Leadership, Ethics, and Communications: Foundations of a Sustainable Organization

Leadership, Ethics, and Communications 1

LEADERSHIP, ETHICS, AND COMMUNICATIONS

Leadership, Ethics, and Communications:

Foundations of a Sustainable

Organization

Bryan Hill

Webster University


Abstract

Purpose

This paper was written to explore the links between effective organizational leadership,

ethics, integrity, and communications. The paper looks at recent organizational crises which

have stemmed from a lack of ethical leadership, and a few possible scenarios which can lead

to unethical decision making. Also looked at is the impact of ethics on organizational

communications; strategy; culture; human resources; organizational development and

change; organizational and personal reputation; as well as the impact on other organizational

aspects. Further, the paper focuses on common recommendations for organizational ethics

policies, as proposed by academicians, organizational leaders, and international councils

which have created global ethics declarations. Scriptures from Judeo-Christian, Muslim, and

Buddhist religions are reviewed in the Appendix for foundational leadership, ethics, and

communication principles. In addition, my hypothesis is that ethical leadership, decision

making, and communications has a tremendous impact on an organization‘s long-term

sustainability and profitability.

Problem with Hypothesis

Problems of the hypothesis include that, while most national cultures and large world

religions share many of the same moral ethics and values, there are some people, including

professors and business leaders within these societies, who do not subscribe to the same

ethical views—believing that moral ethics are not conducive to intelligent and profitable

organizational leadership. Another problem stems from the question: Who gets to decide

whose set of ethics is used as the base for the organization?


Proposed Methodology

This is a qualitative data analysis focusing on the subject of ethical organizational leadership,

decision making, and communications. The data examined has been gathered from various

newspaper and internet articles—including articles on unethical decision making and actions

at Enron, Arthur Andersen, A.I.G., Standard & Poor‘s, and Moody‘s; from business and

communications textbooks, international business ethics declarations and, as found in the

Appendix, scriptures from the Judeo-Christian Holy Bible, the Jewish Tanach, the Muslim

Qur‘an, and Buddhist teachings.

Conclusions

Various studies and articles suggest that effective organizational leadership is also ethical

leadership; that an ethical organization is built upon the foundation of values set by founders

and senior executives; that these values are embedded into the culture of the organization and

written into its vision and mission; and that communications is the delivery method of these

values and the means by which they are reinforced.

These are subjects which generate much interest, study, and writing. A search of Google

presents over 14 million results for ―ethics in business [or workplace],‖ 473,000 for ―ethics in

accounting,‖ and 831,000 for ―ethics in advertising.‖ Searches on ―organizational leadership‖

yield 4.5 million results, ―organization ethics‖ yields almost 2.5 million results, ―leadership

ethics‖ yields 969,000 results, and ―ethical leadership in business‖ yields almost half a

million results. Turning to the subject of ―ethical communication‖ returns 12.3 million

results, while a search on ―organizational culture and leadership‖ returns 1.35 million results,

and a search on ―organizational culture and ethics‖ returns 498,000 results. More

specifically, there are 925,000 results for a search on ―Enron ethics,‖ with a combined


836,000 other results searching ―Enron scandal,‖ ―Enron fraud,‖ and ―Enron collapse.‖ A

Google search on ―A.I.G. bailout‖ provides nearly three million results.

I conclude that organizations which have strong ethical values, and employ ethical decision

making and communications, build a solid reputation with stakeholders, the media, and the

community at large, and have the opportunity for long-term sustainability and the potential

for greater success.


Leadership, Ethics, and Communications

Foundations of a Sustainable Organization

The Problem

Effective organizational leadership has as two cornerstones of its foundation: good ethics

(or morality), and good communication ability. Solid ethics (or morals) help an organizational

leader to make wise decisions for the organization. Good communication ability helps the leader

to transmit his or her vision and direction throughout the organization, assists in building trust,

and inspires organizational members to adopt the vision and follow the direction. Without good

ethics, a leader can make bad decisions for the organization, even though the decisions may be

legal. Without being a good communicator, the leader has difficulty in establishing or

maintaining the culture of the organization, developing and implementing strategies, bringing

about organizational development or change, and effectively handling crisis management and

crisis management communications. While it can be argued that there are many other qualities

essential to good, effective leadership, both good ethics and good communication skills appear

foundational.

Important Studies

The news is filled with reports on organizations stumbling and faltering as a result of

making unethical decisions. Virtually without exception, these unethical decisions and actions

stem from unethical leadership and an organizational culture where ethical values are not built

into every policy, every practice, and every decision made by senior executives and other

employees. It is the responsibility of senior leadership to set the values for the organization and

to transmit them to all employees by embedding them within, and communicating them through,

the organizational culture. Aronson (2001) states that, ―Leaders are obligated to set a moral


example for organizational members and to determine those organizational activities which may

be detrimental to the values of society in general‖ (Avolio, Weichun, & May, 2004, cited in

text). According to Avolio, et al., when ―[l]eaders exhibit ethical behaviors…they help to elevate

followers‘ moral awareness and moral self-actualization….[and] create the right conditions and

organizational culture…to foster the development of ethical behavior‖ in their followers.

Gilman, Hand, Navran, and Brown (2008) show what happens when leadership does not exhibit

ethical behaviors, by stating that, ―Ethical lapses at the upper echelons of management tend to be

perceived as tacit permission to choose the ‗path of least resistance‘ at lower levels.‖ This is why

Mathis and Jackson (2008) stress that, ―the primary determinant of ethical behavior is

organizational culture, which is the shared values and beliefs in an organization‖ (p. 22). Sankar

(2003) sees the leader(s) as the one(s) ultimately responsible for communicating a culture of

ethics, values, and integrity throughout the organization: by highly visible means such as

―speeches, company publications, [and] policy statements,‖ but more importantly, through his or

her ―personal actions.‖ Mathis and Jackson summarize the results of ethics in an organization by

stating that:

On the strategic level, organizations with high ethical standards are more

likely to meet long-term strategic objectives and profit goals….[and to be] viewed

more positively by individuals in the community and industry, as well as by

consumers and employees….translat[ing] into bottom-line financial results and

the ability to attract and retain human resources‖ (p. 22).

Current Leadership Crises

Since the beginning of the new millennium, it has been evident that there is a leadership

crisis in American organizations. These crises have stemmed from a lack of ethical values on the


part of senior executives—the leaders of organizations. The lack of ethical values has led to

unethical decision making and actions on the part of leaders and employees alike; when ethics

have been only nominally built into the culture, there is a lack of walking the talk and of keeping

employees accountable in living ethical values.

In 2001, the media began covering what would become one of the first and greatest

displays of organizational corruption and unethical leadership in this new millennium—the

collapse of the Houston-based energy company, Enron.

At Enron, the focus of leaders was on short-term profits, stock prices, and stockholder

dividends, instead of long-term sustainability. That led senior executives to engage in many

unethical and illegal practices to drive up the per share price of Enron stock. In the process, those

executives were amassing great personal wealth on their own shares of stock. As the company

began to falter, those same senior executives were encouraging their employees to continue

purchasing stock—stating that the company was healthy—while at the same time those leaders

were selling their own shares in the company and not disclosing to their employees and other

stakeholders that Enron was losing millions of dollars; was in debt; that its leaders were guilty of

fraudulent bookkeeping and other unethical business practices; and that the entire organization

was collapsing. After Enron collapsed, thousands of employees were ―unemployed or financially

devastated,‖ having lost their jobs and their life savings (Blohowiak, 2004). Among those who

would be brought to trial were the former Chairman of the Board, Kenneth Lay, the former Chief

Executive Officer, Jeffrey Skilling, and the former Chief Accounting Officer, Richard Causey

(Blohowiak).

Malcolm Salter, in his book Innovation Corrupted: The Origins and Legacy of Enron’s

Collapse (Hancock, 2008, cited in text), says that:


[Enron‘s] downfall can be traced to supreme arrogance bred by considerable

success, some extremely poor diversification decisions, and poorly conceived and

implemented administrative practices that led, over time, to reckless gambling and

ethical drift….and perverse financial incentives [for executives which] led to a

gladiator culture in which executives proposed—and risk managers and the board

of directors approved—a growing number of risky gambles with high expected

returns….[while engaging in] intense lobbying [of Congress] to encourage further

domestic deregulation and limit federal oversight of the energy industry….Once

Enron‘s ethical drift took hold, its collapse was only a matter of time.

In his book, Salter asks, ―Why did Lay‘s espoused faith and Christian values fail to

guarantee his moral leadership and protect the enterprise from increasing immoral behavior?‖

(Hancock, 2008, cited in text). Hancock did not provide an answer from Salter, nor give his own.

Csorba (2006) says that the culture and practices of Enron were filled with

―manipulation, infighting, backstabbing and fuzzy math;‖ ―greed, distrust and deception;‖ ―a

consistent manipulation of accounting rules, but also a pattern of careless recruitment practices;‖

and an ―utter lack of leadership.‖ He says that ―integrity‖ was often talked about at Enron, and

even promoted, but it wasn‘t truly practiced by the senior executives; nor was it practiced down

through the organization (Csorba). On that note, Csorba states that while former Enron employee

Sherron Watkins was giving her testimony during the trial of Kenneth Lay and other Enron

executives, she talked of notepads being distributed to the employees by those executives. These

notepads bore a quote by Dr. Martin Luther King, Jr. which stated, ―Our lives begin to end the

day we become silent about things that matter‖ (Csorba).


Ethics Scoreboard.com (2004) states that Enron CEO Skilling lacked four key leadership

ethics: ―responsibility, competence, prudence, and accountability.‖ Further, whether Skilling

would be found guilty of breaking the law or not, his actions while serving as Enron CEO were

still unethical (Ethics Scoreboard.com). Ethics Scoreboard.com says that Skilling‘s lawyers tried

to use the defense that he was only following the advice of his lawyers and accountants;

however, as Ethics Scoreboard.com points out, ―CEOs [don‘t] take orders from lawyers and

accountants,‖ CEOs are the ones to give the orders. ―A CEO like Skilling says [to the lawyers

and accountants], ‗We have this idea that seems to allow us to hide our losses without violating

any laws. Will it work?‘‖ (Ethics Scoreboard.com). Instead of refusing to be a part of these

unethical practices, both the lawyers and the accountants helped Skilling and other senior

executives at Enron to ‗cook the books‘ and engage in other acts to hide Enron debt and other

dealings.

F. J. Reh (n.d.) states that ―Enron….[like any] organization [had] an obligation to all of

its stakeholders, not just its stockholders, and those obligations were not met in this case.

Executives…made decisions that were wrong….[possibly including] illegal activities.‖ Feh

continues, ―Many people [were] also…beginning to question the professional conduct of auditors

Arthur Andersen. Did their interest in preserving their income cloud their judgment?‖

Gilman, Hand, Navran, and Brown (2008) state that the accounting firm Arthur Andersen

displayed a conflict of interest by serving as a consultant to Enron while at the same time acting

as their auditor. Enron then hired away former Arthur Andersen employees to become Enron

managers, furthering the conflict of interest, according to Gilman, et al. (2008). But this also

went beyond being a conflict of interest for, as Gilman, et al. state: ―The independence and


integrity of financial auditing organizations are fundamental to the stability and growth of…free

markets throughout the world.‖

Authors of Crafting and Executing Strategy: The Quest for Competitive Advantage:

Concepts and Cases, Thompson, Strickland, and Gamble (2008), summarize the lack of ethics on

the part of both Enron and Arthur Andersen:

Enron…touted four corporate values—respect, integrity, communication, and

excellence—but some top officials engaged in dishonest and fraudulent

maneuvers that were concealed by ‗creative‘ accounting; the lack of integrity on

the part of Enron executives and their deliberate failure to accurately

communicate with shareholders and regulators in the company‘s financial filings

led directly to the company‘s dramatic bankruptcy and implosion over a six-week

period, along with criminal indictments, fines, or jail terms for over a dozen

Enron executives. Once one of the world‘s most distinguished public accounting

firms, Arthur Andersen was renowned for its commitment to the highest standards

of audit integrity, but its high-profile audit failures and ethical lapse at Enron,

WorldCom, and other companies led to Andersen‘s demise—in 2002, it was

indicted for destroying Enron-related documents to thwart investigators (p. 29).

Csorba (2006), referencing Matthew 7: 24-27 of the Holy Bible, says of Enron

leadership: ―Management constructed this house on the sands of deceptions, lies and fraud,

instead of building it on the solid foundation of trust and transparency.‖

But Enron has not been the only organization to make the news over unethical decision

making, unethical practices, and unethical leadership. The current economic collapse (of 2008) is

riddled with a lack of organizational ethics. Unfortunately, as with Enron, for many of these


organizations there exists ―a wide gap…between [their] stated values and [their] actual business

practices‖ (Thompson, Strickland, and Gamble, 2008).

The current financial crisis is the result of many factors, including: losses realized by

mortgage and investment companies, such as American Insurance Group (A.I.G.), and banks,

through borrower defaults on securities backed by high-risk subprime mortgages; the merger of

Bear Stearns with J.P Morgan Chase; the filing for bankruptcy protection by Lehman Brothers;

and the buyout of Merrill Lynch by Bank of America (Craig and Lucchetti, 2008). Many of these

factors were as the result of unethical, though legal, decisions.

Using information reported by Bloomberg, Kiel (2008) states that an additional blow to

the economy—and a further example of unethical leadership—has been the practice, since 2000,

of credit ratings organizations such as Standard & Poor‘s, and Moody‘s, which have let a focus

on profits distract these organizations from their obligation to investors to provide honest ratings

of securities based on their financial risk and reward potential. Instead, Standard & Poor‘s, and

Moody‘s, allowed a conflict of interest to develop (Kiel). These ―major credit rating

agencies…gave much of the risky securities their highest credit ratings [AAA], effectively

preserving the illusion that they were risk-proof‖ (Kiel). This was done in order to make their

customers—the banks packaging and selling the securities—happy. The higher Standard &

Poor‘s and Moody‘s rated the securities, such as the AAA gold standard, the more money these

credit rating agencies made from the banks who hired them to rate their securities, and the more

business the banks would give them versus competitors (Kiel).

One of the reasons individuals make unethical decisions is because of extreme pressure

put on them—by leaders, managers, the board, Wall Street analysts, stockholders, and others—to

perform and make money or cut costs. In his article, Kiel (2008) talks about the intense pressure


put on analysts at Standard & Poor‘s and Moody‘s to make the numbers work in order to give

securities the AAA ratings. They were instructed to do whatever it took. Using testimonies and

e-mails disclosed by the Securities and Exchange Commission (SEC), Kiel quotes a senior

analyst at Standard & Poor‘s as saying, ―My mandate was to find a way. Find the way.‖ Kiel‘s

article reveals other quotes from the SEC report, such as, ―the ratings were essentially fictional.‖

Kiel relays that ―an analyst at [one] rating agency complained that her firm‘s model didn‘t

capture ‗half‘ of the deal‘s risk, but that ‗it could be structured by cows and we would rate it.‘‖

Frank Raiter, Standard & Poor‘s managing director, was ―told ‗to just guess‘ at the value of [the]

complex securities…‖ (Kiel). Mr. Raiter also said that, ―…if we could have hired a supreme

being to tell us exactly what the loss was on a loan, [we] wouldn‘t have hired him because the

Street wasn‘t going to pay us extra money to know that‖ (Kiel). And it wasn‘t just that people

were making ‗bad‘ decisions without realizing the consequences. Many fully expected the

current crisis to come—just not necessarily knowing how quickly it would arrive. They were

making unethical decisions, because they had a choice in their actions and because they sensed

that what they were doing wasn‘t right. ―Let‘s hope we are all wealthy and retired by the time

this house of cards falters,‖ wrote one analyst in a 2006 e-mail which the SEC obtained (Kiel).

Another organization with some recent questionable ethics is American Insurance Group

(A.I.G.). Joseph Cassano, the fired former head of A.I.G.‘s financial products unit, was

responsible for pursuing ―many of the complex financial transactions that pushed the company to

the brink of collapse‖ (Sorkin, 2008) while with the company. After receiving $120 billion in

taxpayer-provided government bailout money, A.I.G. executives went on a retreat costing nearly

half a million dollars. That decision was quickly reported in the press and on talk shows.


Craig and Lucchetti (2008) state that there is a large concern by taxpayers that the

hundreds of billions of dollars being given in bailout loans to financial and other organizations

may be going to pay bonuses to their leaders—the same ones who have placed the economy in

its current condition.

Realizing this himself, New York Attorney General Andrew Cuomo began working with

A.I.G. to ensure that taxpayer money was not going towards paying bonuses to executives.

A.I.G. already had a $600 million reserve for 2008 executive bonuses (Sorkin, 2008). Although

the $600 million was not going to come from government bailout money, Cuomo pushed for

A.I.G. to suspend the bonuses, stating, ―There should not even be any contemplation of bonuses

for executive performance because I find it hard to conceive of a situation that you could justify

a performance bonus for management that virtually bankrupted a company‖ (Sorkin). The paying

of bonuses to these executives is itself an ethical dilemma: how can the bonuses be justified

when the company has to take a multi-billion dollar loan to keep from collapsing and employees

are losing their jobs?

As Sorkin states, A.I.G. agreed not to pay any bonuses this year—including the $70

million Joseph Cassano would have received as part of his severance package (2008).

Attorney General Cuomo, in a letter to A.I.G. executives, identifies the need for

executives to earn back the trust of the public—especially the financial sector‘s need to earn

back the trust of investors and taxpayers (Sorkin, 2008). He states:

I believe that rebuilding trust in our capital markets requires executive

compensation packages that are rational, fair, and based on bona fide performance

measures that are disclosed to the public. We must ensure that executive pay

package structures no longer create improper incentives for executives to


overleverage their companies and manipulate the books for their own short-term

financial benefit (Sorkin, 2008).

Cuomo identifies the market pressures that leaders face to make their organizations

profitable—pressures which cause many leaders to focus too heavily on short-term gains…and

entice many leaders into making unethical decisions in the name of competition and profitability.

Leaders who are successful in making their companies profitable also run the risk of the allure of

executive compensation tied into those profits. Such was the case in the example of Enron, and

in the example of Standard & Poor‘s and Moody‘s.

Many organizational leaders do, however, have moral values and practice ethical decision

making. Once such set of leaders during the current economic crisis is Lloyd Blankfein, CEO of

Goldman Sachs, and six other Goldman Sachs executives who have requested that the

organization refrain from paying them ―tens of millions of dollars‖ (Craig and Lucchetti, 2008)

in 2008 bonuses which they were scheduled to receive as part of their employment contracts.

Each executive will still receive their $600,000 in base pay, but felt that ―the right thing to do,‖

considering the current economic crisis, was to forgo the bonuses (Craig and Lucchetti). Craig

and Luchetti quickly point out, however, that as part of the ‗right thing to do,‘ this includes

continuing to give bonuses to the ―lower-level‖ employees who continually work hard for the

organization.

Craig and Lucchetti believe that Blankfein and the other Goldman Sachs executives may

be setting the standard for executives to follow at other financial and mortgage institutions, as

well as other organizations (2008). Doing so, Craig and Lucchetti believe, will help these

financial and other institutions to win back some of the trust that has eroded as a result of this

crisis.


Ethical and Unethical Leadership and Communication

The leader sets the ethical tone for the entire organization. The leader establishes the

ethical and moral values, shaping them into a vision for the organization and writing them into

the company‘s mission and codes of conduct—building with them the foundation of the

organization‘s culture. The leader, utilizing the human resources and communications staff,

communicates throughout all levels of the organization and to all stakeholders—especially

employees—by publishing and promoting these ethical values, vision, and mission, so that

everyone knows the ethical values which are to drive every decision and every action within the

organization, and which are to form the culture by which the development and growth of every

employee and leader is fostered and by which the reputation of all are protected.

In Character Not Charisma is the Critical Measure of Leadership Excellence, Y. Sankar

(2003) states that ―The character of the leader is grounded on such core values as integrity, trust,

truth, and human dignity, which influence the leader‘s vision, ethics and behavior.‖ Sankar says

that these ―organizational values‖ become ―strongly internalized‖ and that leaders can ―influence

cultural and ethical values by clearly articulating a vision…that employees can believe in,

communicating the vision throughout the organization, and institutionalizing the vision through

everyday behavior, rituals, ceremonies, and symbols, as well as through organizational systems

and policies.‖

It is the responsibility of the senior leader to empower and enlist the support of all leaders

and division managers to take ownership of the ethical vision and culture and establish them

throughout their functional areas, spreading them, and causing them to take root down through

mid-level managers and line supervisors, until they reach all employees, with empowerment for

each to take ownership along the way. In short, the overall value system for an organization is


created by the leader, incorporated into and sustained by the culture, and transmitted to and

owned by the followers through relationships built upon good communications, wherein the

responsibility for an ethical culture begins and ends with the leaders. ―[I]ntegrity (or the lack of

it) flows from the top down‖ (Sankar, 2003).

The leaders may be the founders—who build the organization on their own personal

values and establish the culture of the organization. Or, the leaders may be developed or brought

in to continue to shepherd and grow the organization—following the same ethical path

established by the founders, further entrenching the values into the culture, and increasing the

interconnection between that culture and all stakeholders. Or, the leaders may be hired to turn an

organization around—possibly establishing a value-based ethical culture for the first time, or

realigning and fortifying a culture and organization that has departed from its ethical, value-

based roots.

