Saturday, December 17, 2016

Squandering a Tradition of Ethical Leadership Instead of Protecting the Accrued Reputational Capital: The Case of Ratan Tata in India

In India, Ratan Tata was a revered figure, dubbed Mr. Clean, until the end of 2016, by which time serious allegations of financial improprieties had cut into the stellar reputations of both the man and the famous company founded by J.N. Tata, who had intentionally applied his Parsee ethic to the founding of India’s first steel company with a zero tolerance for corruption. Generally speaking, strategic ethical-leadership and even the resulting reputational capital depend on the persona of whoever is in charge of a company, and not even family linage can be counted on to perpetuate a culture of ethical leadership and protect a company’s accrued reputational capital.

One of the most serious allegations of financial impropriety in the Tata conglomerate came from Ratan Tata’s chosen successor, Cyrus Mistry, in October, 2016. Citing an internal audit, he reported to Tata’s board that the company’s “airline joint venture, AirAsia, had made more than $3 million in ‘fraudulent transactions’ with two companies.”[1] In a reaction befitting guilt, Ratan Tata ousted Mistry as a result; the rationale—that “the board of Tata Sons lost confidence in him and in his ability to lead the Tata Group in the future”—can be interpreted as implicating even the board, which at the very least was doing Ratan’s bidding rather than protecting the company.[2] Firing the messenger is not the sort of move that protects a company’s reputational capital; rather, the dismissal suggests that the company’s culture was not appreciative of whistle-blowers.  At the very least, the reaction sent a message to potential whistle blowers to keep quiet. The company may actually have been rife with corruption, rather than having faltered in one instance.

In December, 2016, Subramanian Swarmy filed a court complaint calling for “an investigation into allegations from a government report that [Ratan] Tata in 2008 used a front company to apply for a telecommunications license, potentially circumventing the limits on the number of licenses one investor could hold.”[3] At the time, investors were competing for licenses to provide cell-phone service in India. In 2013, India’s Serious Fraud Investigation Office recommended prosecuting Ratan Tata, yet the government did not file a case in court. Besides doubtlessly having government connections, he could take advantage of longstanding reputations of his company and himself—something he could not do in December, 2016.

Mistry doubtlessly believed that the reputational capital of the company was at stake. “Never before has the Tata Group, including the philanthropic objectives of the Tata Trusts, been in jeopardy to this extent and scale,” he said in a public statement in December.[4] Accordingly, he said he had been trying “to protect the Tata Group from capricious decision-making by the interim chairman,” Ratan Tata.[5] Long past were J.N. Tata’s religious (i.e., Parsee ethic)-commercial decisions to provide nice bungalows with yards (after Tata’s son Dorab had viewed the squalid housing conditions of steelworkers in Pittsburgh), and free schools and hospitals in the village he carved out of the jungle for India’s first steel company, Tata Steel.[6] J.N. Tata regarded the company, the first venture of Indian self-reliant steel-making in British India, as playing a significant role in India’s eventual economic and political independence. In contrast, Ratan Tata was doubtlessly chiefly concerned with making money.

What is the lesson we can extract from this case of a mammoth family business? Even family linage cannot guarantee the continued salience of religious ethics—in this case, J.N. Tata’s Parsee environmental and charitable ethics—in the strategic leadership of a company. Put another way, ethical leadership is a function of persona rather than being institutionalizable in nature. So too, a company’s ethical reputational capital can quickly be squandered by a CEO/board-chair even though a company’s reputation might be the sort of thing thought to be inherently institutionalized. Even when a company is handed down to the next generation, diligence is necessary to safeguard the accumulated reputational capital; it cannot be assumed that tomorrow will be like today.

[1] Geeta Anand, “A Clash Atop India’s Tata Empire Has a Titan on the Ropes,” The New York Times, December 17, 2016.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Skip Worden, “The Role of Religious and Nationalist Ethics in Strategic Leadership: The Case of J.N. Tata,” Journal of Business Ethics 47, no. 2 (October, 2003): 147-64.

