Archive for the ‘accountability’ Category

Baseless Accusations Aimed at Lady Gaga’s Charity Foundation

Accusations recently arose that Lady Gaga’s charitable foundation, the Born This Way Foundation (BTWF), was spending its money in what looked like an irresponsible way. For example: according to 2012 tax filings, BTWF spent almost $60,000 on publicity fees, $50,000 on social media, and nearly $80,000 on travel, but spent “only” $5000 in the form of “grants to organizations or individuals.”

BTWF was founded in 2011 to “foster a more accepting society, where differences are embraced and individuality is celebrated.” But how, commenters wondered, could the foundation accomplish that mission when the vast majority of its spending is goes to what many organizations would consider mere overhead?

As it happens, the accusations were more smoke than fire — not surprising, since the story originally broke on ShowBiz411 and were popularized by Gawker.

Gaga’s mom (who is also co-founder and president of BTWF), Cynthia Germanotta, responded recently, saying that the nature of BTWF had been misunderstood:

“First and foremost, we are an organization that conducts our charitable activity directly, and we fund our own work. We are not a grant-maker that funds the work of other charities, and were never intended to be.

Our activity has included The Born Brave Bus Tour, which has travelled to 23 communities, interacting with more than 19,000 young people and raising awareness to the tune of more than 300 million media impressions. The foundation’s messages of kindness and bravery have touched more than half a million online users via our website, which includes the Bravest Map Ever and the Play Brave Game, as well as social media channels such as Twitter and Facebook — which on a peak week can hit 50 million individual users.”

In other words, the ShowBiz411 story betrayed a lack of understanding of what BTWF is for, and what it takes to run a foundation of that kind. It doesn’t make sense to insist that a charity give away more money to charity — when it is itself dedicated to doing what most charities do, namely spending donated money in ways that aim to help people directly.

Of course, the fact that BTWF (or any other foundation) is dedicated to doing good does nothing at all to put them beyond critique. Indeed, a do-good mission is itself a good reason to insist on accountability, since a do-good mission is liable, in at least some cases, to make those who run a foundation feel a sense of entitlement. And the need for accountability is all the more relevant with regard to charities that accept donations from the general public: when people are trusting you with their money and when all they get in return is your promise to use it well, well, you’ve got an obligation to live up to that trust.

So yes, accountability at charitable foundations is an important topic. Too many (that is, more than zero) foundations spend too much on overhead and too little on doing good. Were I a donor to BTWF, I would like to know a little more about just how the foundation spends its money, why it had to spend so much in 2012 on lawyers ($150,000).

The lesson here is one that should be heard not just by charitable foundations, but by organizations of all kinds. It’s not enough to be doing good. You have to communicate that to key stakeholders. And that means telling them not just that you are doing good, but letting them know how you’re doing it.

University Frosh Rape Chant Poses Leadership Challenge

Last week, a scandal sprouted on Canada’s east coast, when it was discovered that part of Frosh Week activities at Saint Mary’s University (SMU), in Halifax, included the chanting of a song promoting the sexual assault of underage girls. The news broke shortly after a video of the chant was posted online. Condemnation was broad and swift. Some were angry at the students. Others were angry at university administrators. Others simply lamented the sad state of “youth today” and the perpetuation of the notion that it is OK to glorify rape.

As it happens, I taught for about a decade in SMU’s Philosophy Department; I still have friends who teach there. I know some of the administrators involved in this case, and have more than a little affection for the place, generally.

My own particular scholarly interest in this case, though, has to do with the ethics of leadership. I think the events described above provide a good case-study in the ethics of leadership. That’s not to say that it is an example of either excellent or terrible leadership. But rather, that it’s a case that illustrates the challenges of leadership, and an opportunity to reflect on the ethical demands that fall on leaders in particular, as a result of the special role they play.

Two key leaders were tasked with handling the SMU situation. One was Jared Perry, President of the Saint Mary’s University Student Association. Perry has now resigned. Reflecting on his error, Perry said “It’s definitely the biggest mistake I’ve made throughout my university career and throughout my life.” The other leader is SMU president Colin Dodds. For his part, Dodds has condemned the chant and the chanters, and has launched an internal investigation and a task force.

A leader facing a crisis like this needs to balance multiple objectives.

