LEADERSHIP ETHICS: THE INTEGRITY CAPACITY CHALLENGE

Dr. Joseph A. PetrickExecutive Director

Institute for Business IntegrityWright State University

Leadership Ethics Lecture SeriesOhio Northern University

March 7, 2007

AGENDA

A. Leadership Ethics and Rebuilding Stakeholder TrustB. Integrity Capacity Model for Leadership

Development1. Leadership Process Integrity Capacity2. Leadership Judgment Integrity Capacity3. Leadership Developmental Integrity

Capacity4. Leadership System Integrity Capacity

C. Microeconomic and Macroeconomic Improvements1. Improved Microeconomic Moral

Accountability2. Improved Macroeconomic Moral Accountability

D. New Agenda for Responsible Leadership

Leadership Ethics and Rebuilding Stakeholder Trust

1. Ethical Leadership Failures

2. Literature on Leadership is Vast.

3. Need For a Current Working Definition of Leadership

4. Need for a Current Working Model of Moral Leadership

Working Definition of Leadership

• Leadership is an influence process, both visible and invisible, in a society inherited, constructed, and perceived as an interaction of persons in human (and inhuman) conditions of partnership and/or inequality – an interaction measured by ethical values and by the degree of realization of intended, comprehensive, emergent, balanced and sustainable change.

Integrity Capacity Model of Moral Leadership

The individual and collective capability for repeated process alignment of moral awareness, deliberation, character and conduct that demonstrates balanced judgment, enhances sustained moral development, and promotes supportive systems for moral decision making.

Integrity Capacity Model of Moral Leadership

1. Individual and Collective Integrity Capacity as both Intrinsically and Instrumentally Valuable

2. Integrity Capacity as an Intangible Strategic Asset that Enhances Power and Reputational Capital

Instrumental Value of Leadership Integrity Capacity

Leadership Integrity Capacity

ReputationalCapital

Sustainable Competitive Advantage, Multiple Stakeholder Trust & World-

Class Performance

Dimensions of Leadership Integrity Capacity

1. Leadership Process Integrity Capacity: Moral Coherence

2. Leadership Judgment Integrity Capacity: Moral Soundness

3. Leadership Developmental Integrity Capacity: Moral Maturity

4. Leadership System Integrity Capacity: Moral Wholeness

Leadership Process Integrity Capacity: Moral Coherence

The alignment of individual and/or collective leadership moral awareness, deliberation, character, and conduct on a sustained basis, so that moral coherence results.

Leadership Process Integrity Capacity: Moral Coherence

MORAL AWARENESSPerceptionSensitivity

MORAL DELIBERATIONAnalysisResolution

MORAL CHARACTERCognitive Readiness to ActVolitional Readiness to Act

MORAL CONDUCTResponsibleSustainable

Virtues That Build Leadership & Collective Character

1. Intellectual Virtues

2. Moral Virtues

3. Social Virtues

4. Emotional Virtues

5. Political Virtues

Leadership Judgment Integrity Capacity: Moral Soundness

The balanced and inclusive use of key ethics theories and their subordinated cognate theoretical resources in the analysis and resolution of individual and/or collective ethical issues that demonstrate the moral soundness of leadership judgment.

Leadership Judgment Integrity Capacity (R2C2): Moral Soundness

External

Internal

Control

Flexibility

Achieve Good Results

Follow Right Rules

Build Virtuous Character

Enhance Supportive Contexts

Positive & Negative Zones of Leadership Moral Judgment Integrity (R2C2)

Character

Context

ResultsRules

Negative Zone

AmoralProfessionalism

Negative Zone

Positive ZoneWastes Energy

DisruptsContinuity

DestroysCohesion

OffendsIndividuals

StiflesProgress

NeglectsPossibilities

SlowsProduction

AbdicatesAuthority

CollectsInformation

Maintains Structure Provides Structure

Initiates Action

AcquiresResources

Envisions Changes

FacilitatesInteraction

Shows Consideration

Leadership Judgment Integrity Capacity Based on Respecting Four Human Nature Drives

Character

Context

ResultsRules

Negative Zone

AmoralProfessionalism

Negative Zone

Positive Zone

DRIVE TO DEFEND

DRIVE TOACQUIRE

DRIVE TO LEARN

DRIVE TO BOND

Ranges of Moral Judgment Evaluation using R2C2 ™

Quantitative Qualitative Anchors Ranges 0 – 1 Extremely Unacceptable

Under-emphasis

2 Unacceptable Under-emphasis

3 Minimally Acceptable Emphasis

4 Below Average Emphasis

5 Average Emphasis

6 Above Average Emphasis

7 Optimal Emphasis

8 Unacceptable Over-emphasis

9 – 10 Extremely Unacceptable Over-emphasis

Judgment Integrity Capacity Graph & Global Leadership Ethics Communication

DILBERT CEO LACK OF LEADERSHIP JUDGMENT INTEGRITY CAPACITY

Context

Results

Character

Rules

Flexibility

ExternalInternal

Control

(INVOLVEMENT)

(ADAPTABILITY)

(EFFECTIVENESS)

(CONTINUITY)

LEADERSHIP EXTREME CONCERN FOR PROFITS

Leadership Developmental Integrity Capacity: Moral Maturity

The organizational and extra-organizational cultural cognitive improvement of individual and/or collective leadership moral reasoning capabilities from a stage of self-interested connivance, through a stage of external conformity, and onto a stage of internalized commitment to moral principles that demonstrates moral maturity.

