Tuesday, November 18, 2014

Faith Leadership and Ethical Leadership: Absurd and Ethical Visions

Leadership under religious auspices can be distinguished from ethical leadership. The shift from ethical to religious principles is more involved than merely swapping one kind for another. The dynamics pertaining to faith are distinct. Kierkegaard makes this point very well in his text, Fear and Trembling. In short, an individual of faith must go it alone when the paradox of faith violates ethical principles.

In willingly facing the absurd in which sacrificing Isaac contradicts God’s promise that Abraham’s seed would spread like the wind among nations, Abraham cannot make intelligible to anyone else why he is to violate the ethical principle of duty to his son. That is to say, God calling Abraham to violate an ethical principle that is universal in that it is easily understood by people by acting on faith on the strength of the absurd, which cannot be explained or even communicated intelligently. This puts such “knights of faith” in an isolated, even terrifying, position, for they face the absurd alone and as unethical.

As applied to leadership, a knight of faith cannot make a vision that is absurd due to the paradox of faith intelligible to his or her followers. Hence, such a leader cannot tell his or her follows to follow in the sense of being like the leader; even as a leader, a knight of faith is isolated—hence the fear. A knight of faith willingly gives up the security and comfort of accepted understandings, such as duty and justice, and thus cannot justify his or her acting on faith. A leader of faith undoubtedly fears for his or her tenure owing to the impossibility of making the rationale behind his or her vision intelligible even to supportive followers. Such a leader is reduced to saying, in effect, Trust me in going this way even though it looks absurd. A corporate board having supervisory responsibility for such a CEO would obviously be in a tight spot, as would the CEO.

Making matters worse, an individualist (in terms of being above the universal manifesting as ethical principles) is suspect in organizational life. “There is a fear of letting people loose,” Kierkegaard writes, “a fear that the worse will happen once the individual enjoys carrying on like an individual.”[1] Clashing fundamentally with this mentality, “(n)o person who has learned that to exist as the individual is the most terrifying thing of all will be afraid of saying it is the greatest.”[2]  The clash between the collectivist and individualist ideologies renders a leader of faith all the more tenuous, and thus afraid as well as insecure. Yet such a leader can draw strength from the absurd itself because he or she feels an absolute duty to the absolute (i.e., to God).

This is not to say that the ethical leader is without value. As Kierkegaard puts it, the “tragic hero renounces himself in order to express the universal.”[3]  In prosecuting a son for murdering a stranger, for example, on the basis of justice—a principle understood intersubjectively, and thus a universal principle—a father acts above his own selfish pleasure and thus his particularity more generally. The sacrifice is praiseworthy. Similarly, an ethical leader puts a shared principle above his or her own advantage or interest.

A knight of faith renounces relevant universal principles “in order to be the particular.”[4] Hence, particularity as selfish pleasure lies below the universal while particularity on the strength of the absurd lies above the universal. A leader of faith is thus superior to an ethical leader, according to Kierkegaard’s account. As difficult (and rare) as it is to find an ethical leader willing to sacrifice his or her particularity, I submit that it is rarer still to find a leader act on faith in advancing a paradoxical absurdity even though as in Abraham’s case the absurdity collapses at some point and the leader’s vision is realized. In other words, Abraham got to keep Isaac after all, but only after suffering through renouncing the universal (i.e., the duty to protect Isaac) and embracing the absurd by faith.

Interestingly, a leader in the midst of the absurdity can only have faith that the absurdity itself is nonetheless possible, rather than that he or she will come out well in the end. For Abraham really thought he would have to sacrifice his son until the point in which God said that the ram would do instead.  So a knight of faith cannot rest on consequentialism or selfish pleasure as easy outs. Accordingly, I suspect that such a leader’s credibility stems from the deep suffering that is unavoidable and cannot be justified by sacrifice to a universal ethical principle. From the credibility, followers can have faith in such a leader even without being able to understand why such a leader would advocate for an absurdity.

[1] Soren Kierkegaard, Fear and Trembling (Penguin Books: London, 1985), p. 102.
[2] Ibid.
[3] Ibid., p. 103.
[4] Ibid.

Thursday, September 18, 2014

Can ethical leadership be taught?

In the typical business school, this question would be interpreted, or “refurbished.” Can students be trained to become ethical leaders? While often conflated contemporaneously, these two questions are indeed distinct. Instructors, professors and school administrators should first decide which question is more relevant to their purposes. The question chosen should fit with the education, pedagogical method, and philosophy of education of not only the instructor or professor, but also the school itself. In this essay, I distinguish the two questions in order to unpack them with their full significance.

The entire essay is at “Can Ethical Leadership Be Taught?

Monday, September 8, 2014

Toward a Definition for Ethical Leadership: Disabusing the Pessimists

Linda Thornton, a management consultant, suggests that “the definition of leadership ethics is still unclear; its scope is broadening, making it a moving target.”[1] This is not good news for the topic. Fortunately, the field may be making the task of definition unduly arduous. Scholarship is needed to ferret through the debris so a concept of ethical leadership can be constructed that is both academically rigorous and of use to practitioners, whether in advising and “doing” ethical leadership.

Thornton points to the increasing scope of problems that can occur in leadership ethics globally as having broadened the scope of leadership ethics. She assumes that the “widely differing values, rules and laws” in the various cultures (including corporate) mean that the “way we define ‘leadership ethics’ has to be different” (p. 60). She is assuming (erroneously) that the particular context of an application must be part of the concept’s definition. Furthermore, she treats defining leadership ethics as the same as defining “an ethical company.” What happened to leadership? Perhaps we can now see how the problem of definition has been rendered unduly difficult by fallacious assumptions.

Besides distinguishing particular cultural values and principles from ethical leadership as a concept that holds irrespective of the context, the concept can perhaps be further delimited. For example, Thornton includes adhering to legal requirements as part of the definition. However, ethics is not the same as law; something can be unethical without being illegal. For example, Goldman Sachs sold derivative securities that the investment bank was shorting. Not informing the customers of the firm’s own shorting may have been unethical, but it was not illegal at the time. Also, it can be ethical to violate a law deemed as unjust (e.g. apartheid). The requirement of law-keeping is thus a dogmatic interlarding of an extrinsic factor into the definition of ethical leadership.

