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Developing Ethical Leadership

Developing Ethical Leadership 11
Developing Ethical Leadership er R. Edward Freeman Lisa Stewart a Featuring a Thought Leader Commentary™ with Steve Odland, Chairman and CEO, Office Depot, Inc. ™ Bridge PP© 2006, Business Roundtable Institute for Corporate Ethics www.corporate-ethics.org Distribution Policy: Bridge Papers™ may only be displayed or distributed in electronic or print format for non-commercial educational use on a royalty- free basis. Any royalty-free use of Bridge Papers™ must use the complete document. No partial use or derivative works of Bridge Papers™ may be made without the prior written consent of the Business Roundtable Institute for Corporate Ethics. A PDF version of this document can be found on the Institute Web site at: http://www.corporate-ethics.org/pdf/ethical_leadership.pdf Bridge Pa Pers ™ Uniting best thinking with leading business practice.ContEnts Foreword ....................................................................................................2 What is ethical Leadership ......................................................................2 Becoming an ethical Leader .....................................................................8 developing ethical Leaders ......................................................................9 Thought Leader Commentary™ with s teve Odland .............................10 a bout the a uthors ...................................................................................13ForEworD what Is EthICaL LEaDErshIp? The Business Roundtable Institute for One typical response to the “ethics crisis” Corporate Ethics is an independent in business is a clarion call for more entity established in partnership with “ethical leadership,” yet there are few Business Roundtable—an association explanations of what exactly is meant by of chief executive officers of leading the term. Many executives and business corporations with a combined workforce thinkers believe that ethical leadership is of more than 10 million employees and simply a matter of leaders having good 4 trillion in annual revenues—and character. By having “the right values” leading academics from America’s or being a person of “strong character,” best business schools. The Institute the ethical leader can set the example for brings together leaders from business others and withstand any temptations and academia to fulfill its mission to that may occur along the way. Without renew and enhance the link between denying the importance of good character ethical behavior and business practice and the right values, the reality of ethical through executive education programs, leadership is far more complex and the practitioner-focused research and stakes are much higher. outreach. TM Over the past 25 years, in talking Institute Bridge Papers put the best to executives in a number of industries thinking of academic and business leaders about the problems of how to lead in a into the hands of practicing managers. TM world of great change—globalization, Bridge Papers convey concepts from democratization, and incredible tech- leading edge academic research in the nological advances—we have identie fi d field of business ethics in a format that a number of touchstones for the idea of today’s managers can integrate into their “ethical leadership.” Our experience is daily business decision making. 1 often contrary to the picture of business Developing Ethical Leadership is an TM Institute Bridge Paper based on the research of R. Edward Freeman. Weaving Leaders see their constituents as his research together with learnings not just followers, but rather as he has garnered from conversations with a host of executives and students stakeholders striving to achieve during the last 25 years, Freeman creates that same common purpose... a framework for developing ethical leadership. executives one n fi ds in public discussion The accompanying interview with where they are often seen as greedy, Steve Odland, Chairman and CEO competitive, and only concerned with of Office Depot, Inc. provides a CEO compensation. In fact most executives perspective on what it means to be an want to be effective in their jobs and to ethical leader in today’s business and leave their companies and the world a social contexts, addressing key topics such better place, creating value on both fronts as executive compensation and the need for those whose lives they affect. to encourage a culture of pushback. Business Roundtable Institute for Corporate Ethics 2Our view of ethical leadership takes It is important for leaders to into account not only the leader but tell a compelling and morally also his constituents (followers and key stakeholders), the context or situation rich story, but ethical leaders that the leader and constituents face, must also embody and live the leader’s processes and skills, and the the story. outcomes that result. Leaders are first and foremost members of their own empowers leaders to incorporate and organizations and stakeholder groups. As be explicit about their own values such, their purpose, vision, and values are and ethics. The following list provides for the benefit of the entire organization a framework for developing ethical and its key stakeholders. leadership. It is based on the observations Leaders see their constituents as not of and conversations with a host of just followers, but rather as stakeholders executives and students over the past 25 striving to achieve that same common