The Business of Ethics

Daniel Rudolph, Senior Associate Dean, Stanford Graduate School of Business (SBS) spoke to DNA about the ground rules that define values in leadership – January 21, 2007

It is difficult to say precisely where in a business the ethical questions will pick up. This can be best taken care of if the crisis is put together into as many challenging circumstances as possible.

Precision

An important merit for an ethical corporation is transparency and consciousness. That is making sure people are aware of what is going on. One of the important questions asked in the Enron case was why did not the Enron board know what was going on. But it is an accepted fact that if executives do not want the board to know about things the former cannot. Insistence on transparency in management practices means that the company will be more geared up when things go wrong.

Always Be Curious

The directors of companies need to ask the right questions. For example, while working with the CEO one needs to make sure of asking the right questions and getting the right information in order to ensure that things are going the right way. This is not just in terms of ethics but also in terms of whether the business is progressing in the right direction.

See the Forest, Do not count the Trees

The wide-ranging role companies now play in society needs to be understood. This is one of the four managerial approaches: entrepreneurship, with a bias on action and innovation that can drive change; the idea of being competitive in the world and managing a multi-cultural workforce; how to change an organisation for the better; how to play a broader role in society.

An ethical worker or manager has to take a wider view, especially on the question of who the stakeholders outside the corporation are. In India many family owned companies worry about the larger community they are a part of, and provide housing, healthcare and education to the less advantaged. That is a part of ethics.

Act Fast, Efficiently and Effectively

If there is a problem or something has not been done, the concerned person has to come clean and settle it promptly rather than conceal it. Managers need to be trained to know exactly what is going on. The responsibility cannot be delegated to someone else; saying “I did not know anything about it,” like the Enron people did.

N R Narayana Murthy has said that bad news has to take the elevator, but good news can take the stairs. That is a mindset. People look up to strategic leaders like Mr. Murthy because they believe them to be straightforward and dependable.

Have the Apparatus

Taking responsibility implies needing the tools to analyse situations. For example many managers wonder why they need to know finance and accounting. They do not have to be experts but they should know enough to be competent to know what is going on. The Balance Sheets of companies always look good, but the real matter is in the footnotes. Accounting and accountability go together.

Speak Up, and Plainly

Managers have to be forthright in their exchange of ideas. Trying to make believe that something is what it is not is insincere at best and a credibility killer at worst. Having people’s trust is significant, for employee retention, for shareholders and for the wider society.

Live Your Principles

Managers have to live their values and communicate them to others. The world is grey, not black or white. The society is always trying to decide. Companies have to develop a culture for people to tell the truth – not just what they want to hear. Without the truth they are sunk.