Archive for the ‘Ethical Leadership’ category

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

September 22, 2016

Update: September 27, 2016: Independent directors of Wells Fargo’s Board 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 and CEO John Stumpf will forfeit $41 million of unvested equity awards and “will forgo salary during the investigation.” The statement also said former head of retail banking Carrie Tolstedt left the company (presumably this week as she wasn’t expected to leave until the end of the year) without severance and has forfeited approximately $19 million. Neither Stumpf or Toldstedt will receive a 2016 bonus. The U.S. House Financial Services Committee will hold a hearing on Wells Fargo’s “unauthorized customer accounts” on September 29 with Chairman and CEO called to testify.

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, 2016

    Gael 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: Women Leaders Galvanize Detroit Around Justice

November 8, 2015

photo gold key in puzzle doorWhen things fall apart for lack of human and financial resources, becoming overwhelming, the key that enables leaders to transform the impossible to solvable is a compelling sense of greater purpose that is shared.

An illustration is the story of how Kym Worthy, Prosecutor of Wayne County, Michigan raised, and is a catalyst in efforts to continue to raise, the millions of dollars needed to process over 11,000 rape kits that were unopened and untested, found in Police storage; some there as long as 30 years. The move to solvable is often slow, demanding resilience. For Worthy, who began this effort in 2009, it evolved from personal and professional commitment and actions to enlisting others in the goal that justice be available to each rape victim.

As with any leadership act once it taps into others’ shared beliefs, momentum builds that can overcome obstacles. Worthy’s efforts got on the radar of Detroit businesswoman Joanna Cline who involved other Detroit businesses in raising funds, awareness and donating services. A public-private partnership called Enough SAID (Sexual Assault in Detroit) has been created.

Meanwhile, Detroit had its own problems filing for, and then emerging from, bankruptcy. This could have derailed the business leaders’ efforts. However the fundraising continued. As an outcome of ethical leadership, the stakeholders had grown to include the city of Detroit as well as the rape victims.

“The business community has rallied around us,” said Peg Tallet, chief community engagement officer at Michigan Women’s Foundation in an interview, “particularly businesswomen who are saying this can’t happen here if we are going to make this the city we’re all working to make it.”

Worthy’s office “has been able to identify 625 people suspected of being serial sexual assault offenders.” According to one of the businessmen involved in Enough SAID, “…you can’t have economic development if you can’t feel safe walking to your car after work.”

Those involved in Enough SAID provide a crucial teachable moment for other cities, governments, chambers of commerce, businesses and communities in general.

The Week in Ethics

Gael O’Brien, November 8, 2015

Gael O’Brien is The Ethics Coach columnist  for Entrepreneur Magazine. She is also a columnist for Business Ethics Magazine where her September column  is “Volkswagen’s Next Challenge: Keep Scandal from Happening Again.”

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: Leadership Lessons at American Academy of Arts and Sciences

June 18, 2013

column photo of ethics under microscope The integrity of the leader of an honorary society for independent public policy — founded  in 1780 during the American Revolution — is  under question as a result of misrepresentations on her resume and criticisms from former employees over her bullying, micromanaging management style.

While there is never a good moment for negative media attention, it is coming at a particularly awkward time for the American Academy of Arts and Sciences. It is landing on the eve of the June 19, 2013 release of a commission report the academy has guided for more than two years, expected to offer far reaching recommendations for education and cultural institutions.

Leslie Berlowitz, the head of the academy for the last 17 years, is now on leave while an internal investigation by an outside law firm addresses issues raised in a series of articles in the Boston Globe in June 2013. The articles indicate that the academy’s applications for at least three federal grants list Berlowitz having a doctorate from New York University (NYU) that NYU has no record of her completing. The National Endowment for the Humanities, which gave $1.2 million to the academy based on grant applications that included Berlowitz’s inflated credential, has referred the issue to its inspector general.  The Massachusetts Attorney General’s Office (charged with overseeing nonprofits) has also announced an investigation. Two others who gave grants to the academy (US Department of Energy and Carnegie Corporation of New York) are checking to see if false information was provided on their grant applications.

The articles indicate that in checking her resume against NYU records, where she worked before joining the academy, a job title for one position is misstated and length of service for another is misrepresented.  Academy employment ads refer to Berlowitz as “doctor” and further investigation by the Globe reporter found an email two years ago from Berkowitz where she implied she had a doctorate.

