Corporate Leadership Going Awry A Business Ethics Maze

By Dorweiler, Vernon P.; Yakhou, Mehenna | Business Renaissance Quarterly, Fall 2006 | Go to article overview

Corporate Leadership Going Awry A Business Ethics Maze


Dorweiler, Vernon P., Yakhou, Mehenna, Business Renaissance Quarterly


Abstract

Scandals have expanded widely in the business community. The number of companies involved covers a spectrum of industries. It is said that the depth of scandals reaches corporate governance, corporate integrity and business practices (Hopen, 2002). The question is what has caused this eruption of scandalous conduct. The brief answer is the lack of, or design for, ethical standards in the corporate leadership. This paper is focused on the scope of business scandals, and then the leadership basis for correction of the scandals.

Keywords: Business Scandals, Corporate Leadership, Corporate Culture, Ethics.

Leadership of Corporations

At the outset, leadership is a broad mandate on individuals. The Baldridge criteria assess leadership as "visionary" that sets directions for the corporation. Those directions are determinative, but are few: customer focus, values to be followed, and meeting high expectations.

Other corporate activities and decisions follow from these, guiding corporate objectives in the interest of shareholders and stakeholders.

An important asset of the corporation is the workforce. Motivating and up-to-date learning are involved. With motivation, the workforce is engaged in the business, as innovative and creative. From the values (standards) and motivation (dynamic), the processes of the corporation are built on strategies (guidance of business direction), on systems (value standards) and methods (means of achieving).

Leadership requires officers to be role models, in involvement and in ethical behavior. The areas of involvement are found in the above sequence: vision, direction, valuebased, and engaging the workforce.

These requirements are set in corporate by-laws, and further in systems & methods. Motivation is set in ethics of the organization.

Leadership of a corporation is included in the purpose of a Board of Directors (the Board). Likely, most management decisions are made by internal directors of the corporation, as the Management Committee.

The Board of Directors has a central purpose to make strategic and directional changes (Clark, 1986). The Management Committee makes tactical and operational decisions. The main limitation of the Board of Directors is insufficient knowledge of details to make operational decisions. Earlier that was an excuse for a company's conduct considered as improper for Board officers.

Internal directors have access to the key information of the corporation: operational, financial and future expectations. External directors have broad responsibilities, and only special contact with the operational details of the corporation. With the split of roles, director versus management, scandals readily take place. From the difference in roles, there can be a divergence in direction of the corporation. Recall that the term director has been determined from its historic meaning: a director directs the affairs of the corporation. Boards now are intended to manage, to determine the direction of the corporation. That is the original, and probably most accurate, role of directors (Thornbury, 2003).

A proper query then is to regard scandals as the creative role of the corporation. This analysis introduces the answer as remote from the roles identified thus far. First, business ethics are primarily a guideline, at whatever level stressed: director, executive officer, manager, and worker. Next, the different corporate actions are not constrained by ethics, or even by corporate guidelines; many are discretionary with the Board.

Modernly, the internal-external split is mostly eliminated, as external directors become embedded in depth in corporate decisions. The reason is due to profit guidance, to meet financial needs, including executive compensation (Wong, 2003). At times, financial decisions are made independent of profit performance. This result is carried so far that bankruptcy protection is necessary, or that a scandal is externally discovered (MacLean, 2002). …

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