Archive for the ‘Code of Conduct’ category

The Week in Ethics: Wells Fargo’s Next Move? 10 Suggestions

September 22, 2016

Update: See my 12/10/16 Business Ethics column on Where Wells Fargo Goes From Here .

Update: In October 2016 Timothy Sloan replaced Chairman/CEO John Stumpf, becoming CEO and President. The chairman role was split and given to independent lead director Stephen Sanger.

Update: September 27, 2016: Wells Fargo Independent directors issued a statement  they will lead an investigation into “the bank’s retail sales practices and related matters” with the Board’s HR Committee and independent counsel. Chairman/CEO John Stumpf to forfeit $41 million unvested equity awards and “will forgo salary during the investigation.” The U.S. House Financial Services Committee will hold a hearing on bank’s “unauthorized customer accounts” on 12/29/16.

How will Wells Fargo resolve the ethical and culture issues it faces? And, how will it move beyond a poor showing at the Senate Banking Committee hearing and start to rebuild trust? First some background. Then 10 suggestions.

The best thing a CEO with strong convictions about the “rightness” of his/her own position can do when embroiled in a crisis is to spend time with trusted sources (inside or outside their company) who see things very differently. Being open to these viewpoints and questions iphone-pictures2-222and multiple perspectives raised make it harder for  CEOs to stay wedded to their position. However, once a CEO is under fire the temptation to stick with like-minded people can increase. What’s lost then is stimulation to think deeply about different aspects of an issue to gain new insights and awareness that enable developing alternatives legitimately aligned with values. Being stuck in “rightness” can lead to error blindness, a term popularized by Kathryn Schulz  who points out, “Trusting too much in feeling you are on the right side of anything is dangerous.”

It can lead to decisions that put a CEO on the defensive in front of a U.S. Senate hearing, as John Stumpf Chairman and CEO of Wells Fargo experienced September 20, 2016 testifying before the U.S. Senate Committee on Banking, Housing & Urban Affairs.

Stumpf was questioned about the bank’s unauthorized accounts and allegations of a pressure-cooker sales culture which became public in 2013 (Los Angeles Times story) and continued. Wells Fargo has fired 5,300 employees, paid a fine, faces an investigation into its sales practices by New York and California federal prosecutors and can anticipate an upcoming hearing by the U.S. House Financial Services Committee in addition to follow up from the Senate Banking Committee. Earlier this month The U.S. Consumer Financial Protection Bureau filed a consent order outlining findings of the bank’s “improper sales practices”from 2011 to 2016.

A few days before the Senate hearing Stumpf, in an interview, disputed Wells Fargo has a culture problem. He maintained that stance with Senate committee members, while indicating changes the Bank planned to make. However, the bipartisan committee was united in criticism that Stumpf, the Board and senior leadership hadn’t gone far enough, fast enough and weren’t showing accountability. From the Republican Committee chair to Democratic challengers, Senators didn’t buy that the bank’s culture isn’t an issue.

Where does this leave Wells Fargo? Anyone who has been through corporate crises — as I and many others have — knows that criticism from outsiders is hard to take. However, there are huge pitfalls if Mr. Stumpf stays locked in the “rightness”of his position (in spite of his 30 plus years service at Wells Fargo, presiding over several of its acquisitions and knowing his industry and company better than outsiders).

His performance at the Senate hearing this week indicates his time has been spent with legal and public relations teams and like-minded insiders. Getting out of a crisis, turning around a culture and re-earning political and public trust, doesn’t happen by working harder with the same mindset. (The much touted definition of insanity is doing the same thing over and over and expecting different results.)

I’ve limited myself to 10 suggestions for Wells Fargo to support the start of a turnaround:

