Responsible Leadership as Subdriver of Corporate Reputation


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Responsible Leadership as Subdriver of Corporate Reputation

  1. 1. Ekaterina Samartseva RESPONSIBLE LEADERSHIP AS SUBDRIVER OF CORPORATE REPUTATION IN THE POST-CRISIS ENVIRONMENT1 Corporate social responsibility (CSR) is recognized by academic and businesscommunities as one of the drivers of corporate reputation. During crises CSR facilitatesminimization of reputation damage and mitigation of social pressure; it also may result insupportive stakeholders’ behavior [1]. Nevertheless, CSR is not a panacea against interference incorporate affairs. Positive background in such field as CSR may be ambiguous, the more acompany succumbs to social pressure the higher chances are that it will be attacked by the publicin the future [2, pp. 55-56]. Some experts are more pessimistic in their evaluation of CSR’sinfluence on reputation. Andrew Griffin, a corporate reputation specialist, believes that as a toolfor maintaining reputation SCR is completely ineffective [3, p. 192]. Despite different interpretations of CSR’s role in reputation defense and their guidingmotives, companies around the world continue to participate in social and environmentalchallenges and invest in their own CSR programs. However in the current context, against thebackdrop of recent global recession and «crises of trust» of the last 10-15 years (chain ofbankruptcies and scandals involving the largest world-known companies - Barings Bank, EnronCorporation, Arthur Andersen, Parmalat, etc) social responsibility of business has acquiredspecial significance. Responsibility should become part of the whole corporate strategy, and thekey role in the process belongs to corporate leaders. Thereby, the future lies with responsibleleaders and responsible leadership as a firm basis for success of CSR programs in the future. The global financial crisis of 2008-2010 has undermined public trust in large businessand corporate leaders [4]. As Jeffrey Immelt, General Electric CEO, says, «we are at the end of adifficult generation of business leadership, and maybe leadership in general. Tough-mindedness,a good trait, was replaced by meanness and greed, both terrible traits» [5]. Managementeffectiveness has ceased to be synonym for true leadership. Companies have been judged, to alarge extent, by their top management’s actions, by adequacy of their public statements to thefinancial situation. A scandal involving top managers of General Motors, Chrysler and Fordwhich had arrived to Washington in private jets to plead for a U.S. government bailout inNovember, 2009 made it obvious that tough crisis measures may be supported by stakeholders inreturn for «corporate sacrifices» such as frugality, modesty and tact. Global media were creating1 Originally published: XII International Conference on History of Management Thought and Business, ConferenceProceedings, Lomonosov Moscow State University, 2011.Ekaterina Samartseva, 2011. 1
  2. 2. images of heroes and antiheroes of the crisis period by spreading out any statements, particularlyprovocative and imprudent. Thus, the decision of Deutsche Bank Management on forgo bonusesfor 2008 was welcomed by the press [6] in contrast to the commentary of Totals CEOChristophe de Margerie on the senselessness of cutting his salary. The provocative statement wasmade at a time Total had announced both dismissal of 555 employees and record profits of 14billion Euros for 2008 [7]. Such half-forgotten topics as integrity, morality, fairness, responsibility to present andfuture generations, etc have appeared on the agenda again. As Arif Zaman, reputational riskexpert says, morality is not the common principle of business conduct, but it is morality thatforms the basis of corporate social responsibility [8, p. 333]. We harbor no illusions thatcompanies which has survived financial crisis will run business in compliance with high ethicaland moral standards. Nevertheless, the proper intentions are of critical importance for sustainabledevelopment of companies in the post-crisis environment. The concept of responsible leadership is relatively new. It has been developed since thebeginning of the 2000s by experts in business ethics, values-based leadership, cross culturalmanagement, psychology, sociology and philosophy. The paper of Joanne Ciulla is dedicated toleadership ethics [9]. The morality of a leader exerts influence on organizations, communitiesand the whole society. Leaders have the potential to inflict harm and generate value for theirfollowers. The author defines leadership as a specific type of human relationship and ethicswhich determines the way we treat each other in various situations. She also examinesconstituent parts of leadership ethics (correlation of ethics and efficiency, altruism and personalinterest) and emphasizes the essence of positive