The Dilemmas of Ethical Leadership

February 10, 2021

This article was written by Brook Horowitz, CEO of IBLF Global, published on The Room.

Is “ethical business” a contradiction in terms? Can integrity be profitable? What are the practical tools of ethical leadership? Brook Horowitz, CEO of IBLF Global and Business Integrity Advisor to the United Nations Development Programme, provided insight into these salient questions and other critical dilemmas facing business leaders today in this article. He discussed more in a series of 4 interactive masterclasses on “Leading with Integrity”.

I do love corporate websites!

To read those statements of commitment to integrity and principles, you have to wonder why there are ever any corporate scandals. Like these, for instance:

“We are dedicated to complying with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard.” — Goldman Sachs

“As a participant in the United Nations Global Compact we support and respect the Ten Principles on human rights, environment, labor, and anti-corruption, and we reflect these principles throughout our policies and practices. We bring this commitment to life through our Values, our Code of Professional Conduct, and our policies and practices related to the environment, our supply chain, our people, and our professional standards.” — McKinsey and Company

“We have strong governance and accountability processes to ensure our global business acts in line with the law, local regulations and our values.” — Rio Tinto

Yet these same companies were involved in some of the world’s largest corporate and political scandals of recent years in South Africa, Guinea, Malaysia and the United States.

How can these beautiful statements and these dire examples of corporate malfeasance be reconciled? Are these “accidents”? Is it poor management? Is it a rogue employee? Each case may have arisen for quite different reasons, but at root, most of these debacles share a common feature: a poor ethical culture and a failure of leadership.

To be sure, nothing undermines a company’s reputation more than a corporate scandal (actually, that’s not true: a cover-up of a corporate scandal undermines their reputation even more). Indeed, such events devalue all the great things these companies do to create wealth, promote environmental stewardship and contribute to social development around the world. How can you believe the commitment of these companies to their beautifully crafted ethical codes after this?

It’s hardly surprising that Edelman’s Trust Barometer 2021 finds that “CEOs’ credibility is at all-time lows in several countries…making the challenge for CEO leaders even more acute as they try to address today’s problems.”

I am quite sure that if the CEOs themselves were asked, they would not recognise themselves in these descriptions. Most corporate leaders genuinely believe they are “doing the right thing”, “setting the tone from the top” and “walking the talk” (I do love these business-speak cliches!). They would be surprised by the idea that they are not trusted or that they are unreceptive to the needs of society.

Therein lies just one of the dilemmas of ethical leadership which will be the subject of my forthcoming talk in The Room.

There are many others, which each of us, as leaders, entrepreneurs, business executives and professionals, come across every day in working life.

You will recognise them soon enough. The health and safety team taking a short cut in order to allow a product launch to go ahead on time. A sales rep giving an expensive gift to a client’s daughter at her wedding. A tech company selling clients’ data without permission. A multinational avoiding tax in multiple jurisdictions.

These examples are not necessarily all outright contraventions of the law. Indeed, in new, rapidly developing markets, the law itself may be untested, unenforced, ambiguous, or even, non-existent.

And sometimes, ethical dilemmas may arise in the “grey area” — that twilight zone between illegality, ethical ambivalence, and traditional behaviour in a particular social or cultural context. Sometimes, without engaging in dubious business, the companies might not be able to perform their primary mission: to return value to shareholders. Indeed, some would argue that by following an excessively strict ethical code, profit is put at risk, possibly jeopardising the survival of the company and the livelihoods of its employees and families.

When grappling with critical dilemmas of ethical leadership, key questions surface: How can you run your company with integrity and still be entrepreneurial? Is “ethical business” a contradiction in terms? Can integrity be profitable, and if so, how? What are the practical tools of ethical leadership? How can you, as a leader, incentivise your workforce to share your values and principles? How can you make your company into an “island of integrity” when unethical behaviour is prevalent in your markets? How can you project your own values onto your markets and communities, and contribute to co-creating a fair, transparent, and ethical business environment?