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LEADERSHIP ETHICS: THE INTEGRITY CAPACITY CHALLENGE

Dr. Joseph A. Petrick
Executive Director Institute for Business Integrity Wright State University

Leadership Ethics Lecture Series Ohio Northern University March 7, 2007

AGENDA
A. B. Leadership Ethics and Rebuilding Stakeholder Trust Integrity Capacity Model for Leadership Development 1. Leadership Process Integrity Capacity 2. Leadership Judgment Integrity Capacity 3. Leadership Developmental Integrity Capacity 4. Leadership System Integrity Capacity Microeconomic and Macroeconomic Improvements 1. Improved Microeconomic Moral Accountability 2. Improved Macroeconomic Moral Accountability New Agenda for Responsible Leadership

C.

D.

Leadership Ethics and Rebuilding Stakeholder Trust

1. Ethical Leadership Failures 2. Literature on Leadership is Vast. 3. Need For a Current Working Definition of Leadership 4. Need for a Current Working Model of Moral Leadership

. comprehensive. constructed. emergent. balanced and sustainable change. in a society inherited. both visible and invisible. and perceived as an interaction of persons in human (and inhuman) conditions of partnership and/or inequality – an interaction measured by ethical values and by the degree of realization of intended.Working Definition of Leadership • Leadership is an influence process.

Integrity Capacity Model of Moral Leadership The individual and collective capability for repeated process alignment of moral awareness. character and conduct that demonstrates balanced judgment. enhances sustained moral development. and promotes supportive systems for moral decision making. deliberation. .

Integrity Capacity Model of Moral Leadership 1. Individual and Collective Integrity Capacity as both Intrinsically and Instrumentally Valuable 2. Integrity Capacity as an Intangible Strategic Asset that Enhances Power and Reputational Capital .

Multiple Stakeholder Trust & WorldClass Performance .Instrumental Value of Leadership Integrity Capacity Leadership Integrity Capacity Reputational Capital Sustainable Competitive Advantage.

Dimensions of Leadership Integrity Capacity 1. Leadership Judgment Integrity Capacity: Moral Soundness 3. Leadership Process Integrity Capacity: Moral Coherence 2. Leadership System Integrity Capacity: Moral Wholeness . Leadership Developmental Integrity Capacity: Moral Maturity 4.

so that moral coherence results. and conduct on a sustained basis. deliberation. .Leadership Process Integrity Capacity: Moral Coherence The alignment of individual and/or collective leadership moral awareness. character.

Leadership Process Integrity Capacity: Moral Coherence MORAL AWARENESS Perception Sensitivity MORAL DELIBERATION Analysis Resolution MORAL CHARACTER Cognitive Readiness to Act Volitional Readiness to Act MORAL CONDUCT Responsible Sustainable .

3. 5.Virtues That Build Leadership & Collective Character 1. 2. 4. Intellectual Virtues Moral Virtues Social Virtues Emotional Virtues Political Virtues .

Leadership Judgment Integrity Capacity: Moral Soundness The balanced and inclusive use of key ethics theories and their subordinated cognate theoretical resources in the analysis and resolution of individual and/or collective ethical issues that demonstrate the moral soundness of leadership judgment. .

Leadership Judgment Integrity Capacity (R2C2): Moral Soundness Flexibility Build Virtuous Character Enhance Supportive Contexts Internal Follow Right Rules Achieve Good Results External Control .

Positive & Negative Zones of Leadership Moral Judgment Integrity (R2C2) Negative Zone Abdicates Authority Positive Zone Wastes Energy Context Character Slows Production Shows Consideration Envisions Changes Disrupts Continuity Facilitates Interaction Acquires Resources Negative Zone Amoral Professionalism Collects Information Initiates Action Destroys Cohesion Maintains Structure Stifles Progress Provides Structure Offends Individuals Rules Neglects Possibilities Results .

Leadership Judgment Integrity Capacity Based on Respecting Four Human Nature Drives Negative Zone Positive Zone Context DRIVE TO LEARN Character DRIVE TO BOND Negative Zone Amoral Professionalism DRIVE TO DEFEND DRIVE TO ACQUIRE Rules Results .

Ranges of Moral Judgment Evaluation using R2C2 ™ Quantitative Ranges 0–1 2 3 4 5 6 7 8 9 – 10 Qualitative Anchors Extremely Unacceptable Under-emphasis Unacceptable Under-emphasis Minimally Acceptable Emphasis Below Average Emphasis Average Emphasis Above Average Emphasis Optimal Emphasis Unacceptable Over-emphasis Extremely Unacceptable Over-emphasis .

Judgment Integrity Capacity Graph & Global Leadership Ethics Communication .

DILBERT CEO LACK OF LEADERSHIP JUDGMENT INTEGRITY CAPACITY .

LEADERSHIP EXTREME CONCERN FOR PROFITS Flexibility Context (ADAPTABILITY) Character (INVOLVEMENT) Internal External Results (EFFECTIVENESS) Rule s (CONTINUITY) Control .

Leadership Developmental Integrity Capacity: Moral Maturity The organizational and extra-organizational cultural cognitive improvement of individual and/or collective leadership moral reasoning capabilities from a stage of self-interested connivance. and onto a stage of internalized commitment to moral principles that demonstrates moral maturity. through a stage of external conformity. .

Leadership Moral Development Stages & Their Work Cultures Principled Integrity HOUSE OF INTEGRITY Democratic Participation Allegiance to Authority (Commitment) HOUSE OF COMPLIANCE Popular Conformity (Conformity) Machiavellianism HOUSE OF MANIPULATION Social Darwinism (Connivance) .