years, and on readings of both popular purpose, vision, and values. These and scholarly business literature. Written follower and stakeholder constituents from the perspective of the leader, these have their own individuality and ten facets of ethical leaders offer a way autonomy which must be respected to to understand ethical leadership that is maintain a moral community. more complex and more useful than just Ethical leaders embody the purpose, a matter of “good character and values.” vision, and values of the organization and of the constituents, within an Ethical l EdE a rs : understanding of ethical ideals. They 1. articulate and embody the purpose connect the goals of the organization and values of the organization. with that of the internal employees and It is important for leaders to tell a external stakeholders. compelling and morally rich story, but Leaders work to create an open, two- ethical leaders must also embody and way conversation, thereby maintaining live the story. This is a difficult task in a charitable understanding of different today’s business environment where views, values, and constituents’ opinions. everyone lives in a fishbowl—on public They are open to others’ opinions and display. So many political leaders fail to ideas because they know those ideas embody the high-minded stories they make the organization they are leading tell at election time, and more recently, better. business leaders have become the focus of similar criticism through the revelations Characteristics of Ethical of numerous scandals and bad behaviors. Leaders CEOs in today’s corporations are really In today’s turbulent world, ethics and ethical role models for all of society. values are present at a number of levels Following a series of unethical for executives and managers—leaders activities by Citigroup employees in who devote their time and energy to Japan in 2004, new CEO Chuck Prince leading the process of value creation. This fired several executives, publicly accepted broader concept of ethical leadership 3 BRIDGE PAPER™: Developing Ethical Leadership3. Find the best people and develop Ethical leaders pay special them. This task is fairly standard in attention to finding and different models of leadership. Ethical developing the best people leaders pay special attention to finding and developing the best people responsibility and bowed apologetically precisely because they see it as a moral 2 to Japanese officials. Not only did imperative—helping them to lead Prince’s message resonate within Japan, better lives that create more value for but it also signaled a new era of “shared themselves and for others. Finding the responsibility” within the culture of best people involves taking ethics and Citigroup where every employee was character into account in the selection expected to take ownership for their process. decisions that affected the enterprise. Many CEOs have said to us that judging someone’s integrity is far 2. Focus on organizational success more important than evaluating their rather than on personal ego. experience and skills. Yet, in many Ethical leaders understand their place organizations, employees are hired to within the larger network of constituents fill a particular skill need with little and stakeholders. It is not about the regard to issues of integrity. leader as an individual, it is about something bigger—the goals and dreams 4. Create a living conversation about of the organization. Ethical leaders also ethics, values and the creation of value recognize that value is in the success of for stakeholders. people in the organization. Too often business executives In 1998, in a bold gesture demon- think that having a laminated “values strating how he valued the company’s card” in their wallet or having a purely line employees, Roger Enrico, former compliance approach to ethics has solved Chairman and CEO of PepsiCo, chose to the “ethics problem.” Suffice it to say forego all but 1 of his salary, requesting that Enron and other troubled companies that PepsiCo, in turn, contribute had these systems in place. What they 1 million to a scholarship fund for didn’t have was a conversation across all 3 employees’ children. levels of the business where the basics In a similar manner, the founders of of value creation, stakeholder principles JetBlue began a process of matching, and societal expectations were routinely from their salaries, employee donations discussed and debated. There is a fallacy to a charity. Today, their entire salaries go that values and ethics are the “soft, to the JetBlue Crewmember Catastrophic squishy” part of management. Nothing Plan charity, to assist sta ff with crises could be further from the truth. 4 not covered by insurance. e Th point of In organizations that have a live these examples is not that ethical leaders conversation about ethics and values, donate their salaries to charities, but people hold each other responsible and rather that ethical leaders identify and act accountable about whether they are really on levers, such as employee loyalty, that living the values. And, they expect the drive organizational success. leaders of the organization to do the Business Roundtable Institute for Corporate Ethics 4same. Bringing such a conversation to life be legitimate authority, even if there is means that people must have knowledge no cost for disobedience. To avoid this of alternatives, must choose every day to “Authority Trap” it is critical to have stay with the organization and its purpose an established and explicit way for because