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Book synthesis

Leading ethically to strengthen collective performance

What exactly is ethical leadership and how does it affect your company’s bottom line? After studying the impact of ethical leadership on company performance for seven years (2006-2013), Fred Kiel found that ethical leaders achieve 5 times greater returns for shareholders than unethical ones. Extract from the latest issue of Business Digest:

Business Digest ethics

1. The homo economicus model is outdated. Human nature is generally prosocial: people tend to value ethical rules and avoid harming others. Consequently, the “self-interested, coldly calculated, take-no-prisoners approach” that has long influenced popular conceptions of business leadership in the west does not in fact help you “win” — in life or in business.

2. How ethics impacts business performance. Leaders with strong character create more value: The CEOs and executive teams that were rated the most ethical by their employees achieved as much as five times greater returns for their organizations than those rated the least ethical.

3. Strengthen your ethical character. The following four character habits were found to make the most difference in terms of long-term company financial performance:
• Keeping promises and following through on commitments
• Owning up to mistakes and working to correct them
• Accepting that other people make mistakes
• Treating people as people, not numbers or commodities, by helping them develop their personal skills and accomplish their personal goals

The Volvo Cars example
“It is entirely possible to raise awareness around ethical behaviors and decision-making,” reports the Volvo Car Group’s Chief Compliance & Ethics Officer, Erica Wikman, who explains her organization’s strategy for developing ethical reflexes throughout its leadership ranks.

Based on Return On Character: The Real Reason Leaders and their Companies Win by Fred Kiel (Harvard Review Press, March 2015), “Pourquoi des managers même pas méchants prennent-ils des decisions immorales ?” by Sonia Arnal (Allez Savoir!, January 2015); “How unconscious bias affects everything you do,” by Howard Ross (Fast Company, October 2014); “Loyalty to a Leader Is Overrated, Even Dangerous,” by Julie Irwin (Harvard Business Review, December 2014); “Peer Pressure for Teens Paves the Path to Adulthood” by Shirley S. Wang (The Wall Street Journal, June 2013) and the interview with Erica Wikman, Chief Compliance & Ethics Officer, Volvo Car Group.

Watch the video:

BizBasics: Unethical decision making in organizations – UNIL MOOCS

Between 15 September 2015 and 17 November 2015, Professors Guido Palazzo and Ulrich Hoffrage of the University of Lausanne are leading a MOOC on “Unethical decision making in organizations.”

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Caroline Schuurman
Published by Caroline Schuurman