ETHICS, EXPECTATIONS, AND BOARD DYNAMICS Dr. Bradley R. Agle George W. Romney Endowed Professor Marriott School of Managem...
Name the Company? First Clue <ul><li>This company inflated its financial statements by way of complex “straw deals” </li><...
Name the Company? Second Clue <ul><li>This company made large financial donations to politicians who could influence regul...
Name the Company? Third Clue <ul><li>This company’s accounting firm, Arthur Andersen, served both consultancy and auditor ...
Name the Company? Fourth Clue <ul><li>This company was forced into bankruptcy, decimating the retirement funds of trusting...
Name the Company? Fifth Clue <ul><li>All of the events referred to in the earlier clues occurred at this company during th...
Ethical Corporate Leadership <ul><li>Personal Behavior </li></ul>Corporate Leadership Ethical  Leadership Cynicism Bad New...
1991 U.S. Sentencing Guidelines Seven Steps of Due Diligence <ul><li>Develop Compliance Standards & Procedures </li></ul><...
2004 Amended U.S. Sentencing Guidelines <ul><li>Requirements are Enhanced with greater Rigor and Detail </li></ul><ul><li>...
2004 Amended U.S. Sentencing Guidelines – Minimum Requirements <ul><li>Organizations must: </li></ul><ul><li>Identify area...
Areas of Influence in Creating an Ethical Organizational Culture <ul><li>1) Formal statements of organizational philosophy...
Areas of Influence in Creating an Ethical Organizational Culture <ul><li>5) Stories, legends, myths, and parables about ke...
Ethical Role Modeling <ul><li>What makes one an ethical role model? </li></ul><ul><li>Findings from my research with Drs. ...
Ethical Role Models <ul><li>What they are not (or at least not necessarily): </li></ul><ul><li>Perfect </li></ul><ul><li>D...
Four Dimensions of  Ethical Role Models <ul><li>Interpersonal Behaviors </li></ul><ul><li>Ethical Action and Expectations ...
Interpersonal Behaviors <ul><li>Care, Concern, Compassion </li></ul><ul><li>Support and Take Responsibility for Others </l...
Ethical Action and  Expectations of Self <ul><li>Honesty, Integrity, Trustworthiness </li></ul><ul><li>Humility </li></ul>...
Fairness with others <ul><li>Distributes resources equitably </li></ul><ul><li>Open to and solicitous of input </li></ul><...
Articulating Ethical Standards <ul><li>Communicates high ethical standards </li></ul><ul><li>Holds others ethically accoun...
Warning: Bathsheba Syndrome <ul><li>Top Leaders: </li></ul><ul><li>Have Privileged Access </li></ul><ul><li>Can Lose Strat...
The Importance of Leadership <ul><li>“ Never underestimate the power of a small group of people to change the world – inde...
Business Ethics in 2011: Where will the Leadership Come From?
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Brad Agle - Ethics, Expectations and Board Dynamics

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Brad Agle - Ethics, Expectations and Board Dynamics

  1. 1. 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
  2. 2. Name the Company? First Clue <ul><li>This company inflated its financial statements by way of complex “straw deals” </li></ul>
  3. 3. Name the Company? Second Clue <ul><li>This company made large financial donations to politicians who could influence regulations affecting its industry </li></ul>
  4. 4. Name the Company? Third Clue <ul><li>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) </li></ul>
  5. 5. Name the Company? Fourth Clue <ul><li>This company was forced into bankruptcy, decimating the retirement funds of trusting investors and costing taxpayers billions of dollars </li></ul>
  6. 6. Name the Company? Fifth Clue <ul><li>All of the events referred to in the earlier clues occurred at this company during the 1980’s </li></ul>
  7. 7. Ethical Corporate Leadership <ul><li>Personal Behavior </li></ul>Corporate Leadership Ethical Leadership Cynicism Bad News Confusion/ Lack of Recognition Active Inactive Positive Negative
  8. 8. 1991 U.S. Sentencing Guidelines Seven Steps of Due Diligence <ul><li>Develop Compliance Standards & Procedures </li></ul><ul><li>Give One Executive Overall Responsibility </li></ul><ul><li>Ensure That Executives are Trustworthy </li></ul><ul><li>Communicate Standards & Procedures </li></ul><ul><li>Create Steps to Ensure Compliance </li></ul><ul><li>Enforce Standards Consistently </li></ul><ul><li>Modify Program Appropriately </li></ul>Corporate Leadership
