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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Academic writing and “intended misdirection”

I teach a research methods class for graduate students studying applied economics. In order to drive certain points about research and academic writing, I often give my students simple puzzles and brain teasers in class. I used the following today, which is widely known as the Missing Dollar Problem (MDP).

Three men walk into a hotel to rent a single room. The manager says the room costs $30, so each man pays $10. Later that day, the manager realizes that he overcharged for the room by $5; the room should have been $25 rather than $30. He gives the bellhop five $1 bills and asks the bellhop to give the money to the three men in the room. The bellhop is a bit dishonest and puts $2 in his pocket. When the bellhop gets to the room, he hands each man $1. Thus, instead of paying $10 each for the room, each man has now paid $9. Now, $9 paid by three men is $27, which added to the $2 in the bellhop’s pocket makes $29. Where did the extra dollar go?

Teachers can use the MDP to talk about the importance of math or why ethics matters. I use it to illustrate the importance of clarity and honesty in academic writing. The MDP is a problem because of a flaw in how the story is told. It is true that the men paid $27 instead of $30 for the room, but the $2 kept by the bellhop should be subtracted from the $27 rather than added to it. (The room cost $25, so the money returned to them means they paid $27; the difference between the cost of the room and the amount paid is the $2 kept by the bellhop.) In other words, an intended misdirection in the telling of the story resulted in readers having an incorrect understanding of reality.

Unfortunately, pressure exists for academics to produce and publish novel and important results, thus creating an incentive for “intended misdirection.” In extreme cases academics engage in “questionable research practices,” as one report of research on the topic noted, and worse–outright fabrication (see the discussion of Academic Integrity by the National Institutes of Health for examples).

Certainly, academia is not the only industry where “intended misdirection” happens (think lawyers, and politicians, and used car salesmen, and …). But surely academia can do better and should hold to a higher standard. Academic writing needs to be clear, precise and accurate … and honest.