Connecting the Dots between Leadership, Ethics and Corporate Culture

By O'Toole, James | Ivey Business Journal Online, September/October 2009 | Go to article overview

Connecting the Dots between Leadership, Ethics and Corporate Culture


O'Toole, James, Ivey Business Journal Online


Many large, progressive global companies are becoming dynamic, organic, decentralized organizations in which leaders use shared values, mission, and purpose to gain alignment with corporate goals on the one hand, and commitment to innovation and processes of adaptive change, on the other. Succeeding in this mission depends on the leader's commitment and support. Would-be progressive leaders will learn how to make the transformation by reading this article.

With increasing frequency, farsighted corporate leaders, the business media, and the most progressive business schools are using a new management vocabulary. This new lexicon includes words and phrases such as Globalism, Sustainable Growth, Stakeholders, Continuous Innovation, Corporate Culture, Ethics and Values-Based Leadership. While these words may appear unrelated, the dots between them can be connected. When they are, they constitute a formidable challenge for the business community: Leaders of global corporations must learn how to create socially and economically sustainable corporate cultures.

This challenge is as complex as it is important. Its complexity derives from the fact that it contains numerous and disparate elements. These elements include:

* The manifest need to protect the environment by using natural resources wisely and by proactively addressing issues of pollution and global warming;

* The moral imperative to treat workers in developing nations with respect and dignity, a responsibility that includes training and educating workers to be able to contribute to the long-term development of their nations;

* Implicit social responsibilities to all domestic corporate stakeholders, including employees, customers, suppliers, dealers, and host communities;

* The legal imperative to obey all the laws in every country where a company operates, including complying with regulations and reporting procedures, as well as beyond the letter of the law, to include ethical business practices and organizational governance.

The challenge is important because, when met, it will provide for the long-term profitability of the organization. For no matter how well a company may perform its non-economic functions, it will be viewed as a failure if it fails to fulfill its traditional task of providing customers with the goods and services they need, at prices they are willing to pay. To do that requires an effective business strategy along with the appropriate internal management practices needed to create continuous organizational self-renewal, innovation, and customer responsiveness-all of which are needed for sustainable long-term growth.

The red ball of profit

While the centrality of this complex set of challenges has become increasingly clear in recent years, it is far from new. In 1975, the CEO of pharmaceutical giant Johnson&Johnson presented his executive team with exactly those challenges. He sent the team on a two-day retreat to discuss the founding document of their company, the J&J Credo, which had hung unheeded and yellowing on company walls for decades after it was penned by the company's founder. The Credo outlines the company's specific responsibilities to all its stakeholders, starting with its customers-the doctors, nurses, patients and mothers of sick children who buy the companies medicines-as well as its suppliers, employees, host communities and, finally, the company's share owners.

Toward the end of the meeting, one of J&J's top executives summarized what he saw as the reality of corporate life. He said that being an executive in a large company was like being a circus juggler, attempting to keep five balls in the air simultaneously. Four of those balls were white (those representing customers, suppliers, employees and communities). The fifth ball, the one representing shareholders, was red. To the approval of most of his fellows in the room-and, in fact, reflecting the beliefs of the vast majority of corporate mangers at the time-the executive said it was possible to drop one of the white balls and still survive, but allowing the red ball of profit to fall would be fatal.

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