it is important and inspires employees to “push back” if someone them. Making a strong commitment thinks that a particular market, region, or to bringing this conversation to life is internal process is out of line. essential to do if one is to lead ethically. This needs to be made part of the Most people know the story of organizational culture, not just a line Johnson and Johnson’s former CEO Jim item in a compliance program document. Burke and the Tylenol product recall in Some companies have used anonymous the 1980s in which, at a great short-term e-mail and telephone processes to give financial cost, he pulled all potentially employees a way around the levels of tampered-with products off the shelves, management that inevitably spring up thereby keeping the public’s trust intact. as barriers in large organizations. Many The less well-known background executives also have used “skip level” to this story, however, is critical to meetings where they go down multiple understanding the final outcome. Well levels in the organization to get a more before the Tylenol crisis hit, Johnson & realistic view of what is actually going on. Johnson had held a series of “challenge General Electric’s famous “workout” meetings” all around the world, where process—where workers meet to decide managers sat and debated their “Credo,” how to fix problems and make the company better—was a way for front line employees to push back against ...there must be mechanisms the established policies and authority of management. All of these processes of pushing back to avoid the lead to better decisions, more engaged values becoming stale and employees, and an increased likelihood of dead avoiding damaging mistakes. In a company that takes its purpose a statement of their purpose and or values seriously, there must be principles of who they wanted to be as a mechanisms of pushing back to avoid the company. The conversation about ethics values becoming stale and dead. Indeed, at Johnson & Johnson was alive, and many of the current corporate scandals in many ways made Jim Burke’s choice could have been prevented if only there about handling the situation clearer than were more creative ways for people to it otherwise would have been. express their dissatisfaction with the actions of some of their leaders and 5. Create mechanisms of dissent. others in the companies. The process of Many executives don’t realize how developing these mechanisms of dissent powerful they are simply by virtue of will vary by company, by leadership their positions. Psychologists such style, and by culture, but it is a crucial as Stanley Milgram have long ago leadership task for value creation in demonstrated that most of the time today’s business world. people will obey what they perceive to 5 BRIDGE PAPER™: Developing Ethical Leadership6. Take a charitable understanding of ...one issue common to the others’ values. recent business scandals was Ethical leaders can understand why different people make different choices, that managers and executives but still have a strong grasp on what they did not understand the limits would do and why. Following twenty- seven years in South African prisons, of “putting shareholders first.” Nelson Mandela was still able to see the good in his jailers. After one particularly standard banking practice of only lending vicious jailer was being transferred to people with collateral, and turning it away from Robbins Island because of on its head, Yunus spawned an industry Mandela’s protest and push back, the of micro-lending to the poor. jailer turned to Mandela and stated The Grameen Bank’s motto is that “I just want to wish you people good poverty belongs in a museum. In addition 5 luck.” Mandela interpreted this to having one of the highest loan statement charitably as a sign that all repayment rates in the banking industry, people had some good within them, the bank’s program of lending to poor even those caught up in an evil system. women in Bangladesh to start businesses Mandela felt that it was his responsibility has helped millions of them to be able to to see this good in people and to try and feed themselves. bring it out. One CEO suggested that This leadership can just as often take instead of seeing ethical leadership as place within the ranks of organizations preventing people from doing the wrong as it does at the highest CEO and board thing, we need to view it as enabling levels. Several years ago, the CEO of people to do the right thing. DuPont was implementing a new, stringent company-wide commitment to 7. Make tough calls while being 8 reduce factory emissions. He visited one imaginative. facility where the plant engineers insisted Ethical leaders inevitably have to that such requirements could not be make a lot of difficult decisions, from met. The chairman responded that the reorienting the company’s strategy particular plant would then have to be and basic value proposition to making closed—causing hundreds of job losses. individual personnel decisions such as Several weeks later, the plant working with employees exiting the engineers delivered the news to the organization. Ethical leaders do not CEO that they had figured out how attempt to avoid difficult decisions by to meet the requirements—and save using an excuse of “I’m doing this for the money. While we don’t know the names business.” The ethical leader consistently of the plant engineers who surely spent unites “doing the right thing” and “doing numerous hours determining how to the right thing for the business.” meet the requirements, we see the results The idea that “ethical leadership” is of their leadership and imagination. just “being nice” is far from the truth. 