Saturday, November 12, 2016

Transforming Transformational Leadership: Foundations over Ideology

James Burn’s concept of transformational leadership is in essence a process in which “one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality.”[1] This includes a moral commitment to develop followers, especially morally. To Burns, transformational leadership is therefore “an ethical, moral enterprise.”[2] I contend that the term transformation is not inherently ethical, and so it can apply to leadership in an amoral sense. Freed up from the limitations of being viewed primarily or even exclusively as moral, transformation can be seen to apply to leadership in at least two, much more direct—or central—ways than morally: as referring to a leader’s own transformation and to a leader’s vision being transformational.

Regarding a leader’s own transformation, taking on a substantial position of authority can transform a leader. To be sure, such a transformation may include moral development, but the change is much broader so reducing it to the moral dimension would be misleading. Referring to the change in President-Elect Warren G. Harding, Evalyn McLean observed, “He was, more and more, inclined to believe in himself. He cherished an idea that when a man was elevated to the presidency, his wits, by some automatic mental chemistry, were increased to fit the stature of his office.”[3] The solemn deference by others strengthened his self-confidence, which in turn could be expected to fundamentally alter, and thus transform, his capacity as a leader. As to the automatic neuro-chemical changes conforming a President-elect to such a statue as befits the high office, clearly in this way too transformation of a leader is accomplished. Harding himself remarked to his fellow Shriners two months before his inauguration, “I wonder if you know the feeling of a man who has been called to the greatest office in the world. There is an aloofness of one’s friends, and that is one of the sad things; and in me there is a deepening sense of responsibility.”[4] Anticipation of the coming awesome responsibility of the U.S. presidency would surely have a substantial effect psychologically—maturating the person and in this sense lifting him to fit the august office.

Almost a century later, Donald Trump may have undergone a maturating transformation in the days following his election to the U.S. presidency. In spite of the many rash things said during his campaign, he spoke quite effectively at 4 a.m. in New York to calm international markets—Dow futures had plunged more than 700 points. He assured allies that the U.S. would have good—but fair—relations with other countries. Within days, the Dow hit a record high. Then, just two days after election day, a subdued, almost reverential President-elect and President Obama spoke jointly in conciliatory words in the Oval Office to quell anti-Trump protests from escalating—Trump even remarking that Obama is “a good man.”[5] In both cases—assuaging worried investors and allies around the world, and facilitating a peaceful transfer of power—Donald Trump could be perceived as rising to the office—his transformation seeming as automatic as if he were going up one of the escalators in his high-rise “Trump Tower.”

The second way in which transformational can be applied to leadership in a fundamental sense refers to leadership vision. Whereas a vision that merely moves an organization or society along incrementally is hardly transformational, a vision whose basis or foundation (i.e., paradigm) represents a qualitative change from the status quo can be labeled as transformational. In this latter sense, a vision represents a paradigm change, which involves changing systems rather than “tweeking” existing ones.  

I contend that the transformation of a leader and a transformational vision are essential and fundamental to leadership, whereas the moral intent to develop followers and even the leader herself morally or otherwise is not. To be sure, moral development is a good thing, and important; the world could surely use more of it.  It can be in the transformation of a leader and in the development of followers. In his comment on how being President-Elect was affecting him, Harding went on to point to his enhanced realization that untruth “must be guarded against.”[6] Notice, however, that this is just part of Harding’s own account of how he had been changed.

The development of followers, moral or even in a broader sense, is just one of many policies that leaders can adopt as a matter of ideological preference. In fact, Bass’s original notion of transformational leadership as “a process by which followers trust, admire, and respect their leader . . .  may not necessarily elevate followers to higher moral ground but rather, depending on the leader’s vision and personal motivation, may in fact lead followers in negative, unethical and immoral directions.”[7] So even an ethically-tinged view of transformational leadership may not include the moral development of followers (and the leaders themselves). Bass would subsequently coin “authentic transformational leadership” to salvage the full moral connotations of Burns’ transformational leadership, but authenticity only means that motive is in sync with word and deed, rather than that the motive, word, and deed must necessarily be moral in nature, and more specifically oriented to people’s moral development.[8]

Therefore, transformational leadership can pertain to leaders whose visions are transformational yet do not include the development of followers as the leader’s moral task. Transformational leadership may pertain to amoral and even unethical tasks. Transformation is principally a term pertaining to change, rather than morality. It follows that Burns choice to make the moral development of followers and even leaders the way in which leadership is transformational can be viewed as too narrow, even distorted in overstating an element, given the more fundamental ways in which transformation pertains to leadership.