On one hand, a leader needs to safeguard the integrity and reputation of the organization. Of course, just how to do that can be a vexing question. Do you do that by effecting a ‘zero tolerance’ policy, or by a more balanced approach? Do you focus on enforcement, or education?

A leader also needs to deal appropriately with the individuals involved. In this case, that means offering not just critique (or more neutrally, “feedback”) to the students involved, but also offering compassion and advice in the wake of what everyone agrees is a regrettable set of circumstances. In particular, a situation like this involves a “lead the leaders” dynamic. It is an opportunity for university leaders to teach something specifically about leadership to the student leaders involved. It is also, naturally, yet another opportunity for university leaders to learn something about leadership themselves; unfortunately, that lesson must take the form of learning-by-painfully-doing.

Finally, a leader needs to be responsive to reasonable social expectations. In this case, those expectations are complex. On one hand, society wants institutions entrusted with educating the young provides a suitably safe setting, and arguably one that fosters the right kinds of enculturation. On the other hand, society wants — or should want — universities to be places where freedom of speech is maximized and where problems are addressed through intellectual discourse. Indeed, my friend Mark Mercer (in SMU’s philosophy department) has argued that what the university ought to demonstrate, in such a situation, is its commitment to intellectual inquiry and to the idea that when someone uses words we disagree with, we should respond not with punishment but with open discussion and criticism.

Balancing those objectives is a complex leadership challenge. And there’s no algorithmic way to balance such competing objectives. But one useful way to frame the leadership challenge here is to consider the sense in which, in deciding how to tackle such a challenge, a leader is not just deciding what to do. He or she is also deciding what kind of leader to be, and what kind of institution he or she will lead. Each such choice, after all, makes an incremental difference in who you are. It is at moments like this that leaders build institutions, just as surely as if they were laying the bricks themselves.

Ethics and Online Reputation Management

In a recent interview with Reputation.com, I talked about the effect the internet has had on reputation management, and the connection between that and ethics.

The risk, of course, in having an ethics professor like me talk about reputation management is that it’s all too easy to give the impression that the two topics are the same. In fact, I’m pretty sure there are people out there who assume they are the same thing.

And certainly there are those in the field of ethics who contribute to that way of thinking. Sometimes that takes the form of what is often referred to as “the business” case for ethics (or for CSR or for sustainability). “The business case” takes many forms, but all of them boil down to an assertion that acting ethically (or being socially responsible or being sustainable, whatever) is good for your business. The specific mechanisms mentioned are varied. Treating your workers well improves retention. Going green reduces energy costs. And, yes, that being ethical is good for that all-important corporation reputation.

The worry is that businesses exposed to such arguments will come to think of ethics from a purely instrumental point of view: we’ll act ethically only because, and only to the extent, that it’s good for profits. Thinking of ethics that way implies an incredibly low level of commitment. You won’t always in every situation be able to draw a straight line between this bit of ethical behaviour and that bit of profitability. And so the ethics of a company under the sway of “the business case,” it seems, would be liable to have its ethical behaviour ebb and flow on a pretty regular basis.

The key, though, isn’t to avoid talking about the business case for ethics. Because it is simply true that, on the whole, acting ethically is good for business. Sure, you can make a quick buck by being a cheat. But smart managers have known forever that the route to sustainable profits lies in paying your bills on time, treating your employees well, cleaning up your own messes, and dealing honestly with your customers. Having a reputation for doing those things is truly good for business.

Clearly, having a reputation for doing those things isn’t precisely the same thing as actually doing them. In theory, it’s possible to act badly but to keep the facts quiet. Or at least, that was the case once upon a time. Then along came consumer blogs and Twitter and Facebook and Tumblr and so on; now, accusations of bad corporate behaviour has a way of getting out and spreading like wildfire. Today, certainly, it seems like the easiest way to get and keep a reputation for honesty and integrity is actually to behave with honesty and integrity. It’s always better to avoid fires than to have to put them out. That’s why the best reputation management method is to build a good reputation in the first place.

But of course, sometimes even an honest company, trying its best to treat people right, can hit a rough patch. Sometimes something goes wrong, and sometimes — in an era in which all of your customers have access to a 7 billion-person conversation called the Internet — that fact that something went wrong gets aired in a very public way. Hence the need for online reputation management, to control the damage. But even here, the key is to make your participation in those online conversations genuine, or if you prefer “authentic.” You need to be sincere about your commitment to doing the right thing, and to making things right when mistakes are made. This is the irony of the business case for ethics. The best way to reap the benefits of a reputation for being ethical is not to pay much attention to those benefits, but to focus on the importance of doing the right thing — for its own sake.