Thornton also tucks into stakeholder management into her construal of ethical leadership, where she avers that the scope of ethical leadership includes “how what we do in organizations affects profits, people, and the planet” (p. 60). In other words, ethical leadership requires “making choices that do not harm groups not traditionally considered constituents of the organization” (p. 60). However, the validity of the claims even of groups “traditionally considered constituents” is subject to debate ethically, given the property rights of a firm’s stockholders. The term “constituent” alone is problematic in stakeholder management. To refer to an external stakeholder as one is itself to engage in a power-grab. Adding additional groups, as if required as an inherent part of ethical leadership, suggests that the matter of defining is following an ideological or partisan agenda.  In this way, definitional difficulties have been expanded quite unnecessarily. Such ideological or prescriptive agendas, by the way, are admittedly all too salient in the writings of many business ethics scholars; the lapse is not limited to consultants and leaders in the field. Stakeholder management theory, for example, could be an ideological Trojan horse coming in "under the radar" under the subterfuge of scholarship. This practice itself is unethical. Adding one's ideology into the process of defining the concept of ethical leadership is like pouring dirt into clear mountain-stream water. Working toward a definition of ethical leadership thus entails as a first step filtering out the precipitate slug.

More difficult to shave off the definition of ethical leadership—but perhaps no less necessary—are ethical values that are universally-held and maybe even intrinsic to ethics itself. Thornton lists honesty, integrity and fairness. However, it may not to be ethical to be honest, such as in telling a Nazi SS officer that a family of Jews is hiding in the wall between the kitchen and living room. Fairness too might be conditional from an ethical standpoint. Whether integrity, which can be defined as congruence between word and deed, contains substantive ethical principles is itself a matter of dispute (see “Integrity in Strategic Leadership”).

Beyond the unnecessary roadblocks evinced in Thornton’s depiction of the problem in defining ethical leadership, the attitude of some practitioners—whether consultants or leaders—toward knowledge generally (and especially on a construct as potentially ideological as ethical leadership) functions as an obstacle to achieving a definition. Viewing knowledge as “just another perspective” among opinions—essentially treating knowledge as opinion—is to tacitly dismiss defining itself. In other words, treating knowledge as relative or simply as whatever anyone happens to think about a topic effectively eviscerates scholarship, not to mention clearly defined concepts. The meaning of a word becomes whatever the user decides, and this dilutes meaning itself and impairs communication. I suspect that behind practitioners who reject the academic literature of a concept relevant to their own field, or treat a theory or empirical result as simply another perspective among their own opinions is the false presumption of being entitled as scholars without the higher education that is requisite. Whether in raising their own opinions to the status of knowledge or disavowing knowledge as anything more than opinion, the anti-intellectualism is ultimately self-defeating. If the only thing that can go into the definition of a concept is opinion, the project of defining ethical leadership is indeed doomed. Fortunately, knowledge does exist—even in the case of the concept of leadership! Such knowledge is neither opinion nor subject to it. Therefore, in order for the phenomenon of ethical leadership to achieve an a priori conceptual solidity, scholarship is needed. Such scholarship, being oriented to the concept itself, should not be based on empirical surveys, opinions from the field, or even the participating scholars’ own ideological agendas.

1. Linda Fisher Thorton, “Leadership Ethics Training: Why Is It So Hard to Get It Right? September 2009. 

Monday, September 1, 2014

Emperors and Generals: On the perspectival Wisdom at Upper-Echelon Leadership

In complex social arrangements, such as exist in governments, business firms, and religious organizations, a person must climb through many levels before reaching persons of sufficient height and occupational breadth that what had been said to be binding requirements suddenly become as though unfettered butterflies. Astoundingly, the mid-level subordinates may even object as the rules are relegated back to their true status as guidelines. Beyond the element of greater authority, a greater perspective in terms of what truly matters is profoundly important in this regard. Having many decades of lived experience, plus a certain maturity in place of pettiness, is also in the mix. A Pope of the Roman Catholic Church, for example, may be more likely to pick up on a sincere heart of the sort Jesus would praise than run through a laundry list of doctrinal requirements.

In the film Emperor (2012), religion and government are intertwined in the Japanese emperor, who was until shortly after World War II also officially a living god. Although his aides attempt to put General MacArthur into a straightjacket of protocol for the meeting with the emperor at the end of the film, both the general and the emperor are off sufficient maturity and perspective to disabuse themselves of the protocols and focus on the truly important stuff. To discern the petty from the profoundly important is a key feature of upper-echelon leadership.

The entire essay is at “The Emperor

Sunday, August 24, 2014

Ethical Leadership: Pruning Off the Debris

As business practitioners grapple with the intangible yet potentially valuable notion of ethical leadership, it is left to scholars to assess whether those practitioners are “coloring within the lines.” It is admittedly all too easy to draw in exogenous material that is pleasing to the eye; it is all too easy to deem such material required for ethical leadership rather than ballast weighing it down, unnecessarily. One business practitioner characterizes ethical leadership as that which “inspires the behaviors in people necessary to create competitive advantage.”[1] As achieving a sustainable competitive advantage is the task of strategy, inspiration alone can be extracted as that which is particular to leadership. Strategy is what is left once one has extracted inspiration from the characterization.

As though to isolate the concept of ethical leadership on a petri dish, the practitioner adds that ethical leaders “distinguish themselves by doing that which is inconvenient, unpopular, and even temporarily unprofitable in the service of long-term health and value.” These stipulations may be dogmatic in the sense of being arbitrary, however, rather than intrinsic to the concept.

What is the nature of the inconvenience and unpopularity, given that the practitioner distinguishes them from being contrary to short-term financial interests? Does it even make sense to admit the existence of an inconvenience that does not register financially? Perhaps the inconvenience is to the leader who wants to retain power, or to others in the organization. Secondly, is the lack of popularity within the organization, or in society (or both)? Lest it not be forgotten, for something to be unpopular in society translates into a lack of congruence between organizational and societal norms or values. It should be noted that organizational-societal congruence lies at the heart of corporate social responsibility. Does doing the ethical thing necessarily entail an incongruence or unpopular measure? The only aggrieved may be the corrupt, while the overwhelming majority within the organization support the ethical leader’s principles and vision for what the organization can be.

Furthermore, sacrificing on short-term financial interests for long-term profitability is not in itself ethical; rather, long-term strategy can viably be at the expense of financial expediency. To essentially “monetize” an intangible asset such as ethical leadership is problematic because the specificity can easily eliminate alternative paths that are just as capable of being classified under ethical leadership.