Sankar (2003) also says that in addition to a leader having a very strong moral ethic and

character, the leader may be ―charismatic.‖ This term, as Sankar relates, has been diluted over

the millennia from its original meaning as a person who has been ―gifted‖ with special qualities

from the Holy Spirit, or a ―higher power,‖ to what is today the secular connotation of one who

has ―personality attributes such as dynamism, style, [and] image…(House, 1977), impression

management, emotional intelligence (Coleman, 1998), extroverted style, self-confidence,

empathetic understanding, and [ability to] articulate[e] a vision (Shamir, 1995)‖ (cited in text). In

this connotation, the charismatic leader has the ability to inspire others to meet organizational

goals, or to believe in themselves or their common cause.

What is needed by organizations is not a focus on leaders who simply have ―charisma,‖

but a focus on leaders with character. As Sankar (2003) states, ―Charisma is not connected to


ethics, moral literacy, mentoring or the design of an ethical culture for the organization by the

leader. It is the character of the leader that is connected to these elements of a leader‘s behavior.‖

Therefore, it is character, not charisma, which sustains an organization as it faces ethical

decisions, and which stirs a leader to also be a mentor and a servant. According to Sankar,

―Character acts as a moral compass for guiding others along the ethical path.‖ It is the character

and integrity that a leader feels slipping away from them as they travel down a path of increasing

unethical decision making and actions, and which can become ingrained in the culture, decisions,

and actions of the peoples and organization he or she leads.

Whereas the ethical leader will be more or equally concerned with the good of the

organization—employees, stockholders, and other stakeholders—as well as the community,

Sankar (2003) states that:

[C]harismatic leadership may occasionally be more personalized in nature where

the leader is self serving, self-aggrandizing, and exploitative of others (Kets de

Vries, 1993; Klein and House, 1998) displaying high levels of Machiavellianism

(i.e. maximizing one‘s self interest at the expense of others through the use of

manipulation and deceit) narcissism and authoritarianism causing loss of self

initiative and self control of their followers.

The above character flaws are what Sankar (2003) refers to as: ―The dark side of

charisma…essentially a crisis in character or character flaws of the charismatic leader, which

neutralize his/her core values of integrity and his search for excellence.‖ The same holds true for

any leader—charismatic or otherwise—who has not developed a character grounded in those

same core values of integrity and excellence.


Sankar (2003) provides a summary of other character flaws which are often exhibited by

charismatic leaders without an ethical grounding, and the impact those flaws have on the

followers they lead:

As a result [of the above-mentioned character flaws], the leader‘s behaviors can

become exaggerated, lose touch with reality, or become vehicles for pure personal

gain….An overpowering sense of self-importance and strong need to be at the

center of attention can lead charismatic leaders to ignore the viewpoints of others

and the development of leadership ability in followers. We might even classify

charismatic leaders as positive or negative by their orientation toward satisfying

their own needs versus those of their followers. For example, negative charismatic

leaders presumably emphasize a devotion to themselves over their mission. They

also are likely to promote personal identification and dependence on themselves

over a more straightforward endorsement and internalization of the values and

ideological goals they are promoting. Positive charismatic leaders, on the other

hand, are more likely to emphasize the mission rather than themselves and to seek

internalization [of the values and ideological goals of the organization] over

personal identification.

Further, referencing the work of House, Spangler, and Woycke (1991), Sankar states:

Such leaders govern in a totalitarian manner, discourag[e] questioning of their

decisions, advocate goals that largely benefit themselves, disregard legitimate

institutional channels, and use punishments and rewards to motivate. Among their

followers, they prefer to foster dependence and unquestioning obedience over

independent thinking (2003, cited in text).


As Sankar states, this is not to suggest that all leaders with charisma have self-serving

motivations, but that a charismatic leader without a strong, personal moral compass, has by the

very nature of charisma, the exponential power to rally masses around a shared cause they

believe in, and to incite unethical practices, lead their followers astray, and cause much pain,

death, and destruction not only to those outside of their organization, but to those within the

organization, and themselves, as well. This has been witnessed through Hitler, Stalin, Pol Pot,

Jim Jones, David Koresh, and others. Likewise, in business, the charismatic leader without

strong personal ethics has the ability to cause much organizational destruction.

J. Reingold (2008), in her article Meet Your New Leader, says that the ―visionary leader,‖

an idea of leadership gaining prominence and popularity in the 1980s and continuing in some

measure today, is rapidly beginning to wane (pp. 145-146). The visionary leader was seen as

almost ―omnipotent;‖ a ―Lone Ranger with…Loyal Tontos;‖ given celebrity status by the media

and ―worshipped by business magazines;‖ and hesitant to admit ignorance to their board of

directors out of fear of rapid replacement (Reingold, pp. 145-146). Reingold writes that, of the

visionary leader, his or her evaluation by the board and the organization; the estimation of their

leadership ability by other business leaders and the media; their salary and bonuses, were all

determined by how well they were able to grow and expand their organizations in a series of

―ever more dramatic moves, such as mergers, acquisitions, or other gambles….[with] [t]he stock

price…widely accepted as a real-time CEO report card, [and] the numerical proof of success…‖

(pp. 145-146). They were expected to sustain the growth of their organizations, lead the stock

prices up, and to have ever-increasing large profits from one quarter to the next—an upward

trend that is almost impossible to sustain. Moderate growth was often not good enough.

Corruption becomes increasingly possible under that kind of pressure and expectation.


According to C. K. Prahalad, ―We took the complex nature of leadership and converted it into a

single metric by basing compensation on stock price‖ (Reingold, p. 145, cited in text).

As Reingold (2008) states, previous generations of leader were focused on creating long-

term success for their organizations, for their shareholders, and for other stakeholders; these

leaders were the founders of the organizations, and then the following generation(s) of leaders

who focused on maintaining what was begun by the founders (p. 146)—moderate growth, solid

reputation, customer satisfaction, and employee loyalty. Quoting noted economist Milton

Friedman, Reingold says that, for visionary leaders however, the ―social responsibility of

business [was] to increase profits‖ (p. 146). Profits—or perhaps more accurately, the bottom line,

to encompass not-for-profit organizational leaders who can also be corrupt—were first and

foremost, and sometimes solely, the focus of many organizations and their leaders.

Today, it is agreed by many that the visionary leadership style has failed, and Reingold

(2008) points to Enron and the dot-com bubble burst as some of the first signs that this style had

major faults (p. 146). Today, the ―visionary leader‖ is seen as largely responsible for the

economic crisis gripping not only the nation, but the world (Reingold, pp. 145-146). Connecting

the terms ―visionary leader‘ and ―charismatic leader,‖ she voices the work of Rakesh Khurana, of

the Harvard Business School, saying, while ―‘charismatic‘ leaders didn‘t boost performance in

the long run….[still] the visionary persevered, his gambler‘s instincts honed and rewarded in a

lightly regulated, winner-take-all environment‖ (p. 146).

The ethical crises which have resulted since 2000 alone make many believe the previous

bureaucratic control, with centralized planning, top-down communications, layer upon layer of

management, and focus upon immediate gains should be replaced. Pinchot (2008) says that

leaders ―feel coerced to manage things for the short term bottom line.‖ This is the type of


environment in which leaders, feeling pressure, or enticed by the prospect of great personal

wealth, can find themselves making unethical decisions.

Greed, internal or external pressures to perform, and a lack of a culture where value-

based ethical decisions are encouraged and praised, can lead to an environment where there are

many opportunities for leaders and employees to make unethical, or even illegal, decisions. This

results in a loss of integrity—both personal and organizational—and allows unethical decisions

to compound, and integrity to be further eroded. Returning again to Enron, as an example of the

preciousness of integrity, Csorba (2006) says that ―the day [Kenneth Lay] and his board voted

twice to lift the conflict of interest rules for his CFO to play his games with off-balance sheet

partnerships, both for the benefit of his, and his employer‘s, crooked gain,‖ was the day they

gave away the remainder of their integrity. This resulted in further unethical decisions and

actions which led to an eventual loss of personal and organizational reputation, the complete

collapse of the organization, and the indictment and conviction of several senior Enron leaders

Before this collapse, Enron had hired a ―turnaround guru‖ to help steer the organization

through bankruptcy (Csorba, 2006). According to Csorba, however, Stephen Cooper, the ―guru‖

given the task, determined that ―99 percent of Enron‘s problems weren‘t market driven, but

leadership related—a massive breakdown in accountability and governance.‖ Malcolm Salter, in

his book Innovation Corrupted: The Origins and Legacy of Enron’s Collapse, states that: ―At

Enron there were many opportunities for enormous personal gain that distracted top executives

from the essential tasks of maintaining institutional integrity and building stable relationships

with shareholders and employees‖ (Hancock, 2008, cited in text). Salter, in discussing the

current economic crisis, created in part because of subprime mortgages, says that there were

―perverse incentives for both mortgage brokers and investment bankers‖ to heavily push these


mortgages (Hancock, cited in text)—often to borrowers who could not afford the homes they

were buying. And Reingold (2008), using the example of Stanley O‘Neal, the former CEO for

Merrill Lynch, says that when he took the position in 2002, he had ―the express mission of

catching up with the more aggressive trading firms,‖ betting the existence of the 100-year-old

company on those same investments backed by subprime mortgages, and by ―outsized leverage‖

(p. 146). When ―the bet went bad‖ and the housing market burst from unqualified borrowers

defaulting on their loans, O‘Neal walked away with a ―$160 million severance package‖

(Reingold, p. 146).

In these examples, unethical decision making and actions have stemmed from leaders

who have lacked a commitment to ethical, moral values. They have known what values are; they

have given them lip service; but they have not lived them, nor communicated them, nor

embedded them into the culture of their organizations. In some instances, they have allowed

greed—or lust—for personal gain to set their minds towards how they can achieve more: make

larger salaries and bonuses, develop grander reputations, and receive more praise—even if these

gains come as a result of unethical or illegal actions and cause a loss of personal integrity and

reputation. In other instances, the greed has been for organizational gain: a short-term increase in

market share, profit, and reputation. Further, some examples stem not so much from greed, but

rather as actual or perceived market pressures to perform—to grow the organization and to

achieve greater profits for the company and greater returns for the shareholders. But, again, in

each instance the driving force behind the leaders and, thus, the organizations has not—repeat,

has not—been long-term organizational growth through a committed focus on ethical, value-

based, decisions, actions, communications, culture, and leadership.


Sankar (2003), contrasting ethical, positive charismatic leadership, against unethical,

negative charismatic leadership, asks, ―How can we judge the two charismatic leadership forms

to be ethical or unethical?‖ without first defining what it means to be ethical? Sankar says that

which is ethical is ―that which is morally good, or that which is considered morally right—as

opposed to that which is legally or procedurally right.‖ Paraphrasing Saint Thomas Aquinas,

Sankar says, ―The moral goodness of behaviors should be judged on the basis of the objective act

itself, the subjective motive of the actor, and the context in which the act is performed.‖

Therefore, Sankar suggests:

Charismatic leaders exhibit ethical leadership when they (1) strive to operate with

an altruistic intent, (2) utilize empowering rather than controlling strategies to

influence followers, and (3) endeavor to cultivate virtues and abstain from vices

to build their own character. A virtuous character is the building block of

leadership excellence.

Gilman, Hand, Navran, and Brown (2008) state that there are three questions leaders can

ask to help determine if their organization is riding the ethical fence and susceptible to a breach

of ethics: ―Are employees rewarded for succeeding at any cost or are they urged to be shepherds

of the corporation‘s reputation as well as its assets?‖ ―What pressures do they face to commit

misconduct?‖ And, ―What systemic problems exist that could encourage good people to make

bad decisions?‖

With ―charismatic‖ and ―visionary‖ leadership both seen as ineffective and damaging,

and incapable of creating any long-term sustainability without also having positive traits such as

character, integrity, and moral ethics and values, Americans are looking for leaders who can

provide these positive traits and who can strengthen our organizations and our country. As


Reingold (2008) states, the ―Lifeguard‖ style of leadership is arising out of this ―financial chaos‖

to lead with values that suit this ―environment of increased regulation, diffuse power, and

stagnant stock prices‖ (p. 146). The Lifeguard is focused on long-term success, has situational

awareness, and the ability to study the environment to identify ―weak signals‖ which the

Lifeguard recognizes as calling for a shift in strategy and even ―the courage to….tear up the

strategic plan‖ (Reingold, p. 146). Reingold states that this Lifeguard style of leadership is more

appropriate for our ―interconnected, ever more turbulent world,‖ and Good to Great author Jim

Collins believes that it is a leader‘s ―legislative‖ skills which now make him or her attractive as

compared to the ―executive‖ skills previously sought after (p. 146, cited in text). Collins adds

that, the ―top CEOs will be those who are able to create the conditions for things to get done

rather than hand down orders‖ (Reingold, p. 146, cited in text).

Teamwork is an increasingly popular term in organizations, and the true self-managed

team is slowly increasing in use, but the self-managed team requires leaders who, themselves,

work well in teams and, more importantly, trust their employees to make wise decisions as they

are empowered with ever-greater responsibilities for helping to manage and lead the

organization. The Lifeguard, as Reingold (2008) states, works well in and with teams, does not

have to be the one setting the rules and is happy to follow the rules set by others, and is not a

leader just for the money but for intrinsic reasons; whereas, ―[w]hile the visionary leaders talked

about teamwork, they believed that they could control their firm‘s destiny by themselves, citing

any attempts to regulate their businesses as hostile and anticompetitive‖ (p. 146).

To help further the growth of an organization, and to help prevent leaders from making

unethical and illegal decisions, leaders should surround themselves with others who are

committed to ethically leading an organization and who are not afraid to speak up, calling the


decisions and actions of the organization and its leaders into question when those decisions and

actions appear unethical. Ethical leadership calls for the leader to listen to the counsel of others,

to accept criticism, to empower others to have a share in the decision-making process, and to

build these character qualities and freedoms into the culture of the organization. In addition to

listening, the leader should also be unafraid of asking a lot of questions when they don‘t know

the answers—which, according to author Collins, was something respected leader President John

F. Kennedy was very comfortable with (Reingold, 2008, p. 146, cited in text).

As F. Reh (n. d.) states, ―Challenging the status quo has to be a top priority in any

organization. Accepting the status quo leads to stagnation. Stagnation will kill any organization.‖

Reh says to the leader: ―Avoid the temptation to surround yourself with individuals who are so

similar to you that they can‘t offer a different perspective [or]….who are so afraid that they

won‘t dissent.‖ This is known as groupthink. Instead, Reh suggests the leader ―Reward creativity

and original thought in [the] decision-making process. Hang on to those people who have

mastered the art of disagreeing without being disagreeable.‖

Likewise, Reh (n. d.) says that employees—or followers—owe it to their leaders to

provide them ―honest‖ feedback; ―to tell them what [they] really think….Especially if [they]

disagree….[and] to give [them] as much information and as many options as possible.‖ Reh says

that one should ―fight hard for what you believe to be right;‖ being ―professional‖ but also being

―candid.‖ However, in supporting the leader and in not creating a hostile environment or

dissension, Reh says that ―[O]nce the boss has made a decision, the discussion and arguing and

dissent must stop. [At that point,] you have an obligation to support your boss in that decision.

You expect it of your people; you should do no less.‖ To do otherwise would be hypocrisy, and


that, too, is an unethical element—to treat a person one way, but to expect to not be treated in the

same manner.

Another important character quality of an ethical leader is the ability to freely admit

mistakes. In an ethical organization, the freedom to freely admit mistakes must be built into the

culture and extended to leaders and followers, alike.

An article by E. Tahmincioglu (2008) discusses the pros and cons of admitting mistakes

in an organization. Ms. Tahmincioglu points to the recent collapse of the economy and points to

author Carol Tavris‘ observation that it has been a rarity on Wall Street to find anyone willing to

admit to their mistakes (2008, cited in text). Citing the testimony of Lehman Brothers CEO

Richard Fuld to Congress, Tahmincioglu states that Fuld defended his decision making and

actions as ―prudent and appropriate,‖ and diverted any responsibility for the collapse to a

combination of short selling, government actions, and similar decisions by others (2008).

Author of the book, Everything I Know About Business I Learned at McDonald’s,‖ and

Inside Management consulting firm CEO, Paul Facella says that, ―In most situations, if people

are honest and explain what they did, and it had no true malicious intent, then most organizations

will acquiesce and like that‖ (Tahmincioglu, 2008). Facella says that organizations like

McDonald‘s have built into their culture the ability for employees to feel ―comfortable‖

admitting to their mistakes, but also states that one should always weigh the consequences first—

to determine when and where to admit to the mistake, and how to admit the mistake to one‘s

managers (Tahmincioglu). The Integrity Dividend author Tony Simmons agrees, stating in his

book that admitting mistakes can have legal implications, including ―loss of bonuses or even jail

time,‖ but adds that the ability to admit mistakes shows responsibility and that one can be trusted

(Tahmincioglu).


Ms. Lin Grensing-Pophal, an HR management expert, offers a three-point approach to

admitting mistakes that she learned through the actions of one of her employees: to admit to the

mistake immediately, to take ―full responsibility,‖ and to offer solutions (Tahmincioglu, 2008).

Quoting Angie Morgan, a former U.S. Marine Corps officer, and co-author of Leading From the

Front: No-Excuse Leadership Tactics for Women, ―When you acknowledge mistakes, you can

start looking for the solutions,‖ but when a CEO doesn‘t accept responsibility and admit to their

mistakes, then these leaders have lost their integrity (Tahmincioglu). According to Ms. Grensing-

Pophal, ―Mistakes, in my opinion, are not opportunities to chastise or place blame, they‘re

opportunities to learn and improve‖ (Tahmincioglu). However, as social psychologist and author

Carol Tavris identifies, while children are supposed to learn how and why to admit to mistakes

as they grow up, they often witness parents and other adults treating the making of a mistake like

doing so means a person is ―stupid or incompetent,‖ rather than the healthier belief that ―those

mistakes [are not] a reflection on their own character and ability‖ (Tahmincioglu).

Showing an ability to admit to mistakes, former Federal Reserve Chairman Alan

Greenspan, who left his post in February of 2006 after serving for 18 ½ years, recently testified

before the House Oversight Committee and admitted to ―flaws in his thinking and in the

workings of the free-market system‖ which helped to precipitate the current financial crisis in

America and around the world (Associated Press, 2008). Mr. Greenspan said he had believed

that those who served as leaders in the banking and mortgage industry would, through

deregulation, act in the best interest of their stockholders and organizations—protecting their

investments and equity—by not choosing to fill the market with subprime mortgage loans and

securities backed by them (Associated Press). The financial leaders did not self-regulate and


protect the economy as they should have. They looked out for their own interests over the

interests of investors. The ethics of their decision making and actions can be questioned.

While admitting to his own mistake of not believing it was possible for there to be a

nationwide ―collapse‖ in home prices, because there had never been one before, Mr. Greenspan

also put some of the blame on investors who were eager to purchase those subprime mortgage-

backed securities and ―did not worry that the boom in home prices might come to a crashing

halt‖ (Associated Press. 2008). Regarding the housing and economic crisis which has resulted,

Greenspan says that it ―turned out to be much broader than anything that I could have imagined‖

(Associated Press).

Americans are increasingly tired of the lack of ethical responsibility found in many

segments of American organizations and are disillusioned with many of today‘s leaders—

business, political, governmental, religious, and the media. Reingold (2008) reports that a recent

study conducted by the Harvard Center for Public Leadership, shows that, of all segments of

leadership in America, confidence in business leaders has dropped significantly further than any

of the others (pp. 145-146). And, as witnessed during the current U.S. Presidential election, there

is a renewed call for government leaders to step in and ‗fix‘ our economy and our nation. For

David Gergen, director of Harvard‘s Center for Public Leadership, ―The CEO of the future is

going to have to be someone who deals well with government‖ (Reingold, p. 146). Reingold says

that the CEO now has to more heavily weigh the ―world of competing entities, ranging from

regulatory agencies to angry shareholders, from consumers to foreign powers‖ (p. 146).

A separate poll, conducted by the Ethics Research Center, shows that Americans

understand the top-down approach of leadership and are seeking an increase in ethical leadership

beginning at the top-most level in the United States—in Washington, D. C. A late-September


2008 bi-partisan, cross-demographic, poll conducted by the ERC showed that 88 percent of

Americans agreed that one of the most important goals of the new administration should be to

create a strong ethics plan (Ethics Research Council, 2008, ―ERC Calls on McCain‖).

In a 2008 letter written to Senators McCain and Obama, Patricia Harned, President of

ERC, cited ―conflicts of interest, abusive or intimidating behavior, …lying to employees…and

fraud…in government‖ agencies and called to their minds the recent ―reported actions of Interior

Department workers engaging in sex, drugs, meals, ski trips, and sports tickets from members of

the oil industry they were supposed to be monitoring‖ (Ethics Research Council, 2008, ―ERC

Calls on McCain‖). She then called for the new administration to initiate ―a rigorous ethics and

compliance program [in Washington] that communicates and upholds a broad set of ethical

principles….followed by a continuing dedication to building and maintaining an ethical culture

(Ethics Research Council, ―ERC Calls on McCain‖).

Echoing the same current sentiment Americans have towards business leaders, Ms.

Harned says, ―It seems the American people at the moment don‘t think ‗Washington‘ and

‗ethics‘ belong together in the same sentence….It is critical that the next President, whoever it is,

seize the opportunity to start re-building the public‘s faith in their government institutions‖

(Ethics Research Council, 2008, ―ERC Calls on McCain‖).

To help protect investors and the general public against the types of unethical and illegal

financial misreporting undertaken by Enron, and to promote transparency across all financial

reports and various other management functions of organizations, Congress shortly thereafter

passed the Sarbanes-Oxley Act. This act calls for senior management to review financial reports

and to affix their signature to the reports, indicating that they have read them and that they

believe all information to be accurate and all financial and accounting processes to be solid.