Top Retailers Sign New Bangladesh Safety Initiative

Workers in Bangladesh will be the beneficiaries of yet another massive effort to improve their lot. Will it work? And will it mean anything for workers in countries other than Bangladesh? It’s a welcome move, but it also raises questions.

According to a press release, an alliance of leading North American retailers has committed to a new plan, The Bangladesh Worker Safety Initiative, intended to “dramatically improving factory safety conditions in Bangladesh.” The coalition includes Walmart, Target, Canadian Tire, Gap, Hudson’s Bay Company, and a dozen other major retailers. That means, according to the press release, that the Initiative covers the “overwhelming majority of North American apparel imports.”

This new Initiative should not be confused with the Accord on Fire and Building Safety in Bangladesh, a labour-led agreement that was announced in May, less than a month after the collapsed the collapse of Bangladesh’s 8-story Rana Plaza collapse, a tragedy that eventually claimed 1,129 victims. Signatories to that Accord included Europe’s two biggest clothing retailers, as well as Tommy Hilfiger, H&M, and Canada’s Loblaw, but there were notable abstentions. Walmart, for instance, was criticized for declining to sign on.

The new Initiative “sets aggressive timelines and accountability for inspections, training and worker empowerment.” Of particular note: “Within one year, 100 percent of all factories that conduct work with an alliance member will be inspected,” and members of the alliance have committed to refusing to do business with any factory deemed unsafe. And, in a worthy commitment to transparency, the alliance will make semi-annual progress reports public.

There is, of course, plenty of room for skepticism. Some will see this new Initiative as a PR move, albeit a rather expensive one. Members of the alliance have already committed $42 million, though of course that number has to be put into context by comparing it to the vast profit the alliance members derive from doing business in Bangladesh. The Bangladeshi garment industry is a $19 billion-a-year industry. (Quick math: that means the size of the Alliance budget amounts to roughtly 0.2% of the size of the industry. That’s not necessarily the most relevant comparison, but it gives you a sense of scale.)

Another source of skepticism, for some, is that this is an entirely business-driven initiative, unlike the May Accord, which was driven by labour and which will be guided by a Board that includes representatives of both corporate and labour interests. The Board of the new Initiative is perhaps less clearly unbiased: the 9-member board will consist of “four retailers, four stakeholders who provide specific expertise, and an independent board chair.” Interestingly, however, the Initiative does include specific provisions not just to look after workers, in the paternalistic sense, but to empower them: it calls for members to support the election of Worker Participation Committees at all factories, along with the provision of anonymous worker hotlines to be administered by a third party.

I continue to wonder and worry that both the new The Bangladesh Worker Safety Initiative and May’s Accord on Fire and Building Safety in Bangladesh represent a kind of Bangladeshi exceptionalism. Why are major retailers joining together in now two big agreements to improve conditions in Bangladesh, but in Bangladesh alone? Admittedly, Bangladesh is important — as far as the garment industry goes, it is second only to China among countries exporting Western brands. But still: it worries me that a factory collapse that could have happened in an number of developing nations has apparently drawn attention only to the fate of garment workers in one, admittedly needy, nation.

Obligations Regarding Our Overseas Factories

This past Tuesday I had the honour of being invited to testify before the Standing Committee on Foreign Affairs of Canada’s House of Commons. The hearing was part of a “study on corporate practices by companies supplying and manufacturing products in developing countries for Canadian consumers.” The discussion wasn’t specifically about the factory that collapsed in Bangladesh last month, but that sad event was certainly on everyone’s mind.

Other witnesses included representatives from the Retail Council of Canada (RCC), from Loblaw, from the Shareholder Association for Research and Education (SHARE), and from Gildan Activewear Inc.

Not surprisingly, a range of views were presented to the Committee. Strong government intervention? Solo efforts by individual companies? Collective action through groups like the RCC? Opinions differed on just how to proceed.

