Ethical and Strategic Leadership GREG HILSENRATH

Strategic Leadership and the Role of Business in Society  21 st century already two financial crises  Accounting scandals: Enron, WorldCom, Tyco…  Global financial crisis: real estate bubble burst  Lessons  Managerial actions affect economy  Ethical business produces wealth but unethical practices destroy it  Stakeholder management is needed

Introduction The need for a company to behave “ethically” is described in terms of a company’s need to interact productively with its stakeholders.

“Ethics of Scandal” Versus “Ethics of Strategy” It is increasingly important for companies to deal with ethics as a corporate strategy that, if uniquely implemented, could achieve competitive advantage for the company rather than waiting to react to possible ethical issues of importance to the targeted stakeholders. It is the necessity of being ethically proactive company rather than being strategically reactive company.

Case Studies

Mark Hurd  CEO of HP after Carly Fiorina  Low profile, no-nonsense, strategy execution forte Highly successful  Increasing market shares for computers and printers  Stock rose 110% (well above that of NASDAQ) 2010 sexual harassment scandal  Forced to resign  With $45 million severance package  Hired by Oracle HP’s CEO Mark Hurd Resigns amid Ethics Scandal

Honesty and Ethics Ranking of Different Professions Only 15% of “high” executives

Key Strategic Leadership Actions  Determining Strategic Direction  Involves specifying the vision and the strategy to achieve this vision over time  Vision is a picture of what the firm wants to be and in broad terms what it wants to ultimately achieve  Strategic direction is framed within the context of the opportunities and threats over next 3-5 years  Includes a core ideology and an envisioned future  Should serve to motivate, “push”, and guide the organization 8

Question: I want you to picture someone that you have worked for (past or present) whom you would describe as an ethical leader. What it is it about that person that makes them an ethical leader?

Strategic Leadership Failures  When the strategic vision for the organization favors the senior executive’s personal interests and not enough of their constituents’ and organization’s interests  When senior executives use failure-prone practices  When senior executives engage in or condone unethical conduct

Why practice ethical leadership?  Ethical leadership models ethical behavior to the organization and the community.  Ethical leadership builds trust.  Ethical leadership brings credibility and respect, both for you and for the organization.  Ethical leadership can lead to collaboration.  Ethical leadership creates a good climate within the organization.  If you have opposition, or are strongly supporting a position, ethical leadership allows you to occupy the moral high ground.  Ethical leadership is simply the right way to go.  Ethical leadership affords self-respect.

Specific components of ethical leadership:  Put the good of the organization and the general good before your own interests and ego.  Encourage the discussion of ethics in general and of the ethical choices involved in specific situations and decisions as an ongoing feature of the organizational culture.  Institutionalize ways for people to question your authority.  Don’t take yourself too seriously.  Consider the consequences to others of your decisions, and look for ways to minimize harm.  Treat everyone with fairness, honesty, and respect all the time.  Treat other organizations in the same way you treat other people – with fairness, honesty, and respect.

Strategy & Ethics Thank You. Questions?