Leadership Moral Development Stages & Leadership Theories Principled Integrity Democratic Participation Allegiance to Authority Popular Conformity Principled Transforming Leadership Theories Majority Participation and Servant Leadership Theories Institutional Contingency Leadership Theories Leader-Membership Exchange (Conformity) Theories Machiavellianism Social Darwinism Path-Goal/Transactional Leadership Theories Autocratic Coercive Power Leadership Theories .

.Leadership System Integrity Capacity: Moral Wholeness The development and alignment of the moral infrastructure within the organization and the shaping of the external moral environment of the leader’s organization to provide a supportive context for moral wholeness in decision making.

Federal Sentencing Guidelines (USFSG) • Sarbanes-Oxley Act (SOX) • Integrity-Based Systems • Enable Responsible Conduct .Leadership and Internal System Integrity Capacity Organizational Moral Environment • Compliance-Based Systems • Prevent Criminal Misconduct • U.S.

Establish compliance standards and procedures 2.Compliance-Based Organization Internal Systems 1. Exercise due care in delegating discretionary authority 4. Communicate and train . Assign high level individuals to oversee program 3.

Comply with USFSG & SOX requirements . and provide safe reporting system 6.Compliance-Based Organization Internal Systems 5. Monitor. Enforce appropriate discipline with consistency 7. Respond to offences and prevent further misconduct 8. audit.

Integrity Steering Committee 5. Statement of Values/Written Code of Conduct 6.Integrity-Based Organization Internal Systems 1. Ethics in Strategy and Structure 4. Moral Leadership at the Top 2. Ethics Policy and Procedure Manuals . Ethics Needs Assessment & Compliance Standards in Place 3.

Integrity-Based Organization Internal Systems 7. and Development Subsystems 9. Ethics in Decision-Making/Meeting Processes . Ethics in Selection. and Performance Subsystems 8. Ethics in Communication Processes and Work Attitudes 10. Rewards/Recognition/Incentive. Ethics Training and Education Programs 11. Socialization. Ethics in Appraisal.

Enforcement Processes of Ethical Standards 15. Ethics System and Quality Work Process Control and Improvement . Organizational Integrity Advisor Responsibilities 13.Integrity-Based Organization Internal Systems 12. Ethics Reporting. Whistleblower Protection and Conflict Resolution Processes 14. Auditing & Improving Subsystems 16. Ethics Monitoring.

Makes fair and balanced decisions . Conducts his/her personal life in an ethical manner 4. Listens to what employees have to say 2.Ethical Leadership Assessment Instrument 1. Disciplines employees who violate ethical standards 3. Has the best interests of employees in mind 5.

E.Ethical Leadership Assessment Instrument 6. Sets an example of how to do things the right way in terms of ethics 9. Discusses business ethics or values with employees 8. Defines success not just by results but also by the way that they are obtained 10. When making decisions. / Organizational Behavior and Human Decision Processes (2005) 97:117–134 . Brown et al. asks “what is the right thing to do?” Source: M. Can be trusted 7.

Domestic External Moral Environment • Corruption Elimination and/or Control • Industry & Professional Standards • Proactive Positive Stakeholder Relations & Triple Bottom Line Accountability 2. Global External Moral Environment • Corruption Elimination and/or Control • Industry & Professional Standards • Proactive Positive Stakeholder Relations & Triple Bottom Line Accountability .External System Integrity Capacity 1.

Demonstrated Judgment Integrity Capacity: Moral Soundness 3. Demonstrated Developmental Integrity Capacity: Moral Maturity 4.Improved Microeconomic Moral Accountability A. Demonstrated Process Integrity Capacity: Moral Coherence 2. Individual Leadership Accountability Improvement 1. Demonstrated System Integrity Capacity: Moral Wholeness .

Demonstrated Process Integrity Capacity: Moral Coherence 2.Improved Microeconomic Moral Accountability A. Collective Leadership Accountability Improvement 1. Demonstrated Judgment Integrity Capacity: Moral Soundness 3. Demonstrated Developmental Integrity Capacity: Moral Maturity 4. Demonstrated System Integrity Capacity: Moral Wholeness .

Domestic & global governance board reforms .Improved Macroeconomic Moral Accountability A. Strengthen leadership professional education 2. Political Economy Accountability Improvement 1. Strengthen professional/industry/education accountability links B. Strengthen leadership for institutional reform 3. Professional Association/Industry Accountability Improvement 1. International leadership harmonization through global business. Balancing types of capitalism/economic democracy 2. government & NGO linkages 3.

Balancing Types of Capitalism Negative Zone Positive Zone Entrepreneur Capitalism DRIVE TO LEARN Communit y Capitalism DRIVE TO BOND Negative Zone Amoral Professionalism DRIVE TO DEFEND DRIVE TO ACQUIRE Regulatory Capitalism Investor Capitalism .

New Agenda for Responsible Leadership in Organizations • National commission with task forces on improving microeconomic levels of leadership integrity capacity accountability • International commission with task forces on improving macroeconomic levels of leadership moral accountability • Integrity capacity building skills in mainstream leadership professional education .

Petrick Executive Director Institute for Business Integrity Wright State University Leadership Ethics Lecture Series Ohio Northern University March 7. Joseph A.LEADERSHIP ETHICS: THE INTEGRITY CAPACITY CHALLENGE Dr. 2007 .