  9. 9. 2004 Amended U.S. Sentencing Guidelines <ul><li>Requirements are Enhanced with greater Rigor and Detail </li></ul><ul><li>As a Fundamental Proposition, organizations must promote an organizational culture that promotes ethical conduct and commitment to compliance with the law </li></ul><ul><li>Requires Boards and Executives to assume the oversight and management of compliance and ethics programs </li></ul><ul><li>This presumes active leadership in defining the content and operation of the program </li></ul>
  10. 10. 2004 Amended U.S. Sentencing Guidelines – Minimum Requirements <ul><li>Organizations must: </li></ul><ul><li>Identify areas of risk where criminal violations may occur </li></ul><ul><li>Train high-level officials as well as employees in relevant legal standards and obligations </li></ul><ul><li>Give compliance and ethics officers sufficient authority and resources to carry out their responsibilities </li></ul>
  11. 11. Areas of Influence in Creating an Ethical Organizational Culture <ul><li>1) Formal statements of organizational philosophy, charters, creeds, materials used for recruitment and selection, socialization </li></ul><ul><li>2) Design of physical spaces, facades, buildings </li></ul><ul><li>3) Deliberate role-modeling, teaching, and coaching by leaders </li></ul><ul><li>4) Explicit reward and status system, promotion criteria </li></ul>
  12. 12. Areas of Influence in Creating an Ethical Organizational Culture <ul><li>5) Stories, legends, myths, and parables about key people and events </li></ul><ul><li>6) What leaders pay attention to, measure, and control </li></ul><ul><li>7) Leader reactions to critical incidents and organizational crises </li></ul><ul><li>8) How the organization is designed and structured </li></ul><ul><li>9) Organizational systems and procedures </li></ul><ul><li>10) Criteria used for recruitment, selection, promotion, leveling off, retirement, and firing </li></ul>
  13. 13. Ethical Role Modeling <ul><li>What makes one an ethical role model? </li></ul><ul><li>Findings from my research with Drs. Trevino and Weaver at the Ethics Resource Center… </li></ul>Personal Behavior
  14. 14. Ethical Role Models <ul><li>What they are not (or at least not necessarily): </li></ul><ul><li>Perfect </li></ul><ul><li>Distant </li></ul><ul><li>Successful </li></ul>
  15. 15. Four Dimensions of Ethical Role Models <ul><li>Interpersonal Behaviors </li></ul><ul><li>Ethical Action and Expectations of Self </li></ul><ul><li>Fairness with Others </li></ul><ul><li>Articulation of Ethical Standards </li></ul>
  16. 16. Interpersonal Behaviors <ul><li>Care, Concern, Compassion </li></ul><ul><li>Support and Take Responsibility for Others </li></ul><ul><li>Values and Maintains Relationships </li></ul><ul><li>Hardworking and Helpful </li></ul><ul><li>Accentuates the Positive </li></ul><ul><li>Accepts others’ failures </li></ul>
  17. 17. Ethical Action and Expectations of Self <ul><li>Honesty, Integrity, Trustworthiness </li></ul><ul><li>Humility </li></ul><ul><li>Holds self to high ethical standard </li></ul><ul><li>Consistently ethical in public and private life </li></ul><ul><li>Self-sacrificial </li></ul><ul><li>Accepts responsibility for, and open about, own ethical failings </li></ul>
  18. 18. Fairness with others <ul><li>Distributes resources equitably </li></ul><ul><li>Open to and solicitous of input </li></ul><ul><li>Respects other equally – never condescending, even in disagreements </li></ul><ul><li>Offers explanations of decisions </li></ul>
  19. 19. Articulating Ethical Standards <ul><li>Communicates high ethical standards </li></ul><ul><li>Holds others ethically accountable </li></ul><ul><li>Puts ethics above personal/company interests </li></ul><ul><li>Uncompromising, consistent ethical values </li></ul><ul><li>Takes long-term multiple stakeholder perspective </li></ul>
  20. 20. Warning: Bathsheba Syndrome <ul><li>Top Leaders: </li></ul><ul><li>Have Privileged Access </li></ul><ul><li>Can Lose Strategic Focus </li></ul><ul><li>Can Come to Believe that the Rules Don’t Apply to Them </li></ul><ul><li>Oftentimes Have a Well-Earned, but Inflated Belief in Their Ability to Control Events </li></ul>
  21. 21. The Importance of Leadership <ul><li>“ Never underestimate the power of a small group of people to change the world – indeed, nothing else ever has” Margaret Mead </li></ul>
  22. 22. Business Ethics in 2011: Where will the Leadership Come From?
  23. 23. Comments and Questions
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