6 Often, exercising “moral imagination” 8. Know the limits of the values and is the most important task. Mohammed ethical principles they live. Yunus founded the Grameen Bank on All values have limits, particular 7 such moral imagination. By taking the spheres in which they do not work as Business Roundtable Institute for Corporate Ethics 6well as others. The limits for certain and then work hard to figure out how values, for instance, may be related to the they can be applied in today’s complex context or the audience in which they are global business environment. being used. Ethical leaders have an acute Principles, values, cultures, and sense of the limits of the values they individual differences often conflict. live and are prepared with solid reasons Ethical leadership requires an attitude to defend their chosen course of action. of humility rather than righteousness: a Problems can arise when managers do commitment to one’s own principles, and not understand the limits of certain at the same time, openness to learning values. and to having conversations with others As an example, one issue common who may have a different way of seeing to the recent business scandals was the world. Ethics is best viewed as an that managers and executives did open conversation about those values and not understand the limits of “putting issues that are most important to us and shareholders first.” Attempts to to our business. It is a continual discovery artificially keep stock prices high— and reaffirmation of our own principles without creating any lasting value for and values, and a realization that we can customers and other stakeholders—can improve through encountering new ideas. border on fanaticism rather than good 10. Connect the basic value proposition judgment. Ethics is no different from to stakeholder support and societal any other part of our lives: there is no legitimacy. substitute for good judgment, sound The ethical leader must think in terms advice, practical sense, and conversations of enterprise strategy, not separating “the with those affected by our actions. business” from “the ethics.” Linking 9. Frame actions in ethical terms. the basic raison d’être of the enterprise Ethical leaders see their leadership with the way that value gets created and as a fully ethical task. This entails taking society’s expectations is a gargantuan seriously the rights claims of others, task. But, the ethical leader never hides considering the effects of one’s actions on behind the excuse of “It’s just business.” others (stakeholders), and understanding Despite intense opposition from how acting or leading in a certain way a number of groups, Wal-Mart CEO will have effects on one’s character Lee Scott won approval in early 2004 and the character of others. There is to build a new store in a West Side nothing amoral about ethical leaders, Chicago neighborhood by listening to and they recognize that their own values and engaging stakeholders who would may sometimes turn out to be a poor most benefit by the value that this new 9 guidepost. store would create. Partnering with The ethical leader takes responsibility black community leaders, Wal-Mart for using sound moral judgment. But, appealed to the needs of the community there is a caution here. It is easy to frame in sections of town where there was a actions in ethical terms and be perceived real need for jobs and stores. Ultimately, as “righteous.” Many have the view the support of the community allowed that ethics is about universal, inviolable Wal-Mart to win City Council’s principles that are carved into stone. We approval. Wal-Mart also committed to need to start with principles and values, seeking minority subcontractors to build 7 BRIDGE PAPER™: Developing Ethical Leadershipthe facility and to eventually hiring the Ethical leaders speak to us majority of the store’s employees from about our identity, what we the local community. Ethical leadership is about “raising are and what we can become, the bar,” helping people to realize their how we live and how we hopes and dreams, creating value for could live better. stakeholders, and doing these tasks with the intensity and importance that “ethics” connotes. That said, there must as well as on yourself. A “responsibility be room for mistakes, for humor, and for principle” is a necessary ingredient for a humanity that is sometimes missing “managing for stakeholders” to be useful in our current leaders. Ethical leaders in today’s business world. Ethical leaders are ordinary people who are living their must consider and take responsibility for lives as examples of making the world a the effects of their actions on customers, better place. Ethical leaders speak to us suppliers, employees, communities and about our identity, what we are and what other stakeholders. If business were we can become, how we live and how we simply concerned with shareholder could live better. value, then this “responsibility principle” would be unnecessary, other than the responsibility to shareholders. BEComIng an EthICaL To become an ethical leader, commit LEaDEr to asking yourself the following types of questions: We have been privileged to know many (1) What are my most important executives that we would classify as values and principles? ethical leaders. What these executives (2) Does my calendar—how I spend have in common is a profound and deep my time and attention—reflect these