Friday, January 20, 2012

Caring for the Commons

Guest post by Fred Kiel, Ph.D. & Doug Lennick:

If you’re in a leadership position, you make hundreds of decisions each day – and most of those have the potential to impact the well-being of others. They are moral decisions. Don Blankenship, the CEO of Massey Coal Mines regularly made decisions to bypass safety procedures and ultimately those decisions led to the accident which killed 29 workers. On the other hand, Jim Sinegal, the recently retired CEO of Costco Wholesale, generously paid his warehouse employees. Even part-time workers receive benefits. Incidentally, Costco employees sell twice as much merchandise per square foot of retail space as their nearest competitor – Sam’s Club! He did so in spite of steady criticism from Wall Street analysts.

So, the decisions you make as a leader are nearly always moral decisions. If a decision impacts the well-being of other people, it is a moral decision.

Moral Intelligence and Universal Principles

In our book, Moral Intelligence 2.0, we define moral intelligence as our mental capacity to apply universal human principles to our personal values, goals, and actions. While cognitive (IQ) and technical intelligence are important in your role as a leader, moral intelligence is significantly more important because it directs the other intelligences and provides meaning. The implementation of moral intelligence can profoundly - and positively - impact your business.

Four universal moral principles (Figure 1), honored by people of all cultures and creeds, are the foundation for organizational success and the health of the global economy. Demonstrating integrity generates trust. Practicing forgiveness for well-intentioned mistakes is necessary for innovation to flourish. Compassion – caring for others as human beings vs. just a means to an end – has a direct impact on the retention of talent. And finally, demonstrating responsibility by admitting mistakes, and showing that you “care for the commons” – or care about “leaving the world a better place” – inspires and energizes people. “Caring for the commons” is more often known as “corporate social responsibility.”

Figure 1
Four Universal Moral Principles

Maximizing Shareholders’ Returns

But not everyone agrees that business leaders need to “care for the commons.” After all, we’ve all been told that the primary purpose of business is to maximize the shareholders’ return over the needs of all other stakeholders. That’s the claim of nearly every analyst on Wall Street. Milton Friedman, for decades the icon of the Chicago School of Economics, also thought so. He emphatically stated this in the middle of the 20th Century. Furthermore, he was firmly against the use of corporate resources for promoting the common good:

“There is only one social responsibility of business—to increase its profits so long as it stays within the rules of the game…Few trends could so thoroughly undermine the very foundation of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. This is fundamentally a subversive doctrine.” (Capitalism and Freedom, p 133. University of Chicago Press)

Wall Street and most corporate CEOs of public companies have embraced this view for at least the past 40 years.

So How Has This Worked For Us?

We think everyone would agree that the foundation of our free enterprise system has taken several jarring hits so far in the 21st century. The quarterly focus on shareholder return at all costs has frayed the fabric that holds the system together. Meeting “guidance” by managing earnings is the standard. “Spin” by a CEO is expected.

Many of the regulations that worked before the mid-1970’s were dismantled and several onerous new regulations have sprung up in reaction to the resulting scandals. Neither of these changes were wise moves. Both the informal and formal rules and regulations have been changed. As a result, the norms for successful commerce have been weakened.

If Milton Friedman were still alive, he would have to admit that it’s not the use of corporate resources for social causes that nearly brought down the world financial system. Quite the contrary – it was social irresponsibility – the pervasive absence of a sense of personal responsibility for the way the capitalistic system works. This is the subversive doctrine!

What Our Research Shows

In our ongoing research on the moral intelligence of CEOs, we’ve discovered that low concern for the common good leads to lower productivity and workforce engagement. Furthermore, business performance suffers. (Figure 2)

Figure 2
CEOs Who Demonstrate a Concern for the Common Good
Versus CEOs Who Show Little Concern

As a business leader, your decisions impact the social fabric – for better or worse.

Demonstrating personal responsibility and a concern for the common good as a leader is one of the major drivers of productivity and workforce engagement. Actual business results can, of course, be impacted by dozens of factors, but a CEO who cares only about pleasing Wall Street and demonstrates little concern for the common good will erode profits and jeopardize the long-term sustainability of the company. 

