criteria include whether words and actions are dissimilar. Polemics do not endear you to your team and customers. Grandstanding does not help here any more than it does in a sales department.

Performance, as in the rest of your business, is what matters. You may not want the mantle of deity, but you carry it. Show what you can do with it.

What will it do for your business? You will garner clear benefits from the public image you’ll generate, but these are minor compared with the internal benefits. When the people who work with you feel aligned with your values, your business will run more smoothly. Things will get done faster, with less of your time required to keep things on track.

When people who work in your business feel they are creating good, they invest more of their own time and thought. To customers, your brand becomes differentiated. That differentiation can help you to speed your business growth.

The community benefits, and your business benefits. You get to keep your job as deity, CEO, and/or owner.¨

What Happened to Joe?

Joe made his hiring decision. He promoted responsible action in word but not in deed. That decision is part of the reason Joe is no longer with that company.

Was Joe wrong to take the list of his customers from his competitor's files? As an ethicist, you could argue either side. But does that matter? Not really. The issue is not what might be correct in an academic setting, but how Joe's team saw his actions and what logical consequences flowed from Joe’s actions.

The management team and employees felt that Joe was saying one thing (be responsible) but acting in another way. Their perceptions drove their responses. One response was that several good people left for other companies. Might they have stayed if they had trusted Joe? We’ll never know, but we do know that his personal plea to stay was ineffective. Joe was out of step with his own people, and this reduced the ability of his firm to grow during a critical period.

What happened to the sales executive that Joe hired? The story is that he left the company two years later and took Joe's customer list with him. The logical consequence of rewarding theft of intellectual property is that the theft repeats. And this time, it was Joe's company that was injured.

Endnotes:

1- The CEO has since been replaced. Joe is not his real name, but the rest of the story is accurate. At the time, Joe was an acquaintance of the author.

2- In private conversation with the author.

3- Contact Habitat for Humanity at http://www.habitat.org/local

4- For tips on how to choose a volunteer opportunity, look at http://networkforgood.org/volunteer/volunteertips.html, or go to http://networkforgood.org/ and click on “find an opportunity.”

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