Equally unsurprising was that the witnesses were unified in their expression of deep sympathy for the people of Bangladesh. Everyone, as far as I could tell, was also in favour of improving working conditions in places like Bangladesh. Shareholders, for example, according to SHARE’s Peter Chapman, are and ought to be concerned about the “ESG” (ethics, social, & governance) obligations of the companies they invest in. Robert Chant — a senior VP at Loblaw, a company that commissioned clothing from one of the companies that worked out of the factory that collapsed in Bangladesh — said that while his company has always been concerned to monitor working conditions, they simply hadn’t thought to have their subcontractors’ buildings inspected. It wasn’t on their radar. And so the collapse in Bangladesh, said Chant, who showed genuine emotion during his testimony, “Shook us to the core,” and spurred his company to commit to doing better.

In my own testimony, I made 3 key points and 3 recommendations:

First, I noted that Canadian companies do indeed have ethical obligations that go beyond the legal minimum required by the governments of the countries in which they operate. Adherence to the law is seldom enough to guarantee that a company or individual has satisfied all relevant ethical obligations. This is of special significance in developing countries with underdeveloped legal and regulatory systems.

Second, I noted that we cannot expect companies operating in places like Bangladesh or China to adhere to Canadian labour standards. And perhaps no one expects that. Canadians generally enjoy high pay and high labour standards because we can afford to. Other countries, unfortunately, are not there yet.

Third, I asked what is the best way for Canadians to contribute to the well-being of those who work in factories in places like Bangladesh. I suggested three answers to this question. First, Canadians can continue buying things made in places like Bangladesh, because that is what gives a high proportion of Bangladeshis jobs. The second way to help is through charitable donations, both to humanitarian groups as well as to groups that are focused on issues like good governance and fighting corruption.

The third thing Canadians can do is to continue paying attention to this issue, and to continue encouraging Canadian institutions — businesses, governments, and NGOs — to keep working towards making things better. All have a role to play in encouraging and offering guidance on the pursuit of incremental improvements in working conditions in developing nations.

The Ethics of Buying a Mayor’s Crack Cocaine Video

roll_of_cashYou might as well stop feeling queazy about efforts at crowdfunding the purchase of the video that allegedly shows Toronto mayor Rob Ford smoking crack cocaine. After all, you’re going to watch the video, aren’t you?

The crowdfunding efforts (and there are at least 2 of them) have been the cause of no end of amusement, and almost as much controversy as the reported existence of the crack-smoking video itself. After all, while the video purports to show an important public official engaging in criminal activity, buying the video from the drug dealers who currently possess it would mean, well, doing business with drug dealers.

We can start to get a grip on this as an ethical issue by looking at it from the perspectives of both ends and means. The end or goal being sought by those trying to buy the tape is, arguably, an important one. If Ford has a crack habit, this is important, since it speaks to whether he is fit to be mayor. Suspicions have already arisen, shall we say, about Ford’s suitability for office: among other worries, the mayor’s ethical failings, not to mention his erratic behaviour, are well documented.

So the ends here might be worthy. What about the means? Well, the proposed means by which to reveal the truth about Rob Ford involves associating with (or at least doing business with) drug dealers. This, in itself, is probably regrettable. Of course, buying a video from drug dealers is not quite like buying crack from them, but still. When you do business with certain types, the taint can’t help but rub off. But then, it’s a one-off deal, not the forming of a long-term business relationship.

So perhaps we can say that the deal, if it happens, would be merely unseemly, rather than fully unethical. And that’s an important distinction. Too often the question gets posed as “Is this ethical?” when what would be more useful is to ask “Just how bad is this?” We shouldn’t think of these things in binary terms. It’s OK to be vaguely uncomfortable with a course of action, as long as we ask ourselves why. That’s not being wishy-washy. That’s being reasonable.

In the end, avoiding the all-or-nothing judgment is pretty important in a case like this, because it’s very unlikely that many of us (in Toronto, at least) will keep our hands clean. The option most of us will choose is to let Gawker or someone else get their hands dirty — let them do the crowd-sourcing, buy the tape, and so on — and then cackle with glee at the results in the privacy of our own homes.

Joe Fresh: is Compensation for Bangladesh an Admission of Guilt?

Loblaw Companies Limited, the company that owns the Joe Fresh retail clothing line, has announced that it will pay compensation to the families of victims of last week’s factory collapse in Bangladesh. Details are sparse at this point, but it’s an interesting development.

