Business leadership and the making and punishing of unethical employees

A study published in the current issue of Business Ethics Quarterly links ethical leadership with improved engagement of employees at work, greater employee voice and lower intentions for employees to exit. In other works, when employees perceive or know their leaders to be ethical, they are more likely to feel good about being at work, more willing to communicate their opinions, recommendation, concerns or ideas to their supervisors, and less likely to leave or intend to the leave the business.

In this context, an ethical leader is someone who is a moral person and who models high moral standards at work. The specific indicators of ethical leadership used in the BEQ paper draw from research by scholars at Pennsylvania State University. If valid, the indicators are informative. There are 10 of them. Ethical leaders

  • conduct their personal lives in an ethical manner
  • make fair and balanced decisions
  • can be trusted
  • ask what the right is when making decisions
  • listen to their employees
  • discuss business ethics and values with their employees
  • have the best interest of their employees in mind
  • set an example of behaving ethically at work
  • discipline employees who violate ethical standards
  • define success by the way results are obtained in addition to results.

I would add one more item to the list. When designing and implementing performance measures and incentives, ethical leaders are careful to ensure that they are promoting incentives rather than pressures to perform. The line between incentive and pressure can be thin. Leaders who are not careful may find that their efforts to motivate workers create pressures for them to lie, cheat or steal.

The CEO of Wells Fargo is learning this lesson the hard way. According to the Wall Street Journal’s report of John Stumpf’s testimony during a Senate Banking Committee hearing yesterday (September 21), the Bank is accused “of fostering a culture where low-paid branch employees were pressured to meet impossible sales quotas to keep their jobs, and so signed up customers for products without their knowledge.” Pressure does not create an environment where employees behave ethically. Even well-meaning employees may find the temptation to fudge numbers or behave inappropriately too strong in such an environment. The Bank reported that it fired more than 5,000 employees for wrongdoing.

So, Wells Fargo created unethical employees and then punished them.

Reminds me of the statement by Thomas More in his book, Utopia, made famous by Drew Barrymore’s character Danielle (aka Cinderella) in the movie Ever After. Danielle is arguing with Henry, the Prince of France, for the release of her servant, who is bound with other poor and destitute prisoners for the America’s. Here is the exchange:

Danielle: A servant is not a thief, your Highness, and those who are cannot help themselves.

Henry: Really! Well then by all means, enlighten us.

Danielle (quoting More): If you suffer your people to be ill-educated, and their manners corrupted from infancy, and then punish them for those crimes to which their first education disposed them, what else is to be concluded, sire, but that you first make thieves and then punish them?

Henry: Well, there you have it. Release him.

That’s quite a commentary about one of the nation’s most prominent banks.

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Author: Harvey James

Professor, Agricultural and Applied Economics, University of Missouri Editor-in-chief, Agriculture and Human Values

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