[1] James M. Burns, J. Leadership (New York: Harper & Row, 1978): 20.
[2] Ken W. Parry and Sarah B. Proctor-Thomson, “Perceived Integrity of Transformational Leaders in Organizational Settings,” Journal of Business Ethics 35, no. 2 (January, 2002): 75.
[3] Francis Russell, The Shadow of Blooming Grove: Warren G. Harding and His Times (New York: McGraw-Hill, 1968): 421.
[4] Russell, The Shadow of Blooming Grove, p. 430.
[5] To be sure, on a brass-tacks political level, Obama and Trump might have made a deal, such that Obama’s Administration would help Trump’s transition team and in exchange Trump may have agreed to amend rather than replace Obamacare and not push for prosecution of Hillary Clinton for corruption. Such a deal would have put the two presidents on “on the same page” such that the Oval Office visit would be viewed as conciliatory. 
[6] Russell, The Shadow of Blooming Grove, p. 430.
[7] Ken W. Parry and Sarah B. Proctor-Thomson, “Perceived Integrity of Transformational Leaders in Organizational Settings,” Journal of Business Ethics 35, no. 2 (January, 2002): 75.  
[8] Bernard M. Bass and Paul Steidlmeier, “Ethics, Character, and Authentic Transformational Leadership Behavior,” The Leadership Quarterly 10, no. 2 (1999): 181-217.

Tuesday, September 20, 2016

On the Difficulty of Ethical Leadership after a Breach: The Case of Wells Fargo’s CEO

On September 20, 2016, U.S. Senators questioning Wells Fargo’s CEO, John Stumpf in the Senate’s Banking Committee “seemed unmoved” by his “attempts to explain why more senior bank executives had not been tied to the widespread illegal sales activity.”[1] Bank employees may have opened as many as two million accounts in customers’ names without those customers’ knowledge.[2] Senator Elizabeth Warren, a Massachusetts Democrat, “said the illegal sales were a big driver of Wells Fargo’s success as one of the nation’s most profitable banks.”[3] She called on Stumpf to give back a large portion of his compensation, resign and be criminally investigated. I contend that giving back some of his compensation and resigning from the bank would have been necessary for the CEO get past the scandal in being able to be a credible and trustworthy ethical leader. That the bank’s board acted independently from its chairman, the CEO, a week later in taking back $41 million of his compensation and $19 million of the stock grants from Carrie Tolstedt, who had led the bank’s retail banking division (and cancelled any bonus for either official) does not lend the CEO any renewed credibility.[4] Rather, the action made the bank’s board members look like they were trying to do what was necessary, given the CEO’s underperformance during the Senate hearing.

“Have you returned one nickel of the money that you earned while this scandal was going on?” asked Warren.[5] Stumpf suggested that the board was considering whether he should also lose some of his compensation, which totaled more than $19 million in 2015.[6] He said the bank’s board was at the time considering whether he should lose some of his compensation, but in a classic conflict of interest, he himself occupied the board’s chairman position. In short, Stumpf admitted that he hadn’t yet been held personally accountable for the actions of his employees.[7]

Furthermore, despite the widespread unethical sales in the community banking unit, the executive who oversaw the retail bank, Carrie Tolstedt, was permitted to retire in July rather than be held accountable for the problems by being fired and having some compensation “clawed back,” Stumpf admitted. [8] Tolstedt received a retirement package that may amount to more than $100 million even though it is unlikely she was not aware of the fraud.[9] If she had been unaware, she clearly failed at her job and did not deserve $100 million.

More than 5,300 employees had been fired for the unethical sales since 2011, but they had been mostly lower-ranking workers, including many who say they felt pressured to bend the rules to meet the bank’s aggressive sales goals.[10] “Have you fired any senior management, the people who actually oversaw this fraud?” Sen. Warren asked the bank’s CEO. “No,” Stumpf replied.

Sen. Warren sized up the CEO thusly: “Your definition of accountability is to push this on your low-level employees. This is gutless leadership.”[11] It is unethical leadership—lacking basic integrity wherein “deed” matches “word.” Rather than putting his money where his mouth was, he offered platitudes, according to many of the senators, “about his willingness to take responsibility for the illegal sales while escaping any real consequences.”[12] To apologize for the actions of others is not sufficient, in other words, to buy back credibility and integrity. Frankly, the words are too easy without accompanying actions that involve real sacrifice by the leader as well as the bank.

