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Brad Agle - Ethics, Expectations and Board Dynamics

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  • 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. Name the Company? First Clue
    • This company inflated its financial statements by way of complex “straw deals”
  • 3. Name the Company? Second Clue
    • This company made large financial donations to politicians who could influence regulations affecting its industry
  • 4. 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)
  • 5. Name the Company? Fourth Clue
    • This company was forced into bankruptcy, decimating the retirement funds of trusting investors and costing taxpayers billions of dollars
  • 6. Name the Company? Fifth Clue
    • All of the events referred to in the earlier clues occurred at this company during the 1980’s
  • 7. Ethical Corporate Leadership
    • Personal Behavior
    Corporate Leadership Ethical Leadership Cynicism Bad News Confusion/ Lack of Recognition Active Inactive Positive Negative
  • 8. 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
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. 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
  • 13. 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
  • 14. Ethical Role Models
    • What they are not (or at least not necessarily):
    • Perfect
    • Distant
    • Successful
  • 15. Four Dimensions of Ethical Role Models
    • Interpersonal Behaviors
    • Ethical Action and Expectations of Self
    • Fairness with Others
    • Articulation of Ethical Standards
  • 16. Interpersonal Behaviors
    • Care, Concern, Compassion
    • Support and Take Responsibility for Others
    • Values and Maintains Relationships
    • Hardworking and Helpful
    • Accentuates the Positive
    • Accepts others’ failures
  • 17. 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
  • 18. Fairness with others
    • Distributes resources equitably
    • Open to and solicitous of input
    • Respects other equally – never condescending, even in disagreements
    • Offers explanations of decisions
  • 19. 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
  • 20. 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
  • 21. 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
  • 22. Business Ethics in 2011: Where will the Leadership Come From?
  • 23. Comments and Questions