Ethical Leadership - The experience of JCU's 3rd IBD cohort

Chapter 2: Shadow Casters - Why Leaders Cast Shadow Instead of Light

 ·         Why would bright, talented CEOs steal from their companies, lie to investors, engage in insider trading, use corporate jets to move family furniture, and avoid taxes?  Why aren’t they satisfied with what they already have, and why do they feel they need more?  Identifying the reasons for our ethical failures (“shadow castors”) is the first step to stepping out of the darkness they create.

o        Faulty decision making and inexperience often go hand in hand; we’re more prone to make poor moral choices because we haven’t had much practice.

·         Unhealthy Motivations

1.      Insecurity- Leaders are often deeply insecure people who mask their inner doubts through extroversion and by tying their identity to their roles as leaders.  They use followers to serve their selfish needs.

2.      Battleground Mentality- Leaders use military images when carrying out their tasks (“wins”, “losses”, “allies”, “enemies”, “doing battle”, etc) with the competition.  The militaristic approach can be counterproductive, and more often than not cooperation is more productive than competition.

3.      Functional Atheism- A leader’s belief that she or he has the ultimate responsibility for everything that happens in a group or organization.  Symptoms include high stress, broken relationships with families, workaholism, burnout, and mindless activity.

4.      Fear- Fear of chaos drives many leaders to stifle dissent and innovation. They emphasize rules and procedures instead of creativity and consolidate their power instead of sharing it with followers.

5.      Denying Death- Our culture as a whole denies the reality of death, and leaders in particular don’t want to face the fact that projects and programs should die if they’re no longer useful.  Leaders also deny death through their fear of negative evaluation and public failure.

6.      Evil- Some people seem driven by a force more powerful than anxiety or fear (jealousy, envy, rage, evil, etc). 

·         Selfishness

o        A great deal of destructive leadership behavior is driven by self-centeredness, which manifests itself through pride, greed, and narcissism.  Self-centered leaders are proud of themselves and their accomplishments.  They lack empathy for others and can’t see other points of view or learn from followers.  They are too important to do the “little things”.  Their focus is on defending their turf and maintaining their status instead of on cooperating with other groups to serve the common good.  Ego-driven leaders ignore creative ideas and valuable data that come from outside their circle of influence.

·         Faulty Decision Making

o        Identifying dysfunctional motivations is a good first step in explaining the shadow side of leadership. 

o        Well-meaning, well-adjusted leaders can also cast shadows.

o        Moral reasoning, though focused on issues of right and wrong, shares much in common with other forms of decision making.  Making a wise ethical choice involves many of the same steps as making other important decisions: identifying the issue, gathering information, deciding on criteria, weighing options, and so on.

o        Decision Making Biases

§         Theories About How the World Operates

·         Ignoring low-probability events even when they could have serious consequences later.

·         Limiting the search for stakeholders and thus overlooking the needs of important groups.

·         Ignoring the possibility that the public will find out about an action.

·         Discounting the future by putting immediate needs ahead of long-term goals.

·         Underestimating the impact of a decision on a collective group (e.g., industry, city, profession).

·         Acting as if the world is certain instead of unpredictable.

·         Failure to acknowledge and confront risk.

·         Framing risk differently from followers.

·         Blaming other people when larger systems are at fault.

·         Excusing those who fail to act when they should.

§         Theories About Other People

·         Believing that our group is normal and ordinary (good) whereas others are strange and inferior (bad).

·         Giving special consideration and aid to members of the in-group.

·         Judging and evaluating according to group membership (stereotyping).

§         Theories About Ourselves

·         Rating ourselves more highly than other people.

·         Underestimating the likelihood that negative things will happen to us, such as divorce, illness, accidents and addictions.

·         Believing that we can control random events.

·         Overestimating our contributions and the contributions of departments and organizations.

·         Overconfidence, which prevents us from learning more about a situation.

·         Concluding that the normal rules and obligations don’t apply to us.

·         Inactive or Overactive Moral Imagination

o        Moral imagination—sensitivity to moral issues and options—is the key to ethical behavior.

o        Leaders fail to exercise moral imagination in large part because they are victims of their typical mental models or scripts. 

§         Scripts are mental shortcuts that enable decision makers to process data rapidly in order to make quick choices.  Our scripts can unfortunately leave out the ethical dimension of a situation.

o        Hyperactive moral imagination can create false scenarios when leaders and followers focus on creativity at the expense of ethical common sense.

·         Ethical Deficiencies

o        Leaders may unintentionally cast shadows because they lack the necessary knowledge, skills, and experience.  Not understanding how to go about making ethical decisions can be a problem.  So can ignorance of ethical perspectives or frameworks that can be applied to ethical dilemmas. 

o        Its possible to blunder into good ethical choices, but it’s far more likely that we’ll make wise decisions when we are guided by some widely used ethical principles and standards. These ethical theories help us define the problem, highlight important elements of the situation, force us to think systematically, encourage us to view the problem from a variety of perspectives, and strengthen our resolve to act responsibly.

·         Making and implementing ethical decisions take both critical thinking and communication skills.

·         We need first-hand experience that comes from tackling real-life leadership dilemmas.

o        Case Study 2.1 – The Multiplied Abused Children

§         Save the Kids founder Steve Hanson is looking for financial support for his lobbying efforts for the ‘sex offender registration’ bill

§         During speeches at fundraising events, he knowingly exaggerates the numbers of abusers and abuse victims to increase contribution

·         Contextual Pressures

o        Not all shadow casters come from within.  Ethical failures are the product of group, organizational, and cultural forces as well. 

o        Conformity is a problem for many small groups.  Members put a higher priority on cohesion than on coming up with well-reasoned choice.

§         Members of these shadowy groups engage in unhealthy communication patterns that generate negative emotions while undermining the reasoning process.

o        Sometimes when tasks are broken down in small segments, workers may not even know that they are engaged in an improper activity.

o        Socialization is a process that encourages employees to set their personal codes aside.

§         There are organizations that deliberately use the socialization process to corrupt new members through co-option, incrementalism, and compromise.

·         Stepping Out of the Shadows: Expanding Our Ethical Capacity

o        Taking on the role of leader is a stretching experience.  We must acquire additional skills to tackle broader responsibilities and master a new set of ethical dilemmas.

o        Leaders with a heightened moral capacity believe that they have a responsibility to act morally in their positions and to set a high ethical standard for followers.

o        Ethical leaders can understand how others think and feel, and anticipate the consequences of their choices.

o        Leaders with expanded moral capacity have a base of experience that enables them to recognize the particular ethical problems they may encounter in their positions and equips them with the mental models or strategies they’ll need to manage these dilemmas.

o        Leaders learn to identify gaps between current performance and where he or she needs to be and then closes those gaps.

o        The most powerful leadership experiences also stretch or challenge people.

o        Three elements—assessment, challenge, and support—should be part of your plan to increase your ethical capacity. (see figure 2.1 Developmental Components on p.52)

o        The following milestones will help you know that you are becoming more ethically competent:

§         Greater self-awareness

§         Greater self-confidence

§         Ethical role modeling

§         Healthy moral imagination

§         Sounder moral reasoning and better follow-through

§         Greater resistance to outside pressures

§         Healthier ethical climate

o        See figure 2.3 Ethical Capacity Development Model on p.56 to see how it all comes together

·         Case Study 2.2 – Napoleon Marches Again

o        Former director of General des Eaux Jean-Marie Messier spent $100 billion purchasing entertainment and media companies between 1994-2001

o        He was called a “modern day Napoleon” with his extravagant living and extreme self-reliance, excluding others from decisions and important financial data

o        However, his businesses did not succeed, the share price dropped tremendously, and federal agencies fined and revoked privileges – Messier still believes he was not at fault

·         Case Study 2.3 – The Ethical Saga of Salomon Inc.

o        Salomon’s government securities trader, Paul Mozer, was charged with putting in illegal bids for gov’t issues to circumvent the legal maximum number of bids

o        CEO John Gutfreund failed to report Mozer’s illegal bids to the Treasury until 3 months later, during which no action was placed against Mozer

o        The failure to act was the leader’s indecisiveness in a culture where big bets in financial trading were part of a game; Salomon eventually was bought by Smith Barney in 1997

o        When the telecom industry became big in the beginning of 2000s, Salomon, specifically trader Jack Grubman, was accused and fined for misrepresentation of information; incentives from the company and financial wealth pushed for Grubman’s touting of WorldCom despite unreliable information