Chapter 8

Moral person, moral leader, moral organization

For a leader to be trusted, he or she must, of necessity, be a moral person by character, attitudes and activities. Dealing with others one to one or in a large organization always raises the question of conditio humana, which is the concern about human nature and how humans live their lives. The sense of morality and its rationalization need to be adapted to the condition of life: there will always be an interplay between morality and the characteristics, key events, and situations which compose the essentials of human existence. In this, morality and law, which also governs how we live, are closely related. Both deal with questions of justice and want to establish a just world in accordance with their precepts (Weinberger 1991). Also, a sense of morality must consider that each individual possesses dignity and is endowed with liberty, which is how a person expects to be treated by others. Corporate leaders face the challenge of having to be fair to these sides of human nature, with a view to others as well as introspectively. They need to deal with expectations – those of others as well as their own.

The discernment of expectations is a decisive factor in decision-making at all levels of institutions. On a level that is very familiar to the practitioner, this human side has been aptly described by Chris Argyris in his book The Impact of Budgets on People (Argyris 1952),¹ where the title says it all. Anyone who has had to set up a budget or assess the content of a budget in any organization has become familiar with people’s propensity to overstate or understate in order to be “on the safe side.” Employing a budget as a control device will unnecessarily have these consequences. Budgets should rather be seen as a guide to enable future decision-making.

Responsible leaders should pay attention to the moral experiences and expectations of their followers. As with Douglas McGregor’s Theory X, that workers tend to be positively engaged towards their work and their fellows (see section 3.1), leaders should first assume that their employees care for each other. But they should also be on the lookout for individuals who intend to outmaneuver their peers. Some of this may lie in an intrinsic feature of humans that has been eradicated through positive experience in most of us, but not in all, and which has been called Social Darwinism. The connotation of “Social Darwinism” is to apply Charles Darwin’s (1809–1882) theories on natural selection to economics (where it supports laissez-faire theory) and to human behavior. It is associated with the phrases “survival of the fittest,” attributed to Herbert Spencer (1820–1903), and “root, hog, or die,” an old country catchphrase taken on by sociologist William Graham Sumner (1840–1910). Things have changed since the times of these scholars, but there are certainly people around who act by the principle, even if subconsciously.

The opposite of Social Darwinism is altruism – disinterested and selfless concern for the well-being of others. William MacAskill, a professor of philosophy at Lincoln College, Oxford, and a founder of the Effective Altruism movement, has spelled out five key questions that help guide our altruistic decisions (MacAskill 2015): how many people benefit, and by how much? Is this the most effective thing I can do? Is this area neglected? What would have happened otherwise? What are the chances of success, and how good would success be? Applying these questions to real-life scenarios, where leaders often have to determine which causes are the most important ones to be addressed, connects the personal sphere to the sphere of leadership in organizations.

This brings us to the question of whether a person or a leader can always abide by reasoning, abiding by, for example, the Kantian imperative and faith-based convictions? Or are there situational influences on how a person makes decisions? Crane and Matten (2004, pp. 128 ff.) identify two main types of situational influences: issue-related factors and context-related factors. With issue-related factors, they consider the nature of the ethical issue itself, and, in particular, its degree of moral intensity, that is, how important the issue is to the decision-maker. And they consider the issue’s moral framing: how that issue is actually represented within an individual’s personal environment or within the organization, where some moral issues will be deemed as important and others not.

Issues-related argumentation is not very far from the five questions asked by MacAskill, as it relates to the magnitude of consequences, the probability and the concentration of the effect, the temporal immediacy, the proximity that the decision-maker has to those impacted by his or her decision, and the question of whether there is a social consensus on the ethics of the problem in question.

