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A broken compass.
3 minute read

Chocolate, Lies, and Other Telltale Ethics Fails [Guest Post]

The September resignation of BP’s CEO Bernard Looney in the wake of him lying about romantic relationships with coworkers provokes important questions: How could a supposedly smart person think that they could get away with this behavior? What makes corporate leaders lose touch with basic ethical standards like “do not lie”?

Looney is not alone. More and more CEOs get fired because of unethical behavior. Are CEOs getting more unethical than in the past? Probably not. What has changed is society’s expectations on the ethical standards of business leaders. You cannot proclaim yourself a purpose-driven and socially responsible company when your leaders’ actions proclaim the opposite.

So why is it so difficult for leaders to be good ethical role models?

The power intoxication!

Failure #1: Being oblivious to their false sense of entitlement

One explanation for ethical leadership fails is the effect of power. If you give people power and they are not prepared for it, or if there are no controls against abuse of power, chances are high that they will abuse it. 

Yes, power can do strange things to normal people: According to one study, sudden power increase pushes people to believe that subordinates are sexually interested in them.  

Power obviously comes with a sense of entitlement. In one of my first ethics projects at a department store, my workshop participants told me that the manager of the sweets department took one piece of chocolate from the display every morning. Did this manager realize that he was being a bad role model? Probably not! Did he think that he deserved the free chocolate! Hell, yes!

Failure #2: Not creating psychological safety on their teams

Another important ingredient to the toxic cocktail ethical leadership failure is that most leaders do not invest enough time and attention to creating a speak-up culture among their teams. They also underestimate how scary it can be for their coworkers to speak up to those who hold power positions. 

Imagine you are a manager and during a stressful project one of your team members comes to you with a  concern. Would you say: “Thank you, tell me more, I appreciate your honest critical opinion?” Congrats if you do, but most people do not react this way. We (generally) get defensive. 

Remember the manager from the sweets department who stole a chocolate a day? Do you think his team members spoke up to him about his behavior? Of course not! People do not want to jeopardize their relationships with their managers.

Why these fails are epic

Bad role modeling is an invitation to imitation.

Humans are hardwired for fairness. Thinking back to the sweets department, the culture was impacted by their leader's actions. The team modeled the manager's selfish behavior instead of being collaborative and positive.  

Unfairness kills motivation.

Leaders are up against important obstacles to being good ethical role models, and these challenges stem from the structures and the culture of the organization they work in. If the organization is unfair, nobody will be motivated to produce quality work.

How to avoid these pitfalls 

Of course, you could train your managers in ethical leadership. But since we have seen how strong the effect of power is, it makes much more sense to develop checks and balances against the abuse of power. Therefore, let us now explore what companies and compliance can do on a systemic level to enhance ethical leadership. 

I have three suggestions on how a company could set the stage here:

  1. Ultimately, abuse of power is driven by fear and the unfulfilled desire for appreciation. Consequently, creating a culture of psychological safety and appreciation is a first important step to prevent the perils of power. 
  2. Companies need to include integrity in recruiting and promoting. Of course, it is hard to tell the level of integrity of a person from a 60-minute interview, but a general “no jerks” policy should do the trick. Also, taking reference checks seriously is a pragmatic measure that often gets neglected.
  3. Set clear, measurable expectations and enforce them in your evaluation system. If a leader has repeating or high levels of red flags (e.g., turnover, burnout, etc.) on the team, they should be required to notify HR and/or Compliance. Even just the threat of compulsory notification can create behavior change.

🚧 Caution: We cannot expect leaders to stay humble and grounded if they are part of a highly hierarchical context that celebrates power with lavish salaries, big bonuses, or other status perks.


It all boils down to the other C... Culture

Working towards a culture that leverages ethical leadership is a good investment for compliance because you get so much more out of it than just the prevention of misconduct.

It is empirically proven that teams with ethical leaders do not only act ethically and address sensitive issues before they escalate, but they are also happier and more productive. 

After all, that’s what compliance professionals dream of – being seen as a positive business asset!

Thanks for taking the reins today, Bettina! 

As a pioneer in the field, Dr. Bettina Palazzo has been researching, teaching and consulting in business ethics for over 25 years. Her passion topics are ethical leadership, speak-up culture and compliance communication. It is her mission to turn Ethics & Compliance into a topic that everybody wants to be a part of. Therefore, she created the online group program Compliance Influencer” that leverages the power of sales, marketing, branding and communications to make the life of compliance professionals easier and more impactful. You can find Bettina's website here and follow her on LinkedIn here

And if you're looking for tools to help create psychological safety, we've got that

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