The move will of course garner the company plenty of praise. Some of that praise will be offered only grudgingly, by those who will see it as the least that can be done by a money-hungry corporation in the habit of squeezing profits out of the labour of Bangladeshis with few other options. But still, there will be praise. For it is easy to see the good in a transfer of wealth from a multibillion dollar Western corporation to several hundred exceedingly poor families. Any plausible amount of compensation will be trivial to the company, but an enormous boon the those in Bangladesh who were affected.

But I for one still have questions, in particular questions about what is motivating the move. As I’ve said, the move will do a lot of good, but there are many different principles that might underlie any given action that does good. And we typically care not just about outcomes, but about principles too. Upon what principle is Loblaw compensating the victims in Bangladesh?

Cynics are already assuming that the move is pure PR, aimed at deflecting criticism (however unfair) and dissociating the Joe Fresh brand from the grimy reality of developing-country sweatshops. That’s one possibility.

It might also be that the company sees such payment as a form of charity. The building collapse last week resulted in horrible human suffering. Most big companies donate to charitable and humanitarian causes. And even if Loblaw doesn’t see itself as responsible for the collapse, it must see a connection, emotionally at least, and so the families of the dead are an especially apt target for the company’s charity.

But for me, the word “compensate” raises questions. That word can mean many things. But in contexts like this, it is perhaps most naturally read as referring to payments aimed at offsetting a loss, payments from someone who is either responsible for that loss or who at least for some reason owes such a payment. “Compensation” is not quite the same as “restitution,” of course. The latter word clearly implies culpability. But still, the word “compensation” seems to imply a level of regret, if not guilt. Is that what the company is implying? After all, Loblaw could have opted simply to say “We’re going to help those affected,” or even more neutrally, “We’re going to send money.” But “compensation” is the word the company itself is using. Is that really what they mean? And if so, why specifically do they think they owe compensation? What level of responsibility do they take — do they plan on taking — for the actions of subcontractors on the other side of the planet?

This is more than mere semantics; it’s about the principles underlying corporate behaviour. If, as seems inevitable, we are to regard corporations as entities capable of taking action, and of meriting praise or blame, then we need to be able to talk about what motivates them, and to ask them about the principles upon which they act. In a way, to seek a principled explanation in a situation like this is even more demanding than simply to ask that the company pay up. As I’ve already noted, the money in this case is a drop in the bucket. Giving voice to a set of values and principles upon which corporate behaviour is based is a lot harder than writing a cheque.

Bangladesh, Joe Fresh and the burden of responsibility

In Bangladesh, on Wednesday, a building collapsed, killing at least 260 people.* The factories in the building made garments for a number of global retailers, including Canada’s Joe Fresh. This weekend, I’m very likely going shopping at Joe Fresh, and with a clear conscience. People threatening to boycott the brand are woefully misguided. Their sorrow is justified; a change in their shopping habits is not.

The events in Bangladesh represent an utterly horrible loss of life. Anyone unmoved by such a tragedy is less than human. But to see this as an indictment of Joe Fresh, or of Western consumers, is a serious mistake.

So, just what happened in Bangladesh? The 8-story building that collapsed on Wednesday housed a number of garment factories, a shopping mall, and a bank. The people who died did so partly due to the fact that someone in Bangladesh made a very, very bad decision: police had ordered the building evacuated the day before, due to structural defects, but factory managers ignored that order. That was an immoral decision, and perhaps a criminal one. I hope those managers are brought to justice.

Now, yes, it’s true that the purchasing decisions of Canadian consumers are also part of the causal chain that led to those deaths. But causal connection is not the same as moral responsibility. Every event, tragic or not, is the culmination of countless contributing factors. To be part of a causal chain is not the same as causing something to happen. There is no reasonable sense in which Canadians shopping at Joe Fresh are responsible for Wednesday’s deaths.

In fact, Canadians shopping at Joe Fresh are doing a lot of good. Places like Bangladesh — people in places like Bangladesh — absolutely rely on the jobs provided by the international garment industry. That is, there are people in developing countries who only have jobs because people in the industrialized West buy clothes from retailers who subcontract to manufacturers in places like Bangladesh.

