Brad Agle - Ethics, Expectations and Board Dynamics

ETHICS, EXPECTATIONS, AND BOARD DYNAMICS Dr. Bradley R. Agle George W. Romney Endowed Professor Marriott School of Management Fellow, Wheatley Institution Brigham Young University BECOMING A POSITIVE DEVIANT: ETHICS IN THE BOARDROOM

Name the Company? First Clue
This company inflated its financial statements by way of complex “straw deals”

Name the Company? Second Clue
This company made large financial donations to politicians who could influence regulations affecting its industry

Name the Company? Third Clue
This company’s accounting firm, Arthur Andersen, served both consultancy and auditor roles, and paid a steep price for its role in the scandal (although it resigned the account years before the scandal unfolded)

Name the Company? Fourth Clue
This company was forced into bankruptcy, decimating the retirement funds of trusting investors and costing taxpayers billions of dollars

Name the Company? Fifth Clue
All of the events referred to in the earlier clues occurred at this company during the 1980’s

Ethical Corporate Leadership
Personal Behavior
Corporate Leadership Ethical Leadership Cynicism Bad News Confusion/ Lack of Recognition Active Inactive Positive Negative

1991 U.S. Sentencing Guidelines Seven Steps of Due Diligence
Develop Compliance Standards & Procedures
Give One Executive Overall Responsibility
Ensure That Executives are Trustworthy
Communicate Standards & Procedures
Create Steps to Ensure Compliance
Enforce Standards Consistently
Modify Program Appropriately
Corporate Leadership

2004 Amended U.S. Sentencing Guidelines
Requirements are Enhanced with greater Rigor and Detail
As a Fundamental Proposition, organizations must promote an organizational culture that promotes ethical conduct and commitment to compliance with the law
Requires Boards and Executives to assume the oversight and management of compliance and ethics programs
This presumes active leadership in defining the content and operation of the program

2004 Amended U.S. Sentencing Guidelines – Minimum Requirements
Organizations must:
Identify areas of risk where criminal violations may occur
Train high-level officials as well as employees in relevant legal standards and obligations
Give compliance and ethics officers sufficient authority and resources to carry out their responsibilities

Areas of Influence in Creating an Ethical Organizational Culture
1) Formal statements of organizational philosophy, charters, creeds, materials used for recruitment and selection, socialization
2) Design of physical spaces, facades, buildings
3) Deliberate role-modeling, teaching, and coaching by leaders
4) Explicit reward and status system, promotion criteria

Areas of Influence in Creating an Ethical Organizational Culture
5) Stories, legends, myths, and parables about key people and events
6) What leaders pay attention to, measure, and control
7) Leader reactions to critical incidents and organizational crises
8) How the organization is designed and structured
9) Organizational systems and procedures
10) Criteria used for recruitment, selection, promotion, leveling off, retirement, and firing

Ethical Role Modeling
What makes one an ethical role model?
Findings from my research with Drs. Trevino and Weaver at the Ethics Resource Center…
Personal Behavior

Ethical Role Models
What they are not (or at least not necessarily):
Perfect
Distant
Successful

Four Dimensions of Ethical Role Models
Interpersonal Behaviors
Ethical Action and Expectations of Self
Fairness with Others
Articulation of Ethical Standards

Interpersonal Behaviors
Care, Concern, Compassion
Support and Take Responsibility for Others
Values and Maintains Relationships
Hardworking and Helpful
Accentuates the Positive
Accepts others’ failures

Ethical Action and Expectations of Self
Honesty, Integrity, Trustworthiness
Humility
Holds self to high ethical standard
Consistently ethical in public and private life
Self-sacrificial
Accepts responsibility for, and open about, own ethical failings

Fairness with others
Distributes resources equitably
Open to and solicitous of input
Respects other equally – never condescending, even in disagreements
Offers explanations of decisions

Articulating Ethical Standards
Communicates high ethical standards
Holds others ethically accountable
Puts ethics above personal/company interests
Uncompromising, consistent ethical values
Takes long-term multiple stakeholder perspective

Warning: Bathsheba Syndrome
Top Leaders:
Have Privileged Access
Can Lose Strategic Focus
Can Come to Believe that the Rules Don’t Apply to Them
Oftentimes Have a Well-Earned, but Inflated Belief in Their Ability to Control Events

The Importance of Leadership
“ Never underestimate the power of a small group of people to change the world – indeed, nothing else ever has” Margaret Mead

Business Ethics in 2011: Where will the Leadership Come From?

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Brad Agle - Ethics, Expectations and Board Dynamics

by Kevin Jessop on Dec 06, 2011

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Brad Agle - Ethics, Expectations and Board Dynamics — Presentation Transcript