sense of ethical principles, values, and values? character at the core of their leadership. (3) What would my subordinates They see their job as making others and peers say my values are? better, and enabling them to pursue (4) What mechanisms and processes their own hopes and dreams. They are have I designed to be sure that the people able to get things done in complicated who work for me can push back against organizations and societies. But, it is my authority? their ethical core which pervades their (5) What could this organization do relationships with followers, the skills or ask me to do that would cause me to and processes which they use in leading resign for ethical reasons? them, their analysis of the contexts, and (6) What do I want to accomplish their own sense of self. with my leadership? Becoming an ethical leader (7) What do I want people to say is relatively simple. It requires a about my leadership when I am gone? commitment to examining your own (8) Can I go home at the end of the behavior and values, and the willingness day and tell my children (or a loved one) and strength to accept responsibility for about my leadership, and use my day’s the effects of your actions on others, work to teach them to be ethical leaders? Business Roundtable Institute for Corporate Ethics 8Executives can develop shared DEvELopIng EthICaL conversations and conceptions of how LEaDErs “ethical leadership” can be implemented in their particular company. The best way for organizations to Executives need to figure out develop ethical leaders is to engage how to have “challenge meetings,” in some of these questions. Viewing routine processes where anyone in the business simultaneously in economic and organization can raise a challenge to ethical terms helps to send the message whether or not the company is living that ethics isn’t just an important set its values, or its enterprise strategy of rules not to violate, but that it is an approach. Without the ability to integral part of what it means to work at challenge authority, there can be no such your organization. thing as true ethical leadership. There are some concrete steps about Many fear that anarchy would be the how best to develop ethical leaders result of such a process. Our experience within the framework that most global is just the opposite. Values, purposes, businesses find themselves. The first principles, an enterprise approach—all step is to bring life to a conversation deliver a disciplined way to think about about how the organization benefits its how to make the business better and stakeholders and about understanding more effective, and help to develop pride the organization’s values. in the organization. This doesn’t need to be a formal program. It could be as elaborate as town hall meetings. Or, as one executive suggested to us, we simply could have an “ethics” or “stakeholders” moment at most meetings. Such moments, analogous to “safety moments” at companies like DuPont, set aside a brief time to raise concerns about the effects of the meeting on key stakeholders, or on a company’s values and ethics. Equally, the “ethics” moment could elaborate on how the conversations and decisions of the meeting were aligned with company values. Many companies have leadership development programs. These programs need to be strengthened by adding the idea of “ethical leadership.” It is not necessary to use the specific principles we have developed, but companies can make themselves better by engaging participants in a conversation about what they see as “ethical leadership.” 9 BRIDGE PAPER™: Developing Ethical Leadershipa thought LEaDEr CommEntary™ with steve odland, Chairman and CEo , office Depot, Inc. Q: How do you develop ethical leaders within Office Depot? Steve Odland: I believe that employees at all levels throughout the organization must demonstrate and exercise ethical leadership every day. Our salespeople, for instance, have to know and believe that we don’t sell products to customers that they don’t need. Each one of us must work to provide value for our customers and shareholders. In some respects the term “ethical leaders” is redundant—we really are just developing leaders that ot officede are focused on delivering value to our Steve Odland customers every day. Leadership should of course be ethical as well. Odland: At Office Depot, all employees Development of these qualities share in the responsibility for creating and is critical, and here’s why. In a retail maintaining an ethical culture. That effort, environment like ours, “Office Depot” of course, starts with the Chief Executive in the mind of our customers is their Officer and the Board of Directors local store and store employees, not me demonstrating their commitment to as CEO or our corporate offices. It’s the company values and principles in whether those local employees are helpful consistent and concrete ways. I frequently and whether the store has the products speak to groups of employees about the that customers need when they need importance of our company values, about them. Thus, we need to emphasize ethical how we want to treat each other, and leadership throughout our organization. about what we stand for as a company. To develop ethical leaders, it is The company culture can’t just be mine, it important for the ethics codes to be has to be all of ours. clear, and to ensure that all employees Employees must be free to push back, understand what is expected of them. to report ethical violations, and to suggest Another critical component to ensuring changes—all