Ethics and Business Leadership: An address to SAICA

Address by Dr Reuel J. Khoza (Chairman of Nedbank Group Limited, Aka Capital  and author of several books including Let Africa Lead and Attuned Leadership) to “Nedbank Group Technology Leaders”  I  6 June 2013

1. ETHICS DESCRIBED

“Ethics” and “Morality” are concepts which are often used interchangeably or as synonyms: an ethical issue just is a moral issue. To an increasing degree, though, the term “Ethics”, is being used to apply to specialised areas of morality, such as medicine, business, the environment, etc. Where professions are involved as is the case in good business practice, a governing body will typically draw up a “Code of Ethics” for its members. “Ethics”  in this sense can be viewed as a subset of morality, being that aspect of morality concerned with the moral obligation relating to the practice of a profession or discipline.

On the other hand, some philosophers, from Socrates to Bernard Williams, use “ethics” in a broad sense to refer to reflective answers to the question: “How do I live?”  “What is my cardinal sense of bad and good?” If we accept this broad sense of “ethics”, then morality becomes a subset of ethics, being that aspect of ethics concerned with obligation.

2. BUSINESS ETHICS

Business ethics is one of the areas of applied ethics. The application of morality to business is as old as business and morality themselves, but the rise of business ethics as an identifiable, subject of study took place in the 1970’s in the USA and since the late 1980s, Europe, Australia and other countries in Asia, Africa and South America.

Business ethics grapples with the moral justification of business structures and practices. Because corporations are a dominant feature of the free enterprise system, much work has focussed on the structures, governance, responsibilities and activities of corporations. In this regard business ethics deals with the moral responsibilities and rights of individual managers and employees.

The importance of international businesses has led to discussions of international business ethics and to a reconsideration of moral and cultural relativism. This takes on special significance when considering doing business in societies with corrupt governments. Some critics have called into question whether Western approaches for ethics actually enjoy their claimed universality. The key focus of international business ethics has been on the actions of multinational corporations from so-called developed countries operating in emergent economies. Issues include bribery, the use of child labour, the degradation of the environment, exploitation of labour and the increasing gap between rich and poor countries.
In recent times the issue of genie-coefficient of national income distribution and the excessive pay packages executives arrogate to themselves have assumed centre stage in many countries.

Global issues involve the justice and fairness of policies of global institutions like the World Trade Organisation and the World bank, ozone layer depletion, the depletion of non-renewable natural resources, and the attendant role and responsibilities of corporations and nations in stopping or reversing these.

The growth of Internet as a medium of commerce which crosses national boundaries with ease, is also generating new concerns about the ethical aspects of privacy violations by businesses, control of commercial pornography, and protection of intellectual property available in digital form.

3. ETHICS IN AN AFRICAN CONTEXT

Ethics gets to the heart and soul of authentic, wholesome leadership – the ethical commitment that must impel leaders and followers forward in their quest for the life of what Aristotle called public virtue. Good leadership strives to fulfil the common good; and I contend that leadership which does not do so is not leadership at all but misleadership. In African terms, it is our humanness that confers a collective consciousness and forms the basis on which leadership is built. A leader who embraces Ubuntu will see the public good as not just an aggregation of individual benefits, but as a gain for the whole community which is greater than the sum of its parts. Our humanness overrides our differences. The knowledge we have of ourselves is also knowledge of others as we come from the same human stem, and this is what makes us ethical creatures by nature. Ubuntu imposes the same principle as Emmanuel Kant’s categorical imperative; to be ethical is a universal duty. But while Kant’s argument is compelling it is not complete. African humanism makes up a deficiency in Western individualist rationalism by insisting that morality is an expression of the collective spirit and not merely an individual duty. Leadership is an extension of this duty and spirit.
Moral necessity has strong implications for the philosophy of attuned leadership.  It makes sense to talk of a ‘leadership imperative’ that is necessarily focused on the common good. If we are in essence moral beings, then leadership must at all times strive to do good and avoid moral turpitude. Virtue is leadership’s beacon.  As I said in the 2009 presentation on leadership:

I see leadership whose defining features are probity, humility, integrity, compassion and humanness. I perceive leadership that does not shy away from the difficult nor the unpopular decisions or measures. A leadership that practises introspection and self-renewal, and lives by the tenets of consultation, persuasion, accommodation and cohabitation, shunning coercion and domination. I dream of leadership which is politically and personally as gracious, honourable and magnanimous in defeat as it is in success. A leadership that appreciates that the success of others does not diminish its own success, but adds to the good of the commonwealth.

For many Africans the term ‘commonwealth’ carries connotations of British imperialism. This in turn implies that a system (colonialism) was imposed on people and that they turned to nationalist political leaders for liberation. Then, nationalist leaders had virtue on their side, but today, decades after independence, it cannot be taken for granted that former liberationists still occupy the moral high ground. Like any leaders elsewhere in the world, they must work to prove themselves. Those who elevate the effects of leadership – that is, power, wealth and acclaim – to ends in and of themselves are not virtuous, not accountable, not compassionate towards the poverty of their people, and are guilty of misleadership. Corruption and venality are the outcome.

4. SOME ETHICAL QUESTIONS IN LEADERSHIP

(i) There is need to distinguish good from bad leadership: To deny the distinction in serious discourse is akin to a medical school that would claim to teach health while ignoring disease.

(ii)  Bad leadership is not purely the fault of a few bad leaders. We are all in this together.

Archbishop Desmond Tutu opines that South Africa taught him “two contradictory things”. On the one hand we “have an extraordinary capacity for good”. But on the other hand, we “have a remarkable company for evil – we have refined ways of being mean and nasty to one another through genocides, holocausts, slavery, racism, wars, oppression and injustice.”
(Let South Africa Show the World How to Forgive”, Knowledge of Reality (2000)

An important distinction needs to be made between Ineffective Leadership versus Unethical Leadership.