  1. The board should appoint a new chairman — an independent director — separating the role from the CEO for many reasons including signaling stronger board governance.
  2. The board should immediately decide about claw backs related to compensation of former head of community banking Carrie Tolstedt, Stumpf and any others. As part of re-earning trust, all their actions should be transparent and well communicated.
  3. The board should direct Stumpf and his team to meet with Wells Fargo’s ethics and compliance teams and risk officers to discuss/evaluate ethics, compliance and risk operations for strengths, weaknesses and safeguards to better integrate sales and all business strategies with corporate values and prepare a report for the board.
  4. The compliance and ethics leaders (and C-suite leader to whom they ultimately report) should initiate meetings with leaders of the Ethics & Compliance Initiative and the Society of Corporate Compliance and Ethics to address best practices, implementation challenges and examples where ethics and compliance leaders weigh in on business strategy discussions in sales and all areas.
  5. The board and senior management should identify outside experts to discuss how to  realign authentically culture around values. A place to start is the nearby Markkula Center for Applied Ethics.
  6. Stumpf and his management team should become acquainted with Margaret Wheatley’s concept of self seal (the rightness of one’s position), Kathryn Schulz’ TED Talk (error blindness) and Margaret Heffernan’s  Willful Blindness for starters. These are lenses that encourage conscious and unconscious unethical behavior.
  7.  A cross-functional team of senior leaders with ethics and compliance leaders should review the company’s five primary values; for each, identify five or six specific expected behaviors to be incorporated into company policy and discussed in ethics training and performance reviews. Currently, the values are too abstract.
  8. Under the value “Ethics” the company says “We strive to be recognized by our stakeholders as setting the standard among the world’s great companies for integrity and principled performance. “This should become a business objective with Board and CEO focus to keep this commitment at the center of the turnaround’s activities.
  9. At the upcoming House Financial Services Committee hearing, Stumpf and those testifying can start rebuilding trust by being fully prepared to answer questions directly and completely, having with them information relevant to committee questions. Stumpf should also make himself available to Senate Banking Committee leadership to make sure information provided since that hearing addressed open questions.
  10. Trust is a relationship where “integrity” and “principled performance” are realities, not marketing slogans. In relationships with employees, customers, customers affected by unethical actions, employees pressured by aggressive sales tactics, Wells Fargo leaders have to admit what went wrong and make systemic changes. A start is to amend the vision statement that says “We want to satisfy our customers’ financial needs and help them succeed financially” and add “in ways that build lasting relationships of trust and integrity.”The Week in EthicsGael O’Brien, September 22, 2016Gael O’Brien is The Ethics Coach columnist  for Entrepreneur Magazine. She is also a columnist for Business Ethics Magazine where her September column is “One man’s Leadership Toward a Goal: ‘The Great Mission of Business Ethics.'”

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The Week in Ethics: Is Ethical Leadership Contagious?

July 24, 2013

If you were trying to foster ethical leadership in your organization, could anything make it “contagious?”

For starters, labeling it as “ethical leadership” might not take you as far as you’d like. How often do people say they are on board, “get it” and don’t need more?  While they might be willing to read about or take courses in strategic or global leadership, for example, many equate ethical leadership with what they learned growing up; if they need to spend more time talking about it, it might look like they are deficient in Golden Rule 101.

That’s the problem with blinders leaders, high potentials and any of us can have about our own ethical development — why it can suddenly be hard to give voice to values (because we’ve never thought about a potential conflict that suddenly surfaces) or why decisions are made weighing only legal and financial consequences (without noticing the potential for unintended ethical consequences) or why we need to be right.

When we talk about ethics and leadership in organizations, we need to translate it into values and behaviors we want visible in the culture that in turn build off a company’s values. While we say that ethical leadership encompasses the highest personal and organizational standards that vagueness creates an abstraction where everyone “gets it”  in theory, and can overlook it in practice.

Our language sets up creating the norm of what the organization stands for — and the behaviors supporting that — which then demystifies and brings the type of leadership we want to see and cultivate into day-to-day reality. If those qualities are talked about in examples and stories when the CEO meets with the board, direct reports and others; if they are linked to business success, reinforced in informal and formal mentoring programs, meaningfully incorporated into performance reviews, and play a role in why people get recognized, promoted or let go: the norm can be imitated and then owned.

Emotional Intelligence (EQ) is increasingly being reinforced in organizations as a way to develop leaders and help them succeed. (See Daniel Goleman’s What Makes a Leader.) Reinforcing EQ reinforces attributes important in ethical leadership so it is a win-win.

Some resources for thinking about how ideas can take hold in a culture include Contagious: Why Things Catch On by  Jonah Berger (video above) and the books that fueled his thinking: Gladwell’s The Tipping Point and the Heath brothersMade to Stick.

Applying that to what could make ethical leadership contagious involves first looking at what  natural advantages exist in your culture to tap into to help ideas take hold. Then, what ideas might offer perceived value. For example, creating a special leadership forum site with links to good articles, blogs, book reviews and news stories fosters leadership development that reinforces the norm you want, with triggers to keep the subject top of mind, while saving leaders’/potential leaders’ time in finding useful information they can apply and share with others. Launch it with a sense of exclusivity: perhaps needing a password. Enlist the support of admired leaders in the organization to make reference in meetings to an article on the site they liked, and find other ways to have the site talked about and positioned as a place high potentials go for useful leadership tips. Who wouldn’t want to be considered “high potential”?

How do the values and attributes of ethical leadership become contagious in organizations?

They are modeled by the board, CEO and other leaders. They are talked about and interrelated with business and personal success. They are mentored and cultivated, enmeshed in the culture’s stories and allied with how people feel/see they can make a difference. They are linked to reducing stress. They are connected to what stakeholders’ value, attached to what it takes to belong and reinforced throughout the organization.