Context-related factors, while certainly affecting decision-making in the personal sphere, are more apparent in the setting of organizations. We are back again with the very human feature of experience and expectation:

• People expect to be rewarded for what they do – and we take it for granted that they are likely to do what they are rewarded for. Therefore, decision-making is influenced by the systems of reward for moral behavior that people see operating in their workplace. If expectations fail in this context, decision-makers will change their criteria.
• People expect authority from their leaders. People don’t just do what gets rewarded; they do what they are told to do, or, perhaps more correctly, what they think they are being told to do. Leaders may not be directly instructing employees to do something ethical, but their instructions to the employees may appear to leave little option but to act in a moral manner.
• People expect that an organization works well. This brings us back to Max Weber’s and Paul du Gay’s advocacy of the advantages of good bureaucracy. Bureaucracy organizes the influence of rewards, punishments and authority. To get the best effect for moral decision-making, bureaucracy should stimulate, not suppress, moral autonomy. The functionality of specific rules and roles in the bureaucratic organization must leave enough freedom for thinking and not make the employees act as “moral robots.” The author of this book, at the start of his business career in a very large organization, heard the CEO spell out the maxim that job descriptions must never be so tight as to obstruct autonomy and never be so wide that a weak leader can hide behind them. This is a groundwork of not just effective but also moral and responsible leadership.

The term Groundwork for Moral and Responsible Leadership brings us to the theme of the moral enterprise. Moral business practices stem from moral culture, and moral culture creates moral organizations. In the 1980s, ethics professor Patrick E. Murphy would restrict the means for creating the moral organization to “corporate credos, programs such as training and ethics audits and codes tailored to the specific needs of a functional area” (Murphy 1989, p. 81), but there is a much wider spectrum nowadays. And we have long surpassed Milton Friedman’s dogma that “only people can have responsibilities; a corporation is an artificial person, and, in this sense, may have artificial responsibilities, but business as a whole cannot be said to have responsibilities” (Friedman 1970, p. SM 12). Today, corporations have accepted the double responsibility for “doing good” and “avoiding bad.” Most of them are aware that they need to prevent corporate social irresponsibility, such as cheating customers, violating human rights or damaging the environment not just in their own firms but far beyond (Lin Hi and Müller 2013).

We have seen very positive developments since the corporate scandals of the 1990s (if it were not for the criminal acts effected by Volkswagen in 2015 and further misconduct of the same firm in August 2016 with regard to squeezing small suppliers; see Rauwald 2016). There were always “high-ethics, high-profit” firms: Motorola, 3M, Cadbury Schweppes, Northern Chemical, Apple, to name just a few recorded by Pastin (1986). Some 30 years later, most of these and many more appear in Firms of Endearment by Sisodia, Wolfe, and Sheth (2014). The authors describe these “firms of endearment” (FoEs) as fueled by passion and purpose instead of cash, and say that FoEs view society and their workers as the ultimate stakeholders. They are “humanistic companies” where the stakeholders (customers, employees, suppliers, business partners, society and investors) develop an affectionate connection to their company, and where the companies seek to maximize their value to society as a whole.

One might ask how “passionate commitment” of the firm translates to profits, but results are amazing: in comparison to “Good to Great” companies (Jim Collins’s pivotal research; Collins 2001) and to the S&P 500, FoEs dramatically outperformed these companies over the last 10 and 15 years. When using share value as the performance measure, the increase over the 15-year period ending in 2014 was 1,681.11% for US FoEs and 1,180.17% for international FoEs compared to 262.91% for Good to Great companies and 117.64% for the S&P 500 companies. The spread has widened drastically in the last five years of this 15-year period: for the 10 years ending in 2009, the figures were 409.66% for US FoEs, 512.04% for international FoEs, 175.80% for Good to Great Companies and 107.03% for the S&P 500 companies (Sisodia, Wolfe and Sheth 2014, p. 114).

What makes a firm a moral organization – “a firm of endearment”? Sisodia, Wolfe and Sheth (2014, pp. 8f.) list the following:

• They subscribe to a purpose for being that is different from and goes beyond making money.
• They actively align the interests of all stakeholder groups and not just balance them.
• Their executive salaries are relatively modest.
• They operate at the executive level with an open-door policy.
• Their employee compensations and benefits are significantly higher than the standard for the company’s category.
• They devote considerably more time than their competitors to employee training.
• Their employee turnover is far lower than the industry average.
• They empower employees to make sure that customers leave every transaction experience fully satisfied.
• They make a conscious effort to hire people who are passionate about the company and its products.
• They view their suppliers as true partners.
• They honor the spirit of the law rather than merely following the letter of the law.