Doug Lennick is the CEO and Co-founder of the Lennick Aberman Group, a performance-enhancement consulting firm that works with executives, leaders and athletes. Fred Kiel, Ph.D., is co-founder of KRW International, Inc. and brings over 30 years of experience to his work with Fortune 500 CEOs and senior executives. Their latest book, Moral Intelligence 2.0, Enhancing Business Performance & Leadership Success, offers insights into the mechanics and benefits of moral leadership and competency.


Abby Glenn said...

Thank you for such an interesting introduction in your post. It was very interesting to find a text that organized a set of moral principles to help guide ethical decision-making. I am currently a communications graduate student and my classes this semester focus on communication ethics and corporate social responsibility, both of which your post speak to.

I entirely agree with your statement about moral decisions, “if a decision impacts the well-bing of other people, it is a moral decision”. As a leader, one must recognized that he/she is always in a position of power that determines the
well-being of employees. The leader must also be aware that the decisions he/she makes have the potential to trickle down to affect customers, buyers, and community members. The decisions do not just impact those immediately around a leader.

I also like how you define moral intelligence as “our mental capacity to apply universal human principles to our personal values, goals, and actions.” Your definition immediately made me think of two readings I’ve recently had for class. In Communication Ethics Literacy, Dialogue and Difference (2008) by Arnett, Fritz, and Bell, the text outlines theoretical ways of understanding communication ethics. Universal-Humanitarian communication ethics is one of the six outlines that are suggested in the text. The main focus of this understanding is the Kantian utilitarian perspective, “which refers to the decision making that seeks to do the greatest good for the greatest number of people” (p. 48). I believe that it is the responsibility of a leader to make decisions that will positively impact the greatest number of people.

Your definition of moral intelligence also addresses the fact that leaders must apply their ethical decision making to “our personal values, goals, and actions”. One thing that I’ve come to understand through a reading from Aristotle is that we cannot make an ethical decision purely based on logic. Rather, one must also use emotion and personal experience to determine what is truly the best decision for the greatest number of people. In Arash Abizadeh’s (2002) article about Aristotle, The Passions of the Wise: Phronesis, Rhetoric, and Aristotle’s Passionate Practical Deliberation, Abizadeh argues that according to Aristotle, “character (ethos) and emotion (pathos) are constitutive features of the process of phronetic practical deliberation: in order to render a determinate actin-specific judgment, practical deliberation cannot be simply reduced to logical demonstration” (p. 1). The text continues to say that because ethical decision-making relies on emotion and personal experience to apply to logic, there is no clear-cut “right” decision. “Consequently, it is unreasonable ever to demand of moral and political philosophy, and the written laws, that they be exact in the way that mathematics might be” (Abizadeh, 2002, p. 1).

To this extent, I fully appreciate how your text outlines four universal moral principles that will lead to corporate social responsibility. Throughout the readings I have done for class, it is evident that ethical decisions made by leaders greatly impact corporate social responsibility. However, I have yet to come across a reading that attempts to organize a foundation of ethical decisions that will lead to greater corporate success.

Once again, thank you for your post and an introduction to your text.

Arnett, R. C., Fritz, J. H., & Bell, L. M. (2008). Communication ethics literacy, Dialogue and difference. Thousand Oaks, CA: Sage.

Abizadeh, A. (2002). The passions of the wise: phronesis, rhetoric, and Aristotle’s passionate practical deliberation. Review of Metaphysics, 56(2), 267.

Anonymous said...

Our society has gotten so used to hearing stories like that of Don Blankenship; blatant disregard for the safety of others. It is unfortunate that the media showcases stories like that of Massey Coal Mines, rather than the stories of CEOs like Jim Sinegal. It is no wonder citizens have grown weary and cynical about "corporate America".

I agree the decisions leaders make are nearly always moral decisions. These decisions will impact a number of people, only beginning with the employee. I wonder how leaders like Blankenship are able to "sleep at night" knowing that their action or in-action in some cases, could be deadly.

I like how the book Moral Intelligence 2.0 defines moral intelligence. If moral intelligence is in fact our mental capacity to apply universal human principles to our personal values, goals, and actions, it begs the question as to whether everyone is actually capable of this ability. For instance, Blanksenship has no integrity or responsibility.

It is true that many business leaders can not see past the bottom line and in the end are able to look beyond the commons when making decisions.

I wonder how much more successful and profitable business, their leaders, and employees would be if all leaders could actually care for the commons.

Carie Benton
Grad Student
Drury University