Consistency in itself between word and deed is a very important aspect of integrity. A “divergence between words and deeds has profound costs as it renders managers untrustworthy and undermines their credibility and their ability to use their words to influence the actions of their subordinates.”[13] The application to leaders is straightforward: A divergence between word and deed also reduces a leader’s credibility and trustworthiness, and thus detracts from his ability to influence subordinates and the wider society to buy into his vision. Hence, nothing in Stumpf’s efforts at the U.S. Senate to “contain the damage to his bank’s reputation”[14] boosted his integrity, credibility and trustworthiness to his subordinates and at the societal level.

The main point to take away from the CEO’s attempt at strategic leadership before the U.S. Senate is how very difficult it is to go beyond platitudes of apologies to match them with inconvenient actions, such as firing senior-level managers, with “clawbacks,” and including the CEO himself even though he chairs the very board whose task it is to supervise him. Rather than exploiting a structural conflict of interest, a CEO/Chair must “take a hit” in order to have the trust and credibility both organizationally and in society to regain integrity. Such integrity is in turn required for effective ethical leadership to be practiced. Blaming others outside the inner circle of seniority in an organization and offering an easy apology too vague to say for certain whether the leader was part of the unethical practices do not suffice.

1. Michael Corkery, “Illegal Activity at Wells Fargo May Have Begun Earlier, Chief Says,” The New York Times, September 20, 2016.
2. Ibid.
3. Ibid.
4. Stacy Cowley, “Wells Fargo to Claw Back $41 Million of Chief’s Pay Over Scandal,” The New York Times, September 27, 2016.
5. Corkery, “Illegal Activity.”
6. Ibid.
7. Emily Peck, “Elizabeth Warren Hammers Wells Fargo CEO: ‘You Should Be Criminally Investigated,” The Huffington Post, September 20, 2016.
8. Corkery, “Illegal Activity.”
9.  Ibid.
10. Ibid.
11. Ibid.
12. Ibid.
13. Tony L. Simons, “Behavioral Integrity as a Critical Ingredient for Transformational Leadership," Journal of Organizational Change Management 12 No. 2 (1999): 89.
14. Nathan Bomey, “Four Things to Watch as Wells Fargo CEO Testifies,” USA Today, September 20, 2016, p. B1.

Thursday, September 15, 2016

On the Meaning and Value of Leadership: Formulating a Social Reality as a Vision

I submit that leadership is the formation of a vision and persuading other people to adopt it. From this standpoint, leadership is distinct from management—the latter taking the vision as a given and going from there to formulate strategy and implement it as policies. In short, a vision is open to leaders to change but closed to managers, who must take a vision as a given.

Regarding a leader’s vision, I contend that it contains meaning and values held together in a social reality; hence the breadth of a vision. Two scholars insist that a leader works to shape and interpret situations out of what has previously remained implicit or unsaid, guiding by common interpretation of reality via vision through foresight, hindsight, a world view, depth perception, peripheral vision, and revision.[1] The social reality in a vision is thus deep as well as broad, reaching even the subconscious level of the human mind. To the extent people have bought into the leader's social reality, the leader has led.[2]

Detecting or fashioning "meaning" is crucial to formulating a social reality for a vision. A couple scholars suggest that leaders "structure experience in meaningful ways."[3] In "defining the reality of others", leaders influence "systems of meaning," which circumscribe a leader’s vision as well as organizational activity.  In short, an essential factor in leadership is the capacity to influence and organize meaning."[4]

Humans are "congenitally compelled to impose a meaningful order upon reality."[5] Some people are able to do this better than others. Leadership is therefore basic to the human condition.[6] In fact, accurately defining reality can be considered a leader’s duty, with ethical implications not only from that duty, but also in the meaningful content of a leader's construed social reality, which can be laced with ethical principles and values.[7] Regarding the content, leaders interpret social reality in such a way that particular values and/or beliefs are highlighted.[8] In other words, a leader's "meaning making" includes giving meaning to shared values that are important and make a difference.[9] 

Therefore, both the doing and product of leadership can be viewed normatively. Accordingly, ethical leadership can pertain to the doing of leadership as well as to the content of visionary leadership. For example, a manager being called to serve in a leadership position can view accepting the promotion as an ethical imperative to impart meaning and values for people in the organization, who are otherwise having difficulty coming up with a social reality that is gripping and thus meaningful and of value. Such meaningfulness and values can themselves involve ethical principles set as duties, which followers as well as the leader should undertake.