A month after turning down requests to be interviewed by the reporter and two weeks after the first Globe story was published, Berlowitz said in a statement that she “never intentionally misrepresented her accomplishments,” accepted responsibility for materials that left “an incorrect impression,” and acknowledged that she had the title of vice president of institutional advancement at NYU rather than academic advancement which, the Globe reported, has appeared on the academy website and in grant applications.  An academy spokesman originally blamed Berlowitz’s staff for resume errors, saying she was unaware of them.

The profile that emerges in the article is of a board/governing council extremely supportive of Berlowitz, who in 2004 bypassed the normal election process for membership into the Academy of Arts and Sciences — which honors the most accomplished scholars, innovators, and artists in their fields — when they added her as an inductee. They quietly inserted her name into “the original six-month-old announcement, a spokesman acknowledged, making it look as though Berlowtiz had been voted in along with everyone else in the spring.” Berlowitz’s $598,000 salary — higher than many college presidents’ — and first travel perks also indicate Board support. Former employees quoted in the article indicated the board ignored complaints about Berlowitz’s management style made to them.

The significant number of former employees willing to talk (anonymously and as named sources) to the Globe about their criticisms of Berlowitz’s leadership, calling her management style bullying, harsh, dismissive and micromanaging raise the question of what is motivating them. Is it a set up or revenge by those who believe they were treated badly capitalizing on her current vulnerability? Or is the issue an outcome of a detached governance process with too heavy reliance on the internal leader and no means to ensure that the leader’s management style and the organization’s work environment are functional and appropriate?

Either way it offers a cautionary tale about leaders vulnerability when they are unaware of the impact their leadership tone, style and communication have on employees; or worse, when they ignore or rationalize that impact without seeking to address it.

The unfolding saga at the academy also sends a message to boards that they have a responsibility to help an organization’s leader succeed by not just looking at the results, but being aware of the impact a leader is having on the larger team; and when there are red flags, stepping up to ensure the leader gets coaching in emotional intelligence or other issues, monitoring his or her workplace performance to be clear about expectations of improvement.

The academy’s purpose is to honor excellence. The need for all the investigations indicate that excellence has been compromised in terms of how the academy and their leaders have operated internally. Restoring integrity will involve transparency about the investigations’ findings, dealing directly with allegations about Leslie Berlowitz’s leadership, and putting as high a priority on how things are done internally as the achievements that result from them. The founding fathers would expect no less.

Gael O’Brien June 18, 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 June 2013 column looks at leadership vulnerabilities of departing OSU president Gordon Gee.

The Week in Ethics: Pepsi’s Advertising Disconnect From Social Responsibility

May 2, 2013

Update: May 4, 2013: Pepsi pulled the ad, but a segment of the ad is still available to view as of today here 

Having a woman CEO hasn’t sensitized those at Pepsi making advertising decisions based on an ad pulled this week showing a hysterical blond, battered, white woman intimidated by a policeman who is drinking a Mountain Dew demanding that she pick her batterer out of a line up of African-American men and a goat.

The ad, part of a series, developed by Tyler, The Creator, an African-American rapper, is a reminder that in the search for hip the lens of celebrity has its own focus.

Does Pepsi’s pulse on America really think the new edgy is taking half-a-dozen demeaning stereotypes, throwing them at the wall and not caring what sticks as long as you notice the can of soda?

The ad blunder for Mountain Dew is a reminder to companies that the definition of corporate social responsibility goes beyond the dollars they give to improve causes important to them. If they don’t link their influence in the world to how they sell products, their corporate responsibility becomes just veneer.

When every nine seconds in the U.S. a woman is beaten or assaulted  (the leading cause of injury to women), when a Georgia High School just had its first-ever integrated prom, when a Chicago Police Department is criticized for racial stereotyping and ”accidental racist” is too common……when rape in India — a four-year-old girl sexually assaulted died this week — continues to underscore attitudes toward women and girls — pandering to demeaning stereotypes in attempts at hip and wannabe amusing advertising betrays corporate responsibility.

USA Today illustrates recent advertising missteps that resulted in bad press and pulled ads: parodies of suicide (Hyundai zero emission cars) and depressed women (McDonald’s regional Big Mac ad) and Ford’s depiction of sexily-dressed women bound and gagged in the back of a Figo compact car — all tributes to bad judgment.

Hip is seductive– it crowns itself its own cool, evaporates in backlash and leaves corporate responsibility without much to say for itself.

Gael O’Brien May 2, 2013

The Week in Ethics

Gael O’Brien is The Ethics Coach columnist for Entrepreneur Magazine; she is also a columnist for Business Ethics Magazine — her April column is about the road to second chances.