Team 6: Flavio Zanetti, Carol Blenda, Videhi Mallela, Tanu Panigrahy, Russ Pinizzutto

Ethical Leadership

“The future of business is more ethical business”

- O’Sullivan, Smith, Esposito

Characteristics:

– Honesty/Integrity

– Justice/Fairness

– Personal Accountability

– Leading by Example

– Encouraging Initiative

– Respect for Others

– Team Building/Community Building

Why is it Important?

• Need was recognized as far back as 19th

Century

• Reasons for unethical behavior– Pressure to succeed in increasingly competitive

global market

– Pressure to prove worth as a leader

– What you achieve becomes more important than how you achieve it

• 4 examples to follow:

Key problems at Enron

• Governance failure at the Board level• Dishonest management, conflicts of interest• Culture of deception, self-interest• Unethical manipulation of accounting and disclosure• Auditor deficiencies and Regulatory short-sightedness

• Deceptive reporting practices—lack of transparency in reporting financial affairs

• Unduly aggressive earnings targets and management bonuses based on meeting targets

• Excessive interest in maintaining stock prices

4

The Space Shuttle Challenger Disaster – January 28, 1986A Failure of Ethical Leadership

• The solid rocket boosters had known engineering design flaws• Low temperatures exacerbated the problem• The engineers strongly recommended that the launch be postponed• A management decision overrode the engineering decision• The spacecraft exploded 73 sec after launch• The root cause was known beforehand – O-ring seal failure when cold

• Seven astronauts were killed

The management team failed to provide ethical leadership• Lack of integrity• Lack of respect for the engineers• Ignored the concept of teamwork• Ignored consequences for companies and public reaction

• Ignored their primary responsibility: the safety of the crew!

Rana Plaza factory collapse in Bangladesh, April 2013

• Local media reported cracks in the building before the tragedy of April 2013• Suppliers ignored and threatened workers with a one month salary cut• Large garment firms ignored the warnings

– (or never had any communication channel built to be informed)

• 1,129 Bangladeshi garment workers killed and hundreds handicapped• Low cost labor to increase the profit margin or helping an under developed

country’s economy? Ethical or Unethical?

The management team failed to provide ethical leadership• Leading by example - Why did these giant garment firms fail to play fair?• Respect for others - Cheap labors’ life has no value? Leaders overlooked the

workers working conditions• Community building - Failed to give back to the community which provided them

with huge profit margins• Avoiding being accountable - did not audit the suppliers or put pressure on them

to comply with basic human rights

Cisco • Employees, contractors, partners constantly reminded of

Cisco’s commitment to being ethical

– Retaliation not allowed

• Named as one of Ethisphere’s World’s Most Ethical Companies

• Starts with hiring process with candidates committed to ethical behavior

• Open and honest work environment

• Managers are aware of corporate values and training is required

• Operates in full compliance of all local laws in each country where it has presence

• Maintained leadership position in industry

Summary

• Ethical companies do exist and are successful• Ethical companies depend on all employees to

be ethical at all times• It’s a choice of leadership to create the ethical

culture and provide tools to help individuals do both the right thing and things right!

"It takes less time to do a thing right than to explain why you did it wrong“

— Henry Wadsworth Longfellow