Nevertheless, the practitioner narrows the purview of that which counts as ethical leadership even further. Ethical leaders “view the world as interconnected and develop multidisciplinary solutions to address complex problems that crop up every day.” The world as interconnected is a salient feature of the feminine template, whereas the hub-and-spokes framework is consistent with the masculine way of relating to the world. Were the feminine structure also that of ethical leadership, the hub-and-spoke framework of stakeholder management would not be ethical. Put another way, attending to the interests of individual stakeholders could not be considered a viable approach to ethical leadership.

Nor does ethical leadership connote “multidisciplinary,” or even being broad-minded. An ethical leader can legitimately be single-minded in preaching a particular ethical principle applied to herself or the organization. Similarly, nothing in the concept of ethical leadership requires that the problems to which it applies are complex. In fact, ethical leadership is not simply another name for effective problem-solving; rather, management is oriented to problem-solving. To reduce the vision of an organizational or society leader to particular solutions is essentially to micromanage leadership into management, and therefore to commit a category mistake.

The practitioner slips into his own domain (i.e., management) in projecting a content onto ethical leadership. For example, he claims that the “leadership team” at Ritz-Carlton “allows each employee to spend up to $2,000 to address customer issues at his or her own discretion.” While giving front-line employees more discretion with which to resolve customer complaints is a laudable policy, I’m not convinced it is ethical in nature. The statement, employees should be given the use of $2,000 each, does not feel like the trust of the claim. Rather, it seems like smart, even broad-minded management not to be so niggardly with one’s control over one’s budget.

Lastly, the practitioner’s own ideology has infused into his concept of ethical leadership, as evinced in his claim that “Ethical leaders extend trust to their workers, creating the conditions necessary to empower employees, suppliers, and even customers to take the risks necessary to create game-changing innovations.” The prescriptive tone is in the subtle must extend and must create. Furthermore, is top-down management really unethical? If so, the ethical principle of fiduciary duty, which extends downward from a corporation’s board, can only be an oxymoron. The interlarded ideological demands here may be nothing more than a power-grab by means of defining. The grab in this case pertains to not only the practitioner in defining ethical leadership, but also organized labor vicariously.

At the same time, common sense tells us that ethical leadership is not just integrity in the sense that a leader's actions are consistent with her words; ethical implies that the content of at least one basic ethical principle is involved. The problem is when an ideology quietly slips in and presumes to declare itself an ethical principle. Ethical leadership itself is artificially narrowed, and likely even distorted, in the process.

Behind my critique is the Nietzschean claim that the imposition of modern morality by ethicists is itself none other than a self-serving power-grab to get the strong to do their bidding.[2] That is, the moralist’s defining is actually an act to dominate out of weakness. The club used is Thou Shalt Not, and the ethicist’s pleasure is obtained by his or her ideology overcoming the external obstacles in practitioners who have other beliefs and values.

If Nietzsche is correct, ethical leadership itself may be severely and yet invisibly infected. At the very least, its definition would need to be severely pruned back—like a government’s bloated budget that has become distended from political pressure from various special-interests (i.e., ideologies). Rather than thinking about what you want ethical leadership to be, try asking yourself what it is.

1. Dov Seidman, “Ethical Leadership: An Operating Manual,” BloombergBusinessWeek, December 17, 2010.

2. Friedrich Nietzsche, a German philosopher, most of whose books were published in the 1870s and 1880s.  Key to his philosophy: pleasure from the power in overcoming obstacles (internal or external) is our main urge, or instinctual motive.

Toward a Theory of Ethical Leadership: Exculpating Interlarding Ideologies

Constructing an accurate ethical-leadership concept that is not over-extended by one’s ideological agenda ought to begin with defining leadership itself. That is to say, more attention should be paid to thinking about what leadership is. Beyond its attributes and any contextual artifacts, leadership itself must be identified as a distinct phenomenon before we can go on to highlight the ethical dimension that completes “ethical leadership.” Then what counts as the ethical dimension of leadership can be clipped back to that which is implied in the definition of leadership, which in turn is entailed in the essence of the phenomenon.

How we characterize the ethical dimension depends in large part on how we define leadership. For example, if leadership is defined as making sense of actual and desired social happenings, then ethical leadership is the obligation to satisfy followers’ need for meaning. On the other hand, if leadership is defined as distinguishing and favoring a desired value relative to actual values, ethical leadership is the obligation to instill the desired value in others. In his text, Leadership, James M. Burns claims that transformational (as distinct from transactional) leadership is geared to the followers’ development.[1] While doubtlessly salubrious, such an accretion is dogmatic, or arbitrary, if we are to base the ethical dimension of leadership on our definition of leadership itself. I suspect that the arbitrariness here comes from the scholar’s own values, which he intentionally or unintentionally “slips in” or superimposes as being necessary to ethical leadership itself.

To tease out the presence of ideology in the formulation of a practical concept like ethical leadership, I submit for your consideration the possibility that Hitler was a transformational leader even though he did not lead in order to develop all of his followers. I suspect at least some German Jews supported Hitler because of his job-creating success from re-militarizing Germany—at least until the Nazi regime broadened its anti-Communist mandate to go after the Jews. Rather than merely exclude some Germans from being his followers, Hitler went after some of his existing followers. It cannot be said, therefore, that Hitler’s leadership was in keeping with the development of his followers.

Even so, Hitler’s leadership was transformative in terms of meaning and values pertaining to Germany itself. In re-formulating it from “the vanquished” to the third German empire, or Reich, Hitler sought to transform Deutschland. He was not merely a transactional leader, micro-managing incremental change within a given social-political paradigm or framework.

So we have a case of transformational leadership in which the development of followers is not that which is necessarily being transformed. Burns might have used the term in that way, but actually transformation has to do with systemic as distinct from incremental change; paradigm change rather than reforming existing programs. Adding content or application to transformational beyond this likely comes out of someone’s personal ideology rather than what is entailed in the construct itself.

For example, the redistribution of wealth or power is not inherent in ethical leadership defined as “making” and “selling” meaning. Redistribution does not necessarily come to mind as a leader formulates and sells a particular social reality whose meaning is valued by followers. The particular prescription comes out of an ideological agenda superimposed on ethical leadership rather than being implied in sense-making or valuing itself. 

