Click here for coaching and mentoring information. Ethics in Effective Governance

"Effective governance by the board of a "nonprofit" organization is a rare and unnatural act. Only the most uncommon of nonprofit boards functions as it should by harnessing the collective efforts of accomplished individuals to advance the institution's mission and long-term welfare." ("The New Work of the Nonprofit Board" in the September-October 1996 issue of the Harvard Business Review)

BusinessWeek magazine reports that "for-profit" boards, "...have become either passive or conflicted players in this morality play, unwilling to question or follow up on even the most routine issues. If governance of the modern corporation isn't completely broken, it is going through a severe crisis of confidence." (May 6, 2002 issue)

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Legacy of Enron's Inept Leaders

As the trial of Kenneth L. Lay and Jeffrey K. Skilling begins on January 2006 in Houston, the fallout from the demise of Enron is more than financial. Lay and Skilling are heavily to blame for the inept management that led Enron, once America's seventh-largest company with 31,000 employees and a stock market value of $35 billion, into bankruptcy. But the greatest legacy of these inept executives may be their social and ethical impact on future business leaders.

Research by the Center for Academic Integrity ("CAI"), a think tank affiliated with the Kenan Institute for Ethics at Duke University, shows that undergraduate business students do more cheating than just about anyone else.

The survey of nearly 50,000 students at 69 schools found that 26% of business majors admitted to serious cheating on exams, and 54% admitted to cheating on written assignments, which includes plagiarism and poaching a friend's homework. The results come from surveys conducted over the past three years by Donald McCabe, a management professor at Rutgers Business School and founder of CAI.

McCabe says cheating has increased since he began doing surveys 15 years ago. Technology makes it easier to cheat but he adds that a "disturbing" number of students use recent corporate and political scandals to justify their behavior. (BusinessWeek, February 6, 2006 issue)


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This moral laxity has come to pervade even the bluest of the blue chips.

Boeing lawyer warns of company's legal peril

By Dominic Gates and Alicia Mundy, Seattle Times staff reporters, Jan. 31, 2006

The Seattle Times reports that at Boeing's annual leadership retreat earlier this month, the company's top lawyer delivered a devastating worst-case assessment of the potential damage that still looms from the company's recent ethics scandals.

General Counsel Doug Bain's unflinchingly direct speech offers an extraordinary look at the inner workings of a powerful company as it struggles to recover from scandal, retrieve its reputation and ensure ethical behavior in future.

"Was there a culture of win at any cost?' Bain asked his audience, some 260 top Boeing executives gathered in Orlando, Fla. "We now know what that cost is."

In this powerful presentation, Bain makes the case that poor ethical decisions are seriously damaging one of the country’s oldest, largest and most important companies. Settlement costs with the government and lost revenues due to ethics scandals at the aerospace giant already have cost over $1 billion and could reach $5 – 10 billion. 15 Boeing Company Vice Presidents have lost their jobs due to ethical “lapses” over the past few years. He noted that in 2005 alone, 900 of the formal ethics complaints that were lodged internally with the company’s Office of Ethics and Business Conduct were found to have substance.

Today's challenge is to create corporate cultures that encourage and reward integrity, as much as creativity and entrepreneurship. To make this happen, executives need to be the moral compass for stakeholders and take personal responsibility for corporate shortcomings.

Ehtical cultures are the result of diligent effort--frequent, scheduled conversations between leaders and employees about what the standards of your company really are according to Laura Hartman, a professor at DePaul University.

How ethically vulnerable is your organization? Just go around and ask people what the core values are that define your company. You may be surprised at the variety of the answers.

As a leader, you have to set the standard yourself, constantly keeping your actions above reproach. Talk through hypothetical scenarios with the staff so that they'll know what to do when they come up against an ehtical dilemma and you're not around.