According to Mathis and Jackson (2008), the Sarbanes-Oxley Act was passed ―to make

certain that publicly traded companies followed accounting controls that would reduce the

likelihood of illegal and unethical behaviors‖ (p. 25). Human resource (HR) specialists and

authors, Mathis and Jackson state that the act has large sections regulating ―executive

compensation and benefits,‖ the establishment of codes of ethics, the setting up of ethics

hotlines, the implementation of ―anti-retaliation policies for employees who act as whistle

blowers,‖ and a more in-depth and more frequently occurring ―verification process‖ to guard

against the fraudulent misrepresentation, by employees, of their hours worked (p. 25).

Business leaders, and professional business associations, recognize the impact these

previously-mentioned, and other, ethics scandals have had on public trust. Speaking for the

National Association of Corporate Directors (NACD) (2008), Kenneth Daly, President and CEO

states:

The current economic crisis has eroded public and investor confidence in

corporate governance. American corporations must take action to restore the

public trust. For the past year, we have worked with business leaders and

shareholder groups to create…[a] set of Principles to serve as a framework for

strengthening governance for U.S. publicly traded companies….[and to] empower

board leadership, particularly in the areas of oversight of risk, corporate strategy,

compensation, and transparency.

Those Principles for the board of the directors alluded to by Daly address concerns and

regulations under the Sarbanes-Oxley Act, and include ―setting the tone‖ for organizational

ethics, integrity, and transparency—principally in the area of ―financial disclosures and

controls,‖ and making sure all government laws and regulations are followed (National


Association of Corporate Directors, 2008). As set forth by the Principles, qualities the director of

the board should have include ―integrity, objectivity, judgment, diplomacy, and courage‖

(NACD). The Principles call for each board to have separate ―Independent Board Leadership‖

which provides ethical safeguards to help prevent conflicts of interest between the Board of

Directors, the CEO, and President (NACD). The Principles also state that the board should

establish strong and open communications and relationships with investors, creating

―dialogue…about corporate governance…and long-term strategy issues‖ (NACD).

The NACD also recognizes the ―pressures‖ put upon the CEO and other leaders by

―competing‖ interests—the board, shareholders, and other stakeholders. As well, the NACD

recognizes that the board, too, is subject to the interests of the shareholders, employees, and

other stakeholders, and that both the CEO and the board have to try and balance these

―competing [interests] and pressures‖ (NACD, 2008) while trying to position the organization

for long-term success and simultaneously trying to meet short-term objectives which are often

the key focus of shareholders and financial analysts.

The NACD (2008) has delineated the principle of ―Integrity, Ethics, and Social

Responsibility,‖ stressing it as key to the creation and maintenance of organizational culture and

the cornerstone of building sustainable relationships with stakeholders. This principle makes the

board responsible for ensuring the development of an ethical ―corporate culture‖ through

communications with ―senior management‖ in which the board outlines ―the parameters of the

desired culture, reviewing efforts of management to inculcate the agreed culture (including…[a]

review of compliance and ethics programs) and continually assessing the integrity and ethics of

senior management.‖

The NACD (2008) also stresses that integrity, ethics, and social responsibility are:


…at the heart of effective governance, and should factor into all board

decision…particular[ly]…when considering management proposals; assessing

internal controls and procedures; reviewing financial reporting and accounting

decisions; and…when discussing management development and succession

planning. [Also, the] board should pay special attention to how members of senior

management approach their own conflicts of interest.

However, in a review of the NACD Principles, for Business Network (BNET), P.

Galuszka (2008) states that, while the principles raise the standards for corporate governance,

there is still a long way to go in many areas, including ―backing many aspects of corporate

democracy, such as direct shareholder nominations of director candidates‖

Additionally, the Ethics Resource Center (2008, ―Performance Reviews‖) states that the

Federal Sentencing Guidelines for Organizations (FSGO) outlines six fundamentals of ―a

comprehensive ethics and compliance program,‖ which include: ―written standards of ethical

workplace conduct;‖ ―means for an employee to anonymously report violations of ethics

standards;‖ ―orientation or training on ethical workplace conduct;‖ ―a specific office, telephone

line, e-mail address or Web site where employees can get advice about ethics-related issues;‖

―evaluation of ethical conduct as part of regular performance appraisals;‖ and ―discipline for

employees who commit ethics violations.‖

But the ethics crisis, and its remedies, extends beyond business organizations and the

studies provided by the Business Roundtable, the Ethics Research Council, and the National

Association of Corporate Directors. The ethics crisis extends beyond the United States, affecting

multinational and global organizations caught between the different cultural, legal, political, and

ethical views of the various nations in which they conduct business (Mathis and Jackson, 2008,


p. 22). Mathis and Jackson state that maneuvering through the ethics of various nations can

become tricky; especially considering that, in some nations bribery of officials is an accepted and

common practice in conducting business, and is often the surest and quickest way to make sure

things get done (p. 22)—such as obtaining a license or having utilities connected. Mathis and

Jackson state that, while these may be legal practices in the country in which a multinational

company is operating, the organization must still follow the laws of its home country (p. 22).

This is particularly difficult for U.S. businesses trying to be competitive against multinational

organizations from other countries which are operating in the same nation. Those other

multinationals may be allowed to give bribes or gifts to the same officials without any

repercussions by their home governments—something which the U.S. organizations cannot do,

therefore giving a competitive advantage to those other multinationals (p. 22).

Mathis and Jackson (2008) advise that an organization‘s legal department should be able

to help the organization follow the strict U.S. laws and ―limitations‖ set forth by the Foreign

Corrupt Practices ACT (FPCA), and provide guidance to leaders and others faced with making

ethical and legal decisions (p. 22). The FPCA basically says that any practice which would be

illegal in the United States, must be treated as illegal in the country in which the organization is

conducting business (Mathis & Jackson, p. 22).

The ethics crisis is being witnessed around the world, affecting organizations operating in

their homelands—Japanese organizations in Tokyo, Indian organizations in Mumbai, Ukrainian

organizations in Kiev, United Arab Emirate organizations in Dubai, and other organizations

elsewhere—and there are individuals and global organizations trying to help solve this problem.

Pinchot (2008) says:


Freedom extended to people embedded in a deep sense of community is the basic

lesson the Japanese are teaching the world….[and] we must learn to be ethical not

only to the level of company and beyond to the level or our national communities,

but to extend our ethical boundaries to include the world.

Islamic business analyst Rafi-uddin Shikoh, in reviewing the book Islamic Business

Ethics, written by Dr. Rafik Issa Beekun, states the author‘s suggestion that Islamic business

leaders also institute within their organizations ―a Code of Ethics to guide the organization‘s

ethical principles in all its interaction[s],‖ with ―compliance‖ monitored and guaranteed by

―ethics advocate[s]‖ who form an ―ethics review panel‖ to analyze the decisions of management

on a regular basis; who ensure employees are hired, in part, based on their ethics and then further

trained on their ―ethical responsibilities;‖ who ensure the culture provides employees with a ―set

[of] common [ethical] expectations and understanding within the organization; and, adjusting the

award system to reward ethical behavior and encourage repetition‖ (Shikoh, 2005).

Shikoh (2005) states that the book, ―addresses key principles of management from an

Islamic point of view with a stated goal to help Muslims engaged in business to act in

accordance with the Islamic system of ethics‖ supported by verses of scripture, or Surah, from

their holy book, the Qur‘an. As Shikoh also states, the book was designed to address

organizational ethics and leader‘s responsibilities within global business, the global economy,

and the technology used in its operation, not only from an Islamic, or Muslim, ethical

perspective, but also in comparison to ethical principles from five other ―dominant ethical

systems‖ around the world (2005). In defining ethics, Shikoh describes them as ―a set of moral

principles that distinguish what is right from wrong‖ (2005)—a definition which most people

around the world, from various nations, cultures, and religions, can all agree with.


Shikoh (2005) makes the point that Islamic business ethics are derived specifically from

the beliefs and teachings of their faith and writes, ―By behaving ethically in the midst of the tests

of this worldly life, Muslims prove their worth to God.‖ Shikoh states that there are certain

fundamental aspects of Islamic ethics: discovering intentions when judging another‘s ethical or

unethical actions; freedom of belief; and the individual experience of purification during one‘s

life. Shikoh also lists the author‘s use of five foundational aspects which are central to Islamic

ethics: ―unity,‖ ―equilibrium,‖ ―free will,‖ ―responsibility,‖ and ―benevolence‖ (2005, cited in

text). He lists the practical responsibilities, based upon Islamic teachings, which Dr. Rafik Issa

Beekun says Islamic individuals have towards their organization: ―These…include honesty and

truthfulness; keeping your word; loving God more than trade; supporting intra-Muslim trade;

being humble; using mutual consultation in business affairs; not dealing in fraud or bribery; and

dealing justly‖ (Shikoh, 2005, cited in text). However, Shikoh also contrasts these Islamic ethics

and teachings with the reputation that Muslim businesspersons have for bribery, lack of

transparency in business, discrimination across stakeholders, breaking contracts, cheating, and

lying (2005).

Shikoh says that the author‘s framing of ethics as part of an organization‘s ―social

responsibility‖ is very similar to the trend of Corporate Social Responsibility (CSR)—towards

one‘s stakeholders, society, and nature—currently practiced by leaders in organizations

throughout the world (2005). Regarding the social responsibility towards nature for the Islamist,

this includes the ethical treatment of animals, proper disposal of manufacturing waste, and other

environmental abuses which can pose serious threats to the health of citizens, livestock, and

crops (Shikoh). Dr. Rafik Issa Beekun stresses that this social responsibility is not a one-way

street, but that stakeholders also have a responsibility back to the organization (Shikoh, cited in


text). The Islamic organization and its leaders have a social responsibility to the employee to

make ethical hiring and firing decisions, pay fair wages, maintain a safe environment in which to

work, and ensure employee privacy; the employee, on the other hand, has the organization as its

stakeholder and, therefore, should always be honest, should continue to improve their skills

through training, and should remain free of conflicts of interest (Shikoh).

According to Dr. Rafik Issa Beekun, maximizing profits should not be ―the ultimate goal

or only ethical outcome of trade in Islam,‖ however neither does Islam ―reject profits or trade

and does not aim to remove all differences in income and wealth that may result in various social

and economic classes‖ (Shikoh, 2005, cited in text). The Qur‘anic scripture to support this is

found in Surah 18:46, which states, ―Wealth and sons are allurements of the life of this world;

But the things that endure, good deeds, are the best in the sight of your Lord, as rewards, and

best as the foundation for hopes" (Shikoh, 2005).

This coincides with Judeo-Christian verses from the Bible, such as Matthew 6:19-21,

which talk about storing your treasures in Heaven as opposed to on earth, because the things of

earth fade, rot, are stolen, and are otherwise eventually destroyed. The treasures stored in

Heaven, however, are good works, which are recorded and follow a person into judgment,

according to the teachings of the Judeo-Christian faith. It is also true that throughout the history

of the Jewish nation, as well as Christian nations, the profits of hard work are honorable and

many classes have always existed and have been honored by God. So, for the Muslim, the Jew,

and the Christian alike, while riches and fame and other kinds of prosperity should be considered

as good, and as blessings, it is treating others well—by being respectful and being honest—

which should be the main pursuits of a person; the rest are to come as rewards, not goals.


Matthew 6:21 seals this thought and also serves as a warning against covetousness and greed,

―For where your treasure is, there your heart will be also‖ (New King James Version).

Dr. Rafik Issa Beekun uses 2:282 from the Qur‘an to impart Islamic teaching on the

honoring of contracts and the importance of honesty and fairness: ―…when you deal with each

other in transactions involving future obligations in a fixed period of time, reduce them to

writing. Let him who incurs the liability dictate, but let him fear his Lord God, and not diminish

aught of what he owes‖ (Shikoh, 2005, cited in text). So, for Muslim and non-Muslim

businesspersons, alike, honoring contractual obligations preserve one‘s integrity and are a part of

ethical business practices.

Shikoh (2005) also sums up two other Qur‘anic principles as discussed in Dr. Rafik Issa

Beekun‘s book:

…in discouraging the temptations to exaggerate and lie about one's products or

services during sales or marketing, the importance of honesty and truth is

referenced as laid out by this saying of the Prophet Mohammad (saaw): ‗The

merchants will be raised on the day of resurrection as evil-doers, except those

who fear God, are honest, and speak the truth.‘ [This corresponds to the Jewish

and Christian beliefs in a resurrection and judgment.] Similarly, the following

Ayah (4:29) is used in support of Muslims not resorting to extravagance (the

extravagant behavior of the dot-com companies during the internet boom comes

to mind here): ‗O you who believe! Eat not up your property among yourselves in

vanities: but let there be amongst you traffic and trade by mutual good-will: nor

kill (or destroy) yourselves: for verily God has been to you Most Merciful.‘ [This

corresponds to the writings in Ecclesiastes by King Solomon that pursuing


worldly riches and goals is vanity and chasing after the wind; and other Bible

(Tanach) texts which warn against covetousness, greed, and pride].

Shockley-Zalabak (2006) also discusses organizational misleading in public

communications, stating:

We have all questioned the truth of particular organizational messages.

Advertising claims are often exaggerated, with consumer complaints frequently

hidden from public scrutiny….Strategic organizational communication is an

intentional effort to shape our perceptions. Themes selected for marketing,

advertising, and crisis management may focus or frame an issue away from the

product or service to a more generally accepted societal good‖ (p. 374)

All communications must be framed with the intent that the receiver ‗buys‘ the message the

sender is ‗selling.‘ But, the message must be truthful and not misleading.

Muslim, Jewish, and Christian business leaders have much in common regarding

business ethics and share many tangents of faith. Many of these same ethical concepts can also

be found in the writings of Buddha, and in other various religions. Moreover, there exist some

who profess to have no religious beliefs, but whom still adhere to these scriptural ethics on the

basis that these are universal principles and are the ‗right thing to do.‘

Of the international organizations trying to solve the ethics crisis, one put forth A

Universal Declaration of a Global Ethic, in 1993, in Amman, Jordan, after the conclusion of a

series of international, intercultural, and interreligious meetings, held over several years, between

theologians, educators, and business and government leaders (―An Interfaith Declaration,‖ 1993).

As reported by the Center for Global Ethics, the leaders represented the three ―monotheistic‖

world faiths of Judaism, Islam, and Christianity—each faith having its origins in Abraham, their


biological or spiritual father, whose life and legacy are found in the Scriptures of the Tanach

(Judaism), Holy Bible (Christianity), and Qur‘an (Islam) (―An Interfaith Declaration‖). It was

their purpose to move beyond stereotypes and religious and cultural differences in order to

identify common ethics which underlie and drive personal and business decision making and

actions in organizations across all main religious and ethnic populations and cultures, and to

show the relevancy, wisdom, and strength of these traditional ethics which are being supplanted

by a new breed of ethics which has fewer moral boundaries and requires less responsibility (―An

Interfaith Declaration,‖ 1993; Shafer, 1998).

According to Shafer (1998), of the Center for Global Ethics, the Center‘s mission is to:

…coordinate the work of thinkers, scholars, and activists from around the world,

who are working to define, implement, and promote policies of responsible global

citizenship. As profoundly interconnected members of a global community, we

recognize the need to develop and advance the acceptance of a viable and

sustainable Global Ethic.

A Universal Declaration of a Global Ethic was created primarily through the Center for

Global Ethics, and is associated with the Global Dialogue Institute, the Institute for

Interreligious, Intercultural Dialogue, and the Journal for Ecumenical Studies, all located at

Temple University in Pennsylvania, and under the direction of Leonard Swindler, Professor of

Catholic Thought and Interreligious Dialogue at the university (Shafer, 1998).

Interspersed throughout the paper so far have been just a very few of the ethical teachings

contained in the scriptures of these three major world religions—Judaism, Islam, and

Christianity. A more substantial, but by no means conclusive, selection of Judeo-Christian

scriptures, along with some of the teachings of Buddha, can be found in Appendix A and


Appendix B, respectively, and are profitable for learning the wisdom of personal and business

ethics.

However, a very incomplete summary of ethical principles, which these above four faiths

share, and which can be found in other faiths, cultures, and societies, include: the need of a

person for self-control—their thoughts, their words, and their actions; humility as opposed to

arrogant pride and self-importance; honesty, truth, transparency, and keeping one‘s word versus

deception, lies, and breaking promises (such as contracts); respecting and upholding the law;

being respectful to others instead of disrespectful; being grateful instead of ungrateful; having

confidence, hope, and a lasting positive reputation as a result of maintaining integrity at all

times; charity as opposed to greed; servanthood and social responsibility; culture;

communications which lift a person up, or instruct, or offer advice and constructive criticism and

correction, but which are not said in a mean spirit with the intent of hurting or destroying a

person; listening to wise council versus trying to decide everything oneself; being contemplative

as opposed to making hasty decisions; listening to what one has to say before making a decision

or opening one‘s mouth; admitting mistakes, seeking forgiveness, and providing restitution

versus covering mistakes up; learning from mistakes; having compassion; empowering others to

grow, to learn, and to make wise decisions; the wisdom of long-term planning versus acting for

the short-term; being satisfied with what one has and working honestly and diligently to gain

more versus being covetous and cheating and stealing to get what one wants now; diversity and

non-discrimination; stewardship of one‘s time, talents, money, and that of the organization under

one‘s leadership; honor as the result of actions versus honor sought after as its own reward;

balance and equilibrium; justice tempered by mercy; fair measures in valuing the worth of

products, services, contracts, and people; not pursuing unjust profits; and long-term


organizational sustainability and prosperity versus sudden ruin and destruction—both of which

comes as a result of one‘s decisions and actions; for thoughts lead to actions.

Yet some people question whether ethics or morality makes for good business practices.

Dr. E. Rozycki (1993), in his paper Leadership vs. Morality: An Unavoidable Conflict?,

questions whether or not leadership and morality are mutually exclusive, and if the ―standards of

judgment‖ required to be a ―heroic leader‖ is ―in conflict with common notions of morality,‖ or

being a ―moral leader.‖ ―[M]oral heroic leadership‖ is desired, according to Rozycki, because

people want organizations—their leaders and employees—to do ―more good than evil‖.

Citing ―elite private‖ universities and the military as examples, Rozycki (1993) says that

both seek to turn out these heroic leaders, but that heroic leadership is promoted as: ―acting

through organizations to get the job done [through]….[l]eadership…stimulated by providing

incentives to rule-breaking…done cleverly enough to avoid getting caught in the act….[and] to

achieve a superordinate good, if only from the perspective of the immediate group to which one

belongs.‖ Rozycki says that, in the elite private universities, a student may pull off an elaborate

hoax and get expelled, yet that student can be welcomed with open arms by another private

university for exactly the reason he or she was expelled from the other university. Rozycki states

that the student was welcomed because the student proved him- or herself clever and capable of

organizing and pulling off the stunt. Rozycki also states, ―Rule-breaking done with wit and style

can become a mark of distinction‖. Regarding the military, Rozycki says that recruits are told to

achieve a certain objective, such as to mop the floors, but are not given the resources by which to

accomplish the mission. Rozycki says that they are expected to use their intelligence and

resourcefulness to acquire what they need and get the job done, but should they get caught

stealing, they will be punished. ―In both cases,‖ states Rozycki, ―there is some sense that a


‗higher‘ good is served by the competition that often subverts rules that govern ‗ordinary‘

situations.‖ He further states that:

The basic risk of leadership is encountering interference with one‘s effectiveness.

The leader is expected to ‗break the rules‘ from time to time to achieve greater

goods. But only success justifies this ‗outlawry.‘ Even then, whether a ‗greater

good‘ has been achieved may be a matter of substantial controversy. It is difficult

to be a leader even in a pluralistic society‖ (Rozycki, 1993).

This statement can help explain the pressures that leaders face—such as being expected

to achieve continually rising stock prices—and the temptation to break the rules and do the

unethical to achieve the objective. Yet, when they do commit unethical actions and are caught,

they are castigated by many of the same individuals who placed them under what may have been

unrealistic expectations and pressures in the first place.

This is why Rozycki (1993) asks whether or not one can be a ‗heroic leader‘ and also be a

‗moral leader.‘ Rozycki says that there is something ―particularly disturbing about [a] discussion

of ‗moral, heroic leadership‖ and that the thought is too ―simple.‖ The two paragraphs which

follow are Rozycki‘s thoughts on how leaders and organizations can be morally defective:

The mythos of heroic leadership seems to require that a ‗real leader‘ be the cause

or author of the organizational act. This leads to an interesting dilemma. One kind

of morally defective organization is one which prevents moral veto power by

individuals over organizational acts. Individuals other than the leader become

mere functionaries, instruments of the leader‘s will. An administrator can only be

a cause or an author of a organizational act, that is, a ‗heroic leader,‘ if his action


cannot be vetoed by his subordinates, i.e., if the organization is morally defective.

Thus, leadership presumes a morally defective environment of action.

Any action performed by one constrained from the exercise of moral

choice is ceteris paribus morally defective. So, even if the administrator‘s

command is morally correct, the organizational action will necessarily be morally

defective. But if the organization is not morally defective, i.e., each actor within it

may veto the administrator‘s cause or command on moral grounds, then the

administrator is not the author of the organizational act. The organizational act in

a morally non-defective organization is substantially the act of those moral agents

who execute it. Thus, the administrator‘s act, even if moral in such circumstances,

is not heroic leadership.

Dr. Rozycki (1993) further states that, for the sake of managing society, because it is not

practical to punish everybody, leaders who are guilty of crimes are punished as an example to the

followers who are left free to be condemned by their own guilty consciences. He states that such

was the case with the execution of Nazi leaders after World War II while thousands of followers

were not punished. Unethical and corrupt business, political, and religious leaders are also held

up as examples when they are punished—with the hope that this will dissuade others from

pursuing the same unethical or illegal courses of action.