To be sure, one could get out of the straightjacket here by widening the definition of leadership beyond that which is intrinsic to the phenomenon itself. For instance, one could say that redistribution is part of fairness, which in turn is an ethical principle, so ethical leadership must entail redistribution. This is essentially cheating, however; a definition that goes beyond the nature of that which is being defined is not accurate. The ethical dimension of leadership is delimited by what leadership itself is, rather than what ethics may entail. As a methodology in coming up with a working definition of leadership, and then of ethical leadership, we should be as strict as possible so not to leave any fat on the bone. No freeloading ideological trappings allowed.

Rather than being excessively stark or hopelessly minimalist, this approach emphasizes essence or the nature of something as the basis for delimiting a concept. Thwarting any potentially interloping ideological agendas is gravy. I believe that ethical leadership can indeed be understood and explained in terms of its essence in spite of the encroaching nature of the interlarded opinions and ideological agendas that seek to monopolize the concept for their own purposes. Put another way, the development of knowledge on ethical leadership, I contend, is being held hostage by ideologues who seek to use the label to further their own agendas. The ethical dimension intrinsic to leadership itself may be much thinner than we suspect.

[1] James MacGregor Burns, Leadership (New York: Harper & Row, 1975).

Tuesday, August 19, 2014

Religion in Ethical Leadership in the Secular Context of Business

In Peter Berger's terms, the sacred and the profane are like oil and water. In Augustine's terms, the heavenly and earthly kingdoms are two distinct realms, a Christian being only a pilgrim passing through the latter, hence not to be "of it" while in it. I contend that such "white and black" dichotomies are artificial, and thus ill-fitting as paradigms in which to situate religion and ethical business leadership. Perhaps a devoutly religious CEO can unabashedly apply ethical elements of his or her religion without severing them from their theological underpinnings, and therefore without the need for subterfuge. I suspect that the legions of the CEO's subordinates would feel more, rather than less, respected. 

Sunday, August 10, 2014

Sun Tzu's Art of War: A Recipe for Leadership in Business

According to Master Sun in The Art of War, “Leadership is a matter of intelligence, trustworthiness, humaneness, courage, and sternness.”[1] Although Sun Tzu is referring mainly to military (and related political) leadership, lessons can be learned on exercising business leadership by means of a careful adaptation.

Following Master Sun’s thesis statement on leadership, Du Mu observes that intelligence “involves ability to plan and to know when to change effectively. Trustworthiness means to make people sure of punishment or reward. Humaneness means love and compassion for people, being aware of their toils. Courage means to seize opportunities to make certain of victory, without vacillation. Sternness means to establish discipline in the ranks by strict punishments.”[2] Crucially, as per Taoism more generally, these traits should be in balance. In fact, the management of balance, which includes reaching and sustaining an equilibrium state, is more important than the particular attributes themselves in a distinctly Taoist recipe for effective leadership. Accordingly, hypertrophy—an increase in any particular variable at the expense of the whole—is NOT the way of leaders in the Way.

In The Art of War, Jia Lin warns against hypertrophy. “Reliance on intelligence alone results in rebelliousness. Exercise of humaneness alone results in weakness. Fixation on trust results in folly. Dependence on the structure of courage results in violence. Excessive sternness of command results in cruelty. When one has all five virtues together, each appropriate to its function, then one can be a military leader.”[3] Although Master Sun then says, “Discipline means organization, chain of command, and logistics,” self-discipline is a vital resource that a leader of the Way must tap in order to keep each leadership virtue from encroaching on the others and thus compromising or enervating the person's leadership. [4]  Intelligence, humaneness, trust, and courage or sternness much all be given enough space to breath, or the resulting leadership will be lop-sided. Least of all should a leader informed by The Art of War go into battle or face competitors as though a bike whose tire-spokes have not been adjusted sufficiently that the wheels are true (i.e., straight rather than wobbly).

Intelligence—which involves ability to plan and to know when to change effectively—must not be emphasized to the point that the purported leadership is reduced to mere tactic. Moreover, strategic leadership must not be allowed to tip too far over, whether in the direction of strategy or leadership.[5]

Furthermore, exercising Sun Tzu's prescription for leadership does not involve so much courage or sternness that humaneness is left in the dirt. This is no capitulation to weakness; Zhang Yu points out that if “the people are treated with benevolence, faithfulness, and justice, then they will be of one mind, and will be glad to serve.”[6] Jia Ling adds that if “the leaders can be humane and just, sharing both the gains and the troubles of the people, then the troops will be loyal and naturally identify with the interests of the leadership”[7] 

Giving humaneness more than its due (i.e., beyond its optimal effectiveness in the exercise of leadership), such as in allowing compassion to eclipse self-confident (rather than shamed) courage, weakens the exercise of leadership. Astute readers will doubtless notice the rather odd omission of any moral argument here. Nietzsche's account of compassion as a weakness fits very well here and can thus add depth to Sun Tzu's conception of leadership.

Nietzsche maintains that Schopenhauer’s notion of compassion  is essentially weakness.[8] Rather than saying that compassion is a manifestation of weakness as Nietzsche contends, Master Sun posits that acting solely on compassion engenders weakness. Both Nietzsche and Sun dismiss the sort of strength that manifests as compassion of the most inconvenient sort. The Dali Lama, for instance, could be regarded as weak rather than strong for refusing compassion for the poor in order to make even more money from his workshops "on the road." The nature of strength, and thus weakness, may be said to differ in a religious or spiritual context from the moralistic compassion described by Shopenhauer. Indeed, Nietzsche and Sun Tzu may have bad news for the moralizing business ethicists.[9]


To be sure, Master Sun had in mind military leadership, which he maintains is a part of political leadership. We cannot assume, therefore, that his breed of leadership applies to spiritual strength, or even business acumen. 

For example, the sort of courage called for in business pales in comparison with that which comes into play on a REAL battlefield. The use of military jargon by CEOs such as Dick Fuld, former chair and CEO of Lehman Brothers, is thus sheer ego; a corporation's vice presidents are not "lieutenants" and competing is not "a battle." As the saying goes, boys will be boys.

It must be admitted, however, that power-aggrandizement is no stranger in either the religious or business domain. To this extent, the art of war applies.  Indeed, vision and charisma are useful qualities in religious and business leadership. Ironically, a military general is more apt to rely on decisiveness and raw force. 