None the less, some people are expressing outrage at the fact that Bangladeshis are dying so that Canadians can have cheap clothes. Is this situation really so unique? In North America, the deadliest trade is commercial fishing, followed closely by mining and logging. Does anyone imagine that no corners are cut in those industries, no safety standards violated? So Canadians, too, are dying…dying so that Canadians can have cheap crab and haddock, cheap oil and aluminum, and cheap wood and paper products. Actually, a lot of that stuff goes for export, so Canadians are dying so that people from other countries can have those things cheaply. Such is globalization: millions of people world-wide take risks that they think are worth taking, in order to make a living, and they can do so because people on the other side of the world are willing to pay them to.

But of course, companies like Joe Fresh still have some obligation to make sure that their subcontractors are treating employees decently. And the company certainly acknowledges as much. According to a statement on the brand’s Facebook page, their parent company, Loblaws Inc. has…

“robust vendor standards designed to ensure that products are manufactured in a socially responsible way, ensuring a safe and sustainable work environment. We engage international auditing firms to inspect against these standards. We will not work with vendors who do not meet our standards.”

In other words, the company makes exactly the promise it ought to make. Of course, there’s only so much it can do to guarantee that its subcontractors won’t break the law, on the other side of the planet. But then again, there’s notoriously little any company can do to guarantee that its subcontractors won’t break the law, whether it operates on the other side of the planet or just down the street.

Has Joe Fresh done enough in this regard? It’s impossible to say from the outside. But what’s crucial, here, is to see that even an event as tragic as Wednesday’s building collapse in Bangladesh does nothing to impugn the company’s integrity. Should we ask questions? Of course we should. But these events shouldn’t make us jump to conclusions. Nor will they deter me, at least, from going shopping this weekend.

————–
*Note added Oct. 2013: the death toll eventually climbed to over 1,100.

Making Sense of Tone at the Top

In my last blog entry, I began a discussion of the question of the extent to which the right “tone at top” contributes to a company’s success. I began by exploring just what we mean by ‘tone” in this context, and what kinds of activities and behaviours by leaders should be seen as constituting setting the right tone.

Next, what does it mean to focus on tone specifically at the top?

The “top” can’t be thought to mean the CEO, or even the entire executive team. “Top” should be interpreted as meaning whomever is at the top, for you, ethically: whomever you regard as a moral leader. Because leadership isn’t a job title. Anyone who embodies the key leadership values of trustworthiness, insight, humility and enthusiasm is likely to be seen as a leader, regardless of job title.

So let’s talk for a moment about not just the tone at the literal “top”, but also the tone at the middle. Average tenure of a CEO these days is, what, 4 or 5 years? This means that the tone at the literal top of the organization is likewise liable to change every 4 to 5 years. But lower down, every organization has a larger class of middle managers who come and go much less frequently.

And from the point of view of ethics, that has to be important. Don’t forget, in most large organizations, most people never get to meet the CEO, or for that matter any C-suite executive. For them, someone in middle management is effectively “the top” – the top of the relevant chain of command. So the right tone has to be set at many managerial levels.

Finally, we need to ask what “success” is. When we assert that positive tone at the top “ensures success,” what do we mean?

“Success” here has to be taken to mean “ethical success,” because “ethical success” means doing justice to the full range of ethical obligations that obtain within an organization. That means doing your best to earn a decent return for investors, while at the same time treating people with respect and playing by the rules. Success in this regard means achieving a reasonable level of compliance with not just the letter but also with the spirit of the law, and with the unwritten rules of the game, and with reasonable social expectations.

Now, no one can ever reasonably expect to turn a tough, competitive business environment into a love-in, or expect that any organization with hundreds or thousands of employees will be able to guarantee that no one ever breaks a rule. But if an organization is going to come even close to meeting reasonable expectations, meeting the capitalist ideal of playing fair while trying to earn a decent living by selling a decent product, it is going to have to do that in large part through the force of effective leadership.

A positive tone at the top is the closest thing there is to a guarantee of success, as long as you think critically about what those words must mean for a complex organization in a competitive environment.

Does the Right Tone at the Top Guarantee Success? Part 1

I spent the morning today speaking at Centre for Accounting Ethics Symposium called “Accounting Ethics and Tone at the Top” (put on by the School of Accounting and Finance, University of Waterloo). I was part of a panel discussion that took on the provocative question of whether positive ethical tone at the top ensures success.