Dr. Rozycki (1993) also argues that, in a ―pluralistic…modern society, too much

‗morality‘ is probably counterproductive in terms of social control. Too strict an enforcement of

rules—moral or legal—might cause the kind of resistance which eventually might bring the

legitimacy of those rules into question.‖


Dr. Rozycki (1993), in his conclusion, may be considering moral, heroic leadership to be

a mixed blessing, calling that leader ―conflicted, and…ultimately, tragic,‖ yet that leader is ―a

teacher who provides us with common understandings of the moral basis of social action.‖

Tony Simmons, author of The Integrity Dividend, mentioned previously in this paper,

generally agrees that being ethical and admitting mistakes is the best practice—that it pays

―dividends‖—but also seems to imply that the ethical decision to admit a mistake may be

contextual, stating that, because admitting the mistake may bring severe consequences, one

should ―be able to read if those around [them], and the company [they] work for, are worthy of

the truth‖ (Tahmincioglu, 2008).

Pamela Shockley-Zalabak (2008) takes this question of whether or not to admit a mistake

a step further, saying that even within an organization, different people may have different

personal moral codes, and the question of whether or not to admit a mistake is a matter of their

interpretation of what is ethical. She states:

Employees have individual value systems and make individual judgments about

the rightness or wrongness of communication behavior. Even in organizations in

which openness is encouraged, an individual employee may choose not to notify a

supervisor of a serious mistake. The individual judges this behavior as ethical

because of his or her intent to correct the problem. The employee‘s supervisor, on

the other hand, may consider it unethical to withhold information that could affect

the productivity of the group. An absolute judgment about the rightness or

wrongness of the employee‘s behavior is difficult. It is possible to understand,

however, that individual and organization values can differ, contributing to

different interpretations of ethical behavior‖ (Shockley-Zalabak, 2008, p. 120).


However, as Pinchot (2008) states, ―[E]thics is [not] a luxury—it‘s a staple in the success

of any enterprise.‖

Ms. Pinchot (2008) draws the correlation between the organization of businesses and the

organization of societies, stating that:

Effective societies and effective companies alike have their grounding in ethical

basics that rest on freedom and democracy: the value of [individual personal]

diversity; distributed power [empowerment to make ethical decisions]; continuous

reality testing [where Max De Pree says organizational culture makes truth and

the distribution of information paramount]; distributed leadership; global ethics;

acting for the long run [versus short-term gain]; and the Golden Rule.

Ms. Pinchot (2008) follows by taking the ‗Golden Rule,‘ an ethical core value of many

organizations, and applies it to organizational practices, giving a glimpse at the payoffs for living

by the ‗Golden Rule‘ and the consequences for not doing so. The consequences would include

those witnessed in the last decade and briefly written about in this paper. Ms. Pinchot states:

‘Do unto others as you would have others do unto you‘ is the basic rule for

community survival. Those groups which survive well will treat each other and

even their customers as equals, with consideration and respect. Internally, the

‗Golden Rule‘ is needed to prevent our worst – destructive-in-fighting, stifling

authoritarianism, [and] diverting status-seeking. This principle is the basis of

pulling together and getting done anything of value…..We function best when we

can count on others, and others on us, and when we are willing to collaborate with

our colleagues and customers on mutual goals. Every workplace that has long-

term success rests on community values: mutual support, caring for each other,


our customers, and the worlds we share, and being responsible to learn and

change so as to produce unquestionable positive value--or jeopardize everyone's

survival (2008).

Thompson, Strickland, and Gamble (2008) list the core values, and resultant ethical

actions, for several well-recognized organizations. At Kodak, these include: ―respect for the

dignity of the individual, uncompromising integrity, unquestioned trust, [and] constant

credibility‖ At Home Depot, these include: ―giving back to the community [social

responsibility], respect for all people, doing the right thing, taking care of people, building strong

relationships, and creating shareholder value‖—ethically At Toyota, this includes ―respect‖ and

―quality‖—for there is an ethical obligation to do your best; DuPont includes ―ethics, respect for

people, and environmental stewardship;‖ Heinz includes ―respect‖ and ―integrity,‖ as well as,

―Empowerment…to empower our talented people to take the initiative and to do what‘s right,‖

(Thompson, et al., p.28).

Thompson, Strickland, and Gamble (2008) say that an organization‘s core values must be

incorporated into an ethical strategy, and give a two-pointed argument for doing so: ―because a

strategy that is unethical in whole or in part is morally wrong and reflects badly on the character

of the company personnel involved and…because an ethical strategy is good business and in the

self-interest of shareholders‖ (p. 338). Thompson, et al., further states that there are three levels

of ―business costs‖ which can result from unethical business decisions and actions:

Level 1 costs [include] government fines and penalties; civil penalties arising

from class-action lawsuits and other litigation aimed at punishing the company for

its offense and the harm done to others; [and] costs to shareholders in the form of

a lower stock price. Level 2 costs [include] legal and investigative costs incurred


by the company; costs of providing remedial education and ethics training to

company personnel; costs of taking corrective actions; [and] administrative costs

associated with ensuring future compliance. Level 3 costs [include] customer

defections; loss of reputation; lost employee morale and higher degrees of

employee cynicism; higher employee turnover; higher recruiting costs and

difficulty of attracting talented employees; adverse effects on employee

productivity; [and] costs of complying with often harsher government regulations

(2008, p. 339).

Crisis management communications expert and author Steve Wilson (2002) talks about

what is perhaps the most important result of integrity, and ethical versus unethical decisions and

actions—the reputation of an individual or an organization. Wilson (2002) says that, ―It can take

decades for an organization [or a person] to build a good reputation, yet it can be destroyed in

just a few hours‖ (p. 139). Integrity is built upon trust. Trust comes from ethical decisions and

actions. A good reputation comes from the integrity built by repeated ethical decisions and

actions. Once the trust is gone, it can be an extremely hard and long process of rebuilding that

trust—and that trust is what leads consumers to buy products and services; what leads lenders to

grant financing at favorable terms; what leads suppliers to give favorable terms on the sale and

shipping of its products; what leads the government to not see a need for additional regulations;

and what leads investors to purchase more shares of an organization‘s stock. ―Emphasizing

responsible business conduct is the surest means of preserving a company‘s intangible assets‖

(International Business Ethics Institute, n.d.)

So, if the basic benefits of ethical leadership, decision making, and actions for an

organization are that all stakeholders remain satisfied and even happy, no laws are broken, the


organization enjoys a favorable reputation and, as a result, the organization also enjoys

sustainable growth and profits, then what are some of the policies and procedures that a leader

should do to ingrain ethical values into the organization‘s culture and operations?

The leader should first have a strong set of personal, ethical values which he or she uses

while creating a strategic vision for the organization and laying out its mission. Thompson,

Strickland, and Gamble (2008) state that: ―A strategic vision portrays a company‘s future

business scope (‗where we are going‘), whereas a company‘s mission typically describes its

present business and purpose (‗who we are, what we do,‘ and why we are here‘)‖ (p. 24). They

state that, ―An effectively communicated vision is a valuable management tool for enlisting the

commitment of company personnel to actions that get the company moving in the [common]

intended direction‖ (Thompson, et al., p. 25). Additionally, ―Strategic visions become real only

when the vision statement is imprinted in the minds of organization members and then translated

into hard objectives and strategies‖ (Thompson, et al., p. 26); which is also true of an

organization‘s ethics and culture—which must all be lived by the employees and made tangible

so that all employees can get on the same sheet of music. The vision statement of Charles

Schwab, one of a half-dozen examples of vision statements by highly recognizable companies

given by Thompson, et al., states: ―To provide customers with the most useful and ethical

financial services in the world‖ (2008, p. 26). This illustrates their emphasis on ethics within

their strategic vision.

Thompson, Strickland, and Gamble (2008) stress that leaders should only pursue

organizational strategies that ―can pass the test of moral scrutiny‖ and that any strategy chosen

―allows management to fulfill its ethical duties to all stakeholders‖ (pp. 10-11). However, they

also point out that sometimes strategies seem to fall in a ―gray zone‖ between what logically


seems ethical and what logically seems unethical; and that it is during these times that decisions

will need to be made based on ―how clearly the boundaries [have been] defined‖ (Thompson, et

al., pp. 10-11).

Thompson, et al. (2008), also have a firm belief in what constitutes ―the payoffs of a clear

vision statement.‖ The payoff being that ―it crystallizes senior executives‘ own views about the

firm‘s long-term direction;‖ ―it reduces the risk of rudderless decision making;‖ ―it is a tool for

winning the support of organizational members for internal changes that will help make the

vision a reality;‖ ―it provides a beacon for lower-level managers in forming departmental

missions, setting departmental objectives, and crafting functional and departmental strategies that

are in sync with the company‘s overall strategy;‖ and ―it helps an organization prepare for the

future‖ (Thompson, et al., p. 26).

Thompson, Strickland, and Gamble (2008) make the connection between the

organization‘s vision and mission and the organization‘s values, describing core values as ―the

beliefs, traits, and ways of doing things that…guide the pursuit of [an organization‘s] vision and

strategy, the conduct of company‘s operations, and the behavior of company personnel‖ (p. 27).

Thompson, et al., further connect the vision, mission, and values (ethics) to the organization‘s

culture, saying that, ―[T]he stated core values and ethical principles are the cornerstones of the

corporate culture‖ (p. 435).

Once the leader crafts the strategic vision and mission for the organization, he or she

should then enlist the help of the human resources and communications staff to help begin

forming the organizational culture around these ethical values, and communicating them through

print, such as newsletters and annual reports, and through the media, such as podcasts and

electronic media releases. All employees need to make this culture more than a set of ideals, but


something that is lived. Living the culture through his or her ―personal actions‖, Sankar (2003)

notes, is the most important way a leader can communicate ethics, values, and integrity within

the culture of the organization.

The Human Resources (HR) department can help the leader build this culture through its

hiring, training, promotion and retention, discipline, and firing practices. As part of its hiring

process, the HR department can employ the use of honesty and integrity tests, provided that they

―relate the test content to specific job content‖ so as to avoid the possibility of a discrimination

suit (Mathis & Jackson, 2008, pp. 239-240). These tests are currently being used in about 28

percent of organizations (Mathis & Jackson, p. 240). The HR department can also rely on asking

good interview questions and checking references. Once hired, the employees should be given a

comprehensive ethics training package, including ―A written code of ethics and standards of

conduct,‖ as well as going through a program whereby the new hire is trained on expected

ethical behavior, how to go about obtaining advice when facing ethical dilemmas, and how to

confidentially report ―ethical misconduct or questionable behavior‖ (p. 23). The promotion

process can take into consideration the ethics of a candidate, partly documented by performance

reviews which include a section on employee ethics. The organization can focus on promoting

those employees it feels best exemplify the ethical character and culture it wishes to ensure.

Those employees who breach the ethics policies can first be counseled if the infractions are

minor and there is reason to believe the employee will turn their conduct around, and be

dismissed at any time the breach of ethics becomes too damaging.

Interestingly, according to the Ethics Resource Center (ERC), ―only 43 percent of human

resource professionals said their organizations include ethical conduct as part of employee‘s

performance appraisals;‖ 7 percent report working for an organization that does not have any


kind of ethics program whatsoever, and only 23 percent have a ―comprehensive ethics and

compliance program in place‖ (ERC, 2008, ―Performance Reviews Often Skip Ethics‖).

However, ―82 percent of HR professionals said they reported ethical misconduct when it was

observed, compared with 61 percent of employees‖ (ERC, ―Performance Reviews‖). When HR

employees did not report ethics violations, the reasons given were that they either felt they could

not do so anonymously or that those who committed the ethics violations would go unpunished.

The same findings by the ERC also show that while ―human resource professionals…are

their organization‘s primary resource for ethics-related issues, and…help create ethics

policies….most don‘t feel…truly part of the ethics infrastructure….[but rather feel that] they are

just asked to ‗clean up‘ the situations caused by ethics violations‖ (Ethics Resource Center, 2008,

―Performance Reviews‖). Yet, the results of surveys conducted on organizations and their

leadership by the organization Business Roundtable shows that ―the single most important factor

in ethical decision-making [is] the role of top management in providing commitment, leadership,

and example for ethical values‖ Sankar (2003).

Additionally, the Ethics Resource Center (ERC), says that a study entitled The Ethics

Landscape in American Business reveals that: ―A small proportion of [human resource] HR

professionals (19 percent) and employees (U.S. average: 11 percent) reported feeling pressure by

others (within their organization or externally) to compromise their organization‘s ethics

standards, company policy, or the law (2008, ―Performance Reviews‖). The same survey

revealed that ―HR professionals think that top management (77 percent) would be less likely to

be held accountable if caught violating their organization‘s ethics standards than supervisors (86

percent) and non-management employees (91 percent)‖ (ERC, 2008, ―Performance Reviews‖).

And, confirming that unethical decision making and unethical practices are not reserved for


practice by an organization‘s leaders, the study also revealed that the ―[e]thical misconduct most

commonly identified by HR professionals included abusive or intimidating behavior toward

fellow employees,…abuse of e-mail or Internet privileges…. calling in ‗sick‘ inappropriately,

and…taking credit for someone else‘s work‖ (ERC, 2008, ―Performance Reviews‖).

According to Mathis and Jackson (2008), at UPS (United Parcel Service), a culture

emphasizing ―ethics and corporate integrity‖ is a principal way to achieve competitive advantage

in the marketplace (p. 23). The practice at UPS is different than what was sometimes practiced at

Enron where, rather than ―examin[ing] whether [a potential employee‘s] moral character

matched the company‘s so-called fidelity to integrity,‖ Enron recruits were often hired based on

―academic credentials, innovative ideas and raw ambition‖ (Csorba, 2006). Csorba says this was

the case with Enron employee Andy Fastow, who caught the attention of CEO Jeffrey Skilling

and was ―recruited from Continental Illinois Bank [because] he helped pioneer a system of

raising capital by selling notes backed by risky loans‖ (2006).

Even after a culture built upon an ethical strategic vision has been established within an

organization, and it has been embraced by all employees—especially the leaders—there still

come times when the organization finds itself needing to make moderate to even drastic changes

to strategic objectives in order to remain competitive or to grow. During these times of change,

known as ―strategic inflection points,‖ ―tough decisions [need to be made] about the company‘s

course‖ (Thompson, Strickland, & Gamble, 2008, p. 26), and a firm set of ethics will help the

leaders to avoid making unethical decisions which may cost the organization everything in the

long-term even though it decisions appear profitable in the short-term.

These strategic inflection points, or changes, are often specifically identified by internal

or external organizational development (OD) and change practitioners, or perhaps a combination


of the two, whose job it is to determine, alongside the senior executives, what strengths or

weaknesses exist within the organization, what threats or opportunities exist within the

environment, what changes need to be made, how to go about making those changes and

instituting them (and generally embedding them in the culture), and then measuring the rate at

which the changes are being embraced and implemented, and the effectives of those changes on

bringing about the desired results.

If an organization realizes that it has an organizational culture with a lack of ethics, it

may be hard for the leader, the OD practitioner, and the HR department to bring about change if

that culture is strongly entrenched. If a culture has been weakly established, whether ethical or

unethical, it is easily subjected to change. Moreover, if an organization has a strong ethical

culture, it is more able to endure change, and even crises, and when the leaders do set about

change, the change is usually in harmony with the existing values and this fact is communicated

to all stakeholders (Thompson, Strickland, & Gamble, 2008, pp. 28-29, 420).

According to Thompson, Strickland, and Gamble (2008):

In companies with long-standing values that are deeply entrenched in the

corporate culture, senior managers are careful to craft a vision, mission, and

strategy that match established values, and they reiterate how the values-based

behavioral norms contribute to the company‘s business success. If the company

changes to a different vision or strategy, executives take care to explain how and

why the core values continue to be relevant. Few companies with sincere

commitment to established core values ever undertake strategic moves that

conflict with ingrained values‖ (pp. 28-29).


For the crisis management communications expert, ethics is the key to handling any crisis

which develops for an organization—whether naturally occurring, such as an earthquake, or

man-made, such as embezzlement by a senior executive. The crisis itself may not have been the

result of unethical decision making, yet the way an organization handles the crisis can have

ethical implications and, therefore, implications for the leaders‘ integrity and the organization‘s

reputation (Wilson, 2002, p. 139).

The CEO should typically be the communicator during the crisis; he or she is the public

face of the organization. According to Wilson (2002), all communications should be ―absolutely

open and honest‖ (p. 37). It is important to communicate honestly with all stakeholders—

employees need to feel secure over their safety and jobs; shareholders need to feel secure over

their investment; the public, receiving information through the media, needs to feel secure in that

the organization is socially responsible and one that it can trust to do business with.

To those he consults with, Wilson (2002) talks of ―the importance of their first

response…what they do and what they communicate during the first minutes or first hours of a

crisis may well shape public opinion for hours, days, weeks, and possibly forever‖ (p. 17).

Wilson says that, ―If you reduce crisis management to its simplest form, it is this: Determine

what is the right thing to do, and then figure out how to do it‖ (2002, p. 37).

The freedom to determine what the right thing to do is, and to do it, is at the heart of

empowerment. To empower employees, there must be trust that the employees understand the

vision and the mission and that their capacity for carrying out any objective is formed through a

common set of ethical values shared across the organization. As Pinchot (2008) states:

In these circumstances of increasingly empowered and self-organized employees,

simple rules and rigid policies are not enough to guide employees. There must be


a shared sense of where the organization is trying to go, and then, because ends

never justify means, a deep respect for ethics. The power of leadership is in

providing ethical and effective power to the people.

Leaders are finding that employees who are empowered to make choices, ―to self-

organize…change and grow,‖ to actively contribute to the planning and success of the

organization, to bring their creativity and their knowledge bases, and who are valued by the

organization, are more productive and are happier with their work, the organization, its culture,

and its leaders (Pinchot, 2008).

Avolio, Weichun, and May (2004) explored how ethical leadership psychologically

impacts employees and sets the condition in which they make decisions and take actions—such

as being honest and demonstrating loyalty. Their basic argument was that, when employees feel

and believe themselves to be empowered by their organizations—and this empowerment is

actually demonstrated through leadership action, followed by reciprocal action on the part of the

employee—the employee develops a trust in the leaders and a commitment to the organization.

In the future, the ethics of leadership will play an even greater role in business, and those

organizations that are the most ethical, that are driven by time-tested values that are generally

accepted as universal, and that make ethics a foundational aspect of their culture, will be

recognized by consumers with their purchases and employees and investors with their loyalty.

Method

Description of Method

This study was conducted using secondary research collected from the internet,

textbooks, magazines, newspapers, and Jewish, Islamic, Christian, and Buddhist scriptures.


This study originated with the belief that there was an ethics crisis in the world, more

prominently displayed by organizational leadership because of their stature and their visibility in

the media. After recalling some of the ethics scandals which have arisen since 2000, beginning

with Enron and continuing through those of A.I.G., Moody‘s, and Standard & Poor‘s during this

current economic crisis, some research and data collection from the internet, magazines, and

newspapers was conducted.

Before an in-depth analysis of my data was begun, I determined that these ethical failings

were as a result of ‗reaping what you sow‘—that scriptures from the Christian Bible, the Jewish

Tanach, the Muslim Qur‘an, and the teachings of Buddha all share many of the same ethical

beliefs, are the foundations of the majority of nations in the world, and all predict the very

consequences (reaping) that have resulted from the unethical decisions and actions which were

sowed by the leaders of these organizations. These scriptures also all prescribe how to lead an

organization to peace and prosperity through ‗doing what is right,‘ or ethics.

However, contained within this paper are only a few verses of Judeo-Christian and

Islamic scripture. This was intended to provide better flow from one topic to the next, and

because of the length of analysis of scriptures. Instead, all of my analysis of various Judeo-

Christian and Buddhist scripture, and their practical business applications, have been enclosed in

the first two (of four) appendices which follow. The one or two Islamic verses not previously

referred to in this paper can be found in its appropriate section in the Annotated Bibliography.

Upon determining that the scriptures from these major religions all teach very similar,

basic ethical truths which are almost universally accepted, and determining that they are the

foundations of ethics, laws, and business practices worldwide, I decided that my attention would

be focused on the fact that there is, indeed, an ethical leadership crisis; that ethical leadership is


strongly tied to communication and integrity; what kinds of organizational pressures and

problems exist that give opportunity for unethical decisions and actions to arise; that ethical

principles for business are common and shared and that associations exist in the United States

and globally which are seeking to adopt a global code of ethics and to solve this ethical dilemma;

and how ethics broadly affect an organization across many functions.

Results

Ethical crises of leaders and organizations are commonly reported around the world by

the media. These crises result from unethical decision making and illegal actions. As a result,

leaders who do not maintain their ethical principles can engage their organizations in conduct

that can severely damage or destroy the reputation, profitability, and existence of the

organization.

Common ethical principles are shared by much of the world. These principles can be

found in the scriptures of major world religions. There is great similarity between the teachings

found in the scriptures of the Jewish Tanach, the Christian Bible, the Islamic Qur‘an, and the

teachings of Buddha. The governments and cultures of many nations, and the structure and

culture of most organizations, have their foundations in the ethics common to these scriptures.

Individuals, associations, and governments in the United States and across the globe are

concerned with the ethical climate in business, government, politics, religion, and the media.