More specifically, the virtues in Sun Tzu's theory of leadership can themselves be applied under the principle of balance in religious institutions and (other) businesses. For example, excessive sternness, as is involved in treating corporate policy as if it had the status of law, comes at the expense of trust as well as compassion. Too much courage in firing "lieutenants" who might otherwise become a viable threat eviscerates trust throughout a corporate headquarters and suffocates any sense of humaneness. 

Of course, a CEO who is so preoccupied with being humane (or wanting the company to be viewed in society and even internally as compassionate and trustworthy) that he or she depletes the corporate coffers on the company's corporate social responsibility programs is not exactly acting intelligently in terms of leading a viable concern. 

In conclusion, we need to be careful in how we apply Sun Tzu's Art of War to leading a business. The leadership attributes needed for victorious military exploits are not necessarily those that pertain to effective business leadership. That said, Sun Tzu's virtues, such as intelligence and trustworthiness, are not without value in a business setting, and balancing them is conducive to the notion of optimization in a business sense. For instance, going overboard in misappropriating military terminology can be sign of underlying weakness that wants so much to dominate (Nietzsche). In Sun Tsu's terms, the exaggerated verbal toughness (think of Fuld) can be read as a desire to be reckoned as more courageous than is deserved or warranted (at the expense of intelligence), or to be sterner than need be (at the expense of humaneness).[10]  Perhaps the lesson is to calibrate the intensity of Sun Tzu's virtues to fit the business setting as distinct from a theater of war and then assess whether the virtues are in balance (i.e., none is getting pushed aside by any of the others). Applying The Art of War need not imply that business is somehow a military operation. Ironically, studying Sun Tzu's text can afford us a useful opportunity to come up with a better sense in which business leadership is distinct even as it can benefit from theories stemming from leadership in other domains.

1. Sun Tzu, The Art of War: Complete Texts and Commentaries (Boston: Shambhala, 2003), p. 44.
2. Ibid.
3. Ibid.
4. A parallel can perhaps be made to Aristotle’s doctrine of the mean, wherein a given virtue becomes a vice when too little or too much is in one’s conduct relative to what is appropriate. This does not mean moderation. For example, the anger that is appropriate (and perhaps even necessary) in stopping a thug from beating up a homeless person far exceeds the amount or intensity of anger that is suitable or fitting in an argument over politics. For an application of Aristotle's doctrine to his notion of natural wealth in checking greed, see Skip Worden, "Aristotle's Natural Wealth: The Role of Limitation in Thwarting Misordered ConcupiscenceJournal of Business Ethics, Vol. 84, No. 2 (January 2009), pp. 209-219.
5.Skip Worden, "The Role of Integrity as a Mediator in Strategic Leadership: A Recipe for Reputational Capital," Journal of Business Ethics, Vol. 46, No. 1 (August 2003), pp. 31-44.
6. Sun Tzu, The Art of War, p. 42
7. Ibid, p. 43.
8. Schopenhauer posits that compassion naturally manifests from the metaphysical One, which pervades everything, and thus all people. He gets his notion of the One from Plotinus, a neoplatonist in the third century. Interested readers might want to compare Plotinus with Shankara, a monist in Hindu philosophy who lived in the eighth century.
9. Skip Worden, "A Genealogy of Business Ethics: A Nietzschean Perspective," Journal of Business Ethics, Vol. 84, No. 3 (February 2009), pp. 427-456.
10. I would emphasize the virtue of self-confidence being too low and thus manifesting as heady egotistical excesses, but this virtue and the related vice are exogenous, or outside of, Sun Tzu's version of leadership. This is not to disparage Sun Tzu's theory of effective military leadership, for no theory captures every conceivable variable. 

Monday, July 14, 2014

Business Leadership Wading into Partisanship in Politics: Howard Schultz of Starbucks

In 2011, the Huffington Post reported the following. “Howard Schultz is calling on his fellow CEOs—and other would-be donors—to boycott all campaign contributions to either party until the nation's elected leaders put aside their political posturing and find some common ground on long-term fiscal issues. Schultz wrote in a widely distributed email dated Monday that, like ‘so many common-sense Americans,’ he wants elected leaders to consider ‘all options, from entitlement programs to taxes,’ and reach a wide-ranging budget deal ‘long before the deadline arrives this fall.’ Schultz concluded with a promise: ‘We today pledge to withhold any further campaign contributions to the President and all members of Congress until a fair, bipartisan deal is reached that sets our nation on stronger long-term fiscal footing.’”[1] The CEO was essentially preaching his political ideology wherein “partisan and ideological purity” are not permitted to trump the “well-being of the people.” James Madison would have been proud, though perhaps a bit confounded as to why the CEO of a large company would venture out of his daily routine to make a sort of campaign speech. In a positive sense, the business executive’s vision was one of “collective confidence in each other” and “in our ability to solve problems together.”[2] This is a good example of a leadership vision being applied to the societal level by an organizational leader. This intangible asset comes, however, with its own risks and difficulties, which the aspiring business leader is well advised to consider.

First, regardless of the company’s reputation in society at large, if the CEO’s political message is itself partisan or can be taken as such, partisans of the opposite persuasion may begin to have their coffee elsewhere, and even perhaps launch a boycott of the company’s stores. The personal reputation of the CEO and the reputational capital of his or her company can be mitigating factors. Even though Schultz goes against the Republican exclusion of tax increases among the possible means of reducing the federal government’s deficit, his generalist appeal for a bipartisan deal in line with the people’s welfare along with his invocation of the ethical principle of fairness may have effectively relativized any partisan elements in his speech. That is to say, in staying mostly above the fray, the CEO can be interpreted as safeguarding his company from political retaliation.

Secondly, the leadership vision for society enunciated by a CEO can be in tension with the organizational strategic interests the company.[3] Stressing overarching values and principles that are themselves non-partisan is one way of obviating such tension. Yet some tension can be a good thing, for reputational capital appreciates “appreciably” if a management is willing to sacrifice in terms of the bottom line, at least in the short-run.

Even though it is not in Starbucks’ financial interest that taxes on coffee be minimized, Schultz’s letter to other CEOs notably includes the possibility of additional taxes in solving the problem of the recurrent gaping fiscal imbalance of the U.S. Government. He writes that “our ability to solve problems together” includes the two major parties in Congress coming to a deal on reducing the deficits. This “means reaching a deal on debt, revenue, and spending long before the deadline arrives this fall. It means considering all options, from entitlement programs to taxes.” The inclusion of taxes introduces a tension with Starbucks’ strategic interests, which also cannot be ignored. Crucially, the tension adds to the credibility of the CEO’s societal leadership vision with respect to Schultz’s more immediate self-interest and that of Starbucks as well.