leadership as the main issue of leadershipstudies. Lynne Sharpe Paine draws attention to the necessity of integrating financial performancewith morality by introducing her model of center-driven leadership [10]. She points up that themajority of modern decision-making models doesn’t include morality while the moralcomponent is a necessity for compliance with financial, legal and ethical standards in the moderncontext. Paine introduces 4 «lenses» as components of her model (purpose, principles, peopleand power) which also serve as a sort of compass for decision making. Leaders should act in the«area of acceptability» as the point of interception of ethics and economics. Ethical concepts andmoral thinking skills as well as tools of economic analysis will help to define this area. Piter Pruzan and William Miller discuss spirituality as a foundation for responsibleleadership [11]. Their concept is corroborated by interviews conducted with corporate topmanagers from the U.S., Europe and Asia. Relying on spirituality, regardless of differentEkaterina Samartseva, 2011. 2
  3. 3. interpretation of the term by leaders, they will naturally learn to take on responsibility for theirpersonal actions and for their companies. Thomas Maak and Nicola Pless use an approach based on human relationships [12]. In aglobalized and multicultural environment leaders face various challenges, such as managementof workforces of different cultures, social status, religions, education, etc; ethical compliance;public trust in business; demands and values of an organization’s stakeholders. Formation andsustaining of trust and stable relations with all stakeholders becomes the main competence of theleaders contributing to growth of their authority. The authors also consider a leader to be a moralperson who needs ethical intelligence based on the following key components – moralawareness, reflection skills, critical thinking skills, and moral imagination. George Brenkert analyzes correlation between integrity, responsible leadership andaccountability [13]. Sonja Sackmann studies responsible leadership across cultures and proposesa dynamic model of leading responsibly. The author emphasizes that leaders should pay attentionto cultural identities of their interaction partners [14]. Tong Schraa-Liu and Fons Trompenaarsexplicate responsible leadership through ability to solve dilemmas resulting from sense ofresponsibility of leaders towards stakeholders and the society. By reconciling inner dilemmas(self-responsibility, self-examination and discipline) leaders will be able to solve outerdilemmas, to fulfill the responsibility towards stakeholders [15]. To sum up all above mentioned, the following components of responsible leadership maybe emphasized: moral integrity, value system, ability to reconcile personal demands withdemands of stakeholders, reflection skills, ability to create and maintain harmonious relationshipwith interaction partners representing varied cultural traditions. Development of responsiblecorporate leadership institute may become timely, proactive response to challenges of the rapidlychanging environment. Bibliography 1. Baron, D. (2006), ‘A Positive Theory of Moral Management, Social Pressure, and Corporate Social Performance’, 2. Vogel, D. (2005), ‘The Market for Virtue. The potential and Limits of Corporate Social Responsibility’, Brookings Institution Press. 3. Griffin, A. (2009), ‘Reputation Management. Gaining Control of Issues, Crises and Corporate Social Responsibility’, Moscow: Alpina Business Books. 4. ‘2009 Edelman Trust Barometer’, 5. ‘Jeffrey Immelt, GE CEO: Era of Meanness, Greed Drawing to End’, 6. 7. Shirbon, E. ‘Oil boss says even halved, his pay would jar’, Samartseva, 2011. 3
  4. 4. 8. Zaman, A. (2008), ‘Reputational Risk. How to manage for value creation’, Moscow: Olimp-Business. 9. Ciulla, D. (2008), ‘Ethics: the heart of leadership’, Responsible Leadership, Moscow: Alpina Business Books, pp. 33-49. 10. Sharp Paine, L. (2008), ‘A compass for decision making’, Responsible Leadership, Moscow: Alpina Business Books, pp. 79-93. 11. Pruzan, P. and C. Miller, W. (2008), ‘Spirituality as the basis of responsible leaders and responsible companies’, Responsible Leadership, Moscow: Alpina Business Books, pp. 96-121. 12. Maak, T. and M Pless, N. (2008), ‘Responsible Leadership: a relational approach’, Responsible Leadership, Moscow: Alpina Business Books, pp. 53-74. 13. G. Brenkert, G. (2008), ‘Integrity, responsible leaders and accountability’, Responsible Leadership, Moscow: Alpina Business Books, pp.127-142. 14. A. Sackmann, S. (2008), ‘Leading responsible across cultures’, Responsible Leadership, Moscow: Alpina Business Books, pp.163-176. 15. Schraa-Liu, T. and Trompenaars, F. (2008), ‘Towards responsible leadership through reconciling dilemmas’, Responsible Leadership, Moscow: Alpina Business Books, pp.181-199.Ekaterina Samartseva, 2011. 4