They are concerned that many leaders lack an ethical grounding and, therefore, so do many

organizations. These individuals, associations, and governments are proposing ethical actions

leaders can take on a personal level; policies, procedures, and practices they can implement

across their organizations; legislation that can be enacted to help leaders and organizations

ensure ethical financial accountability; and global business ethics declarations.


In the United States, 43 percent of organizations have employee performance reviews

containing an evaluation of the employee‘s demonstrated ethics; 7 percent of organizations have

no ethics programs whatsoever; 23 percent of organizations have an in-depth ethics program; 61

percent of employees and 82 percent of Human Resources staff report suspected unethical

activity; and 11 percent of employees and 19 percent of HR staff report pressure from the

organizations to breach their own written ethics policies.

Discussion

Interpretation of Data

Organizational and leader ethics begin with individual, personal ethics. The ethical

failures witnessed in organizations come as a result of personal actions made by individuals

without ingrained ethical values to drive their decisions. It is only by developing these ethics

within individuals that organizations can truly be protected from unethical decisions and actions.

Unfortunately, ingraining moral ethics into an individual is not easy, because it is a matter of

character, recognition of wrong ethical beliefs, and desire to change. By the time an employee is

hired by their first employer, much of their character—including ethical values—is already

established. When an organization has ethical leaders, vision and strategy and culture can be

formed upon these leader‘s values. Employee acceptance and buy-in of these ethical values and

culture greatly enhance the opportunity for an organization to remain ethical in its operations and

to enjoy a good reputation, sustained growth, and prosperity.

More should be done to develop a strong ethical grounding in children at an early age.

This should be the responsibility of parents, family, friends, and churches. To aid them, schools,

mentoring programs, and extracurricular activities should create programs to help build these


ethical values in children as they continue to age. Even throughout college and into the mid-20s

and older, these individuals should be mentored by their universities and their employers.

Pride, greed, and even fear seem to be dominant characteristics which drive a person to

commit unethical acts. Pride can come through the desire for recognition; an arrogant belief in

one‘s own abilities; or the belief that one is better, smarter, more talented, or more deserving

than others. Greed can come through a desire for more power, more prestige, a greater salary and

bonus, a more distinguished reputation, or a greater position for their organization within the

market or within the affections of society. Fear can come through the pressures to meet multiple

and diverse demands from a variety of stakeholders; through the fear for job security; or from

some deeper fear of failing to measure up to the expectations of someone whose approval one

desires. All three are characteristics rooted in self-centeredness—not wholesale belief that one is

better than others, but a focus on one‘s own concerns above the concerns of others.

While the organizational tackling of ethics on both broad and defined levels is absolutely

necessary to sustain an ethical organization, the true work must be done beginning with the

decision of the individual to commit to living ethically.

Evaluation of Data

Much has been done on the study of ethics, leadership, decision making and

communications. Evaluation of materials which can be turned up by Google searches alone are

far-reaching. Bodies of knowledge exist that show what ethics are and how to live one‘s life or

lead one‘s organization in that manner. Other works exist which identify and analyze unethical

decision making and actions, and the repercussions to those involved. Additionally, there are

undoubtedly studies which show the costs to organizations which derive from these unethical

acts.


Further studies I would like to see would cover how one experiences a paradigm shift

from thinking unethically to thinking ethically, or vice-versa; and how one goes from being

highly ethical, to losing one‘s ethical direction and grounding and integrity, and then rebuilding

that framework again to develop a stronger ethical character.

All the studies I have analyzed show that there is an ethical crisis in many of today‘s

organizations; that ethics, integrity, decision making, and communications are inextricably

linked with leadership; that the ethical culture of an organization begins at the top with the

leader; and that all decisions and actions are made based on personal values, regardless of how

strong or weak the ethical culture of one‘s organization is, or how comprehensive its ethics plans

are.

Contributions

I believe that the contribution made by this research point to an understanding that ethics

provide depth to leadership and breadth to the application of ethics across organizational

functions. I believe that the research further proves the universality of these ethics across various

religions and cultures and shows that these common ethical dilemmas can be jointly overcome.

Additionally, I believe that the small collection of Buddhist, Islamic, and Judeo-Christian

scripture contained in this paper and in the Appendix can lead to further research and analysis on

the similarity and universality of basic ethical principals across religions, cultures, and nations.


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Appendices

Appendix 1

The Holy Bible. New King James Version. (1982). Nashville: Thomas Nelson Publishers.

The Holy Bible. New International Version. (2005). Grand Rapids: Zondervan.

The Holy Bible. Today‘s New International Version. (2005). Grand Rapids: Zondervan.

The Holy Bible. Holman Christian Standard Version. (2003). Nashville: Holman Bible

Publishers.

All Bible texts are from the New King James Version unless otherwise noted in citation.

The Holy Bible, of Judeo-Christian faiths, is filled with instruction and warnings on how

to conduct one‘s affairs in the world of business. These instructions and warnings are extensions

of how to live one‘s life in harmony with oneself—to live peacefully and with a clear

conscience; to live in harmony with others in a society; and to live in harmony with God. These

instructions and warnings are the foundation for the social code—the ethics—used to govern and

direct the people of nations formed on Judeo-Christian principles. Likewise, every nation has its

own set of ethics, its own set of social (moral) codes. The majority of these ethics are

universal—principals which the people of all nations and religions accept as the way to live

one‘s life and the way to treat others—though they come to the peoples through different means.

For the person of Jewish ancestry and faith—for the Jew is either born as a Jew, through

ancestry, or converts to the faith—the ethical codes can be found in the Tanach, the same verses

and books which establish the Christian New Testament of the Holy Bible, and which are

referenced below. The Tanach is split into three parts: the five Books of Law (Torah)—Genesis

through Deuteronomy—given to the prophet Moses, and which also establish the timeline for the

creation of the earth and the history of mankind; the writings of the Prophets—such as Joshua,


Isaiah, and Jeremiah; and the Hagiographa—which includes Psalms, Proverbs, Job, Esther,

Daniel, Chronicles, and others. For the Muslim, who shares with the Jew the common ancestral

father of Abraham, and whom the Christian has as a ―spiritual father,‖ the Qur‘an is the principle

collection of writings which establish the moral (ethical) code of Muslim peoples and nations,

and which were revealed to the prophet Mohammed. The writings of Christians, Jews, and

Muslims are worded the most similar, though other world religions share the same common

views of living an upright and ethical life, the same views of the leader needing to set the

example, and have many of the same views of effective communication with others. Buddhists

have as their foundational ethical writings the teachings of Gautama Siddhartha, or Buddha, who

was born a prince in India about 2500 years ago, who left the palace as a young man to ponder

spiritual and natural laws, and who became the founder of the Buddhist religion of

Enlightenment (Bukkyo Dendo Kyokai). Still, there are many other religions throughout the

world that have contributed ethical, moral, social laws to their peoples and the governments of

their nations.

―Better is the poor who walks in his integrity, than one who is perverse in his lips, and is

a fool‖ (Prov. 19:1, New King James Version). Two business applications can be found here.

First, a wise leader should keep his or her communications wise and truthful to avoid being

regarded as foolish, dishonest, and untrustworthy. Second, it is better to lead a small and

modestly profitable organization that deals honestly with all stakeholders, than to lead an

unscrupulous and greedy organization where growth is built upon dishonesty, cheating, and

greed. This proverb shows that there is a strong link between being ethical and having

integrity…and being wise in how and what one communicates to others. Both are foundational to

a wise leader—who will choose personal integrity over fame and fortune, and who will choose to


cultivate good communications skills to build relationships and encourage people. This is the

leader who also understands the value of Proverbs 22:1, ―A good name is to be chosen rather

than great riches; loving favor rather than silver and gold‖ and the maxim of Proverbs 29:23,

which says, ―A man‘s pride will bring him low, but the humble in spirit will retain honor.‖ The

following are additional Biblical texts which expound on these two traits of a good leader.

―[W]alk before Me…in integrity of heart and in uprightness…‖ (1 Kings 9:4). According

to The New Lexicon Webster‘s Dictionary of the English Language, upright means ―morally

honorable.‖ Here God speaks to Solomon, king of Israel, and says that if Solomon and his people

follow the Lord and obey His laws, then his kingdom would be established and not end; but, if he

or his people turned away from the law (―commandments and statutes‖), then the kingdom

would be brought to an end and people, particularly foreigners, would pass by and mock them,

saying that this was because they chose to forsake the Lord and His commandments. A business

application is that a nation is built on laws—both the judicial laws that are written down and are

punishable in the court system, and the moral laws, or ethics, which the majority of society holds

to, to maintain a peaceful and happy state of existence where people live to respect one another

for the common good of all. Not all morals and ethics—social laws—are written in a code of

law, but people follow them to promote society and to treat others as they would wish to be

treated. For the members of an organization, beginning with the leader, to uphold these laws is to

strengthen its probability for survival and prosperity, and to be regarded well by society. But to

turn away from keeping those laws would be to greatly increase the probability that the

organization will fail—either completely collapse or be significantly reduced in size, strength,

production, earnings, and reputation. Those outside the organization—the foreigners—will mock


them; these include competitors, legislators, the media, educational systems, and society in

general.

―Then the LORD said to Satan, ‗Have you considered My servant Job, that there is none

like him on the earth, a blameless and upright man, one who fears God and shuns evil? And still

he holds fast to his integrity, although you incited Me against him, to destroy him without

cause‘‖ (Job 2:3). A business application here is that the leader and members of an organization

should maintain their integrity in all situations, regardless of the conditions or whether they have

been provoked or not. Though a competitor applies unethical practices against your organization,

this does not justify sacrificing your integrity by adopting unethical business practices as well.

Specifically, unethical business practices should not be used in retaliation. Though the

government may enact new tax laws or trade barriers which negatively affect the profit potential

of the organization, laws must still be followed; and in doing so integrity may still be maintained.

Personal and organizational integrity should always come before profit and growth. Sustainable

success can be achieved and maintained, in part, through ethical and legal business practices. But

unethical and illegal business practices set the person, and the organization, up for a fall.

―Is not your reverence your confidence? And the integrity of your ways your hope?‖ (Job

4:6). A business application here is that one can be confident that reverence—respect, a healthy

fear of, and value—for the law and for ethics will produce positive results with the potential of

growing the organization. At the least, it serves to keep one from acting illegally or unethically,

which could destroy the organization. It is this maintaining of integrity in the practices of an

organization—through its leaders and followers—which produces hope that the organization will

be well regarded by customers, will be competitive in the marketplace, will achieve a good

profit, and will continue to be able to serve the community.


―Even as I have seen, those who plow iniquity and sow trouble reap the same‖ (Job 4:8).

The business application here is that a person or organization which performs unethically or

illegally will generally receive (reap) results commensurate with what they did or applied

(sowed). Those unethical or illegal actions will generally come back on them—being exposed,

receiving penalties, and losing good regard by others including customers, creditors, and

suppliers.

―[T]ill I die I will not put away my integrity from me‖ (Job 27:5). The business

application is that integrity must always be maintained and that there is never an instance when a

situation should justify an action which would cause one‘s integrity to be lost.

―Let me be weighed on honest scales, that God may know my integrity‖ (Job 31:6). A

business application is that people and organizations should be judged according to what is

right—legally and ethically—without favor given to who is popular, actions that are profitable

though not legal or ethical, or any other standards that are dishonest and based on greed.

―So he shepherded them according to the integrity of his heart, and guided them by the

skillfulness of his hands‖ (Ps. 78:72). A good organizational leader possesses both the integrity

to maintain his or her ways and the ways of the organization, and the skills necessary to lead the

organization in its market pursuits. These skills include both the industry-specific ones—in

manufacturing, sales, and service—used to generate the product, as well as character traits and

learned skills necessary to successfully lead the organization—communication skills, strategic

planning, problem solving, creativity, and others.

―For wisdom will enter your heart, and knowledge will be pleasant to your soul.

Discretion will protect you, and understanding will guard you. Wisdom will save you from the

ways of wicked men, from men whose words are perverse, who leave the straight paths to walk


in dark ways, who delight in doing wrong and rejoice in the perverseness of evil, whose paths are

crooked and who are devious in their ways‖ (Prov. 2:10-15, New International Version). Those

who possess wisdom act with integrity, and doing so produces greater wisdom. An

organizational leader possessing wisdom and integrity will be skilled in communication—they

will know how to listen, how to ask productive questions, and how to speak with clarity, passion,

and compassion to others. They will seek wise counsel and shun the advice of the arrogant and

greedy. Their diligence in maintaining their integrity and ethics will naturally protect their

thoughts and actions from decisions which could harm others, their organization, or their own

personal integrity and reputation. As the proverb states, the person will act with discretion; and

the discretion will protect the organization and give it a chance to grow and serve the

community.

―My son, do not forget my law, but let your heart keep my commands; for length of days

and long life and peace they will add to you‖ (Prov. 3:1-2). The business application here is that

an organization which remembers and adheres to judicial and social (ethical) laws will typically

last much longer, and enjoy a more prosperous and peaceful existence, than the organization

which acts contrary to those laws and whose existence is cut short by the actions which bring

about their demise.

―My son, do not despise the chastening of the LORD, nor detest His correction; for

whom the LORD loves He corrects, just as a father the son in whom he delights‖ (Prov. 3:11-

12). Here a business application would be that the wise leader listens to and takes to heart the

correction of a peer or the communication of an earnest employee; a correction from the board of

directors or a governmental agency; or the correction that comes from customers through


feedback or decreased sales. All are given in hopes that the leader, and the organization, becomes

stronger as a result.

―My son, if you have put up security for your neighbor, if you have shaken hands in

pledge for a stranger, you have been trapped by what you said, ensnared by the words of your

mouth‖ (Prov. 6:1-2, Today‘s New International Version). One business application is that the

leaders of an organization must be careful in engaging in contracts with other organizations.

Whether formally contracted through a lawyer, or given as the bond of one‘s word, the

agreements made with another must be done carefully, cautiously, and with discernment, so an

not to bind the organization and its leaders to an agreement which will adversely affect it in the

future—possibly through illegal or unethical practices—and damage reputations.

If leaders act in accordance with the law and ethics, then their practices will be profitable

personally and for the organization. Even if great profits are not realized, consciences remain

clear. Leaders also ought to lead the organization and maintain its reputation with the same care

invested in leading their own lives, and those of their families, and protecting their own

reputation.

―A worthless person, a wicked man, who goes around speaking dishonestly, who winks

his eyes, signals with his feet, and gestures with his fingers, who plots evil with perversity in his

heart—he stirs up trouble constantly. Therefore calamity will strike him suddenly; he will be

shattered instantly—beyond recovery‖ (Prov. 6:12-15, Holman Christian Standard Bible). One

business application here is that the organization led by an unethical leader(s) may have a high

probability that the organization will experience a sudden crisis which will damage it beyond

repair.


―Treasures of wickedness profit nothing, but righteousness delivers from death. The

LORD will not allow the righteous soul to famish, but He casts away the desire of the wicked‖

(Prov. 10:2-3). As discussed elsewhere, in business the profits made through unethical practices

are often not long lasting. Eventually, the practices may cause the demise of the organization. If

all the energy which had been put into achieving growth and profit dishonestly had been put into

honest methods, the growth and profits may have come more slowly or in a smaller amount, but

it will have lasted longer as the organization would have been able to survive on ethical business

practices and a good reputation. This does not mean that leading an organization with integrity

will automatically ensure the organization of success—creativity, intelligence, wisdom, and

innovation are still needed in competition—but ethical leaders will ensure a greater chance for

sustained success by not letting the strengths of the organization be reduced by unethical

practices. See Proverbs 10:4-5, below.

―He who has a slack hand becomes poor, but the hand of the diligent makes rich. He who

gathers in summer is a wise son; he who sleeps in harvest is a son who causes shame‖ (Prov.

10:4-5). Diligence is still required to achieve success. Diligence still requires creating a culture

where employees and the organization can grow, and feel appreciated and safe. It requires

pursuing research and development, where appropriate. It requires reviewing production methods

to create greater efficiency and teamwork. It requires smart labor and hard labor. Diligence

requires looking for good investments to grow profits. It requires maintenance of equipment,

vehicles, and buildings to prolong their life—good stewardship. And diligence requires selecting

and training employees who fit the culture developed by the organization.

―Blessings are on the head of the righteous, but violence covers the mouth of the wicked.

The memory of the righteous is blessed, but the name of the wicked will rot. The wise in heart


will receive commands, but a prating fool will fall‖ (Prov. 10:6-8). From a business perspective,

blessings cover the head of the organization—the leaders‘ minds are filled with thoughts on

organizational maintenance and growth which are ethical and their minds discern which actions

are not ethical and will cause future problems. The leaders‘ words and actions are in accordance

and the organization is blessed with greater harmony amongst employees, managers, and the

macroenvironment which the organization exists in, in addition to the potential for greater

profits. This is in contrast to the mind of the unethical, who possibly engage in illegal practices,

who agree to unfair business practices, who speak before thinking everything out, who make

bold promises that may not be able to keep, whose personal greed or whose lust for the fame of

their organization cause them to overextend the capabilities of their organization. Far more wise

leaders are remembered than those who are unwise. Those who are wise are remembered for

their insightful business practices and the way they treated everyone fairly, empowered them,

and made them feel valued. They become models used to instruct others in what character traits

to develop, and what actions will help enable them to become a successful leader. Those who are

unwise, and are remembered, are used in cautionary tales of what kinds of business practices to

not engage in and what kinds of character flaws to avoid.

―He who walks with integrity walks securely, but he who perverts his ways will become

known‖ (Prov. 10:9). Again, the business application is that unethical and illegal actions will

generally come to light. Also, dishonest gains are often short-lived or come at the expense of

other achievements—such as peace, happiness, long life, reputation, and the ability to sleep well.

―Dishonest scales are an abomination to the LORD, but a just weight is His delight‖ (Prov. 11:1).

The business application is to be honest in all actions, whether accurate sizes, weights, and other


measures for products, or accurate descriptions for products and services, or paying a fair and

agreed to amount for supplies, services, wages, and distribution.

―When pride comes, then comes shame; but with the humble is wisdom‖ (Prov. 11:2). As

mentioned elsewhere, pride can lead to unethical or illegal practices, but genuine humility serves

to keep the heart and mind in check and to prevent these unethical or illegal practices.

―The integrity of the upright will guide them, but the perversity of the unfaithful will

destroy them‖ (Prov. 11:3). In a business application, the ―perversity of the unfaithful‖ can be

rewritten as the ‗lawless and unethical.‘ Again, the law of nature is applied—you reap what you

sow.

―Riches do not profit in the day of wrath, but righteousness delivers from death. The

righteousness of the blameless will direct his way aright, but the wicked will fall by his own

wickedness. The righteousness of the upright will deliver them, but the unfaithful will be caught

by their lust‖ (Prov. 11:4-6). When a leader is caught in illegal or unethical practices, usually

resulting from arrogant pride and greed, often the personal and organizational riches amassed

will have to be used to cover litigation fees. This can result not only in the downfall of the leader,

but also in the downfall of all stakeholders. Employees may lose jobs and retirement savings.

Stockholders may lose their investments. Suppliers may lose monies due them for products or

services delivered. Customers may lose products owed on monies already spent. The leader will

not profit from the monies amassed if sitting in prison, and their conscience may keep them

continually stressed—losing sleep, impairing health, and possibly shortening their life. Ethical

and legal business practices keep the individual and the organization from having to reap the

penalties of the wrong practices sown.


―A gossip goes around revealing a secret, but the trustworthy keeps a confidence‖ (Prov.

11:13, Holman Christian Standard Bible). A business application would be that the art and

science of communication for a leader would include knowing when to remain silent and yet still

be ethical and hold one‘s integrity. Keeping secret proprietary knowledge would seem to be a

given, but sometimes leaders sell their knowledge for personal gain or give the knowledge away

in hopes of securing what they believe to be a more favorable position elsewhere. Further, a wise

business leader will keep in mind their audience when faced with the decision of whether or what

to communicate, how to articulate and time the message, and how to gauge the reaction and

response of that audience.

―One person gives freely, yet gains more; another withholds what is right, only to become

poor. A generous person will be enriched, and the one who gives a drink of water will receive

water. People will curse anyone who hoards grain, but a blessing will come to the one who sells

it‖ (Prov. 11:24-26, Holman Christian Standard Bible). A part of integrity and ethics for an

organization includes generosity. While it is not mandatory for an organization to give back to

the community through time, funding, or other support, the act of doing so helps the organization

and its leaders to remain humble if the spirit of giving is genuine and participated in from the top

down. Additionally, an organization that is generating solid profits, increasing market share, and

finding its stock price growing should not focus solely on retained earnings, additional

investments to further grow the company, or sharing the wealth with only its stockholders in

terms of paying higher dividends, but should also be generous with its employees in terms of pay

increases, raises, bonuses, and profit sharing. Further, organizations often disproportionately pay

high salaries and bonuses to leaders even when their actions and leadership don‘t result in

increased profits but actually cause the organization to lose market share and revenues. Those at


the top often continue to make exorbitant salaries while others within the organization are losing

their jobs or have their wages and benefits decreased.

―Whoever speaks the truth declares what is right, but a false witness, deceit. There is one

who speaks rashly, like a piercing sword; but the tongue of the wise [brings] healing. Truthful

lips endure forever, but a lying tongue, only a moment‖ (Prov. 12:17-19). A business application

is that a leader should always speak (or communicate) the truth; communicating the truth is also

part of integrity. Communicating the truth will carry over to writing the truth—financial

statements won‘t be falsified. There are leaders of organizations who are quick to speak false

claims, promise what they cannot deliver, or hide truths about products, services, or operations.

