[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/POLITICS/01/21/obama.business/art.obamafullday.gi.jpg caption="President Barack Obama plans to meet with his top economic and military advisers on Wednesday."]
Bruce Weinstein, Ph.D.
The Ethics Guy, BusinessWeek.com
“Never underestimate the other guy’s greed.” This isn’t just a classic line from the 1983 Brian De Palma film, “Scarface” (written by Oliver Stone). For many observers of Wall Street, it was greed that catalyzed the economic disaster we’re now clawing ourselves out of.
Isn’t it time to find a new basis for leadership?
Let’s consider the current period to be Wall Street 3G. The first generation, characterized by the largely unregulated expansion of business, ended with the Great Depression. In the second period, business was subject to more regulations but still had a great deal of freedom, leading to crisis we are now in. A crucial lesson from the first two generations is that a philosophy based on greed is both unethical and bad for business. Greed isn’t the only reason we’re in such a troubling situation, however. Honesty, accountability, fairness, and compassion have also been in short supply. I therefore propose the following leadership guidelines for investment bankers, entrepreneurs, C-level executives in organizations large and small, and everyone else whose decisions can affect the financial well being of other people.
1. TELL THE TRUTH. A leader has an ethical obligation to be honest with stakeholders about issues that directly concern them. One of these issues is the leader’s own health. Consider the recent 10% drop in Apple stock after CEO Steve Jobs announced that he was taking a five-month medical leave of absence. Because Jobs battled pancreatic cancer several years ago, speculators wondered if his cancer had returned, even though Jobs had announced earlier that he was merely suffering from a “hormone imbalance.” The problem isn’t just that Jobs may not have the stamina to lead his company the way he traditionally has. Also troubling is the possibility that Jobs misled stakeholders about his condition. There is no shame in being ill, and true leadership involves being forthcoming about one’s illness and anything else that can affect the flourishing of the organization.
2. KNOW YOUR PRODUCT. According to a recent three-part story in the Wall Street Journal, the willingness of investors to buy and sell financial products whose complexity they didn’t fully understand was one of the primary catalysts of the bust. From our current sober perspective, it seems unbelievable that self-identified experts could be involved in transactions with so much at stake and at the same time be ignorant about exactly what it is they were buying or selling, but this is what happened, and on a grand scale, no less.
Because money was being made in these deals, no one thought to question what was going on or had the strength of character to speak up if they had suspicions. In WS3G, however, knowing your product isn’t a nicety of doing business. It is an ethical obligation–to your company, your clients, and yourself.
3. THE GOLDEN RULE IS NOT, “DO UNTO OTHERS BEFORE THEY DO UNTO YOU.” Most of us were taught that we should treat people the way we’d like to be treated ourselves. This rule makes a lot of sense (unless you’re a masochist), but too many business leaders have failed to take it seriously. Instead, the guideline seems to be, “Get all you can by any means necessary.” For example, some credit card companies increase their interest rates significantly without informing consumers when or why they’re doing so. These companies defend such practices on the grounds that they will lose their competitive edge in today’s marketplace if they don’t play hardball. This kind of leadership is short-sighted, unfair, and ultimately bad for business, since the consequences will be more federal regulation and oversight. Remember that time management rule, “If you don’t manage your time, someone else will”? Good leaders know that if they don’t regulate their businesses themselves, someone else will, which means a loss of freedom for everyone in the organization.
4. DON’T EXPLOIT. It is easy to take advantage of a situation for financial gain, but doing so isn’t consistent with good leadership. After Hurricane Ike hit last year, the wholesale price of gasoline shot up, which was nothing more than price gouging. In the short run, companies that exploited a natural tragedy may have profited financially, but the long-term negative consequences are real and significant: in New York State, more than a dozen companies were fined more than $60,000 for unfair business practices following Hurricane Katrina . Of course, the reason to do the right thing is simply because it is the right thing to do. But it is also true that taking the low road can be harmful professionally and personally.