According to Enderle, the interpretation by potential followers of the social reality in a potential leader’s vision “must not be affected by success-oriented considerations in favor of the corporation” or the general public will not recognize the message as credible.[4] In that case, the effort can really backfire on even a well-meaning, patriotic executive. While “corporate citizenship” seems a bit over the top (except to ad execs), CEOs are human and thus are not merely anonymous, interchangeable functionaries as Max Weber recommends in his theory of bureaucracy.

This diagram comes out of my dissertation, which formulates the theory and applies it to cases cross-culturally. (Image Source: S. Worden)

Indeed, a leader can draw on his or her innate sense of integrity to buffer pressing personal and strategic interests from suffocating any real fiscal sacrifice in the societal message.[5] Whether composed of other ethical principles or simply a consistency between word and deed, integrity can effectively bracket a manager’s temptation to fashion a leadership vision that is actually a subterfuge or projection of his or her own agenda or the organization’s strategic interests. For instance, although Schultz’s inclusion of taxes in his message can be taken as partisan in terms of the American politics at the time that increased taxes on coffee would be averse to Starbucks’ financial interests gives the CEO the credibility needed to wade into partisan waters. Put another way, that he was willing to sacrifice one some business gave him enough reputational capital that he could essentially spend some to get away with making a partisan point defanged of its financial bite.

To be credible in an ideal sense, a CEO’s societal leadership vision explicitly includes the possibility of tangible costs in terms of the organization’s financial or strategic interest. For example, Schultz could have included in his letter a sales tax on luxury beverages as a possibility. The willingness to take on stockholder interests in spite of his fiduciary duty would have given the CEO more credibility with other CEOs, who in turn would be more likely to buy into his leadership vision and thus join in his pledge. Republican CEOs, however, might relate the inclusion of revenue as partisan politically. So to be more credible, Schultz could have written that it should be up to members of Congress working together to decide whether to include additional revenue in the solution. So to have a fully credible societal vision, Schultz would have been well-advised to make explicit the possible costs that his organization and his political party might pay. Being willing to sacrifice one’s partial interest for the good of the whole is, after all, a salient principle in his societal vision.

In short, business executives proffering societal visions as leaders should realize that just as there is no free lunch, credibility on the societal stage comes with its own risks and costs. Although a possible drawback to Starbucks’ business is implied in higher taxes (even raising income taxes would reduce discretionary income, and thus money for dispensable luxuries like a latte or mocha), Shultz could have made the possible financial downside more explicit in order to raise more reputational capital for himself and his firm. Indeed, he could even have proposed a national sales tax in the spirit of putting the fiscal health of the U.S. Government above some incremental sales. Credibility, backed up by a leader’s integrity, is absolutely crucial to a vision being accepted and ultimately turned into reality—especially if the vision is societal and the leader’s fiduciary duty lies on the organizational level in maximizing stockholder returns.

1. Froomkin, D. “Starbucks CEO Howard Schultz Calls For Boycott on Campaign Contributions,” The Huffington Post, August 15, 2011.
2. Ibid.
3. Worden, S. “The Role of Integrity as a Mediator in Strategic Leadership: A Recipe for Reputational Capital,” Journal of Business Ethics, 46 (2003): 31-44
4. Enderle, G., “Some Perspectives of Managerial Ethical Leadership,” Journal of Business Ethics, 6 (1987), no. 8: 657-663, p. 661.
5. Worden, “Role of Integrity.”

Monday, June 2, 2014

Leadership as Influence: Populism for the People

Leadership is influence. This identity sounds innocent enough, even flattering, yet as a definition it is too broad. The application is thus likely to be too broad also. Everyone is reckoned a leader, and no one a follower. Everyone is above average, and everyone is important. For lack of a better label, leadership is modern populism.

Being a student of comparative religion, I still occasionally visit the places of various religions and sects therein. On one Sunday morning, I listened as the pastor of an evangelical Christian megachurch talked about leadership as influence in a sermon that took up nearly the entire service. Parents, teachers, students, and artists—the cashiers at Walmart—and many other roles are actually leadership roles, according to the middle-aged pastor dressed in casual clothes presumably to fit in. “You need to get over the hurdle,” he said as if preaching to the choir, “of thinking that leadership only applies to kings and people on stages.” As influence, leadership applies to virtually anyone—all of us. Populism was the real message. Everyone in his congregation, and the many more he hoped would be added, are important. “A kingdom is actually any place of influence,” he said to rid leadership of its usual applicability. "Everyone is a king in his or her own kingdom by virtue of simply having influence." If everyone is a leader, who is left to follow? 

Theologically, the influence is God-given (Dan 4:17), for God is sovereign, after all. Yet it does not follow that the influence corresponds to the human concept of leadership. That leadership as influence is dangerously tautological, or too broadly defined, to have much integrity as a concept can be likened to collateral damage; the pastor’s ideological agenda of populism lines up nicely with his overarching goal to “grow the membership.” At the end of another sermon—also broadcast on a local television channel—he begged his congregants to bring their friends to church. Do whatever you have to! Just get them here!  In the context of such emotional investment in increasing his revenue base, as could be concluded from the fact that he drove a European sports car and brandished his gold American Express card at the local Starbucks, the emasculation of leadership of any real substance could easily be dismissed. “We are all experts,” the pastor might retort to a rare objector, even if such a foreign entity happened to actually be an expert on the topic. 

Nevertheless, to have influence—even to lead a congregation—does not mean that the person understands influence, or leadership more specifically. In assuming that having influence is always and necessarily a good thing, the minister had not an inkling of Oscar Wilde's reservations. "Influence is simply a transference of personality, a mode of giving away what is most precious in one's self, and its exercise produces a sense, and it may be, a reality of loss. Every disciple takes away something from his master."[1] A person caught up with his or her own influence, whether to get congregants to bring their friends to church or to squeeze out a bit more profit, is likely to miss the downside and thus to praise influence far and wide, beyond the influencer's native ken. 