The list corresponds to what has been said in this book about conducting stakeholder relations responsibly. And there are more novel concepts of morality that are beginning to be practiced in business. The titles of two recent books say it all: Everybody Matters. The Extraordinary Power of Caring for Your People Like Family (Chapman and Sisodia 2015) and Connect: How Companies Succeed by Engaging Radically With Society (Browne, Nuttall, and Stadlen 2015).

This is an optimistic outlook: all those positive examples seem to prove that companies cannot be great unless they are good. An even more positive point of view has been given by the authors of Good Company: Business Success in the Worthiness Era (Bassi et al. 2011). Worthiness means pursuing a purpose that goes beyond making money, incorporating the interests of all stakeholders, and being a good steward throughout. Bassi et al. have ventured to rank the US Fortune 100 companies on their qualities of reciprocity, connectivity, transparency, balance and courage. All these are human centered to a very high degree.

The ranking list of Bassi et al. (2011, pp. 108 f.) has Walt Disney and FedEx with the highest scores, followed by Cisco, IBM and Intel. Walmart, which has so often been criticized for treating employees badly, comes up with a rank not at the lower end but in the middle of the score, as a positive evolvement was happening there in 2011 when the list was set up. This evolvement has continued, and the steps taken by the company to improve working conditions, care for the natural environment and continue to act as a steward for lower-income customers have been widely acknowledged, affecting both reputation and revenue: while other retail chains suffered drawbacks in the first half of 2016, Walmart reported on August 18, 2016, that sales in existing US stores rose for the eighth consecutive quarter, up 1.6% as more customers visited, providing a stark contrast to other retailers (www.wsj.com/articles/wal-mart-lifts-profit-outlook-as-sales-grow-1471519843). So, worthiness obviously pays off. Media stories on Walmart have very rapidly changed from reports on discriminatory events and exceptionally low wages posted on the class action website set up by a law firm (www.walmartclass.com) to a ranking in Fortune’s “Best Companies to Work For” list (http://fortune.com/best-companies).

Big firms must set examples, and most of them clearly do. But it is the moral leader who makes it happen, such as Walmart CEO Doug McMillon, who took the helm on February 1, 2014, and has been widely acclaimed for his achievements to make this huge organization become a good employer, increase awareness of ecological concerns, inclusive growth and a respected corporate citizen. “We are a retailer – we are a merchant,” he said in an interview, “that is our business. But we do not want to sell anything that offends people, and we look for places to make a positive difference” (www.bloomberg.com/news/articles/2015-06-23/wal-mart-ceo-sees-chance-to-make-a-difference-with-social-issues). Doug McMillon’s philosophy has taken up what was said by Paul Camenisch, theology professor at DePaul University in Chicago, at a business ethics workshop in 1985 (as quoted in the introduction to Walton 1988, p. iii): “It is impossible and undesirable to speak of human centered management within business without speaking of human centered management by business in the larger society.”

“Business and the society at large” is a wording that might have been commonly used in the 1980s, but it is not to the point any more. The contemporary understanding is that business is “in society,” as elucidated, among others, by the organizations that bear this name: Business in Society LLC (http://businessinsociety.net) and the Academy of Business in Society (www.abis-global.org) which were referred to in Chapter 1 in conjunction with the UN Global Compact. Human centered management, whether it is exercised in a business firm or in a public institution must be directed towards the common good of all – beyond the stakeholders of a firm or the constituency of a government authority. This has garnered momentum through the United Nations Agenda 2030:² the agenda’s 17 Sustainable Development Goals are interlinked with each other, and their implementation requires efforts from all members of society:

With its resources, both financial and intellectual, the business sector can contribute profoundly to support the processes of goal-implementation, and, to quote from the resolution adopted by the UN General Assembly on September 25, 2015, this “will stimulate action over the next 15 years in areas of critical importance for humanity and the planet” (United Nations 2015, p. 1). Business managers and managers in public entities have to become acquainted with the goals and the strategies of implementation and what this all requires. There is an obvious connection to the UN Principles for Responsible Management Education (PRME), and certainly, a nexus to executive training on human centered management. So, the final chapter of this book will recommend how to create responsible management by teaching the human centered paradigm.