It’s a provocative question because the word “ensure” pretty much points to a negative answer. Success is never guaranteed in business. In fact, it is the constant fear of failure that drives competition, that drives the pursuit of efficiency, that drives innovation. Nothing – literally nothing – guarantees success. Will a killer product ensure success? Of course not! You need the right financial model, the right marketing channels, the right organization, and the right competitive environment too. Will a great team ensure success? No, of course not. Other organizations have great teams, too. You also need the right leadership, a product that consumers want, and so on.

So positive tone won’t guarantee success, but neither will anything else. The right tone won’t guarantee ultimate victory in the marketplace, but that’s hardly a criticism. The fact that a positive ethical tone won’t guarantee success doesn’t mean it’s not important, indeed, essential. Without it, an organization’s chances of long-term success – defined either in terms of integrity or in terms of the bottom line – are considerably diminished.

So what do we mean when we refer to “tone”? Tone is much more complicated than it sounds.

In this context ethical “tone” means the tone or tenor that a leader sets with regard to choices between right and wrong, between more and less admirable forms of behaviour. Tone is the signal that is sent from top to bottom within an organization about what kind of behaviour is to be admired and emulated, and what kinds of behaviour will not be tolerated. Ethical leadership means taking responsibility for the tone you set.

But tone takes many forms. It is crucial to see that setting the right tone means much more than just sounding ethical. It also means acting ethically, and being seen as acting ethically. Tone consists in the set of signals given through the words a leader says and the deeds she does and the attitudes she displays.

It means doing what you can to manage that elusive something called “organizational culture,” and knowing that culture trumps strategy every time.

In particular, setting the right tone means avoiding – in both words and deeds – excuses and rationalizations. Rationalizations (“I had no choice;” “No one was really hurt;” “It’s not my job;” “It’s a stupid rule anyway…”), are an absolutely key ingredient in a great many instances of wrongdoing. And we don’t generally make up rationalizations on our own and learn how to apply them from scratch. We learn them, unfortunately, from our role models, from people we look up to, from people we see as leaders. Leaders can and must set the tone, in neither helping themselves to such rationalizations, nor tolerating them when used by others.

Setting the right tone also means fostering open conversation about ethics, about the obligations of and obligations within your organization. It means putting ethics on the table. It means letting those who work for you know that it’s OK to ask questions about ethics, and to make values and principles an explicit part of their decision-making. A leader needs to build decision-making capacity and empower employees to take responsibility.

We can sum up the significance of tone this way: A great deal has been written about ethical leadership, and the significance of ‘tone at the top.’ That literature might be usefully summed up by two sweeping statements, two unavoidable truths:

1) Ethics must come from the top down. People take their cues from their leaders. Yes, people learn their basic values from their parents and other childhood role-models, long before they become employees. But they learn how to enact those values in a business context from their workplace mentors and leaders. All of us learn basic lessons about honesty and integrity from our parents. But few of us learn about technical concepts such as Conflict of Interest from our parents. They don’t teach us about the moral obligations embodied in fiduciary relationships, or about how to balance the various interests at stake in a quasi-adversarial relationship between buyer and seller. We need leaders – specifically business leaders – to teach us those things. So: Ethics must come from the top down.

The second grand lesson is this:

2) Ethics cannot come from the top down. It cannot be imposed. You need buy-in. You can lead a horse to water, but you cannot make it drink. You can hand every employee a copy of “their” brand-new code of ethics, commissioned by HR and endorsed by the CEO and the Board. But that doesn’t guarantee that anyone will read it, let alone take it to heart. A code won’t overcome an organizational culture that puts short-term profit-seeking above all else; or a culture where individuals put moral blinders on, focusing narrowly on their own jobs rather than taking responsibility for the ethically-significant elements of the organization’s mission. It won’t make up for a culture that tacitly endorses playing fast and loose with accounting rules. That’s why tone – not just sermons handed down from on high – is so important.

A focus on tone can of course easily become confused with a focus on words, and on the personal integrity that a leader takes him- or herself to have. We see this all the time. When the mayor of a major city prides himself on integrity, on wanting to “clean up City Hall” and to put an end to the “gravy train,” but then cannot recognize a blatant conflict of interest when he sees one, you see “tone at the top” gone awry.

In my next blog entry, I’ll continue this topic by addressing what it means to focus on “tone at the top” and whether it can ensure or at least contribute to success.

Follow

Get every new post delivered to your Inbox.

Join 1,580 other followers

%d bloggers like this: