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

Glenn Renwick – Progressive Insurance CEO

1.         How does your personal view of ethics affect Progressive? 

I’d like to say it dovetails very nicely with our core values.  I’ve said on numerous occasions that Progressive as a company is made up of two things, people and money.   So push aside the money for right now, realize that it’s an entirely people organization and the culture of that organization is really our most important asset.  The foundation of that culture is our values; to be fair those values aren’t dramatically different from anyone else’s values.  They’re good values in life and they translate well to the business. 
Having said that, I could say that my values align with Progressive’s values, which is absolutely true.  I think there are things we can do to reinforce those values.  The Progressive Way, our code of ethics, is reviewed by employees each year, but we can get complacent about these values.  I talk about these values regularly, the fact that I hire the people around me based on these ethical considerations in mind.  I think that as a management group we are very similarly minded and therefore that begins to cascade down throughout the organization and ultimately becomes a sort of a hiring practice.  I would say there has to be examples by leadership; one thing that I say often is that bad news doesn’t get better with time.  You’re either ethical or you’re not.  There are no shades of gray for me on that sort of behavior.  There are occasionally ethical dilemmas; there will be times when you’re not exactly sure what to do.  I think most people in most situations know what to do.  There can be a tendency to act without integrity or to report things as you wish them to be, as opposed to the way they are.   Sometimes a project will get into trouble, but emotionally we say everything is OK and that we’ll catch up.  We have ways of convincing ourselves, that things are better than they really are.  But actually not to report it as it really is, I would consider that lacking integrity or unethical because it deprives someone else the opportunity to say “Here’s more resources to get that job done.”  Human nature sometimes convinces us that what we believe will be is a better outcome will occur eventually instead of reporting what is happening.
Another example is “don’t kill the messengers”.  That’s easy to say and it’s almost trite, but you have to be practiced in that.  To get news that you don’t like on any subject whatsoever and not react to it in a way that someone could say, “Well next time I won’t tell you.”  Then you’re creating an incentive not to report things.  If you create an organization that’s not receptive to good news and bad news equally, you have a real problem on your hands.  A leader should not feel awkward in asking how our core values came into play in a situation.  If we all can ask ourselves, “Is that how we would treat the customer or the regulator”; then that’s a good system of checks and balances.  

2.         How do ethics affect the bottom line of your organization?

One thing is that we report monthly.  We have decided not to provide any guidance to those who like to analyze companies or stock.  It’s always an issue for a company to try and provide guidance and then try to meet it.  I happen to think that is a great travesty in American business.  Why do we forecast anything for anybody?  Why don’t we just report more things as they’ve happened as soon as possible?  It’s really a big issue. 

I don’t spend time thinking about what next quarter will be like and then if it not, finding ways inside the company to make those projections occur.  It would be very easy to do that.  I haven’t done that in eleven years and will never do that.  They’re could be all kinds of estimates on earnings out there, but we never comment on them.  All it takes is a maximum of thirty days and new information will be available about what happened that month.  Rather than taking up my time talking to “The Street”, I do none of that.  We do quarterly conference calls and one yearly investor meeting and do the same disclosure to all shareholders.   You as an individual shareholder get the same information as the largest shareholder.  I think that is highly unusual.  I strongly believe that’s the right thing to do.        

3.         What is the relationship between ethics and corporate citizenship at Progressive?

I believe that only ethical businesses will stay in business.  So the best thing we can do for Cleveland or any of the areas we have a presence in is to become a great company.  Employees have a sense if they’re working for a good company or not.  By having a great company and a great culture it allows our employees to do whatever they want in the community.  Progressive has a slightly different philosophy than other companies through our charitable foundation.  Many companies direct their employees to give money here or there.  In 2001, I said that doesn’t make any sense.  We let our employees decide where all our charitable money goes.  That felt like a very fair and ethical way to distribute our charitable contributions.  If you look around town, Progressive’s name won’t always be there with some of the banks or other companies, but we allow an employee with lower pay and low tenure to have as much influence on where our money goes as I do. 

4.         What is an ethical challenge you faced during your career? How did you respond? 

I have two examples.  The first is Hurricane Katrina which is not so much an ethical decision as an example of the responsibilities of leadership.  We all know what Katrina brought and the devastation on New Orleans.  I went down there with our Claims folks within a day or so and received a special pass to go into New Orleans.  I saw the real damage to many cars, some of which were our insureds, which were filled with what could only be described as raw sewage.  That day I thought through possibly what could happen, I knew that some of those cars could find there way back into the US market being sold to unsuspecting buyers.  I made the decision that not one of those cars would ever leave New Orleans.  We brought in three car crushers and not one car left.  That decision was made simply because it was the right thing to do.  I can’t tell if I cost shareholders money, but I assume I probably did.  We did not expect anything in return, but received a Congressional commendation for our efforts.  Anytime I go to the New Orleans Claims office, everyone knows that story, its important to them.  Something that I think your class really needs to get is that leadership decisions often have to be made with imperfect information.  If you have all the facts, it’s not a decision anymore.  

The second example I wish hadn’t happened.  Three years ago I found out through CNN that one of our investigations in Georgia involved a special investigator who under our direction had gone into a bible study group to observe an individual who may have been making a claim that was far greater than his injuries.  In certain circumstances observations are valid, but I think there has to be some thought as to where to draw the line.  In this case through our own actions and the actions of an investigator, that line was drawn in a very inappropriate place.  That made the news and within a few hours of having any knowledge that this ever happened, I went out with a press release that ultimately said “we’re sorry this ever happened.”  We did not say it was illegal, but it was unacceptable by our values.  By effectively issuing an apology by Progressive for that action, I knew that it would almost certainly invite lawsuits and it did.  In a lengthy deposition for this suit I was able to explain to the plaintiff’s attorney that what I was apologizing for was not an illegal act, but a breakdown in our values.  We were able to settle that lawsuit in a very reasonable agreement for all parties concerned.  When we screw up on our values we say so publically and quickly.  I think when people more junior than you or I see that, that’s what they learn from and therefore more likely to act ethically.