They may speak boastfully, slanderous, or with prejudice. At times, this speech is captured on

video or recorded in interviews and other written articles. They may appear foolish. Their

reputation, that of the organization, and that of their employees, suppliers, and other stakeholders

can be damaged. Their speech may injure other parties. However, the leader who communicates

the truth is able to avoid the problems that come with lying. The leader who communicates in a

spirit of humility, and with respect, empathy, and ―love‖ towards others will be conscientious of

what they say. Most often, their words will not cause others pain. They can firmly give

correction, but also do so without being malicious. They can communicate the truth, but do so

without arrogance. Those who speak the truth, or who speak with genuine concern for others,

will be appreciated for doing so and are more apt to being remembered fondly. Those who speak

lies, or who speak harshly to others, are more apt to be remembered negatively or forgotten.

―He who guards his mouth preserves his life, but he who opens wide his lips shall have

destruction‖ (Prov. 13:3). A business application is that the leader who guards what he or she

says is more likely to preserve their careers and help their organizations, whereas the leader who


does not edit their thoughts and speaks whatever comes to mind is more apt to jeopardize their

careers and their organizations.

―A righteous man hates lying, but a wicked man is loathsome and comes to shame.

Righteousness keep him whose way is blameless, but wickedness overthrows the sinner‖ (Prov.

13:5-6). Business applications here are that a leader who is ethical and has integrity also hates

dishonesty and lying. For some, it is absolutely not a part of their character; for others, they have

an inherent tendency to do so, but fiercely guard against doing so, and are quick to apologize and

make amends if they do. The majority of people feel that lying is one of, if not the most, detested

character traits a person can have. Lying destroys trust, often (though not always) produces a

guilty conscience in the liar, breaks down communication, and ruins relationships. Being ethical

produces ethical actions which, in turn, reinforce one‘s ability and desire to remain ethical. It

builds up the habit of being ethical and produces integrity. Being unethical leads to unethical

actions, which can destroy one‘s self-image, causing one to sense their loss of integrity, become

untrustworthy, and continue the cycle of being unethical as it becomes easier and easier to do so

each time unethical decisions are made—blurring or completely destroying ethical boundaries

which once seemed normal and sensible to a person, forming habits that are hard to break, and

developing unethical character traits. It is the thoughts, motives, and actions of a leader which

establishes them and helps them to grow—and cultivates them into capable leaders. Likewise, it

is the thoughts, motives, and actions of the unethical person which is what removes them from

their leadership position and destroys them.

―Wealth gained by dishonesty will be diminished, but he who gathers by labor will

increase‖ (Prov. 13:11). While this is simple to understand—profits are best gained through

honest business practices—a deeper business application would be that an organization should


not be obsessed with making greater and greater profits. For many leaders, this obsession can

make it too tempting to make illegal or unethical decisions when the opportunity presents itself.

Leaders who otherwise have considered themselves to be highly ethical and moral in the past,

sometimes discover they are not immune to the temptation or even find themselves actively

engaged in illegal or unethical practices they never would have previously imagined themselves

capable of. This is by no means fully the fault of leaders. Boards of directors demand higher

profits and lower costs as they focus on paying out larger dividends to shareholders who seek

ever larger returns on their investments. Additionally, the New York Stock Exchange and other

financial analysts look for an organization to have continual streams of revenues and profits, and

are quick to downgrade a company‘s rating for investment worthiness if a company takes a loss

or simply fails to have returns as large as these analysts believe they should. Organizational

leaders, and investors, alike both come to see it as severely damaging for an organization to have

periods where profits plateau or even decline. Perhaps expectations for profits have become too

unrealistic. An unhealthy cycle has been established; perhaps broken only by a deep recession or

depression. Regardless, the focus on continued profits gives impetus for some leaders to make

unethical and illegal business decisions. For some leaders, it is a too-narrowly focused sense of

obligation to increase earnings—these leaders are other-focused. For other leaders, it is pride and

ego which drives them to make these unethical decisions for fear of being labeled a failure or

incompetent. For some leaders, profits are chased out of greed, for they own many shares of

company stock. The pressure of having to continually earn profits and cut costs gives rise for

leaders at all levels to make decisions which are on the border of honesty and dishonesty.

―The simple believes every word, but the prudent man considers well his steps. A wise

man fears and departs from evil, but a fool rages and is self-confident‖ (Prov. 14:15-16). Here, a


business application is to cultivate discernment, humility, and honesty. Doing so will form in

leaders the desire to be surrounded by other honest people who are not afraid of speaking the

truth. The leaders will want to hear the truth, even when it is painful. They will not want to be

surrounded by others who simply speak what they believe the leader wants to hear. The leader

will develop an analytical mind, not simply believing everything that sounds good or that they

want to believe. The leader will also seek the counsel of others the leader considers to be wise

and will be careful not to become overly reliant and trusting in their own decisions. A balance

should be achieved. The leader should have a healthy confidence in what they know and don‘t

know and be able to gauge their instincts. But they must also have the willingness and desire to

seek the counsel of others—to not believe their way is automatically the right way. This is what

allows the leader to make an ‗informed decision.‘

―A soft answer turns away wrath, but a harsh word stirs up anger. The tongue of the wise

uses knowledge rightly, but the mouth of fools pours forth foolishness‖ (Prov. 15:1-2). Again, a

business application is that a wise leader knows how to communicate with others. He or she

thinks before speaking, particularly if short-tempered. The leader knows how to offer criticism

which builds the desire in others for change and self-improvement, a belief that the change can

be made, and the empowerment to do so; rather than producing self-doubt, wounded spirits, and

fear—possible leading to resentment, hatred, rebellion, and diminished production or retaliation.

―A hot-tempered man stirs up dissension, but a patient man calms a quarrel‖ (Prov.

15:18, New International Version). A business application is to be slow to anger and slow to

speak—to calm down, think, and speak in words and tone that begins to resolve conflict rather to

start one or add fuel to the fire. See Proverbs 15:28 below.


―The heart of the righteous studies how to answer, but the mouth of the wicked pours

forth evil‖ (Prov. 15:28). To make rash choices in speaking (or writing) can produce hurt

feelings, anger, and resentment. This can also lead to reductions in production, bad employee

morale, dissension, and cause qualified and trained employees to go elsewhere for employment

and take their talents and knowledge (including knowledge of the organization) with them. It can

lead employees and other stakeholders to file suits against the leader and the organization. It can

also generate bad publicity for the organization as repercussions are played out in the media.

―A just weight and balance are the Lord‘s…‖ (Prov. 16:11). Again, the business

application is to be honest in all actions and communications.

―Pride goes before destruction, and a haughty spirit before a fall. Better to be of a humble

spirit with the lowly, than to divide the spoil with the proud‖ (Prov. 16:18-19). The business

application here has been discussed throughout the surrounding verses.

―The heart of the wise teaches his mouth, and adds learning to his lips‖ (Prov. 16:23).

The business application is that the leader, and all those engaged in business, should learn to

control their tongue and think before speaking.

―There is a way that seems right to a man, but its end is the way of death‖ (Prov. 16:25).

A business application would call for a wise leader to seek the counsel of those he or she trusts to

help avoid making calamitous decisions. Some courses of action may seem right—even desirous

and profitable—but whose end is destructive for the leader and even the organization.

―[H]e who is glad at calamity will not go unpunished‖ (Prov. 17:5). A business

application could be that, simply, ‗what goes around, comes around.‘ Additionally, having a

mindset that is bitter and rejoices in the disasters which befall others—even those disasters

brought about by others‘ own unethical or illegal decisions, or the punishments distributed by the


court system—can cause a leader to miscalculate their own strengths and weaknesses and

become overconfident; can eliminate a spirit of mercy tempered with the justice; and can

produce a proud or callous temperament. This can affect how that leader directs the organization

and can make it easier for him or her to take their eyes off of their own environment and the

decisions they face. See also the text of Proverbs 24:17-18.

―He who covers a transgression seeks love, but he who repeats a matter separates the best

of friends‖ (Prov. 17:9). A business application here is to not gossip; don‘t spread rumors or even

truths. Don‘t seek the downfall of others, but seek to build others up; care enough to correct

them. Build up your employees rather than tearing them down. Don‘t be so driven to succeed

that you step on your peers, your followers, or even your competitors. Don‘t be satisfied with

creating enemies. Lead in such a way that even your fiercest competitors have respect and

admiration for you; not a fearful respect of your power, ambition, and ruthlessness, but a healthy

respect for the ethical way you lead your organization, and the compassion you show to those

within and outside of the organization. Gossip, slander, and the revealing of secrets can destroy

even the best of relationships.

―A wicked man accepts a bribe behind the back to pervert the ways of justice‖ (Prov.

17:23). In business, a wise leader will neither offer bribes nor accept them, but will conduct all

business fairly and ethically.

―He who has knowledge spares his words, and a man of understanding is of a calm spirit.

Even a fool is counted wise when he holds his peace; when he shuts his lips, he is considered

perceptive‖ (Proverbs 17:27-28). A deeper discourse on wise communication, business

applications include thinking before you speak and not being one who is so impressed with their

own thoughts and words that they are always sharing every thought and opinion they have. A


leader should have well-placed and well-timed words. Sometimes remaining silent on a matter is

the best decision for a leader to make.

―He who answers a matter before he hears it, it is folly and shame to him‖ (Prov. 18:13).

A good leader must be actively engaged in listening, making sure they understand what is being

said, asking for clarification, repeating back what they believe they have heard, asking additional

questions, and then thinking over the matter before commenting. A leader should not be so quick

to offer their opinion, or to believe he or she understands what is being said, that they fail to

listen and, therefore, miss the point entirely. A wise leader will avoid miscommunication.

―Bread gained by deceit is sweet to a man, but afterward his mouth will be filled with

gravel‖ (Prov. 20:17). The business application here is that dishonest and unethical or illegal

business and profits may be appealing at the time that they are being gained, but the time

virtually inevitably comes when the decisions and actions are regretted. Short-term gain often

results in suffering through long-term negative consequences. For an organization, this can result

in lack of funding, diminished market share, reduced profits, an inability to hire competent and

devoted employees, lawsuits, a negative reputation, loss of jobs, and even going out of business.

For a leader, this can also result in diminished reputation, lawsuits, the loss of a highly profitable

and responsibility-filled job, and even the ruining of a career. This can also have consequences

on the leaders‘ personal life—including marital strife and divorce; diminished trust, respect, and

admiration by the leader‘s children; and being unaccepted in social, political, and religious

circles. Also, see the text of Proverbs 17:21 below.

―An inheritance gained hastily at the beginning will not be blessed at the end‖ (Prov.

17:21). The same can be thought of in the business realm—profits hastily gained, often through

deceit and lack of ethical decision making, can either result in the downfall of an organization or


remove much of the peace that would be with the leaders and organizational members had the

profits been gained honestly.

―Do not be envious of evil men, nor desire to be with them; for their heart devises

violence, and their lips talk of troublemaking. Through wisdom a house is built, and by

understanding it is established; by knowledge the rooms are filled with all precious and pleasant

riches‖ (Prov. 24:1-4). This is good instruction for leaders building an organization.

―Do not rejoice when your enemy falls, and do not let your heart be glad when he

stumbles; lest the Lord see it, and it displease Him, and He turn away His wrath from him‖

(Prov. 24:17-18). In addition to its own business application, see the comment on Proverbs 17:5.

―If your enemy is hungry, give him bread to eat; and if he is thirsty, give him water to

drink; for so you will heap coals of fire on his head, and the Lord will reward you‖ (Prov. 25:21-

22). A business application is that sometimes is can be beneficial and even profitable to help out

a competitor rather than to try and reduce their market share or drive them out of business. Joint

ventures in research and development or production can be profitable for both parties. Further,

there are times when helping a fierce competitor will reduce the fierceness of their competition

with one‘s own organization.

―Do you see a man wise in his own eyes? There is more hope for a fool than for

him….The sluggard is wiser in his own eyes than seven men who can answer sensibly‖ (Prov.

26:12, 16). A business application is that a foolish leader will not recognize when he or she is a

fool—making foolish decisions and statements and acting unethically or illegally—but will

consider himself or herself to be beyond competent and extremely wise. They will be slow or

blind to truth. They have become arrogant and proud, and often louder, more adamant in their

position, and more forceful than even those who are wise and speak truthfully. But it is the fact


that they have become so far off course, yet believe that they are right, that their way is the right

way, that makes these leaders so dangerous for the organization. They have no reason to doubt

themselves and, therefore, no reason to listen to even wise counsel. They can drive an

organization to ruin if not stopped by a good board of directors or other such assembly. Even

more, they can ‗lead‘ and organization to ruin if the organization is as blind and self-wise as the

‗leader.‘ This is a time when brave and dissenting, yet wise, voices are needed to lead from

within.

―Let another man praise you, and not your own mouth; a stranger, and not your own lips‖

(Prov. 27:2). The business application for the leader is to avoid being proud and boastful about

his or her accomplishments or those of the organization—particularly when he or she was the

one who lead the organization to some favorable state it is in. It is the pride which can warp ones

sense of right and wrong, and lead to bad decision making. Further, it can make the leader

become unappealing to those outside of the organization and, even worse, it may have the same

affect on those within the organization. This could lead to much organizational conflict. Rather,

the leader should honestly acknowledge that the organization achieved what it has through the

hard work, dedication, perseverance, and skills of the other members of the organization…from

the bottom up. And the wise leader will do best to leave the bestowing of praise, as the passage

says, to others. A good estimation by others is better than, and carries more weight than, a good

estimation of oneself. And, a good estimation of oneself may only be one person‘s opinion,

whereas a good estimation by another may be more readily agreed to. In both cases, however, the

estimation may be shared, but it still remains less arrogant to let others sing a leader‘s praises.

―Those who forsake the law praise the wicked, but such as keep the law contend with

them‖ (Prov. 28:4-5). In business, leaders who obey laws and ethics will speak out against


corrupt business practices and seek to make changes within the organization and the industry.

They will set themselves apart from unethical organizations and unethical leaders as much as

possible. However, corrupt leaders will often seek to do business with other corrupt leaders,

forming their own alliances, and feeling that the other is not corrupt because they are blind to

their own corruption. Such an alliance will generally last only until it is no longer advantageous

to one or more of the leaders or organizations; then the alliance will turn into enemies.

―He who covers his sins will not prosper, but whoever confesses and forsakes them will

have mercy‖ (Prov. 28:13). This is a cardinal rule of crisis management communications. The

leader should quickly establish communications with all affected parties and agencies—

including the media. The leader may give an initial statement that the organization is

investigating the facts surrounding the crisis, and that more time will be needed before a full

statement can be given. However, it is stressed that leaders do not try to cover the crisis, but be

truthful and transparent. If there are aspects that cannot be commented on at the time, then it is

honest and acceptable to say so, but the communications must be honest. The leaders and the

organization are going to be judged in the press and the media. Dishonesty and trying to cover up

the situation will do more to harm the public‘s trust of the organization than being honest,

admitting a mistake, and then being forgiven by the public. Additionally, the media is fairly

sharp at identifying a cover-up and will be relentless in pursuit until they have what they believe

to be the truth. An organization can even become stronger as a result of truthfully dealing with a

crisis, and honestly working with all parties. While it was expensive for Johnson & Johnson to

recall millions of dollars worth of Tylenol in the 80s, after someone had laced several bottles of

capsules with cyanide. Ultimately, by being quick to react, being honest with the media and the

public, protecting the public by temporarily removing the product from the market,


communicating the organization‘s message of putting the interests of consumers and the health

care professionals first, and taking care of families which lost loved ones through poisoning,

Johnson & Johnson was able to rebuild its image and the Tylenol brand. Today, the company is

known for doing the right thing—being ethical—and the profits of the company and market

share of Tylenol attest to honesty being the best policy. Both the brand and the organization are

stronger than ever before, with trust being synonymous with both.

―A ruler who lacks understanding is a great oppressor, but he who hates covetousness

will prolong his days‖ (Prov. 28:16). An organizational leader who does not understand his or

her employees or volunteers, the organization, the industry, the marketplace, the investors and

suppliers and distributors, and does not understand what it means to put others first, to not just

lead but to serve, and deals harshly with people, and devalues them and takes them for granted,

and is greedy, will indeed become oppressors. That leader can easily begin expecting more of the

employees for less. The leader can feel entitle to exorbitant salaries while employees lose jobs,

benefits, 401Ks, and pensions. The leader can even oppress the government, and thereby the

people, by illegally covering profits in order to pay less corporate taxes. The leader who is

compassionate, who listens, who empowers employees, and who practices good business

ethics—all while being a keen strategist and a creative thinker—will be prized by the board of

directors, the employees, the customers, and even Wall Street analysts. They will seek to retain

that person as a leader, as opposed to firing the leader who is the antithesis. It is the former

example of a leader who understands that by treating stakeholders right, the stakeholders will be

more loyal to the organization; employees will work harder and smarter, and will be willing to

make concessions when a compassionate and fair company is facing economic troubles and

needs the concessions in order to retain employees, correct the problems, and turn the company


back around. The leader who is a greedy taskmaster will drive the company under through harsh

conditions.

―A man with an evil eye hastens after riches, and does not consider that poverty will

come upon him‖ (Prov. 28:22). In the same way, this type of leader may believe they are

‗untouchable‘ and impervious to a downfall. But, they usually learn that is not the case.

Sometimes, it is primarily their own career that suffers. But at other times, the organization as a

whole suffers, along with the individual employees.

―Likewise, exhort the young men to be sober-minded, in all things showing yourself to be

a pattern of good works; in doctrine showing integrity, reverence, incorruptibility, sound speech

that cannot be condemned, that one who is an opponent may be ashamed, having nothing evil to

say of you‖ (Tit. 2:6-8). Both leaders and followers should be ethical in all aspects of the

organization: negotiating fair contracts with suppliers and distributors; employees working

respectfully with each other throughout all levels and phases of the organization; forming

relationships with customers, and supplying products and services to them, based on honesty and

fair value; providing employees a fair wage for a fair amount of labor expected; paying the taxes

which are due and not dishonestly altering the books to achieve a lower tax owed; and providing

investors with a fair return on their investment, and not a promise of high returns to satiate the

desire for amassing wealth which then requires aggressive competition and often unethical

business practices to achieve the profits necessary to generate those high returns. Additionally,

all communications with all stakeholders should be honest and not based on unhealthy

(egotistical) pride or greed. There should be no deceptive marketing or false advertising.

Financial records should not be dishonestly adjusted to make the organization appear to be more

financially solvent so that it receives more favorable lending terms by banks, generates greater


levels of stockholder investment, or receives higher ratings on Wall Street and more favorable

media coverage. Leaders should avoid being boastful, both to set an example for the followers

within their organization to carry on in practicing, and to avoid a tarnished and proud image in

the eyes of employees, competitors, customers, the press, and the public. Acting ethically and

speaking humbly will give others less occasion to condemn and speak out against an

organization and its leaders. Speaking humbly and maintaining good communications with all

stakeholders, especially the press, will especially help in a crisis situation. If honest and

courteous relationships are established beforehand, and maintained, employees are more likely to

rally behind the organization during the times of crises, working harder and acting as individual

public relations agents out among society; stockholders are more likely to give the organization

time to address and fix the crisis before pulling out their financing by selling stock; government

regulatory agencies are more willing to work with the organization in addressing accidental or

unknown infractions, or in providing financial assistance; financial lenders may still agree to

generous terms and maintain their relationships; and the media will often give more time for the

organization to investigate the cause(s) of a crisis, take action to begin remedying the crisis, and

provide the media their message, so that when the media does choose to publish or air the story,

it is more favorable to and less critical of the organization. The media may not only choose to

delay the story, but may decide the story is not significant enough to risk damaging the

reputation of the organization. Competitors may even choose not to attack the organization when

they are at a weak point, knowing that that organization is an example of integrity and fairness

and humility; even going so far as to speak up on behalf of the organization. Further, the

competitors may decide to ally with the organization in forming a committee to address similar

situations within the industry, with the hopes of making the industry stronger for all, and also


avoiding any governmental regulations which could be detrimental, yet avoided through

effective self-regulation.

Appendix 2

Bukkyo Dendo Kyokai (Society for the Promotion of Buddhism). (1989). The Teaching of

Buddha. Tokyo: Kosaido Printing Co.

The following are various teachings of Buddha, identified by page and line number from

the above book, and containing principles which can be applied to ethical organizational

practices and communications. Bracketed texts are personal thoughts not in the book.

The point of the teachings is to control your own mind. Keep your mind

from greed, and you will keep your behavior right, your mind pure and your

words faithful. By always thinking about the transiency of your life, you will be

able to resist greed and anger, and will be able to avoid all evils (p.20, line 17).

If you find your mind tempted and so entangled in greed, you must

suppress and control the temptation; be the master of your own mind (p.20, line

23).

Now, there are five evils in the world. First, there is cruelty; every

creature, even insects, strives against one another. The strong attack the weak; the

weak deceive the strong; everywhere there is fighting and cruelty. Second, there is

the lack of a clear demarcation between the rights of a father and a son; between

an elder brother and a younger; between a husband and a wife; between a senior

relative and a younger; on every occasion each one desires to be the highest and

to profit off the others. They cheat each other, there is deception and a lack of

sincerity. Third, there is the lack of a clear demarcation as to the behavior


between men and women. Everyone at times has impure and lascivious thoughts

and desires that lead them into questionable acts and often into disputes, fighting,

injustice and wickedness. Fourth, there is the tendency for people to disrespect the

rights of others, to exaggerate their own importance at the expense of others, to

set bad examples of behavior and, being unjust in their speech, to deceive, slander

and abuse others. Fifth, there is the tendency for people to neglect their duties

toward others. They think too much of their own comfort and their own desires;

they forget the favors they have received and cause annoyance to others that often

passes into great injustice (p. 190, line 19).