CEO's must be willing to share governance responsibility with the board and the board should be vulnerable to the stakeholders. When the "teeter-totter" balance of the CEO (management) and the board of directors (leadership) becomes heavily weighted on the side of the management, this imbalance is sure to lead to governing problems. A weak "rubber stamp" board coupled with a powerful CEO is the root cause of most governance crisis situations.

The best insurance against crossing the ethical divide is a roomful of skeptics. CEOs must actively encourage dissent among senior managers by creating decision-making processes, reporting relationships, and incentives that encourage opposing viewpoints. By advocating dissent, top executives can create a climate where wrongdoing will not go unchallenged.


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Board of Directors Leadership Tips

The board can maintain a governance power balance by insuring that:

1. No more than two inside (management) directors on the board.

2. Only outside directors serve on the audit, nominating and compensation committees.

3. Board members understand that they are directly accountable to and aligned with stakeholders. This accountability should be reflected in restrictions on stock purchases and sales by directors during their terms of service.

4. Create an open board environment where directors are encouraged to speak up and

invite debate. Thorny questions or alternative solutions should not be considered being "disloyal to company management."

5. Directors regularly meet with members of management without the CEO being present.

6. Mandatory term and age limits of board members to allow for new thinking.

7. Conduct an anonymous annual self-evaluation of the board's performance.

An effective board of directors views its composition as strategic and focuses its time and attention on important issues. The board insures that no outside director directly or indirectly draws consulting, legal or other fees from the organization. Nor does the board allow the CEO to stack the board with friends or high-profile non-participating board members.

Coaching Tip

The board of directors can remain knowledgeable about what matters by:

1. Making the CEO paint the "big picture" in annual strategic planning sessions with the board.

2. Keeping in touch with key stakeholders through two-way communications.

3. Deciding what needs to be measured and requesting monthly reporting of key success factors.

4. Act on what matters by not only setting policy but, also, insuring that proper implementation happens.

With the recent reportings of unethical behavior by some executives in Corporate America, it may be time to publicly discuss business ethics. Ethical behavior enhances the well-being of everyone because it comes from, and reinforces, motives and emotions such as love, joy, generosity and compassion.

Asking themselves questions like, "What kind of leader am I trying to be?" and "What am I trying to keep?" can help executives move from where they are today toward ethical behavior by becoming more self-aware. Moving from an "egocentric" state to a "world-centric" state can help us understand what others need and how we can give it to them.

For more information on how executives can put the "Law of Reciprocity" to work for themselves and their organization, please click here.


Check out an "Ethics Toolkit for Managers"
Afterthoughs....

"A great deal of attention has been paid . . . to the technical languages in which men of science do their specialized thinking . . . . But the colloquial usages of everyday speech, the literary and philosophical dialects in which men do their thinking about the problems of morals, politics, religion and psychology -- these have been strangely neglected. We talk about 'mere matters of words' in a tone which implies that we regard words as things beneath the notice of a serious-minded person.

This is a most unfortunate attitude. For the fact is that words play an enormous part in our lives and are therefore deserving of the closest study. The old idea that words possess magical powers is false; but its falsity is the distortion of a very important truth.

Words do have a magical effect -- but not in the way that the magicians supposed, and not on the objects they were trying to influence. Words are magical in the way they affect the minds of those who use them.

A mere matter of words, we say contemptuously, forgetting that words have power to mould men's thinking, to canalize their feeling, to direct their willing and acting. Conduct and character are largely determined by the nature of the words we currently use to discuss ourselves and the world around us."

-- ALDOUS HUXLEY, Words and Their Meanings.


A group of business and thought leaders have created the Open Compliance and Ethics Group Project (OCEG) to establish best practices and standards to help businesses reduce corporate and investor risk. More information is available at www.oceg.org or (602) 234-9278.


The Emperor's Seeds...

An emperor in the Far East was growing old and knew it was time to choose His successor. Instead of choosing one of his assistants or his children, he decided something different. He called all the young people in the kingdom together one day.

He said, It is time for me to step down and choose the next emperor. I have decided to choose one of you. The kids were shocked! But the emperor continued.