For more, please see the following two booklets: Ethical Leadership and Christianized Ethical Leadership.


[1]. Warren Bennis and Burt Nanus, Leaders: The Strategies for Taking Charge (New York: Harper & Row, 1985).
[2]. Skip Worden, “The Role of Integrity as a Mediator in Strategic Leadership; A Recipe for Reputational Capital,” Journal of Business Ethics 46 No. 1 (August 2003): 31.  
[3]. Linda Smircich and Gareth Morgan, “Leadership: The Management of Meaning,” Journal of applied Behavioral Science 18 (1982): 258.
[4]. Bennis and Nanus, Leaders, 39.
[5]. Peter Berger, The Sacred Canopy: Elements of a Sociological Theory of Religion, (Garden City, NY: Doubleday, 1967): 22.
[6]. Worden, “The Role of Integrity,” 32.
[7]. Worden, “The Role of Integrity,” 32; Max DePree, Leadership is an Art (New York: Doubleday, 1989): 53.  
[8]. Kate Rowsell and Tony Berry, “Leadership, Vision, Values and Systematic Wisdom,” Leadership & Organization Development Journal 14 No. 7 (1993).
[9]. Jim Kouzes and Barry Posner, Credibility: How Leaders Gain and Lose it, Why People Demand It (San Francisco: Jossey-Bass, 1993): 197, 206. 

Tuesday, August 30, 2016

Biblical Positive-Thinking Applied to Leadership

"I can do all things through Christ which strengtheneth me.”[1] This biblical verse captures the extraordinary optimism of Norman Vincent Peale. Belief, expectation, and faith—his pillars of the Christian religion—are internals that can move mountains and thus get results. This biblically-based recipe for positive thinking can be applied to leadership, which, after all, is results-oriented. Its desired objective is of course the realization of a vision. Simply put, if religion can be used to do better in a job as Peale insists,[2] this holds for the task of leading other people, which consists of formulating and selling a vision.

A change inside a leader can do wonders in moving a vision’s mountain toward being actualized. From the Bible, “(W)hosoever shall say unto this mountain, Be thou removed, and be thou cast into the sea; and shall not doubt in his heart, but shall believe that those things which he saith shall come to pass; he shall have whatsoever he saith.”[3] A vision may seem impossible but for such faith in a believer that eliminates any doubt. Peale is astonishing in his insistence that that faith as belief and expectation can deliver actual results, regardless of how high external obstacles are. “According to your faith be it unto you.”[4] In fact, “(i)f ye have faith . . . nothing shall be impossible unto you.”[5] A leader with such faith can count on his or her vision being realized. What counts is in the leader’s mind.[6] A leader who doubts and is more generally habituated to negative thinking must transform his or her thought pattern before the benefits of faith can be realized.
Undergirding his theory, Peale claims as a “well-defined and authentic principle” the assumption “that what the mind profoundly expects it tends to receive.”[7] Expect your vision, and that belief itself can move mountains such that your vision is realized by others and the empirical world is changed. Specifically, “(w)ith the creative force of belief you stimulate that particular gathering together of circumstances” which brings your vision to pass.[8] The power of belief can change the external world such that it is more favorable to the objective.
[The expanded essay is a chapter in Christianized Ethical Leadership]

1. Phil. 4:13. Cited from Norman Vincent Peale, The Power of Positive Thinking (New York: Touchstone, 2015), p. 3.

2. Norman Peale, Power of Positive Thinking, p. 48

3. Mk. 11:23. From Peale, The Power of Positive Thinking, p. 98.

4. Matt. 9:29. From Peale, The Power of Positive Thinking, p. 92.

5. Matt. 17:20. From Peale, The Power of Positive Thinking, p. 10

6. Here Peale cites Karl Menninger, who claimed that attitudes “are more important than facts.” Peale, The Power of Positive Thinking, p. 10.

7. Ibid., p. 94.

8. Ibid., p. 91.