Be a CEO in the Know

How to Make Eth­i­cal De­ci­sions in Busi­ness

Indwe - - Contents - Text: Ken­neth Amaeshi: Pro­fes­sor of Busi­ness and Sus­tain­able De­vel­op­ment, Univer­sity of Ed­in­burgh / www.the­con­ver­sa­ Im­ages © iS­tock­

Chief ex­ec­u­tive of­fi­cers (CEOs), like many peo­ple, are driven by their val­ues and con­vic­tions. Tim Cook, CEO of Ap­ple, speaks strongly for the LGBT com­mu­nity. Sales­force CEO Marc Be­nioff stands firmly against pay in­equal­ity. Lau­rence Dou­glas Fink, chair­man and CEO of Black­Rock, is pas­sion­ate about the in­cor­po­ra­tion of en­vi­ron­men­tal, so­cial, and gov­er­nance risks in in­vest­ment de­ci­sions. But are these con­vic­tions “good for busi­ness” or not?

When it comes to so­cial in­jus­tice or pol­i­tics, busi­ness lead­ers can no longer stand by and watch from the side-lines. They must take ac­tion as their em­ploy­ees, cus­tomers and so­ci­ety ex­pect them to. But their po­lit­i­cal views may not align with those of some of their em­ploy­ees or cor­po­rate part­ners, so how are they sup­posed to take a stand and please ev­ery­body at the same time?

New Ways to Re­late to So­ci­ety

Stake­hold­ers are not un­rea­son­able. They un­der­stand that in­di­vid­u­als are free to up­hold and air views they are pas­sion­ate about. They re­spect such lead­ers, even when they dis­agree with them. What they do not like is pre­var­i­ca­tion and hypocrisy. They can eas­ily see through that when it hap­pens.

The for­mer CEO of Unilever, Paul Pol­man, was pas­sion­ate about sus­tain­able de­vel­op­ment goals. He did not hide this pas­sion. He even chal­lenged the mar­ket on quar­terly re­port­ing of per­for­mance, pre­fer­ring a long-term agenda. Unilever did not suf­fer as a re­sult.

Con­trary to Pol­man’s po­si­tion on sus­tain­abil­ity was the view of Steve Jobs, the for­mer CEO of Ap­ple. De­spite his stance, he was viewed as some­one who stood for his pas­sion in tech­nol­ogy and in­no­va­tion.

In other words, the prob­lem is not nec­es­sar­ily hav­ing a po­lit­i­cal view. But what hap­pens when a leader’s de­ci­sions have an in­di­rect neg­a­tive im­pact on the busi­ness, such as boy­cotting a mar­ket be­cause of so­cial in­jus­tice, which could lead to re­duced rev­enue?

Imag­ine a sit­u­a­tion where a CEO de­cides to take a strong stand against bribery and cor­rup­tion. Or per­haps the busi­ness op­er­ates in an en­vi­ron­ment where bribery and cor­rup­tion is rife, or where wield­ers of state power are in­clined to­wards poor gov­er­nance. This is com­mon in many emerg­ing economies with weak mar­ket and demo­cratic in­sti­tu­tions.

In such sit­u­a­tions, it would ap­pear that do­ing the right thing is a lux­ury (un­less it pays). The in­cen­tive to act re­spon­si­bly would be very low – lead­ing to a frag­mented, two

tier mar­ket sys­tem. How can a CEO who still wants to do the right thing com­pete in such a harsh en­vi­ron­ment?

In­no­va­tion and cre­ativ­ity might hold the key to suc­cess here. Col­leagues and I have pub­lished a book, Afr­icap­i­tal­ism: Sus­tain­able Busi­ness and De­vel­op­ment in Africa, that sets out new ways for busi­nesses to re­late to so­ci­ety and meet its needs.

In it, we share what we call C.L.E.A.R. strate­gies, each let­ter stand­ing for an ac­tion busi­nesses can take to con­trib­ute to sus­tain­able de­vel­op­ment goals.

Five Cour­ses of Ac­tion

Col­lab­o­rate. The idea here is for CEOs to en­rol other par­tic­i­pants in their in­sti­tu­tional change ini­tia­tives (such as set­ting stan­dards). This might in­volve part­ner­ships with non­busi­ness en­ti­ties like NGOs. There are also oc­ca­sions when it might be bet­ter for CEOs to go it alone, espe­cially where there is a clear com­pet­i­tive ad­van­tage to be gained by do­ing so. A CEO needs to de­cide on when and how to col­lab­o­rate in pur­su­ing a re­spon­si­ble busi­ness prac­tice agenda.

Lobby. CEOs keen to do the right thing in chal­leng­ing and threat­en­ing en­vi­ron­ments are usu­ally bet­ter off lob­by­ing the rel­e­vant au­thor­i­ties and gov­er­nance fig­ures. They can ask that the play­ers ad­here to the rules, where they ex­ist, or ask for the rules to be changed where they do not sup­port do­ing the right thing.

Ed­u­cate. Some­times, do­ing the right thing is not ap­pro­pri­ately re­warded be­cause stake­hold­ers lack an un­der­stand­ing of the is­sues. For ex­am­ple, con­sumers may not be pre­pared to pay for green prod­ucts and sus­tain­able in­no­va­tion. Then the CEO may want to en­gage and ed­u­cate the rel­e­vant stake­holder groups. En­light­ened con­sumers could be­come a new mar­ket or pres­sure group to raise the bar for the en­tire in­dus­try. The same ap­plies to other stake­holder groups such as reg­u­la­tors, em­ploy­ees and in­vestors.

Align. The CEO needs to be con­sis­tent in prac­tice, while en­sur­ing good in­ter­nal and ex­ter­nal align­ment with the val­ues and pur­pose of the busi­ness. He or she does not want to be seen as “green­wash­ing”. A good ex­am­ple of this would be the lead­ers of BP in the early 2000s. At that time, BP claimed to as­pire to­wards good green (en­vi­ron­men­tal) cre­den­tials, but was part of a coali­tion lob­by­ing the US gov­ern­ment against cli­mate change poli­cies that would have catal­ysed the emer­gence of the green econ­omy in the US. This can be dam­ag­ing.

Re­newal. All of the strate­gies high­lighted above will need to be con­tin­u­ously re­in­forced, and not just treated as on­ce­off ac­tiv­i­ties. That way, the CEO recre­ates and adapts to the eth­i­cal de­mands of the op­er­at­ing en­vi­ron­ment.

Eth­i­cal chal­lenges and dilem­mas will never go away. But the way re­spon­si­ble lead­ers deal with them will make or break them. Stick­ing to one’s be­liefs and con­vic­tions, step­ping aside – or down – when be­liefs and con­vic­tions be­come over­whelm­ingly detri­men­tal to busi­ness, and be­ing in­no­va­tive at do­ing the right thing ap­pear to hold the key to ef­fec­tive re­spon­si­ble lead­er­ship.

CEOs keen to do the right thing in chal­leng­ing and threat­en­ing en­vi­ron­ments are usu­ally bet­ter off lob­by­ing the rel­e­vant au­thor­i­ties and gov­er­nance ac­tors.

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