Executive Ethics: Beliefs, Practices, and Leadership Challenges

Introduction: Ethics at the Executive Level

Persons in positions of leadership inevitably encounter major ethical dilemmas and in fact make ethical decisions on a daily basis. Interviews with senior executives can reveal the complexities of ethical decision-making at the executive level, as personal morals frequently disconnect from the ethical culture governing the organization or the industry's regulatory climate (Bailey & Shantz, 2018). Bandwagon fallacies — the sense that because something is normative it is therefore ethical — predominate in the workplace. An interview with a senior executive (name altered to protect the individual's privacy) shows how personal ethical beliefs can clash with the prevailing norms and values in a given field. Employee diversity adds further complications to executive ethical decision-making. The predominant ethical challenges usually relate to balancing two equally compelling ethical objectives, or weighing the pros and cons of a decision when there are no clear black-and-white resolutions.

No genuine dilemma has a straightforward answer; it is not as if C-suite leaders are faced with simple choices like whether to steal, accept a bribe, or commit a crime. The most common ethical challenges are those that require discipline and self-restraint, but also courage and humility. Understanding how experienced executives navigate these challenges offers valuable insight into the relationship between personal character and institutional ethics.

Ethical Beliefs and Organizational Culture

The subject of this interview holds ethical beliefs that align with universal principles, while leaning more toward the philosophy of character ethics. As Crossan, Mazutis, and Seijts (2013) point out, character ethics or virtue ethics can prove to be a more sensible model or framework for guiding the decisions made by leaders. Unlike deontological or utilitarian ethical frameworks, virtue and character ethics demand self-reflection, the willingness to change, and the ability to act based on intrinsic motivation to do the right thing. At the same time, the subject agrees that a formal ethical code remains essential in any organization.

Research substantiates the subject's belief in a formal ethical code that outlines behavioral guidelines and the ramifications of transgressions. For example, Schwartz (2013) found that formal elements such as "code of ethics, ethics training, an ethics hotline, and an ethics officer" prove far more effective than nebulous means of approaching dilemmas and decisions (p. 39). Leadership always remains critical for the entire corporate culture, inculcating the values and norms of the organization through C-suite behavioral characteristics. The subject shares Hatcher's (2008) conviction that "an organization is only as ethical as its leaders" (p. 98). One of the subject's biggest challenges has been to speak out against immoral acts, even when committed by colleagues he would consider friends. The courage to speak out involves delicate and tactful approaches to communication and emotional intelligence. He notes that the first step should always be direct confrontation with the individual, and then, if necessary, alerting senior leadership.

Human Resources, Compensation, and Ethical Culture

The subject believes that human resources should remain more actively involved in promoting the ethical culture of a company through more robust hiring and training practices. Without over-relying on personality assessments, a human resources department can use tools and techniques to identify the character traits most suitable to the organization's outlook. Similarly, through employee development and training, the human resources department participates in the process of engagement and motivation that minimizes conflict. Three years ago, the subject's company invested in software systems for employee training and also brought in public speakers designed to improve the moral character and outlook of employees.

Intrinsic motivation comes from engaging employees and creating an organizational culture that discourages ethical infractions. Whereas the subject once benefited financially from stock-based compensation, a shift away from such ethically problematic policies has helped his organization overcome some of its most serious problems. Stock-based compensation has traditionally been used as a source of extrinsic motivation for executives, but research shows how this practice leads to "smooth earnings" and the artificial elevation of a company's stock price, as well as broader societal problems such as "lower shareholder returns, bubbles and crashes and huge corporate scandals" (Martin, 2011, p. 43). In light of the ethical and legal problems associated with providing C-suite personnel with stock in the firm, his company made the difficult choice to pull back and fundamentally shift its approach to compensation, reward, and retention of top talent.

The interview therefore underscores the importance of personal responsibility and accountability. Leadership should be comprised of people with solid values, firm ethical judgment, and strength of character that remains unwavering in the face of difficult choices. Loyalty is to values and the mission of the firm, not to cronies within the company, as the subject put it. While not all ethical dilemmas can be resolved easily, through a process of open dialogue and engagement with opposing points of view, leaders can develop creative solutions that promote the goals and values of the organization.

Finally, the subject affirms that ethical behavior need not conflict directly with profitability. As Hatcher (2008) also notes, values have value in the C-suite. MacDougall, Bagdasarov, and Buckley (2008) refer to the concept of the "triple bottom line," which many senior executives have come to adopt in their daily work (p. 212). The triple bottom line refers to the concurrence of financial, social, and environmental performance metrics that most stakeholders take into consideration. An ethical business is one that may suffer some short-term setbacks in order to reap the rewards of long-term success and market dominance through brand recognition and respect. Yet the subject also believes that it is important to fulfill ethical duties not out of a sense of quantifiable obligations, but out of a genuine desire to use the power inherent in the company and its resources to effect positive change in the world.

Conclusion: Teamwork, Humility, and Courage

Speaking with leaders like the subject showcases the diversity of opinions and approaches to business ethics. Not all leaders will believe that character ethics can be integrated into a large company. Many believe that market forces and the legal climate are the only real guides to ethical decisions. Others may believe that religious values are needed to create a stable ethical climate in an organization. This subject straddles the extremes of consequentialism and deontology, showing that rigid stances are just as problematic in the world of business as moral relativism.

Through this interview, I also learned the importance of humor — an unexpected takeaway. The subject kept reminding me that people make mistakes, and that when a leader who has the potential to make errors with major ramifications does make a mistake, it is important to recognize it immediately, correct it, and also have the courage to laugh. Working with a team and continually collaborating with others can also prevent the types of errors that lead to seriously adverse outcomes. Teamwork, humility, and courage therefore remain the core features of ethical decision-making in executive leadership.

References

Bailey, C. & Shantz, A. (2018). Creating an ethically strong organization. MIT Sloan Management Review. http://ilp.mit.edu/media/news_articles/smr/2018/60101.pdf

Crossan, M., Mazutis, D. & Seijts, G. (2013). In search of virtue. Journal of Business Ethics, 113(4): 567–581.

Hatcher, T. (2008). The value of values in the C-suite. In Sims, R.R. & Quatro, S.A. (Eds.), Executive Ethics. Charlotte: IAP, pp. 97–122.

Hoekstra, E., Bell, A. & Peterson, S.R. (2008). Humility in leadership: Abandoning the pursuit of unattainable perfection. In S.A. Quatro & R.R. Sims (Eds.), Executive Ethics: Ethical Dilemmas and Challenges for the C-Suite. Greenwich, CT: Information Age Publishing, pp. 79–96.

MacDougall, A.E., Bagdasarov, Z. & Buckley, M.R. (2008). Applying a primary risk management model to the C-suite. In Sims, R.R. & Quatro, S.A. (Eds.), Executive Ethics (2nd ed.). Charlotte: IAP, pp. 211–234.

Martin, R. (2011). The CEO's ethical dilemma in the era of earnings management. Strategy & Leadership, 39(6): 43–47.

Schwartz, M.S. (2013). Developing and sustaining an ethical corporate culture: The core elements. Business Horizons, 56(1): 39–50.