People love their egoistic comfort, which is a love of fame and praise. But

fame and praise are like incense that consumes itself and soon disappears. If

people chase after honors and public acclaim and leave the way of truth, they are

in serious danger and will soon have cause for regret.

A man who chases after fame and wealth and love affairs is like a child

who licks honey from the blade of a knife. While he is tasting the sweetness of

honey, he has to risk hurting his tongue. He is like a man who carries a torch

against a strong wind; the flame will surely burn his hands and face (p. 234, line

12).

One must not trust his own mind that is filled with greed, anger and

foolishness. One must not let his mind run free, but must keep it under strict

control (p. 236, line 1).

Human beings tend to move in the direction of their thoughts. If they

harbor greedy thoughts, they become more greedy; if they think angry thoughts,


they become more angry; if they hold foolish thoughts, their feet move in that

direction (p. 238, line 20).

At harvest time farmers keep their herds confined, lest they break through

the fences into the field and give cause for complaint or for being killed; so

people must closely guard their minds against dishonesty and misfortune. They

must eliminate thoughts that stimulate greed, anger and foolishness, but

encourage thoughts that stimulate charity and kindness.

When spring comes and the pastures have an abundance of green grass,

farmers turn their cattle loose; but even then they keep a close watch over them. It

is so with the minds of people: even under the best of conditions the mind will

bear watching (p. 240, line 1).

Those who seek the way of Enlightenment must always bear in mind the

necessity of constantly keeping their body, speech and mind pure. To keep the

body pure one must not kill any living creature, one must not steal or commit

adultery. To keep speech pure one must not lie, or abuse, or deceive, or indulge in

idle talk. To keep the mind pure one must remove all greed, anger and false

judgment.

If the mind becomes impure, for sure, one‘s deeds will be impure; if the

deeds are impure, there will be suffering. So it is of the greatest importance that

the mind and the body be kept pure (p. 242, line 12).

As to the suitability of words to be used there are five pairs of antonyms:

words that are suitable to their occasions and those not so suitable to theirs; words

that fit the facts and those that don‘t fit; words that sound pleasant and those that


sound rude; words that are beneficial and those that are harmful; and words that

are sympathetic and those that are hateful.

Whatever words we utter should be chosen with care for people will hear

them and be influenced by them for good or ill. If our minds are filled with

sympathy and compassion, they will be resistant to the evil words we hear. We

must not let wild words pass our lips lest they arouse feelings of anger and hatred.

The words we speak should always be words of sympathy and wisdom.

We must train our mind and fill our hearts with sympathy so that we will

be undisturbed by the words spoken by others (p. 246, line 8).

Under every circumstance you should learn to think: ‗My mind is

unshakable. Words of hatred and anger shall not pass my lips. I will surround my

enemy with thoughts of sympathy and pity that flow out from a mind filled with

compassion for all sentient life (p. 248, line 20).

Whenever a person expresses the thought of his mind in action there is

always a reaction that follows. If one abuses you, there is a temptation to answer

back, or to be revenged. One should be on guard against this natural reaction. It is

like spitting against the wind, it harms no one but oneself. It is like sweeping dust

against the wind, it does not get rid of the dust but defiles oneself. Misfortune

always dogs the steps of one who gives way to the desire for revenge (p. 260, line

5).

One should get rid of a selfish mind and replace it with a mind that is

earnest to help others. An act to make another happy inspires the other to make

still another happy, and so happiness is born from such an act (p. 260, line 17).


Good men and bad men differ from each other in their natures. Bad men

do not recognize a sinful act as sinful; if its sinfulness is brought to their attention,

they do not cease doing it and do not like to have anyone inform them of their

sinful acts. Wise men are sensitive to right and wrong; they cease doing anything

as soon as they see that it is wrong; they are grateful to anyone who calls their

attention to such wrong acts.

Thus good men and bad men differ radically. Bad men never appreciate

kindness shown them, but wise men appreciate and are grateful. Wise men try to

express their appreciation and gratitude by some return of kindness, not only to

their benefactor, but to everyone else (p. 264, line 4).

When a wise man is advised of his errors, he will reflect on them and

improve his conduct. When his misconduct is pointed out, a foolish man will not

only disregard the advice but rather repeat the same error (p. 278, line 1).

Once there was a wealthy but foolish man. When he saw the beautiful

three-storied house of another man, he envied it and made up his mind to have

one built just like it, thinking he was himself just as wealthy. He called a

carpenter and ordered him to build it. The carpenter consented and immediately

began to construct the foundation, the first story, the second story, and then the

third story. The wealthy man noticed this with irritation and said: -- ‗I don‘t want

a foundation or a first story or a second story; I just want the beautiful third story.

Build it quickly.‘

A foolish man always thinks only of the results, and is impatient without

the effort that is necessary to get good results. No good can be attained without


proper effort, just as there can be no third story without the foundation and the

first and the second stories (p. 278, line 5).

Once there lived a poor artist who left his home, leaving his wife, to seek

his fortune. After three years of hard struggles he had saved three hundred pieces

of gold and decided to return to his home. On his way he came to a great temple

in which a grand ceremony of offering was in progress. He was greatly impressed

by it and thought to himself: ‗Hitherto, I have thought only of the present; I have

never considered my future happiness. It is a part of my good fortune that I have

come to this place; I must take advantage of it to plant seeds of merit.‘ Thinking

thus, he gratefully donated all his savings to the temple and returned to his home

penniless.

When he reached home, his wife reproached him for not bringing her

some money for her support. The poor artist replied that he had earned some

money but had put it where it would be safe. When she pressed him to tell where

he had hidden it, he confessed that he had given it to the monks at a certain

temple.

This made the wife angry and she scolded her husband and finally carried

the matter to the local judge. When the judge asked the artist for his defence, the

artist said that he had not acted foolishly, for he had earned the money during long

and hard struggles and wanted to use it as seed for future good fortune. When he

came to the temple it seemed to him that there was the field where should plant

his gold as seed for good fortune. Then he added: ‗When I gave the monks the


gold, it seemed that I was throwing away all greed and stinginess from my mind,

and I have realized that real wealth is not gold but mind.‘

The judge praised the artist‘s spirit, and those who heard of this

manifested their approval by helping him in various ways. Thus the artist and his

wife entered into permanent good fortune (p. 286, p. 17).

Oh my mind! Why do you hover so restlessly over the changing

circumstances of life? Why do you make me so confused and restless? Why do

you urge me to collect so many things?....if you could only learn not to grasp after

things, not to covet things, not to give way to greed, anger and foolishness; then

we might journey in quietness. Then, by severing the bond of desires with the

sword of wisdom, being undisturbed by changing circumstances – advantage or

disadvantage, good or bad, loss or gain, praise or abuse – we might dwell in

peace.

Oh, my dear mind! It was you who first awakened faith in us; it was you

who suggested our seeking Enlightenment. Why do you give way so easily to

greed, love of comfort and pleasant excitement again?

Oh, my mind! Why do you rush hither and thither with no definite

purpose? Let us cross this wild sea of delusion. Hitherto I have acted as you

wished, but now you must act as I wish and, together, we will follow the

Buddha‘s teaching (p. 304, line 14).

It is wrong to think that misfortunes come from the east or the west; they

originate within one‘s own mind. Therefore, it is foolish to guard against


misfortunes from the external world and leave the inner mind uncontrolled (p.

420, line 1).

A pupil should always rise when his teacher enters, wait upon him, follow

his instructions well, not neglect an offering for him, and listen respectfully to his

teaching.

At the same time, a teacher should act rightly before a pupil and set a good

example for him; he should correctly pass on to him the teaching he has learned;

he should use good methods and try to prepare the pupil for honors; and he should

not forget to protect the pupil from evil in every possible way. If a teacher and his

pupil observe these rules, their association will move smoothly (p. 424, line 12).

[One function of a good leader is to be a teacher to the organization. A servant-leader

knows how to first be a good servant and follower, and then he or she will be a good leader—but

a good leader also remains a good servant to those he or she leads.]

The rules of friendship mean there should be mutual sympathy between

friends, each supplying what the other lacks and trying to benefit the other,

always using friendly and sincere words.

One should keep his friend from falling into evil ways, should protect his

property and wealth, and should help him in his troubles. If his friend has some

misfortune, he should give him a helping hand, even supporting his family, if

necessary. In this way, their friendship will be maintained and they will be

increasingly happy together (p. 426, line 9).

[Many of the concepts being discussed regarding the right way to have a relationship

among friends also apply to being a leader and the relationships the leader should have with


others in the organization and foster amongst the employees and across to all stakeholders. Also,

discuss how a good leader knows his or her weaknesses and develops a team whose talents and

skills make up for the leader‘s shortcomings.]

A master in his dealings with a servant should observe five things: He

should assign work that is suitable for the servant‘s abilities, give him proper

compensation, care for him when he is in ill health, share pleasant things with

him, and give him needed rest (p. 426, line 20).

[Good Advice for a leader of an organization. These principles apply.]

A servant should observe five things: He should get up in the morning

before his master and go to bed after him, should always be honest, take pains to

do his work well, and try not to bring discredit to his master‘s name. If these rules

are observed, there will be peace and no controversy between master and servant

(p. 426, line 20, con‘t.).

[This applies to employees of an organization, substituting ―organization‖ and ―leader‖

instead of master as appropriate.]

When Syamavati, the queen-consort of King Udayana, offered Ananda

five hundred garments, Ananda received them with great satisfaction.

The King, hearing of it, suspected Ananda of dishonesty, so he went to

Ananda and asked what he was going to do with these five hundred garments.

Ananda replied: ‗Oh, King, many of the brothers are in rags; I am going to

distribute the garments among the brothers.‘

What will you do with the old garments?

We will make bed-covers out of them.


What will you do with the old bed-covers?

We will make pillow-cases.

What will you do with the old pillow-cases?

We will make floor-covers out of them.

What will you do with the old floor-covers?

We will use them for foot-towels.

What will you do with the old foot-towels?

We will use them for floor-mops.

What will you do with the old floor-mops?

‘Your Highness, we will tear them into pieces, mix them with mud and

use the mud to plaster the walls.‘

Every article entrusted to us must be used with good care in some useful

way, because it is not ‗ours‘ but is only entrusted to us temporarily (p. 438, line

11).

[This is an example of ethical stewardship/trusteeship.]

I will not be jealous of others or envy their possessions; I will not be

selfish either in mind or property; I will try to make poor people happy with the

things I receive and will not hoard them for myself (p. 452, line 10).

[Many good principles. Of which, the leader should not be jealous or envious for the

fame or money he or she thinks is their due—especially when comparing themselves to other

leaders at other organizations. The leader can be dissatisfied, but then the leader must either

accept what they have, or request more and then be willing to graciously part ways if their

request is denied and he or she will be unhappy. Otherwise, the leader may continue to grow


covetous—either making unethical decisions in pursuit of more money or fame for the

organization, and therefore to himself or herself as a result of potential bonuses, or the leader

may become ineffective in his or her leadership, vision, and direction, thus causing the

organization to suffer, or the leader may sow discontent amongst other leaders or employees as

either intentional or unintentional retaliation.]

I will receive all people courteously, give them what they need, and speak

kindly to them; consider their circumstances and not my convenience; and try to

benefit them without impartiality (p. 452, line 14).

[In addition to the obvious, the good leader here is showing empathy and compassion,

thinking of others more than himself or herself, and being a servant-leader.]

There are seven teachings which lead a country to prosperity: First, people

should assemble often to discuss political affairs, and to provide for national

defense.

[Or…‘There are seven teachings which lead a[n] [organization] to prosperity: First,

[leaders] should assemble often to discuss [organizational] affairs, and to provide for…defense

[against economic, environmental (within industry), and competitive threats]‘.]

Second, the people of all social classes should meet together in unity to

discuss their national affairs.

[Or…‘Second, the [employees and leaders] [at] all [levels] should meet together in unity

to discuss their [organizational] affairs.‘]

Third, people should respect old customs and not change them

unreasonably, and they should also observe the rules of ceremony and maintain

justice.


[Or…‘Third, [organizational members] should respect [the current culture] and not

change [it] unreasonably, and they should also observe the [organizational traditions and

‘folklore‘ (different word)] and maintain justice.‘]

Fourth, they should recognize the differences of sex and seniority, and

maintain the purity of families and communities.

[Appropriately, some changes are needed here. ‗Fourth, [the organization] should

recognize the [diversity] of [all members, respect that diversity, and then utilize that diversity to

create competitive advantage within the marketplace]; [the organization should also extend its

leadership and stewardship to all stakeholders, and those within their] communities.‘]

Fifth, they should be filial to their parents and faithful to their teachers and

elders.

[Or…‘Fifth, [the organization] should [respect and genuinely love all stakeholders] and

[extend that respect to the government and its various agencies].‘]

Sixth, they should honor the ancestors‘ shrines and keep up the annual

rites.

[Or…‘Sixth, the organization should honor [its founders and previous good and effective

leaders by living up to their mission, vision, and values, and by working to protect the reputation

of the organization and its brands].‘]

Seventh, they should esteem public morality, honor virtuous conduct,

listen to honorable teachers and make offerings to them.

[Or…‘Seventh, [the organization] should esteem public morality, honor virtuous conduct,

[and carefully consider and weigh the teachings and warnings of applicable subject matter

experts].‘]


If a country follows these teachings well, it will surely prosper and will be

held in respect by all other countries (p. 456, line 1).

[Replace ―country(ies)‖ with ―organization(s).]

The best way for a ruler to reign over his country is first of all to rule

himself. A ruler should come before his people with a heart of compassion, and

should teach and lead them to remove all impurities from their minds. The

happiness that comes from good teachings far exceeds any enjoyment that the

material things of the world can offer. Therefore, he could give his people good

teaching and keep their minds and bodies tranquil (p. 458, line 8).

The first principle in wise administration is…to lead the people to train

their minds (p. 460, line 2).

When people are happy and satisfied, class differences disappear, good

deeds are promoted, virtues are increased, and people come to respect one

another. Then everyone becomes prosperous…(p. 462, line 3)

Therefore, a wise ruler is always thinking of his people and does not forget

them even for a moment. He thinks of their hardships and plans for their

prosperity. To rule wisely he must be advised about everything – about water,

about drought, about storm and about rain; he must know about crops, the chances

for a good harvest, people‘s comforts and their sorrows. To be in a position to

rightly award, punish or praise, he must be thoroughly informed as to the guilt of

bad men and the merits of good men (p. 462, line 18).

[Or…‘Therefore, a wise [organizational leader] is always thinking of his [employees and

other stakeholders] and does not forget them even for a moment. He thinks of their hardships


[both at the organization and in their personal lives] and plans for their prosperity. To [lead]

wisely he must be advised about everything – about [employee working conditions, pay and

benefits, and happiness with the organization; about employee training and performance; about

the success or failure of the organizational culture; about potential crises and crisis management

plans; about customer, consumer, and shareholder satisfaction; about product research and

development; about the effects of marketing and advertising strategies; about how the

organization is viewed in the eyes of the media and the public; about competition, the market

environment, and its opportunities and threats; about the progress of organizational and financial

strategies; about the economy; about governmental regulations; about the environment; about

whether the organization is meeting its short-term and long-term objectives; and about how the

organization is faring according to its balance sheet and income statement.] To be in a position to

rightly award, punish or praise, he must be thoroughly informed as to [organizational goals

achieved or missed, unethical practices of employees, and significant results from employee

performance reviews].‘

A true community has faith and wisdom that illuminates it. It is a place

where the people know and trust one another and where there is social harmony.

In fact, harmony is the life and real meaning of a true community or an

organization (p. 478, line 14).

Of organizations, there are three kinds. First, there are those that are

organized on the basis of the power, wealth or authority of great leaders.

Second, there are those that are organized because of its convenience to

the members, which will continue to exist as long as the members satisfy their

conveniences and do not quarrel.


Third, there are those that are organizes with some good teaching as its

center and harmony as its very life.

Of course, the third or last of these is the only true organization, for in it

the members live in one spirit, from which the unity of spirit and various kinds of

virtue will arise. In such an organization there will prevail harmony, satisfaction

and happiness….

The minds of these people mix like milk and water and finally organize

into a harmonious Brotherhood (p. 478, line 19).

[This could easily be speaking of an organizations‘ culture—in part formed by the values

and ethics, and the mission and vision, of the leaders and founders, and embedded into that

culture so as to permeate the organization and its members and become a living ‗spirit.‘]

Appendix 3

Center for Global Ethics. (1999). An Interfaith Declaration. A Code of Ethics on International

Business for Christians, Muslims and Jews. Retrieved 7 November 2008 from

http://astro.temple.edu/~dialogue/Codes/cmj_codes.htm.

The following Declaration, in its entirety, is based on a series of international,

intercultural, and interreligious meetings held between theologians, educators, and business and

government leaders representing the three ―monotheistic‖ world faiths of Judaism, Islam, and

Christianity, over several years and concluded in Amman, Jordan in 1993. The purpose was to

move beyond stereotypes and religious and cultural differences, and identify common personal

and business ethics shared by members of the three faiths which have their origins in the

Abraham of the Tanach (Judaism), Holy Bible (Christianity), and Qur‘an (Islam), and found in



their Scriptures. The Web site also lists a complimentary paper written by Simon Webly, entitled

Values Inherent in the Interfaith Declaration of International Business Ethics.

AN INTERFAITH DECLARATION

A CODE OF ETHICS ON INTERNATIONAL BUSINESS FOR CHRISTIANS,

MUSLIMS AND JEWS

INTRODUCTION

A series of Interfaith consultations began in 1984 under the patronage of HRH Prince

Philip, the Duke of Edinburgh, and HRH Crown Prince E1 Hassan Bin Talal of Jordan.

Followers of the three monotheistic faiths Christianity, Islam and Judaism took part, under the

auspices of St. George's House, Windsor and the Al Albait Foundation and the Arab Thought

Forum in Amman. More recently Sir Evelyn de Rothschild has joined Their Royal Highnesses as

a patron in this endeavour.

A group of distinguished members of the three religions convened periodically to

deliberate on topics of common interest. Theologians, academics and prominent figures active in

business and government were all involved. Conscious of and concerned about the effects of

violent expressions of religious extremism not only in European and Muslim countries but

throughout the world, the participants sought to highlight the importance of the shared moral,

ethical and spiritual values inherent in the common Abrahamic tradition. Aware of the implicit

danger of religious bigotry and the threats to the essential fabric of contemporary society, they

placed a strong emphasis on the benefit of dialogue, forsaking stereotypical portrayal of each

other. Constructive dialogue, difficult to conduct at the outset, developed as mutual confidence

between the participants improved. A sense of purpose emerged as they recognised the need to

overcome prevailing misconceptions and dispel longstanding misrepresentation. The


consultations eventually culminated into consensus about a variety of topics including business

ethics.

Recent consultations discussed an Interfaith code of ethics for international business,

formulated in the light of the religious traditions of the three monotheistic faiths. Discussions of

the terms of the code began in 1988, and were concluded at a meeting held in October 1993 in

Amman. The provisions of the guidelines reflect the ethical basis indicated in the teaching of the

three religions. The Declaration has been drawn up by a group of eminent scholars, clerics, and

business people from the three religions following a comprehensive review of the teachings of

their respective religions with regard to ethical issues in the conduct of business. They concluded

that the Declaration should be based on the shared concern for justice, mutual respect, steward-

ship and honesty.

The Declaration illustrates, in a practical way, that people of very different cultures or

beliefs often have more in common than is sometimes apparent. It is hoped that the sense of the

Declaration will be incorporated into Statements of Purpose or Codes of Conduct. It is offered on

the understanding that it will help to facilitate expanding international economic activity, which

is beneficial for harmonious international relations and prosperity.

Although the code does not attempt to cover all aspects of business behaviour, it

incorporates the best of contemporary business practice, as well as indicating the modes of good

practice as enjoined by divine injunctions. It is recommended to adherents of the three faiths; and

commended to leaders of international business, as well as teachers of business management;

whether followers of the three monotheistic faiths or not. Special thanks go to Mr Simon Webley

of the British-North American Research Association, for his work on the text.

I. BACKGROUND


A. ORIGIN AND PURPOSE OF THE DECLARATION

The globalisation of business is well underway and growing. For instance:

• The volume of world trade is accelerating again. In 1992 it increased by 4.5% over

1991.

• Cross border investment for productive purposes is expanding even faster than trade.

As a result, crosscultural business relationships are expanding rapidly.

• Stocks and shares of many of the world's largest enterprises are quoted on a variety of

stock exchanges and their directors and staff come from many different countries.

This international expansion of economic activity is revealing some serious differences in

approach to business operations among some of the major participants.

It was these differences, and the conviction that insights of the scriptures of Christians,

Muslims and Jews had an important contribution to make to their resolution, that prompted HRH

the Duke of Edinburgh, HRH Crown Prince El Hassan Bin Talal of Jordan and Sir Evelyn de

Rothschild to invite a group of distinguished Christians, Muslims and Jews to attempt to draw up

a number of principles which might serve as guidelines for international business behaviour. The

group met four times over a period of a few years and explored in some depth the different

approaches to behavioural problems arising in business relationships.

Early in their discussions the participants realised that they had more in common than

they originally thought and that the issues they were addressing were timely and important.

Drawing on the rich traditions and values inherent in their respective faiths, a common approach

was agreed which is set out in the Declaration. Its purpose is to set out an ethical basis for

international businesses. It includes some principles and guidelines for practice to help business

people, traders and investors identify the role they, and their organisations perform in the


communities in which they operate. It also gives guidance in resolving genuine dilemmas which

arise in the course of day-to-day business.