Gael O’Brien July 24, 2013

The Week in Ethics

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine. Gael is also a columnist for Business Ethics Magazine; her November 6, 2013 column looks at whether loyalty is owed when a boss acts as a good leader. 

The Week in Ethics: Petraeus’ Derailment Invites Focus on the Heart of Leadership

November 16, 2012

Too many assumptions are made about leaders once they reach the highest levels of their organization: that they are at the top of their game, operating out professional clarity, and have themselves figured out.

Ivy league educated, storied-career David Petraeus is a poignant illustration.

As director of the CIA, and one of the most acclaimed and highest ranking generals, he seemed among the least likely to derail his career in an ethics scandal. He resigned last week (11/9/12) when an affair, allegedly with his biographer Paula Broadwell, became public.

Beyond issues of national security — which Petraeus said he didn’t violate — the critical question here is a very human one. It gets to the heart of leadership.

How do high achievers driven to achieve, fueled by the desire to have the achievement matter, consistently stay committed to their values and highest aspirations for themselves as a human being?

That is one of the most important questions leaders can ask themselves on a regular basis.

Reflecting on it, they have a better sense of how to unite the pieces of their lives into a wholeness, an integrated self. They can notice more consciously the interplay of their ego and how it may be at loggerheads with their values, or what they say they stand for. It is more possible for them to detect red flags about what is going on within them and around them. It is the essence of being self aware.

Nearly 20 years ago, Daniel Goleman’s “What Makes a Leader” identified emotional intelligence (self awareness, self regulation, motivation, empathy, and social skills) as a critical dimension of leadership that one can continually learn and develop.

Leaders’ vulnerability to ethical lapses, mistakes in judgment, and a sense of entitlement increase when self awareness and self regulation are low, or there is complacency about one’s own ethical development.

Consider very recent exits for CEOs who’ve lied on resumes (Scott Thompson at Yahoo), had “inappropriate relationships with subordinates,” (Christopher Kubasick at Lockheed Martin and Brian Dunn at Best Buy ), or committed “serious financial violations” (Ernst Lieb at Mercedes-Benz USA).

When caught in an ethical lapse, responses like “I regret my conduct in this matter did not meet the standards to which I have always held myself” reflect the language of detachment from self-awareness. On one side — the standards I say I hold myself to; on the other side — how I behave.

Values that become passive do us no good.

In his new book The Pause Principle: Step Back to Lead Forward, leadership development expert Kevin Cashman writes about the importance of a leader’s ongoing focus on self-knowledge and how to expand self-awareness. I interviewed him recently about ways leaders can mitigate vulnerability to ethical lapses.

Leaders reach their career pinnacle for many reasons, often because of their track record, business acumen, strategic ability, and ability to influence and get others to follow.

As mistakes are all too human, what is a safety net?

At the heart of leadership is what sustains leadership.

It is the questions we ask ourselves as we deepen self-awareness that provide answers to how we stay aligned with the values and purpose that express who we are. It a creates the foundation for a leadership that is conscious, authentic, and ethical.

Gael O’Brien November 16, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine. Her November 2012 column is “When CEOs Self-Destruct: Lessons in Values for Corporate Boards.

The Week in Ethics: Goldman Sachs, Not Criminal, Just “Deceptive and Immoral”

August 13, 2012

Update: October 21, 2012, Former Goldman VP Greg Smith was interviewed on 60 Minutes about why he left Goldman seven months ago.

For more than two years, Goldman Sachs’ reputation has been under fire for its alleged role in the financial crisis. August 9, 2012, the U.S. Justice Department (DOJ) announced it won’t prosecute Goldman Sachs.

Goldman Sachs’ spokesman said “We are pleased that this matter is behind us.”

The DOJ said it “determined that, based on the law and evidence as they exist at this time, there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report” issued by the U.S. Senate Investigations Subcommittee in April 2011.

In response to the DOJ’s announcement, U. S. Senator Carl Levin, one of the authors of the bipartisan report, said in a statement: “Whether the decision by the Department of Justice is the product of weak laws or weak enforcement, Goldman Sachs’ actions were deceptive and immoral.”

Levin said the Senate Subcommittee’s investigation of the financial crisis “revealed wrong doing and failures among mortgage lenders, banking regulators, credit rating agencies and investment banks.”

Singling out Goldman Sachs for misleading its investors — selling them securities Goldman itself was betting against — Levin said, “Its actions did immense harm to its clients, and helped create the financial crisis that nearly plunged us into a second Great Depression.” He advocated regulators implement Dodd-Frank with rules that do not water it down, and that they enforce those rules with vigor.”

