Ethics in Corporate Leadership -- Teachable or Not?

Last week it was my pleasure -- and challenge -- to be a guest speaker in a top business school’s MBA class in leadership. The students’ energetic focus on corporate “tone at the top” suggested that with some minor fixes to the dates, this column retains its currency today. 

Ethics Training Needs Reality

Originally published in the IHT on July 28, 2006

This column is dedicated to an honest and hard-working couple who lived across the street from where I grew up.

The husband had retired after a hard blue-collar career for one of the pipeline companies that became Enron. When the company failed and he lost his pension and health care, they were forced onto the dole and died in penury.

In July 2006, the month that the bell tolled for Kenneth Lay, Enron's disgraced chief, this important question came up on my radar: Can personal ethics really be taught in the corporate environment?

A large professional trade group, whose members deal with financial information for investors, was rolling out a major new ethics training effort. Yet it remains apparent that the teachability of ethical behavior is still an important challenge. Companies take on an annual crop of new and inexperienced employees, even while virtue has remained in short supply - from Enron's downfall in 2001 through the 2006 uncovering of widespread backdating of stock option prices.

On the plus side, this project is large, competent and high-minded. It features leading university academics, the latest in snazzy video and graphics in a CD-based curriculum and flexible delivery from self-teaching to small- group seminars.

But here's the rub: In the history of corporate training, no one has ever flunked an ethics course.

With such obvious and squeaky- clean training scenarios as the bonus- driven salesman putting pressure on his credulous client and the agonized junior staff member blowing the whistle on a morals-challenged superior, not even the Lays and Jeff Skillings could miss earning honors marks.

Could it be otherwise? It's baby steps for baby feet to announce and administer a course flagged by unmistakable signs and guideposts. You might as well put pilot trainees in a simulator programmed for level flying in clear sunshine, and then expect them to land a jumbo jet with a double engine failure in a midnight thunderstorm.

Two suggestions could move the instruction beyond the novice level.

The first - based on the reality- driven models actually used for pilots, firemen and emergency room doctors - would embed issues of fraud, irregularity and dubious ethics on an unspecified and unannounced basis, directly into the mainstream training on which global companies spend fortunes annually. Trainees would then have the stimulus and the satisfaction of teasing out the problems for themselves.

Just as physical training issues are calibrated for complexity, so could those in a corporate setting. Important issues abound: Where is the line between good client service and an inappropriate incentive? How far can accounting rules be bent before they are broken? What is the balance between the benefits of booking a contract in an early fiscal quarter and the incompleteness of the paperwork needed to satisfy the auditors?

These and dozens of other real-world issues comprise the case-by- case experiences that arise every day. But there they come with the pressures of market performance and individual career development, and not beribboned in lofty conclusions delivered by highly compensated fly-by consultants with their soft-science doctorates.

Second, in addition to the challenge of shaping the classroom to something like quotidian reality, a company that is truly committed to doing well by doing good must deliver the right tone at the top.

And that in turn means that the true educational moments come from both the formal and the casual messages coming out of the executive suites. No amount of preaching from a human resources department can realign a company's meandering moral compass.

From the misplaced vision leading to Arthur Andersen's collapse in 2002 to the dubious stock sales by senior executives at EADS while the Airbus 380's delivery timetable was deteriorating, staff and management can and do, for better or worse, evaluate with clarity and precision the truthfulness quotient embodied in the messages being sent by their bosses.

If, instead of a fatal heart attack in the luxury of Aspen, Lay could have pulled off a modest but conveniently disabling illness, he might have finished his felonious career by cheating even his jailers. But despite Enron's reputation for coming up with uniquely creative deals, St. Peter at the Pearly Gates had the harsh message that at least one earthly futures contract can be neither hedged nor laid off to an undisclosed third party.

Despite Shakespeare's plangent reminder that "we owe God a death," the misery wrought by Lay's cupidity on my neighbors and thousands of others leaves my sympathies for him no deeper than my belief in his protestations of both innocence and piety.

Only when ethics training is properly framed by the principles of leaders consistently delivering both the walk and the talk, will all the expenditure on courses and software and fancy diplomas be justifiable. Of course, at that point, if the messages were credibly delivered as part of everyday business life, the extra spending would be redundant, unnecessary and more productively directed elsewhere.