Ethical Leadership

In the recent years the technology industry has seen numerous cases of unethical practices from toplevel executives. Elizabeth Holmes, the CEO of Theranos put the lives of thousands of people into danger by hiding that the blood-testing technology she was promoting was not providing accurate results while on the same time she was hiding the truth from the company’s investors (Carreyrou, 2018). Uber’s CEO and Founder Travis Kalanick reportedly got involved into scandals about sexual harassment (Kleinman, 2017) that led to his resignation. In 2020 Amazon’s CEO Jeff Bezos avoided to answer questions in front of US Congress about his company’s practice to track sales from third-party sales and use this data to develop and promote its own products in the Amazon Basics line to compete directly with the third-party sellers that it hosts on the platform (Anderson, 2014). Even companies that had ethics as part of their core founding principles many times sidestep into sneaky tactics, e.g., Google’s famous phrase “Don’t be evil” from its code of conduct is mostly seen as a joke nowadays (Honan, 2012). While unethical practices can be found in every industry, it seems that the technology sector cultivated these kind of behaviors for years or at least accepted them without much critic. These behaviors have drawn the attention of the public and the authorities lately and as someone who is working in the sector it interests me a great deal to understand the reasons and motivations that can drive a leader to abandon their moral roots, ignore company’s code of conduct and get involved into fishy methods to achieve success (or survival).

Ben Horowitz in his book “What you do is who you are” defined culture as the way a company is making decisions even when the leader is absent and pointed out that if the leader does not methodically set the culture of the company “two-thirds of it will end up being accidental, and the rest will be a mistake” (Horowitz, 2019). Schein (Schein, 1985) classifies the mechanisms a leader can influence the company’s culture into five groups:

  • What leader pays attention to and what not
  • How the leader reacts to crises
  • How the leader behaves
  • How the leader rewards
  • How the leader hires and fires

Elaborating in this classification we can see various examples in history where these mechanisms affected a company’s culture.

What the leader pays attention to and what not

Cooke describes some signs that point out that a company is at ethical risk, one of these signs is the focus on short-term gains over long-term goals (Cooke, 1991), and claims that this practice can develop an unethical behavior. One very well-known incident of this behavior is the Volkswagen emissions scandal (Hotten, 2015), the company focused on the short-term goal, to make its cars seem better for the environment, ignoring both the consequences this practice would have to the company itself once the authorities uncover the practice but also to the general society by the pollution of the environment.

How the leader reacts to crises

The recent Covid-19 pandemic has made it clear the importance of great leadership during periods of crisis. Leader’s reaction to a crisis incident demonstrates what is valued by the leader (Schein, 1985). McClendon identified seven habits of great leaders in crisis, some of them are owning-failure, problem-solving mindset, communicate the truth (McClendon, 2021). A great example that shows the importance of these practices is Johnson & Johnson’s reaction to the Tylenol crisis, the company communicated with the authorities immediately and alerted the consumers through media campaigns to not use the product showing that its priority is the public safety (Belludi, 2021). A counterexample is the way Jack in the Box handled the E. coli outbreak that resulted in the death of four children. The company blamed one of its suppliers although investigations showed that it knew about the problem (Andrews, 2013).

How the leader behaves

A leader’s actions communicate strong messages to her employees about her values (Sims, 2002). It is important for the leader to “walk-the-talk”, or as it is more common noted to “lead by example”, to inspire others with actions and behavior rather than words. A CEO that is using the company’s resources to handle personal matters (e.g. the company’s car for vacations), signalizing to the employees that is perfectly fine for them to do the same, even if that is in a smaller scale (e.g. getting office resources at home for personal use).

How the leader rewards

The way the leader rewards indicates the organization’s expectation and signals to the employees what is needed to succeed. Leaders should reward ethical behaviors to send a clear message throughout the organization that this behavior is not only expected but also valued significantly.

How the leader fires and hires

A leader can shape the culture by forming the teams that constitute the organization. Avoiding biases and hiring people with diverse background can act as a shield against corruption by itself. Salomon Brothers financial scandals could potentially be avoided if the company was not hiring exclusively young aggressive ambitious males that wanted to get rich as fast as possible (Hojnicki, 2012).

Conclusion

To conclude, a leader’s ethical values can have a tremendous effect on the organization’s culture and as a result to its every day practices and its relationships with employees, customers, stakeholders and the society. It is not enough though, for a leader to have ethical beliefs, the personal beliefs should be accompanied with actions and the actions should be clear and visible towards the whole organization, so they set the tone of the ethical standards the organizations follows, accepts and promotes.

Bibliography

Published 4 Nov 2021

Software Engineering Lead, Certified AWS Solutions Architect. Newsletter with links for tech leads https://techleads.substack.com/. Opinions are my own and not necessarily the views of my employer.
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