1. Oscar Wilde, "The Portrait of Mr. W. H." 

Tuesday, May 13, 2014

Leadership as a Responsibility to Sacrifice

In the world of journalistic and popular writers who double as motivational speakers, leadership is the proverbial rainbow into which practically any ideal can be subsumed. Unfortunately, the enterprise can be likened to a hot-air balloon that has lost its moorings. That is to say, the link between the aspirations and what they can actually deliver typically received little if any real attention, not to mention respect. In some cases, the promises of leadership motivational-speakers, or “coaches,” run up against, or ignoring outright, human nature itself. Ironically, as such leadership preachments are typically (and quite conveniently) oriented to upper-echelon corporate managers, or executives, Communism suffers from the same flaw: contravening human nature. Yet the leadership bubble continues upward, quite unabated by reality.

Simon Sinek, for example, has spoken of leadership in terms of taking care of others. Dismissing the academic literature on visionary and charismatic leadership, he told his Leadercast audience in 2014 that those qualities can be disregarded. As if he were defining leadership itself, he said that it is “sacrificing for others.” It is “a responsibility; not a right,” he insisted as though his insistence made it a fact. What about all those leaders who act out of a right of authority? Are they not really leaders? To reduce leadership to a duty is at the very least to chop off a major limb—that of leadership authority. More to the point, the reductionism is ideological in nature, cloaked as definitional knowledge. Sinek would have been more honest were he to have said, I think leaders should be motived by a sense of responsibility rather than their authority.

Moreover, what about human nature? What would it have to say about putting the well-being of others in front of one’s own on a sustained basis? If such leadership conflicts with how humans are “hard-wired,” we could predict a short trajectory before burnout.

Lastly, what about the realities of power and money in corporate capitalism? Are they safely to be ignored too? Sinek’s promise of “an organization that sacrifices for others” turns the mechanizations of a corporation upside-down; maximizing profit is not typically accomplished by sacrificing for other companies or stakeholders, and yet to lead a CEO must sacrifice himself and his company out of some sense of responsibility?

My point is simply that reflections such as these that could tie down Sinek’s leadership balloon seem to go by the wayside, or in some cases are not even thought of. All too often, the lofty ideological aspirations are swallowed as some kind of new dogma already established as fact, or knowledge. To be sure, Sinek’s declaration that leadership is a responsibility rather than a right looks dogmatic. Underneath, ideology is presumptuously masquerading as knowledge even as the knowledge itself is safely ignored as an inconvenient truth. 

Friday, April 4, 2014

High-Frequency Trading: On Ethical Leadership as a Remedy

Seemingly overnight in late March, 2014, Michael Lewis managed to pierce the public’s strangely high threshold of awareness of societal systemic moral-lapses with "news" of a moral cancer already well-established in the New York stock market system. The well-known financial author did so through the narrative of a moral leader who had managed to expose the problem from the inside. As appealing as such a figure is on account of the self-sacrifice involved, this case raises the question of whether we as a society are best served by relying on moral leaders to bring the sordid antics of elites behind dark windows to light.

In prominent interviews on CBS’s 60 Minutes and PBS’s The Charlie Rose Show, Lewis made galvanizing headlines by claiming that the stock market was rigged in favor of Wall Street insiders able to pay steep fees to use the electronic “super-highway” built and maintained by high-frequency-trading firms. Jumping on the bandwagon, Eric Schneiderman, the NY Attorney General, suggested that such trading may be illegal where it uses speed in order to gain an unfair advantage over other participants in the market. Although his investigation had been ongoing for more than a year, the fortuitous timing of his announcement struck Lewis as suspicious, in that more was to it than met the public’s eye.  Not to be left out of the spotlight, the US Attorney General—Eric Holder—raised the possibility days later in Congressional testimony that high-frequency trading might violate federal insider-trader law.

In his interviews, Lewis suggested that Schneiderman (and presumably Holder) had felt they could come out publically against the trading because some major Wall Street interests had tacitly given him the nod, no longer on the high-frequency “bandwagon.” Goldman Sachs had recently invested in the IEX exchange, whose “speed bumps” maintained a “level playing field.” A $9 billion hedge fund was losing $300 million a year to high-frequency traders.[1] Those traders explicitly wrote institutional clients of investment banks (including Sachs) out of the loop. At least one high-frequency-trading firm limited investment banks’ use of the super-quick fiber-optic line to their own proprietary trading (i.e., the banks’ brokerage client accounts were excluded).[2]  Goldman Sachs’ bankers had no problem with the restriction, in spite of their avowed claim that their bank was a market-maker.[3]

Like other banks, Sachs used “black pools” instead of routing client trades on the wider market, so “investors had to take it on faith that [the bank] had acted in their interests in spite of the obvious financial incentive not to.”[4] That the bank had been selling subprime-mortgage bonds to even its best clients even while shorting the same “crap” held (long) on its own (proprietary, non-counterparty use) books suggests an organizational tendency all too comfortable with exploiting conflicts of interest at the expense of the bank’s own clients.

So why then did Goldman Sachs invest in the IEX exchange? According to Lewis, the bank went to great lengths to keep Sergey Alexnikov, an ex-employee who stole the bank’s high-frequency-trading code, from being released on bail.[5] Yet by April 2014, discussions in the bank had come down in favor of efforts to wean the market off of the relatively risky high-speed trading. Lewis suggests that with Goldman Sachs’ reputational capital running low, the public would blame the bank for continued market volatility such as flash crashes and outages at exchanges and view the bank as behind and the opaqueness that blanketed the high-frequency-trading segment. Plus, Lewis maintains, the best at Goldman Sachs had realized that they were the best at high-frequency trading. Accordingly, switching to an alternative was in the bank’s strategic competitive interest.

Lest the general public feel reassured that the narrow financial interests of some disenfranchised hedge-funds and an already ethically-compromised bank on Wall Street can always be counted on to protect the public interest (the public weal) encouraging  or at least not discouraging the opportunism of governmental authorities, I submit that the public interest is not as protected as the public supposes. Indeed, societal recognition even of the shaky edifice of presumed protection may be lacking—at least until the thing comes crashing down thanks to some brave insider willing to turn the thing inside out, thus rendering it transparent to the rest of us. Why should it take such a dramatic trigger for the public to take notice? Must a moral leader rise to the occasion for the trigger to go off? 

