Ethical Leadership

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

*/Follow us on Twitter/* [1]

/(Repost of blog from May 21, 2010)/

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] https://twitter.com/rsdsolutions