There are two types of bad leadership: bad as in Ineffective and bad as in Unethical.

• Ineffective Leadership fails to produce the desired change on transformation because of inter alia missing traits, poor education or weaker skills, badly conceived strategies and badly implemented tactics – sheer incapacity.
• Unethical Leadership fails to distinguish between right and wrong, good and bad. The leadership process is contaminated by violating common codes of decency and good conduct.
• James McGregor Burns opines:
  Ethical Leaders put their followers’ needs before their own. Unethical leaders do not. Ethical leaders exemplify private virtues such as courage and temperance. Unethical leaders do not.

Ethical leaders exercise leadership in the interest of the common good. Unethical leaders do not.

Followers are by no means exempt.  Like leaders they too are accountable for what they do or don’t do.

• Ethical followers hold leaders to account. Unethical followers do not.
• Ethical leaders exude private virtues such as courage and temperance.  Unethical followers do not.
• Ethical leaders engage leaders as well as other followers in pursuit of the common good. Unethical followers do not.

Dante and the hottest place in hell...

TYPES OF BAD LEADERSHIP
Barbara Kellerman identifies seven types of bad leadership, viz

• Incompetent Leadership: Characterised by lack of will or skill (or both) to sustain effective action. They cannot rise to the leadership challenge of change.
• Rigid Leadership: Stiff and unyielding. Even though they may be competent, they are unable or unwilling to adapt to new ideals, new information, or changing times.
• Intemperate Leadership: Such leaders lack self-control and are aided and abetted by followers who are unwilling or unable to intervene effectively.
• Callous Leadership: Uncaring or unkind, such leadership tends to ignore or discount the needs, wants, and wishes of the followers or subordinates.
• Corrupt Leadership: Characterised by lies, cheating and outright stealing; they typically put self-interest well ahead of the public interest.
• Insular Leadership: Tend to live in ivory towers, disregarding the needs and welfare of those they should be responsible for.
• Evil Leadership; Such leaders commit atrocities inflicting physical or psychological (often both) pain to ostensible followers.

WHAT CORRECTIVE ACTION CAN BE TAKEN (Barbara Kellerman)
Corrective action can be taken by both leaders and followers.
Leaders: Self Help

• Limit your tenure
• Share power – willingly.
• Don’t believe your own hype – avoid self-deception.
• Get real and stay real.
• Compensate for your weaknesses.
• Seek balance and maintain it.
• Revisit the mission.
• Develop a personal support system and respect it.
• Know and control your appetites.
• Think and reflect.

Leaders: Working with Others

• Establish a culture of openness in which diversity and dissent are encouraged.
• Find and install an Ombudsman.
• Bring in advisers who are both strong and independent.
• Avoid group think.
• Get reliable information and then share it/disseminate it.
• Consult a historian.
• Establish a system of checks and balances.
• Strive for stakeholder symmetry.

ETHICAL FOUNDATION AS SINE QUANON FOR GOOD CORPORATE GOVERNANCE

• Ethics (or integrity) is the foundation of, and reason for, corporate governance. The ethics of corporate governance requires the board to ensure that the company is run ethically. As this is achieved, the company earns the necessary approval – its licence to operate – from those affected by and affecting its operations.
• Corporate governance is, in essence, a company’s practical expression of ethical standards.  It follows that all the typical aspects of corporate governance (such as the role and responsibilities of the board and directors, internal audit, risk management, stakeholder relations, and so on) should rest on a foundation of ethical values.
• The ethics of corporate governance requires all deliberations, decisions and actions of the board and executive management to be based on the following four ethical values underpinning good corporate governance:
  • Responsibility: The board should assume responsibility for the assets and actions of the company and be willing to take corrective actions to keep the company on a strategic path, that is ethical and sustainable.
  • Accountability: The board should be able to justify its decisions and actions to shareholders and other stakeholders.
  • Fairness: The board should ensure that it gives fair consideration to the legitimate interests and expectations of all stakeholders of the company.
  • Transparency: The board should disclose information in a manner that enables stakeholders to make an informed analysis of the company’s performance, and sustainability.
• As a steward of the company, each director should also discharge the following five moral duties:
  • Conscience: A director should act with intellectual honesty and independence of mind in the best interests of the company and all its stakeholders, in accordance with the inclusive stakeholder approach to corporate governance. Conflicts of interest should be avoided.
  • Competence: A director should have the knowledge and skills required for governing a company effectively. This competence should be continually developed.
  • Commitment: A director should be diligent in performing his duties and devote sufficient time to company affairs. Ensuring company performance and compliance requires unwavering dedication and appropriate effort.
  • Courage: A director should have the courage to take the risks associated with directing and controlling a successful, sustainable enterprise, and also the courage to act with integrity in all board decisions and activities.

May I conclude with what might come across as an idealistic note on ethics:

“We understand that there is no distinction between private and public morality, no distinction between private and public behaviour; that even our innermost thoughts are acts of leadership. We understand that each waking moment for each one of us, is an act of leadership. We understand that even our most private actions and thoughts are therefore based on principles and morality instead of expediency…”

“The leadership to which I refer, is not mythical, it does exist in Africa and is epitomised by our own icon, the living embodiment of African leadership: Rolihlahla Nelson Mandela who is an example of what Warren Bennis, the noted leadership expert, might refer to as servant leadership, where the true leader is the servant of all.

Such a quality of leadership is not unique nor is it the result of pre-ordination. It is the result of choice, discipline and application. Mandela does not have these leadership qualities because he is great. Mandela is great because he has these leadership qualities.”

The African in my Dream ….
Reuel J Khoza
Year of publication 2004