I am going to give each one of you a seed today, one very special seed. I want you to plant the seed, water it and come back here one year from today with what you have grown from this one seed.

I will then judge the plants that you bring, and the one I choose will be the next emperor!

One boy named Ling was there that day and he, like the others, received a seed. He went home and excitedly told his mother the story. She helped him get a pot and planting soil, and he planted the seed and watered it carefully. Every day he would water it and watch to see if it had grown.

After about three weeks, some of the other youths began to talk about their seeds and the plants that were beginning to grow. Ling kept checking his seed, but nothing ever grew. Three weeks, 4 weeks, 5 weeks went by. Still nothing.

By now, others were talking about their plants but Ling didn't have a plant, and he felt like a failure.

Six months went by; still nothing in Ling's pot.

He just knew he had killed his seed. Everyone else had trees and tall plants, but he had nothing. Ling didn't say anything to his friends, however. He just kept waiting for his seed to grow.

A year finally went by and all the youths of the kingdom brought their plants to the emperor for inspection. Ling told his mother that he wasn't going to take an empty pot but his Mother said he must be honest about what happened. Ling felt sick to his stomach, but he knew his Mother was right. He took his empty pot to the palace.

When Ling arrived, he was amazed at the variety of plants grown by the other youths. They were beautiful-in all shapes and sizes. Ling put his empty pot on the floor and many of the other kids laughed at him. A few felt sorry for him and just said, Hey nice try.

When the emperor arrived, he surveyed the room and greeted the young people. Ling just tried to hide in the back. My, what great plants, trees and flowers you have grown, said the emperor.

Today, one of you will be appointed the next emperor!

All of a sudden, the emperor spotted Ling at the back of the room with his Empty pot. He ordered his guards to bring him to the front. Ling was terrified.

The emperor knows I'm a failure! Maybe he will have me killed! He thought. When Ling got to the front, the Emperor asked his name. My name is Ling, he replied.

All the kids were laughing and making fun of him. The emperor asked everyone to quiet down. He looked at Ling, and then announced to the crowd, Behold your new emperor! His name is Ling!

Ling couldn't believe it.

He couldn't even grow his seed. How could he be the new emperor?

Then the emperor said, One year ago today, I gave everyone here a seed. I told you to take the seed, plant it, water it, and bring it back to me today.

But I gave you all boiled seeds, which would not grow. All of you, except Ling, have brought me trees and plants and flowers. When you found that the seed would not grow, you substituted another seed for the one I gave you.

Ling was the only one with the courage and honesty to bring me a pot with my seed in it. Therefore, he is the one who will be the new emperor!"


Do your executives need some ethical leadership coaching?

As we go into ourselves, we can go more effectively out into the world---and---as we go out into the world, we go deeper into ourselves. For help in this process of self-discovery, executives should seek a leadership coach.

 Click here for information on Coach John Agno.

Most executives are hired or promoted based upon their technical skills and experience but fired due to their lack of leadership skills.

A leadership coach can help executives and entrepreneurs personally develop from where they are today toward ethical leadership behavior by becoming more self-aware. Moving from an "egocentric" state to a "community-centric and world-centric" state can help you understand what others need and how you can give it to them.


Leadership coaching matters.

Leadership coaching by certified executive & business coach.

Leadership development is not an event.

Albert Einstein once said, "We should take care not to make the intellect our god; it has, of course, powerful muscles but no personality. It cannot lead; it can only serve."

Leaders know and science has discovered emotionality's deeper purpose: the timeworn mechanisms of emotion allow two human beings to receive the contents of each other's minds. Emotion is the messenger of love; it is the vehicle that carries every signal from one brimming heart to another.

Leadership happens in a series of interactive conversations that pull people toward becoming comfortable with the language of personal responsibility and commitment.

That is why leadership development is not an event. It is a process of participating in respectful conversations where the leader recognizes his or her own feelings and those of others in building safe and trusting relationships.

For human beings, feeling deeply is synonymous with being alive.

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