Posted On: Tuesday, January 1, 2019
It isn’t just leaders’ abilities and experience that give them confidence. Authentic confidence means leaders realize that as smart as they are, their view or approach might be wrong. And what they do about that either fuels ethical leadership or spawns disaster.
A significant cause of leadership failure in 2018, as in the past, was the failure of a leader to vet adequately assumptions about a course of action and its unintended consequences.
What is hopeful and points to continued benefits in 2019 is the focus on ethics, business and leadership evident in the call to action by BlackRock founder, chairman and CEO Larry Fink in his January 2018 annual CEO letter: “A Sense of Purpose”. In addition, the unexpected death this month of business ethics pioneer W. Michael Hoffman, who founded the center for business ethics at Bentley University 42 years ago — the first of its kind in North America — offers another call to action through the inspiration and impetus of his legacy.
In spite of our living in a time of great disruption and innovation, being wrong isn’t comfortable, especially for hard charging leaders who often rely on their own counsel. Pulitzer prize winner Kathryn Schulz’s TED Talk “On Being Wrong” explores the danger in our believing we are on the right side of anything. Being an effective leader requires the emotional intelligence to be alert to when we close down on an issue, trust our own counsel too much or don’t routinely explore with others potential unintended consequences in decisions.
Leaders can’t mitigate what their leadership styles preclude them from seeing. When leaders lose themselves in their own sense of power, the rightness of their ideas or how their ideas must be carried out, they invite unintended consequences as well as create significant vulnerabilities for themselves, their organizations and shareholders.
This problem applies to governing a country or leading, for example until just a few weeks ago, the world’s largest automotive alliance. (Carlos Ghosn’s world collapsed last month; he is indicted and in jail.) This malady of a self-serving point of view affected what was the world’s most valuable bank in 2016. In addition to fines already paid, Wells Fargo agreed in 2018 to pay settlements of more than $2 billion to federal regulators, states and shareholders for its massive customer fraud which was rooted in being irrevocably wedded to a cross-selling culture that ignored the red flags raised.
Refusal to listen to experts, hiding failures, misleading investors and doing it her way set a course for why Theranos founder Elizabeth Holmes failed in 2018 in her startup’s big, audacious vision to disrupt healthcare. This fall, Telsa CEO Elon Musk forfeited his chairman role for two years because of a tweet likely anyone on his board or team, if consulted, could have told him would be a huge mistake. Examples of companies’ actions creating unintended consequences go on and on, which is why this issue is so important to address.
In Fink’s “A Sense of Purpose” letter, he raised the bar, aligning ethics with business. He wrote to CEOs: “Society is demanding that companies, both public and private, serve a social purpose.” He continued, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Fink’s 2019 annual CEO letter, expected in January, will likely take farther his theme of company leadership accountability.
Hoffman, who was the Hieken Professor of Business and Professional Ethics, used to say that “Ethical theory without practical application is empty and useless and business practices not grounded in ethical principles are blind and dangerous.” He played a dominant role shaping the business ethics movement. For over 40 years he mentored, shared information or training and gave career support to thousands of faculty members (starting or expanding business ethics centers or business ethics curriculum), business ethics officers and others in the field around the world, in addition to his teaching responsibilities, books and articles.
The long-term success of business depends on the capacity of leaders to integrate ethical approaches with business strategy. Larry Fink seems poised to have tremendous influence in advancing ethical leadership. In addition, Mike Hoffman’s legacy is something those who knew him will carry in our hearts.