Leadership Moral Development Stages & Their Work Cultures

Principled Integrity

Democratic Participation

HOUSE OF COMPLIANCE

HOUSE OF MANIPULATION

Allegiance to Authority

Popular Conformity

Machiavellianism

Social Darwinism

(Conformity)

(Connivance)

HOUSE OF INTEGRITY

(Commitment)

Leadership Moral Development Stages & Leadership Theories

Principled Integrity

Democratic Participation

Path-Goal/Transactional Leadership Theories

Allegiance to Authority

Popular Conformity

Machiavellianism

Social Darwinism

(Conformity)

Autocratic Coercive Power Leadership Theories

Principled Transforming Leadership Theories

Leader-Membership Exchange Theories

Majority Participation and Servant Leadership Theories

Institutional Contingency Leadership Theories

Leadership System Integrity Capacity: Moral Wholeness

The development and alignment of the moral infrastructure within the organization and the shaping of the external moral environment of the leader’s organization to provide a supportive context for moral wholeness in decision making.

Leadership and Internal System Integrity Capacity

Organizational Moral Environment

• Compliance-Based Systems• Prevent Criminal Misconduct• U.S. Federal Sentencing Guidelines

(USFSG)• Sarbanes-Oxley Act (SOX)

• Integrity-Based Systems• Enable Responsible Conduct

Compliance-Based Organization Internal Systems

1. Establish compliance standards and

procedures

2. Assign high level individuals to oversee

program

3. Exercise due care in delegating

discretionary authority

4. Communicate and train

Compliance-Based Organization Internal Systems

5. Monitor, audit, and provide safe reporting system

6. Enforce appropriate discipline with

consistency

7. Respond to offences and prevent

further misconduct

8. Comply with USFSG & SOX requirements

Integrity-Based Organization Internal Systems

1. Moral Leadership at the Top

2. Ethics Needs Assessment &

Compliance Standards in Place

3. Ethics in Strategy and Structure

4. Integrity Steering Committee

5. Statement of Values/Written

Code of Conduct

6. Ethics Policy and Procedure Manuals

Integrity-Based Organization Internal Systems

7. Ethics in Selection, Socialization, and Performance Subsystems

8. Ethics in Appraisal, Rewards/Recognition/Incentive,and Development Subsystems

9. Ethics in Communication Processes and Work Attitudes

10. Ethics Training and Education Programs11. Ethics in Decision-Making/Meeting

Processes

Integrity-Based Organization Internal Systems

12. Organizational Integrity AdvisorResponsibilities

13. Ethics Reporting, Whistleblower Protection and Conflict Resolution Processes

14. Enforcement Processes of Ethical Standards

15. Ethics Monitoring, Auditing & Improving Subsystems

16. Ethics System and Quality Work Process Control and Improvement

Ethical Leadership Assessment Instrument

1. Listens to what employees have to say2. Disciplines employees who violate

ethical standards3. Conducts his/her personal life in an

ethical manner4. Has the best interests of employees in

mind 5. Makes fair and balanced decisions

Ethical Leadership Assessment Instrument

6. Can be trusted 7. Discusses business ethics or values

with employees 8. Sets an example of how to do things

the right way in terms of ethics 9. Defines success not just by results but

also by the way that they are obtained10. When making decisions, asks “what is

the right thing to do?” Source: M.E. Brown et al. / Organizational Behavior and Human Decision Processes

(2005) 97:117–134

External System Integrity Capacity

1. Domestic External Moral Environment• Corruption Elimination and/or Control• Industry & Professional Standards• Proactive Positive Stakeholder Relations &

Triple Bottom Line Accountability

2. Global External Moral Environment• Corruption Elimination and/or Control• Industry & Professional Standards• Proactive Positive Stakeholder Relations &

Triple Bottom Line Accountability

Improved Microeconomic Moral Accountability

A. Individual Leadership Accountability Improvement1. Demonstrated Process Integrity Capacity: Moral Coherence2. Demonstrated Judgment Integrity Capacity: Moral Soundness3. Demonstrated Developmental Integrity Capacity: Moral Maturity4. Demonstrated System Integrity Capacity: Moral Wholeness

Improved Microeconomic Moral Accountability

A. Collective Leadership Accountability Improvement1. Demonstrated Process Integrity Capacity: Moral Coherence2. Demonstrated Judgment Integrity Capacity: Moral Soundness3. Demonstrated Developmental Integrity Capacity: Moral Maturity4. Demonstrated System Integrity Capacity: Moral Wholeness

Improved Macroeconomic Moral Accountability

A. Professional Association/Industry Accountability Improvement1. Strengthen leadership professional education2. Strengthen leadership for institutional reform3. Strengthen professional/industry/education

accountability linksB. Political Economy Accountability Improvement

1. Balancing types of capitalism/economic democracy 2. International leadership harmonization through global business, government & NGO linkages3. Domestic & global governance board reforms

Balancing Types of Capitalism

Community

Capitalism

EntrepreneurCapitalism

InvestorCapitalismRegulatory

Capitalism

Negative Zone

AmoralProfessionalism

Negative Zone

Positive Zone

DRIVE TO DEFEND

DRIVE TOACQUIRE

DRIVE TO LEARN

DRIVE TO BOND

New Agenda for Responsible Leadership in Organizations

• National commission with task forces on improving microeconomic levels of leadership integrity capacity accountability

• International commission with task forces on improving macroeconomic levels of leadership moral accountability

• Integrity capacity building skills in mainstream leadership professional education

LEADERSHIP ETHICS: THE INTEGRITY CAPACITY CHALLENGE

Dr. Joseph A. PetrickExecutive Director

Institute for Business IntegrityWright State University

Leadership Ethics Lecture SeriesOhio Northern University

March 7, 2007