Even though the public awoke in seemingly utter amazement  and immediately started debating whether “beating slower trades to the punch”—essentially seeing that someone is placing an order to buy the one remaining hotel room listed at only $68 on Travelocity and snagging the room first in order to sell it to the person at $74—is inherently unfair, I submit that the public’s retarded recognition of a societal problem (and subsequent over-reaction as the media all-of-a-sudden obsesses on it) is itself a massive problem, particularly in a representative democracy (i.e., Government by the people).  That the general public must be hit squarely on the head before a societal problem is even seen on a societal level suggests that tremendous breaches in accountability are possible, even inevitable, in an extended republic. In other words, wieldy institutional hives and their aggrandizing creatures can easily take advantage of the slack in the people’s attention.

Over at CNBC, Jim Crammer initially seemed underwhelmed, yet came around to openly marvel at the bizarre nature of the all-of-a-suddenness as if the market had only recently been rigged. He first pointed out that day-trading (as distinct from buying and holding a portfolio of diversified stocks over the long term) is not the way for individual investors to make “big money” in the market anyway. As though offering a mere footnote, he lamented that the novel traders had been so secretive about what they were doing. On the morning in which Holder’s statement was broadcast, Crammer was still in his “what’s all the fuss about” mindset.  High-frequency trading had been around for years. Why now, all of a sudden, is everyone taking notice? Crammer seemed to view the watershed as artificial, or at least bizarre. The fact that Michael Lewis had a book to sell was not lost on the neo-realist capitalist at CNBC.

Was Michael Lewis a Moses figure, or Nietzsche’s Zarathustra, descending from a mountain to destroy the false idols or raise all boats with the surfeit of generosity that only a wealthy person can manage? Lewis, who had penned The Great Short to proffer an explanation of the 2008 Financial Crisis, had a financial interest in hyping the story by proclaiming that the market is rigged, for he was selling his just-released book on the topic, Flash Boys. Admittedly, the title sounds a bit like Flash Gordon meeting the Lost Boys. We, the general public, are the lost boys and girls. Even though The New York Times had published excellent reports and analyses of the high-frequency trading whose foundations were being laid as early as 20008—even as foreclosures from liars’ loans almost caused the US financial system to collapse amid a “credit freeze”—it took an interview on 60 Minutes to “blow the cover” of the stealth flash boys.

Actually, as Lewis willingly admits, the credit properly goes to Brad Katsuyama, who left a high-paying job at the Royal Bank of Canada to fix the problem by proffering an alternative, the IEX exchange. Lewis argues that Katsyama recognized that “(t)he deep problem with the system was a kind of moral inertia. So long as it served the narrow self-interests of everyone inside it, no one on the inside would ever seek to change it, no matter how corrupt or sinister it became.[6]  

Brad Katsuyama at his IEX exchange. A moral leader who got very practical in restoring the public's faith in Wall Street. Can we as a society afford to rely on such individuals to fix our problems? 
(Image Source: Stefan Ruiz at NYT)

Being on the inside, in a rather unique position by having learned just how the rigged equity market works, Katsuyama believed that the moral inertia would continue unless he acted on the duty he felt to fix the problem that had harmed many, even among the unknowing financial elite, to the narrow benefit of a relative few.[7] So he set about creating an exchange as a transparent “level playing field” complete with financial incentives capable of restoring the credibility of the financial system in the greater society.  With the mutual funds and pension funds burned by the ultra-exclusivist high-frequency traders as powerful backers, Katsyama sought to restore an equitable and stable infrastructure for the New York stock market. After Lewis managed to galvanize the public’s attention on the highly suspect preferential peaks that high-frequency traders had constructed and profited from as though oligarchs, it is easy to assume that a moral leader of Katsuyama’s fortitude would eventually rise and save Wall Street from itself.

Similarly, Frank Snowden had been an insider whose role in making abuses in the NSA transparent can be reckoned as an instance of moral leadership that few people were in a position (and felt moral inclination) to accomplish. Although former US President Jimmy Carter acknowledged that Snowden had broken the law and should be prosecuted, the elder statesman added, “but I think it’s good for Americans to know the kinds of things that have been revealed by him and others, and that is that since 9/11, we’ve gone too far in intrusion on the privacy that Americans ought to enjoy as a right of citizenship.”[8] With Snowden’s leaks and Obama’s subsequent proposals to restrict the NSA’s access to phone records part of the public lexicon, it is tempting to believe in the inevitability of both the increased transparency and the governmental attention to reform.

Yet the NSA was able to over-reach for years without any insider willing to accept the personal sacrifices necessary to let the rest of us in on what had become the status quo in batch-data collection. Similarly, Katsuyama himself had noticed pricing irregularities strangely dependent on his buy and sell orders as early as 2008—six years before Lewis came along and flooded the problem with transparency on the societal stage. 

Is accountability in a republic retarded at best? Insiders who have managed to accrue enough power can stave off even the eventual "outing" by a moral leader. Just as Lewis was opening the public door on the rigged market, the US Senate Intelligence Committee voted to declassify part of a report on the CIA's use of "interrogation methods" since the attack in 2001 at the World Trade Center in New York. According to Sen. Dianne Feinstein, the report "exposes the brutality that stands in stark contrast to our values as a nation."[9] That such a tale would come almost thirteen years after the attack gives us some indication of how long the public can be kept from knowing even of practices "in stark contrast to" the public's own core values as a people. 

Simply put, relying on moral leaders to make the People aware of systemic ethical lapses going on behind closed doors is severely sub-optimal both in terms of severing the largess to a few at the expense of the many and fixing the systemic problems themselves. This is not to say that such leaders are not heroic, only that republic is ill-served in relying on them to keep the People apprised of what the insiders are up to and fix the problems. We the People, as well as the representatives we elect, are more properly the agents of self-governance, including in the policing of the back rooms in which dangerously powerful interests lie pretty much unfettered from the light of day.

[1] Michael Lewis, Flash Boys: A Wall Street Revolt, p. 77.
[2] Ibid, p. 19.
[3] Ibid., p. 20.
[4] Ibid., p. 87.
[5] Ibid., p. 1.
[6] Ibid., p. 88.
[7] 60 Minutes, March 30, 2014. In terms of ethical theory, Katsuyama’s decision is based on consequentialism generally and utilitarianism (greatest good for the greatest number being the most ethical) in particular.
[8] Susan Page, “Carter: Snowden Good for USA,” USA Today, March 25, 2014. Video: http://www.usatoday.com/videos/news/politics/2014/03/25/6836201/
[9] Susan Davis and Aamer Madhani, "Report Details CIA Tactics," USA Today, April 4, 2014.