Tuesday, June 8, 2010

Ethical Leadership

By Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.



The new Dean at my university (Dalhousie University in Halifax, Canada) is Peggy Cunningham.  We are all very excited about having Dr. Cunningham lead us as we build on some very exciting projects and some new themes in the Faculty of Management at Dalhousie.

One of the most exciting themes is that of Ethical Leadership.  Now if you are like me you probably rolled your eyes when you read that line about “ethical leadership”.  “Here we go”, you are thinking, “another school that is going to hop on the bandwagon by teaching students right from wrong!” 

Dr. Cunningham (Peggy as she likes to be called) is too smart and more importantly too wise for that.  Like me (see my previous blogs) I suspect she believes that right from wrong is not something that can be taught to someone who is past 6 years of age (although I have not discussed this specific point with her.)

Ethical leadership for Dr. Cunningham is leadership with (a) respect, (b) courage, and (c) empathy.  To me that is a very refreshing and encouraging way of looking at ethics and ethical leadership.

Let’s quickly examine this definition of ethical leadership in the context of the ethical issue of the day – namely Goldman Sachs and the Senate review that occurred recently.  Most of you have read the transcripts or seen part of the testimony of the Goldman executives before the review committee.  Probably more of you spent time trolling the various joke sites and e-mails making light of the hearings.

In any case, let’s examine these hearings in terms of ethical leadership.  Who was showing respect?  Was there any respect in any part of the incident (the Abacus transaction, or the review hearings)?  Was there respect shown by those who made fun of the hearings?  (In the interest of full disclosure I am certainly chuckling at the jokes that are still circulating around.)  Was there respect shown by either the executives of Goldman Sachs or by members of the review committee or by the various protesting groups?  Was there respect shown by the counterparties to the original transaction?

Who has demonstrated courage in this whole affair?  Is it the SEC who brought the charges (although we understand there was significant debate about whether or not they should, and there are suspicions that the charges may be politically motivated)?  Who is being courageous? 

Who has demonstrated empathy?  Surely to goodness you are not going to reply the Senate committee members as they empathize with the counterparties who lost on the transaction (the same counterparties that they would have been praising for being courageous for helping to grease the housing boom, or courageous for taking risks to finance profits etc. etc.).

The world of risk management is rife with opportunities where ethical leadership is called for. Think about situations that you have been involved in.  Are you demonstrating “ethical leadership”?  Are the principles of leadership with (a) respect, (b) courage and (c) empathy part of the social fabric of your organization?  Are they part of your personal make-up?

In an earlier blog I stated quite emphatically that I do not believe that ethics (teaching of right from wrong) can be taught to anyone over the age of six.  What I do believe is that ethical leadership can be inspired in people.  I also believe that most of us want to be inspired to be ethical leaders.  In this age of the cynical sound bite, ethical leadership just might become the new black.  I hope so.

1 comment:

Dr. Worden said...

Is empathy really intrinsic to ethical leadership?
Constructing an accurate ethical-leadership concept that is not over-extended by one’s ideological agenda ought to begin with defining leadership itself. That is to say, more attention should be paid to thinking about what leadership is. Beyond its attributes and any contextual artifacts, leadership itself must be identified as a distinct phenomenon before we can go on to highlight the ethical dimension that completes “ethical leadership.” Then what counts as the ethical dimension of leadership can be clipped back to that which is implied in the definition of leadership, which in turn is entailed in the essence of the phenomenon. See http://thewordenreport.blogspot.com/2013/08/toward-theory-of-ethical-leadership.html