5. DON’T MAKE PROMISES YOU CAN’T KEEP….and keep the promises you make. There are circumstances in which we not only have a right but an ethical obligation to break a promise (), but generally speaking, we have a strong duty to be true to our word. This is, after all, one of the primary ways that we show our respect to people (). Recall that last March, Dr. Pepper said it would give out free cans of soda to “everyone in America” if “Chinese Democracy,” the long-overdue album from Guns ‘n’ Roses, came out by the end of the year. When Axl Rose surprised the music world by releasing the album in November, the beverage company was unable to deliver soft drinks to everyone who wanted one . (Whether it’s ethical for a band that has only one of its original members to call itself “Guns ‘n’ Roses” is another matter.) Good leaders are careful to make only those promises they are likely to keep and to do their level best to keep the promises they do make. When they are unable to keep those promises, they own up to it, which brings us to the fifth rule of good leadership:
6. TAKE RESPONSIBILITY FOR YOUR MISTAKES. In Wall Street 3G, transparency and accountability should be the new buzzwords. This means, in part, that business leaders who make mistakes should apologize to those they have let down and do whatever is necessary to make amends. In the wake of toy industry’s lead-paint scare in 2007, Mattel CEO Robert Eckert took the high road and told a Senate subcommittee that the company failed “by not closely overseeing subcontractors in China whose toys didn’t meet U.S. safety standards,” and stated that the company was working with the Consumer Product Safety Commission to ensure that these products would be safer. It must have been extraordinarily difficult for Eckert to publicly apologize, but by finding the courage to do so, he demonstrated ethical leadership.
7. PEOPLE, NOT PROFITS. People often recite—incorrectly–President Calvin Coolidge’s statement, “The business of America is business.” (What he actually said was, “The chief business of the American people is business.”) But far more important is what followed that statement: "Of course the accumulation of wealth cannot be justified as the chief end of existence." Coolidge’s policies are often blamed for bringing about the Great Depression, but if enough people had heeded the latter statement, perhaps our history would have been different. Money has no intrinsic value; it is good only for what it can get us. For the good leader, this means that the ultimate goal in business—and life—is not hoarding riches but making things better for all, especially the neediest.
8. PREVENT HARM. When you can reasonably foresee that a decision is likely to hurt people and you make that decision anyway, you’re being both irresponsible and stupid. For example, subprime mortgage lenders and brokers who loan money to people likely to default are enriching themselves at the expense of the rest of us, since the federal government may be called upon for financial rescue.
What such predators don’t realize is that in the long run, their practices will come back to haunt them in the form of bankruptcy filings, bad PR, and perhaps even prison time for the worst offenders. The good leader recognizes that preventing harm to clients and company alike is both an ethical responsibility and a wise business policy.
9. YOU ARE NOT YOUR CAREER. It is admirable to be passionate about your job, but passion can easily become obsession, and that’s where the danger starts. When your life’s work becomes your life, it’s time to take a step back and re-evaluate your priorities. I’ve already shown why there is no shame in taking vacations or staying home when you’re sick. More critical than either of these is recognizing what’s really important in life—and it’s not your career, no matter how satisfying that may be. The good leader not only makes room for family, friends, and spirituality; he or she knows that these are the things that truly make life worth living.
10. BE KIND, NOT KING. The relentless pursuit to be #1 can blind us to what’s really valuable in life: being a decent human being. Yes, the good leader is enthusiastically devoted to accomplishing his or her mission, but this pursuit cannot be at the expense of the well being of others. For example, leaders with the unenviable task of letting people go will avoid taking the easy way out. No one likes having to be the bearer of bad news, but the good leader does so with the dignity that leadership of the highest order demands.
It should be obvious by now that the above rules apply not just to those in the financial sector but to everyone else, too. They are, after all, based on the five fundamental principles of ethics: Do No Harm, Make Things Better, Respect Others, Be Fair , and Be Loving. As Peter Drucker pointed out, it is not enough to do things right; we must also do the right things. The good leader in Wall Street 3G is concerned not only with getting from A to B, but with deciding whether B is worth getting to in the first place.