The group was particularly pleased that it could agree to issue and endorse the

Declaration as it was conscious that the wide spread reporting of the rhetoric and activities by

extremist adherents (at least in name) of their three religions had produced in the mind of the

general public the idea that only disunity and conflict characterised relationships, including

business relationships, between those of different religious beliefs. The meetings of the group

and the resultant Declaration indicate that whatever: their particular insight of the truth may be

and it is acknowledged that there are differences they nevertheless all share a common heritage

with a high degree of shared values. They also share a common moral basis derived from the

Scriptures, which is as relevant today as it has been in the past. The need to relate this relevance

to contemporary business issues was felt to be particularly important.

The participants were also conscious that, along with the growth in material prosperity in

the industrial world, there is emerging in some quarters a value system which they believe is

detrimental to the wholesome development of human beings: selfishness and dishonesty are

tending to supplant generosity and integrity. As a result, there is evidence that morality and

ethical standards are declining in their respective societies as exemplified by the wide reporting

of dishonest and corrupt practices. Part of the; problem is an ambivalence concerning what is

considered right and wrong and economic relationships have not escaped this influence. It

seemed to the group, therefore, that a reiteration of shared ethical precepts in the form of this

Declaration would help to sustain and improve the standards of international business behaviour.

It was realised that the application of these principles may be more difficult to apply in

some countries than in others because of the different degree of influence that religion has within


a given society. Both Muslims and, to a lesser extent, Jews, generally operate within a social

atmosphere that is conducive to the influence of their religious precepts being heeded, and where

it is normal for moral and ethical concerns to be discussed within a religious ethos.

Christians generally do not enjoy this type of support and guidance. They are more

dependent upon personal convictions which often have to be stated in a secular social

atmosphere that has little sympathy with them. While the influence of Islamic institutions is

more open and obvious, and that of Judaism still strong, the influence of Christianity has come to

be personal and subsumed.

All agreed that, in the final analysis, the application of ethical principles is a [measure] of

personal judgement rather than rules; a code can only set standards. It follows that the

Declaration (or indeed any code of ethics) is not a substitute for corporate or individual morality,

it is a set of guidelines for good practice. It is hoped that it will contribute to maintaining high

standards of business behaviour as well as a better public understanding of the role of business in

society. Some suggestions on how it can be used are contained in an Appendix.

B. METHOD

It is necessary to explain something of the method that has been adopted in producing the

Declaration. It draws on the experience of group members and on a number of existing

guidelines and codes of conduct which have been used by international organisations such as the

International Chamber of Commerce. Individual company codes of ethics, too, have been used

where appropriate.

Ethical issues in business can be classified under three general headings:

• The morality of the economic system in which business activity takes place.

• The policies and strategies of organisations which engage in business.


• The behaviour of individual employees in the context of their work.

In the Declaration, the distinction between these categories is recognised, and there may

indeed be other levels and sub-categories, but the three selected are those where moral issues

most commonly arise.

A second distinction which needs recognition is that while some ethical issues affect all

types of industrial and commercial activity, there are others which are distinctive to a particular

sector. The outstanding example is that of the provision of financial services (e.g. banking).

A third distinction must also be acknowledged. The legal frame work in which business

is conducted is not the same in all countries. For instance, the duties of company directors vary

considerably and employment law e.g. legal notice of dismissal or redundancy is hardly ever the

same in any two countries. While recognising that national law applies to a company registered

in that country (irrespective of the nationality of its owners and managers), and that it should be

scrupulously followed, the laws on the same matter may be less demanding in, say, the country

of the parent company. Some areas of business practice which are covered by law in one country

may be the subject of self administered regulation or of voluntary codes of behaviour in another.

Therefore, some subjects covered by the Declaration I may, in practice, already have the force of

law in some countries.

II. THE DECLARATION

A. PRINCIPLES

The Declaration on International Business Ethics is built on the precepts of the three

religions represented at the dialogues. Christians, Muslims and Jews have a common basis of

religious; and moral teaching: they are the People of the Book. Four key concepts recur in the


literature of the faiths and form the basis of any human interaction. They are: justice (fairness),

mutual respect (love and consideration), stewardship (trusteeship) and honesty (truthfulness).

1. Justice: The first principle is justice which can be defined as just conduct, fairness,

exercise of authority in maintenance of right. All three faiths agree that God created the world

and that justice must characterise the relationship between its inhabitants. Fair dealings between

each other and between believers and others is constantly reiterated in the Scriptures as are God's

justice and mercy in his dealings with mankind.

2. Mutual Respect: The second principle mutual respect or love and consideration for

others is also inherent in the moral teachings of each religion. The word love has many meanings

in most languages. But, as is clear from the reading of Scripture, the God of justice and mercy is

also the God of love. What Scripture expresses as love is here rendered as mutual respect or

reciprocal regard "love thy neighbour as thyself" that exists between two individuals. The

application of this has come to mean that self interest only has a place in the community in as

much as it takes into account the interests of others. My neighbour in the business context can be

defined as any person (individual or corporate) with whom the organisation comes into contact in

the course of business life. Of paramount importance in this respect is the employee.

3. Stewardship: A third principle shared by all three faiths is that of stewardship

(trusteeship) of God's creation and all that is in it. It is a richly diverse universe: "...and it was

good". The Scriptures testify to the beauties and wonders of nature as signs of God's goodness

and providence. Man is set over it all with delegated responsibility a steward charged with its

care and proper use for which he will have to give account. The Scriptures know nothing of

absolute ownership: man is God's trustee.


4. Honesty: The fourth principle inherent to the value system of each of the three faiths is

honesty. It incorporates the concepts of truthfulness and reliability and covers all aspects of

relationships in human life thought, word and action. It is more than just accuracy, it is an

attitude which is well summed up in the word "integrity". In precepts and parables, Scripture

urges truth and honesty in all dealings between human beings. It is stressed that dishonesty is an

abomination and bearing false witness breaches the basic laws of God. In business dealings,

"true scales, true weights, true measures" are to be used. Speaking the truth is a requirement for

everyone.

B. GUIDELINES

The following guidelines are classified under the three general headings referred to

earlier.

1. Business and Political Economy

All business activity takes place within the context of a social, political and

economic system. It is recognised that:

a. Business is part of the social order. Its primary purpose is to meet human and

material needs by producing and distributing goods and services in an efficient manner.

How this role is carried out the means as well as the ends is important to the whole of

society.

b. Competition between businesses has generally been shown to be the most

effective way to ensure that resources are not wasted, costs are minimised and prices fair.

The State has a duty to see that markets operate effectively, competition is maintained

and natural monopolies are regulated. Business will not seek to frustrate this.


c. All economic systems have flaws; that based on free and open markets is

morally neutral and has great potential for good. Private enterprise, sometimes in

partnership with the State, has the potential to make efficient and sustainable use of

resources, thereby creating wealth which can be used for the benefit of everyone.

d. There is no basic conflict between good business practice and profit making.

Profit is one measure of efficiency and is of paramount importance in the functioning of

the system. It provides for the maintenance and growth of business, thus expanding

employment opportunities, and is the means of a rising living standard for all concerned.

It also acts as an incentive to work and be enterprising. It is from the profit of companies

that society can reasonably levy taxes to finance its wider needs.

e. Because the free market system, like any other, is open to abuse, it can be used

for selfish or sectional interests, or it can be used for good. The State has an obligation to

provide a framework of law in which business can operate honestly and fairly and

business will obey and respect the law of the State a in which it operates.

f. As business is a partnership of people of varying gifts they should never be

considered as merely a factor of production. The terms of their employment will be

consistent with the highest standards of human dignity.

g. The efficient use of scarce resources will be ensured by the business. Resources

employed by corporations include finance (savings), technology (machinery) and land

and natural renewable resources. All are important and most are scarce.

h. Business has a responsibility to future generations to improve the quality of

goods and services, not to degrade the natural environment in which it operates, and seek

to enrich the lives of those who work within it. Short-term profitability should not be


pursued at the expense of long term viability of the business. Neither should business

operations disadvantage the wider community.

2. The Policies of a Business

Business activity involves human relationships. It is the question of balancing the

reasonable interests of those involved in the process: i.e. the stakeholders, that produces

moral and ethical problems.

The policies of the business will therefore be based on the principles set out in the

paragraphs above and in particular:

a. The board of directors will be responsible for seeing that the business operates

within the letter and spirit of the laws of the nations in which it works. If these laws are

rather less rigorous in some parts of the world where the business operates than in others,

the higher standards will normally be applied everywhere.

b. The board will issue a written statement concerning the objectives and

operating policies of the organisation, and their application. It will set out clearly the

obligations of the company towards the different stakeholders involved with a business

[employees, shareholders, lenders, customers, suppliers and the community (local and

national government)].

c. The basis of the relationship with the principal stakeholders shall be honesty

and fairness, by which is meant integrity, in all relationships, as well as reliability in all

commitments made on behalf of the organisation.

d. The business shall maintain a continuing relationship with each of the groups

with which it is involved. It will provide effective means to communicate information

affecting the stakeholders. This relationship is based on trust.


e. The best practice to be adopted in dealings with particular stakeholders can be

summarised as follows:

• Consider the social consequences of company decisions e.g. plant closures,

choice of any new sites or expansion of existing ones, and the effects on

smaller businesses.

• Not tolerate any form of bribery, extortion or other corrupt or corrupting

practices in business dealings.

3. Owners (Shareholders)

The shareholders undertake the risks of ownership. The elected directors shall:

• Protect the interests of shareholders.

• See that the company's accounting statements are true and timely.

• See that shareholders are kept informed of all major happenings affecting the

company.

4. Conduct of Individuals at Work

The following are based on best ethical practice for employees in a business.

Employees of an organisation shall:

a. Implement the decisions of those to whom he or she is responsible which are

lawful and in accordance with the company's policies in cooperation with colleagues.

b. Avoid all abuse of power for personal gain, advantage or prestige and in

particular refuse bribes or other inducements of any sort intended to encourage

dishonesty or to break the law

c. Not use any information acquired in the business for personal gain or for the

benefit of relatives or outside associates.


d. Reveal the facts to his superiors whenever his personal business or financial

interests become involved with those of the company.

e. Be actively concerned with the difficulties and problems of subordinates, treat

them fairly and lead them effectively, assuring them a right of reasonable access and

appeal to those to whom their immediate superior is responsible. f. Bring to the attention

of superiors the likely effects on employees of the company's plans for the future so that

such effects can be fully taken into account.

APPENDIX

THE USES OF THE DECLARATION

This Declaration is offered to business people, business organisations and those who

advise companies as a basis for sound ethical business practice.

Relevant sectors of it can be adopted by corporations as an international standard of

business ethics and be acknowledged as such in corporate Annual Reports.

To be effective, it needs endorsement at the highest level of business management and a

means will need to be devised to make employees at all levels aware of its existence. Some ways

of doing this are:

• Reproduce it as a simple booklet with a foreword from the Chairman.

• Include it in literature given to all new employees.

• Make it a subject in all internal training courses.

See that the topics contained in the Declaration are included in business training courses

offered in colleges and universities. It also requires a method of seeing that its precepts are

carried out.


Appendix 4

Center for Global Ethics. (1999). The Caux Roundtable: Principles for Business. Retrieved 7

November 2008 from http://astro.temple.edu/~dialogue/Codes/caux.htm.

The Caux Roundtable: Principles for Business, declared below, is based on a series of

international and multicultural meetings held between senior-most executives from global

companies based throughout Europe, Japan, and the United States. The purpose was to develop a

set of shared principles to guide international business in an increasingly global economy and to

overcome tensions between business leaders of different cultures and different national

government trade policies. The principles identify the need for socially responsible leadership

and strong ethics in relation to all organizational stakeholders, limited natural resources,

technology, the respecting of laws, and the affects of global trade on the society and the

economy.

THE CAUX ROUNDTABLE: PRINCIPLES FOR BUSINESS

In a world which is experiencing profound transformations, the Caux Round Table of

business leaders from Europe, Japan and USA is committed to energizing the role of business

and industry as a vital force for innovative global change.

The Round Table was founded in 1986 by Frederik Philips, former President of Philips

Electronics, and Olivier Giscard d'Estaing, ViceChairman of INSEAD, as a means of reducing

escalating trade tensions. It is concerned with the development of constructive economic and

social relationships between the participants' countries, and with their urgent joint

responsibilities towards the rest of the world.

At the urging of Ryuzaburo Kaku, Chairman of Canon Inc. the Round Table has focused

attention on the importance of global corporate responsibility in reducing social and economic


threats to world peace and stability. The Round Table recognizes that shared leadership is

indispensable to a revitalized and more harmonious world. It emphasizes the development of

continuing friendship, understanding and cooperation, based on a common respect for the highest

moral values and on responsible action by individuals in their own spheres of influence.

INTRODUCTION

The Caux Round Table believes that the world business community should play an

important role in improving economic and social conditions. As a statement of aspirations, this

document aims to express a world standard against which business behaviour can be measured.

We seek to begin a process that identifies shared values, reconciles differing values, and thereby

develops a shared perspective on business behaviour acceptable to and honored by all.

These principles are rooted in two basic ethical ideals: kyosei and human dignity. The

Japanese concept of kyosei means living and working together for the common good enabling

cooperation and mutual prosperity to coexist with healthy and fair competition. Human dignity

refers to the sacredness or value of each person as an end, not simply as a means to the

[fulfillment] of others' purposes or even majority prescription.

The general principles in section 2 seek to clarify the spirit of kyosei and human dignity,

while the specific stakeholder principles in section 3 are concerned with their practical

application.

In its language and form, the document owes a substantial debt to the Minnesota

principles, a statement of business behaviour developed by the Minnesota Center for Corporate

Responsibility. The Center hosted and chaired the drafting committee, which included Japanese,

European, and US representative


Business behaviour can affect relationships among nations and the prosperity and well-

being of us all. Business is often the first contact between nations and, by the way in which it

causes social and economic changes, has a significant impact on the level of fear or confidence

felt by people worldwide. Members of the Caux Round Table place their first emphasis on

putting one's own house in order, and on seeking to establish what is right rather than who is

right.

SECTION 1. PREAMBLE

The mobility of employment, capital, products and technology is making business

increasingly global in its transaction and its effects.

Laws and market forces are necessary but insufficient guides for conduct.

Responsibility for the policies and actions of business and respect for the dignity and

interests of its stakeholders are fundamental.

Shared values, including a commitment to shared prosperity, are as important for a global

community as for communities of smaller scale.

For these reasons, and because business can be a powerful agent of positive social

change, we offer the following principles as a foundation for dialogue and action by business

leaders in search of business responsibility. In so doing, we affirm the necessity for moral values

in business decision making. Without them, stable business relationships and a sustainable world

community are impossible.

SECTION 2. GENERAL PRINCIPLES

Principle 1. The responsibilities of business: beyond shareholders toward stakeholders.

The value of a business to society is the wealth and employment it creates and the

marketable products and services it provides to consumers at a reasonable price commensurate


with quality. To create such value, a business must maintain its own economic health and

viability, but survival is not a sufficient goal.

Businesses have a role to play in improving the lives of all their customers, employees,

and shareholders by sharing with them the wealth they have created. Suppliers and competitors

as well should expect businesses to honor their obligations in a spirit of honesty and fairness. As

responsible citizens of the local, national, regional and global communities in which they

operate, businesses share a part in shaping the future of those communities..

Principle 2. The economic and social impact of business: towards innovation, justice and

world community.

Businesses established in foreign countries to develop, produce or sell should also

contribute to the social advancement of those countries by creating productive employment and

helping to raise the purchasing power of their citizens. Businesses also should contribute to

human rights, education, welfare, and vitalization of the countries in which they operate.

Businesses should contribute to economic and social development not only in the

countries in which they operate, but also in the world community at large, through effective and

prudent use of resources, free and fair competition, and emphasis upon innovation in technology,

production methods, marketing and communications.

Principle 3. Business behaviour: beyond the letter of law, towards a spirit of trust.

While accepting the legitimacy of trade secrets, businesses should recognize that

sincerity, candour, truthfulness, the keeping of promises, and transparency contribute not only to

their own credibility and stability but also to the smoothness and efficiency of business

transactions, particularly on the international level.

Principle 4. Respect for rules.


To avoid trade frictions and to promote freer trade equal conditions for competition, and

fair and equitable treatment for [all] participants, businesses should respect international and

domestic rules In addition, they should recognize that some behaviour, although legal, may still

have adverse consequences.

Principle 5. Support for multilateral trade.

Business should support the multilateral trade systems of the GATT/World Trade

Organization and similar international agreements. They should cooperate in efforts to promote

the progressive and judicious liberalization of trade and to relax those domestic measures that

unreasonably hinder global commerce, while giving due respect to national policy objectives.

Principle 6. Respect for the environment.

A business should protect and, where possible, improve the environment, promote

sustainable development, and prevent the wasteful use of natural resources..

Principle 7. Avoidance of illicit operations.

A business should not participate in or condone bribery money laundering, or other

corrupt practices: indeed, it should seek cooperation with others to eliminate them. It should not

trade in arms or other materials used for terrorist activities, drug traffic or other organized crime.

SECTION 3. STAKEHOLDER PRINCIPLES

Customers

We believe in treating all customers with dignity, irrespective of whether they purchase

our products and services directly from us or otherwise acquire them in the market. We therefore

have a responsibility to:

• provide our customers with the highest quality products and services consistent with

their requirements;


• treat our customers fairly in all aspects of our business transactions, including a high

level of service and remedies for their dissatisfaction;

• make every effort to ensure that the health and safety of our customers, as well as the

quality of their environment, will be sustained or enhanced by our products and

service;

• assure respect for human dignity in products offered, marketing, and advertising; and

• respect the integrity of the culture of our customers.

Employees

We believe in the dignity of every employee and in taking employee interests seriously.

We therefore have a responsibility to:

• provide jobs and compensation that improve workers' living conditions;

• provide working conditions that respect each employee's health and dignity;

• be honest in communications with employees and open in sharing information,

limited only by legal and competitive constraints;

• listen to and, where possible, act on employee suggestions, ideas, requests and

complaints;

• engage in good faith negotiations when conflict arises;

• avoid discriminatory practices and guarantee equal treatment and opportunity in areas

such as gender, age, race and religion;

• promote in the business itself the employment of differently abled people in places of

work where they can be genuinely useful;

• protect employees from avoidable injury and illness in the workplace;


• encourage and assist employees in developing relevant and transferable skills and

knowledge; and

• be sensitive to the serious unemployment problems frequently associated with

business decision, and work with governments, employee groups, other agencies and

each other in addressing these dislocations.

Owners / investors

We believe in honouring the trust our investors place in us. We therefore have a

responsibility to:

• apply professional and diligent management in order to secure a fair and competitive

return on our owners' investment

• disclose relevant information to owner/investors subject only to legal requirements

and competitive constraints;

• conserve, protect and increase the owners/investors' assets; and

• respect owner/investors' requests, suggestions, complaints, and formal resolutions.

Suppliers

Our relationship with suppliers and subcontractors must be based on mutual respect. We

therefore have a responsibility to:

• seek fairness and truthfulness in all our activities, including pricing, licensing, and

rights to sell;

• ensure that our business activities are free from coercion and unnecessary litigation;

• foster long-term stability in the supplier relationship in return for value, quality,

competitiveness and reliability;

• share information with suppliers and integrate them into our planning processes;


• pay suppliers on time and in accordance with agreed terms of trade, and

• seek, encourage and prefer suppliers and subcontractors whose employment practices

respect human dignity.

Competitors

We believe that fair economic competition is one of the basic requirements for increasing

the wealth of nations and ultimately for making possible the just distribution of goods and

services. We therefore have a responsibility to:

• foster open markets for trade and investment;

• promote competitive behaviour that is socially and environmentally beneficial and

demonstrates mutual respect among competitors;

• refrain from either seeking or participating in questionable payments or favours to

secure competitive advantages;

• respect both tangible and intellectual property rights; and

• refuse to acquire commercial information by dishonest or unethical means, such as

industrial espionage.

Communities

We believe that as global corporate citizens we can contribute to such forces of reform

and human rights as we are at work in the communities in which we operate. We therefore have

a responsibility in the communities to:

• support peace, security, diversity and social integration;

• respect the integrity of local cultures; and

• be a good corporate citizen through charitable donations, educational and cultural

contributions, and employee participation in community and civic affairs.


Caux Round Table Steering Committee: Friedrich Baur, President, MST GmbH,

Germany; John Charlton, Managing Director, The Chase Manhattan Bank, USA; Nivelli Cooper,

Chairman, The Top Management Partnership, Ltd. UK; Charles M Denny, Jr, Formerly

Chairman and CEO, ADC Tele communications, Inc. USA; Jean-Loup Dherse, (Chairman, CRII

Consultant, Formerly vice President, World Bank, France, Walter E Hoadley, Senior Research

Fellow, Hoover institution, USA, Ryuzaburo Kaku, Chairman, Canon inc. Japan, Morihisa

Kaneko, Assistant Senior Counsellor, Matsushita Electric Industrial Co Ltd. Japan; Toshiaki

Ogasawara, President Nifco, Inc. Japan.

Information: For copies of the Principles for Business or further information, please

contact

The Caux Round Table Secretariat 1156 Fifteenth Street NW, Suite 910, Washington,

DC 200051704, USA

Tel: + 1 202 872 9077; fax: + 1 202 872 9137).

Originally posted in different form by Lawren Bale 06-07-97

Revised and reposted by Ingrid Shafer 22 April 1999

Date post:	12-Jan-2017
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Leadership, Ethics, and Communications: Foundations of a Sustainable Organization

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