without fear of retribution. ethical leadership within the culture is Every employee’s behavior is important hiring, developing, and promoting those to the company’s success. We can’t always people who will embrace the ethical look over their shoulders, so we need to standards. You can put together elaborate depend on them to do what is right. And ethics codes, but, in the end, if you hire we need to put processes and mechanisms crooks, they will steal. in place so that there are people they can turn to when they need support in Q: How do you encourage a culture of discussing the difficult situations they pushback within your organization? Business Roundtable Institute for Corporate Ethics 10 Photo:P, inc.may face. They need to know that doing choose to take such a strong leadership the right thing is best for them and for position there? our company. Every time someone has Odland: Similar to our personal lives the fortitude to speak up on behalf of where we establish trusting relationships our values, we need to show that this over time by treating one another with is something we encourage—failure to respect, care and honesty, Office Depot communicate that we value this feedback has many relationships with the people of could have a chilling effect that does us the Gulf Coast whose lives were affected all harm. by Hurricane Katrina. Additionally, our company is based in Florida, so our Q: This paper mentions that a key people feel a particular empathy and principle of ethical leadership is compassion for the Gulf Coast hurricane articulating and embodying the purpose victims. In this instance of crisis, ethical and values of the organization. Can you leadership meant responding quickly, explain how you approach this topic generously, and with compassion to in today’s environment where Chief aid our employees, customers and Executive’s lives are often on public fellow citizens, just as we would have display? individually assisted our friends and Odland: Several years ago, I had just neighbors in a time of crisis. become the Chief Executive of a Hurricane Katrina is the American company and had moved with my Tsunami. We continue to encourage family to a new town. As the 4th of July other companies to join us in this approached, since we had just moved in, massive relief effort—not only to help we couldn’t find the American flag, so we our fellow citizens, customers and didn’t have it to display. A snippet in the associates who are suffering, but to ensure paper noted that I was not patriotic or that our economy can withstand the didn’t have a flag out. You will notice if tremendous impact this storm will have you ever drive by my house now I always on American business. Our economy have a flag flying. Now I’m criticized is based on the trust we have in each for not taking it down in the rain, but I other and in our free market system. In know all the regulations on use and abuse just over a week after Katrina, Business of the American flag. Roundtable’s Partnership for Disaster First, as CEOs, we live our lives in Relief collected over 102 million in cash a fishbowl and I think that we have to and in-kind donations from more than understand that. Secondly, we need to 89 corporations. understand that we can’t subject ourselves or indulge ourselves in the common Q: How do you view the connection kinds of human frailties. In today’s world, between executive compensation and the rules have changed and we all have to ethical leadership? adapt to that. Odland: In a free market society, people are valued for their contributions. Some Q: Office Depot was one of the first people in a society value one thing and corporate responders to the hurricane others value another thing. Interestingly, Katrina crisis, with a multitude of our society puts a greater value on sports companies following suit. Why did you 11 BRIDGE PAPER™: Developing Ethical LeadershipAmerican business today that there The bricks and the mortar and is still unethical behavior going on. That’s why we created the Business the brands and all of that, Roundtable Institute for Corporate every company’s got them. Ethics, and that’s why we’re out saying At the end of the day, it’s the how important it is not only for us, but for everybody and all leaders of business people that matter most. to uphold the highest levels of ethical behavior. I don’t know how to say it figures and entertainers—the average much more simply than that. major league salary is 14 million; whereas, the average base salary for a Q: How do you assess the ethical Chief Executive Officer is closer to 1 leadership within an organization? million plus an at-risk bonus. Maybe Odland: I think today it’s different and that’s too high; I don’t know. more risky for us as we go through career If corporate leaders focus on and transitions. You can evaluate all the are successful in creating substantial annual reports and proxies and so forth shareholder value, then having a small until your eyes glaze over at night, but at percentage of that go to the people who the end of the day, it’s about the people create it doesn’t seem out of line. It’s and values and the company. when things get really out of whack that In my case, I did a lot of research there are problems. There’s really no right about the people of the company, the or wrong answer. I think boards need employees of the company, and then to use a common sense, values-based I insisted on meeting every single one approach to determine what is right for of the directors. Today, the pendulum their shareholders. has