Proving Goldman intended to defraud clients is a necessary standard in a criminal case. So how will Dodd-Frank’s implementation of rules get at ethical consequences of actions that aren’t classified as criminal?

What will it put into place to deal with transactions that have a high likelihood of deceiving, misleading or harming clients related to intended or unintended consequences? How will Dodd-Frank get at authenticity of culture — holding institutions accountable for following their own stated values and principles?

Goldman, for example, professes to follow its Business Principles  as a context for day-to-day decisions. The first principle is “Our Clients’ interests always come first.”  After Levin’s subcommittee hearings, Goldman CEO Lloyd Blankfein created a Business Standards Committee to review its  business practices and reaffirm the principles.

Greg Smith, a former employee who resigned publicly from Goldman Sachs in March 2012, called the firm’s culture toxic, disputing anything had changed. Whether Smith had his own agenda for going public or legitimate insider evidence, it just fuels questions about how companies (and in this case Goldman) live up to the stated principles they say shape their culture.

Goldman leaders would be wise not to believe their own press statement that “this matter is behind us.” A company’s reputation is won or lost by the sustainable health of its culture, how values and principles consistently shape actions.

The challenge for Goldman, and any company that has experienced crises, is to recognize the wisdom of applying to reputation management a comment made by Alfred Einstein.

Einstein said, “you cannot solve a problem with the mind that created it.”

Gael O’Brien      August 13, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine. Her July 12, 2012 column is Penn State Scandal Highlights Failures in Leadership and Culture

The Week in Ethics: How to Start a Culture Shift at Penn State

July 13, 2012

July 12, 2012 Penn State University trustees, administrators, faculty, students, staff, and alumni began to digest the 267 page report by former FBI director Louis Freeh. Freeh was  hired by trustees as special investigative counsel  to look at Penn State’s role in a former assistant coach’s child sex abuse scandal. The report offers more than 100 recommendations for action by Penn State.

I talk about culture’s role in deterring or inviting crisis and the impact at Penn State in my July 12 Business Ethics Magazine column. Earlier today, I was interviewed on Minnesota Public Radio about ways Penn State can move forward. One of the things I suggested was a teach-in. I’d like to elaborate on that here.

In the culture section of the Freeh report, the  first recommendation raises the question of how to ensure there is community engagement. The recommendation says:

“Organize a Penn State-led effort to vigorously examine and understand the Penn State culture in order to: 1)  reinforce the commitment of all university members to protect children; 2) create a stronger sense of accountability among university leadership; 3) establish values and ethics-based decision making and adherence to the Penn State Principles as the standard for all university faculty, staff and students; 4) promote an increased environment of transparency into the management of the university; and 5) ensure a sustained integration of the Intercollegiate Athletics program into the broader Penn State community.”

First of all, part 3 of that recommendation needs to be amended to add trustees, the president’s office and all members of the administration to join the rest of the campus in establishing values and ethics-based decision making and adherence to the Penn State Principles.

The recommendation goes on to list several diverse groups on campus who should participate as well as alumni and representatives from peer institutions who have experience in reviewing and improving institutional culture.

To create a greater sense of engagement, as a first step, Penn State might consider  taking the eight recommendations related to culture (two-pages of the report) and emailing them to every student, administrator, and member of the faculty and staff attached with an invitation and request to participate in a one-day teach-in to be held the first week when classes resume next month for fall semester.

Normal class schedule and work would be suspended that day while the university holds a variety of online and face-to-face small and large forums for the campus community to come together to discuss Penn State’s Principles, the values the university wants to stand for, the ways in which the university can support  using values and ethics-based decision making and how a community can support each other in giving voice to values.

How Penn State would organize this, create facilitated discussions, moderated panels, recording  of questions and suggestions and handle follow up to ensure continued engagement in the process would enable the culture piece of the report to become a working document,  a basis for ongoing discussion and understanding.

The key discussion points from the teach-in could be given to the groups the Freeh report specifies for action, including: the Special Faculty Committee on University Governance, Penn State’s Coalition on Intercollegiate Athletics, the Rock Ethic’s Institute, as well as students, faculty, alumni and staff.

With a basis of shared discussion and collaboration to develop ideas, then representatives from these constituencies could meet together with “representatives from peer institutions” as the report suggests who have “experience in reviewing and improving institutional culture in academic settings.”

The goal of this  recommendation is to change the culture. What better way to start than by ensuring a process of ample discussion, understanding, idea generation,and buy-in around what is possible for Penn State to become emerging from this crisis.

Gael O’Brien       July 12, 2012

The Week in Ethics

Gael O’Brien is also a columnist for Business Ethics Magazine. Her July 12, 2012 column is Penn State Scandal Highlights Failures in Leadership and Culture