swung all the way over from really complacent boards that were friends of Q: How do you distinguish between the CEO or the chairman to a situation ethics and morals, and how do you where some boards are made up of incorporate ethics into your business people who may or may not understand decisions? companies, who may or may not Odland: I think ethics are behaviors understand business, who may or may inspired by right and wrong. I think not understand the laws and the financial morals tend to have more of a religious rules. Yet, they’re becoming far more overtone. We all are products of our activist, and they’re actually doing some upbringing and our religious teaching, damage to companies. I wanted to make but I think that we ought to have ethics sure that I had a board that had the right as the undergirding rules of business. It ethics, the right values, and with whom I comes down to the basics of law: don’t thought I could work as a team in order steal, don’t cheat, no fraud. All of the to create shareholder value. The bricks rules and laws that have been passed are and the mortar and the brands and all simply expressions or variations on those of that, every company’s got them. At the themes. end of the day, it’s the people that matter It’s frustrating to a lot of us CEOs in most. Business Roundtable Institute for Corporate Ethics 12aBout thE authors Developing Ethical Leadership thought Leadership Commentary R. EDWARD FREEMAN is the STEVE ODLAND is Chairman and Academic Director of the Business CEO of Office Depot, Inc. Prior to Roundtable Institute for Corporate joining Office Depot, he was Chairman, Ethics. He is the Elis and Signe Olsson Chief Executive Officer, and President Professor of Business Administration of AutoZone, the nation’s largest auto at The University of Virginia’s Darden parts and accessories retailer, which School of Business Administration and he joined in 2001. He is chairman of co-Chair of Darden’s Olsson Center the Business Roundtable’s Corporate for Applied Ethics, one of the world’s Governance Task Force and was named leading academic centers for the study top new CEO in 2002 by Bloomberg of ethics. Markets Magazine. He is a member of the Advisory Council for the Business LISA STEWART is Program Manager Roundtable Institute for Corporate at the Business Roundtable Institute Ethics. for Corporate Ethics. Prior to joining the Institute, Stewart planned and managed executive education programs both nationally and internationally for Executive Education at the Darden Graduate School of Business Administration at the University of Virginia. 13 BRIDGE PAPER™: Developing Ethical LeadershipnotEs 1. This paper is based on research conducted by R. Edward Freeman, Robert Phillips, Jeffrey Harrison, Andrew Wicks, Patricia Werhane, Kirsten Martin, Bidhan Parmar and Margaret Cording. The full academic papers on which it is based can be found in the following sources: Freeman, Phillips, Harrison and Wicks, Managing for Stakeholders, forthcoming book; R. Edward Freeman, Martin, K., Parmar, B., Cording, M., and Werhane, P., “Leading Through Values and Ethical Principles,” Ronald Burke and Cary Cooper (eds.), Inspiring Leaders, Routledge Publishing. Oxford, UK, 2006; “Ethical Leadership and Creating Value for Stakeholders,” in R. Peterson and O. Ferrell, Business Ethics: New Challenges for Business Schools and Corporate Leaders, M.E. Sharpe, 2004; Terry L. Price, Understanding Ethical Failures in Leadership, Cambridge University Press, August, 2005. In addition there is a valuable literature here such as: Joanne B. Ciulla, Terry L. Price, & Susan E, Murphy, (Eds.) The Quest for Ethical Leaders: Essays on Leadership Ethics, (forthcoming, Edward Elgar, November 2005); Steven R. Covey, Principal-Centered Leadership, Free Press; October 1, 1992; etc. 2. Information for this section collected from: Carol J. Loomis and Chuck Prince, “Tough Questions for Citigroup’s CEO,” Fortune, 29 November 2004; and Timothy L. O’Brien and Landon Thomas Jr., “It’s Cleanup Time at Citi,” The New York Times, November 7, 2004. 3. “Boss Gives His Salary to Workers Pepsi Chief Funds 1M in Scholarships,” Associated Press, March 25, 1998. 4. James Wynbrandt, Flying High: How JetBlue Founder and CEO David Neeleman Beats the Competion…Even in the World’s Most Turbulent Industry, John Wiley & Sons, Inc., 2004, pp. 221-222. 5. Nelson Mandela, The Long Walk To Freedom: The Autobiography of Nelson Mandela; Back Bay Books, October 1, 1995, p. 462. 6. Patricia H. Werhane, Moral Imagination and Management Decision Making, Oxford University Press, 1999. 7. Mohammed Yunus, founder of the Grameen Bank, spoke at the Ruffin Lecture Series of the Olsson Center for Applied Ethics at the University of Virginia’s Darden School of Business, November 20, 2004. 8. R. Edward Freeman, Jessica Pierce and Richard H. Dodd, Environmentalism and the New Logic of Business: How Firms Can Be Profitable and Leave Our Children a Living Planet, Oxford University Press, 2000, p. 1. 9. Time, September 5, 2005; pp. 44-49 and on MSNBC.com, “Chicago approves its first Wal-Mart: After lengthy debate, city council votes to allow store,” The Associated Press, May 26, 2004. Business Roundtable Institute for Corporate Ethics 14For more information on the Business Roundtable Institute for Corporate Ethics please visit or call Business Roundtable Institute for Corporate Ethics 100 Darden Boulevard Charlottesville, Virginia 22903 (434) 982.2323 infocorporate-ethics.org www.corporate-ethics.org
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