Ethical Leadership, Part 1: Perilous at the Top | Concepts Unwrapped

Summary

The video script explores the concept of effective ethical leadership, emphasizing the critical role leaders play in shaping a firm's ethical culture through personal example and communication. It highlights the tendency of subordinates to mirror leaders' actions, the vulnerability of leaders to overconfidence and unethical behavior, and the importance of self-awareness and openness to feedback. The discussion also touches on the 'instant entitlement bias' and the unique challenges leaders face in maintaining ethical standards, urging leaders to foster a culture of integrity and accountability.

Takeaways

• 🌟 Effective ethical leaders inspire others through their own ethical behavior, significantly influencing the firm's culture.
• 🗣️ Communication and management of the organization's culture by leaders are crucial for promoting ethical actions among subordinates.
• 👀 Leaders are often the primary source of moral guidance for adults who lack a strong moral compass.
• 🔄 Unethical actions by leaders are more readily imitated by subordinates than their ethical ones, creating a toxic environment.
• 🕊️ Overconfidence in one's ethical standing can lead to rationalization of unethical behavior, even by those who believe they are moral.
• 💼 The 'instant entitlement bias' can cause leaders to take a larger share of resources, reflecting a self-serving attitude.
• 🏢 Lavish lifestyles of corporate leaders can exemplify the instant entitlement bias and set a poor ethical example.
• 🤔 Leaders in positions of power must be cautious of the potential for unethical actions and the rationalization of their decisions.
• 🔑 Central figures in social networks, such as CEOs, may mistakenly believe others agree with their ethical decisions, leading to potential misjudgments.
• 👥 Leaders may be tone-deaf to ethical issues, rationalizing their actions in a way that overlooks the rights of others.
• 🛑 High social status can make leaders feel exempt from rules, leading to a morally perilous position at the top.
• 🤝 The best leaders acknowledge their shortcomings, seek input from others, and foster a culture of open communication and ethical decision-making.

Q & A

What are the two key aspects of being an effective ethical leader according to the transcript?

The two key aspects are acting ethically to inspire others and managing the organization's culture to promote ethical actions by subordinates.

Why is the personal example set by firm leaders so crucial for the ethicality of firm culture?

The personal example set by firm leaders has the biggest impact on the ethicality of firm culture because it serves as a model for others to follow.

How does Nikki's manager stand out in terms of ethical leadership?

Nikki's manager stands out by always considering other people's perspectives, the downstream impacts of decisions, and ensuring the right choices for the company, stakeholders, and client teams.

What observation have Professors Cropanzano and Walumbwa made about adults' moral compass?

They observed that most adults do not have an adequate moral compass and look to their organization's leaders for guidance in moral dilemma situations.

Why are leaders' unethical actions more readily copied by subordinates than their ethical actions?

Leaders' unethical actions are more readily copied because they set a precedent that can be normalized within the organization, potentially leading to a toxic environment.

What is the 'instant entitlement bias' and how does it affect leaders?

The 'instant entitlement bias' is a behavioral factor where leaders, when told they are in charge of a team, tend to keep a larger share of resources for themselves, leading to a perception of self-interest and entitlement.

How does overconfidence make leaders particularly vulnerable to unethical behavior?

Overconfidence can lead leaders to believe they are inherently ethical and thus act without self-reflection, often making ethical mistakes and rationalizing their actions as acceptable.

What is the connection between high social status and the potential for moral peril?

High social status can make leaders feel insulated from consequences, leading to a sense of entitlement and self-serving rationalizations that can result in unethical actions.

Why do some leaders mistakenly believe that others agree with their ethical decisions?

Leaders at the center of social networks, like CEOs, are more likely to mistakenly believe others agree with them due to a lack of dissenting voices and a tendency to surround themselves with like-minded individuals.

How can leaders avoid falling into the trap of unethical behavior?

Leaders can avoid unethical behavior by being self-aware, acknowledging their shortcomings, seeking input from others, and creating a culture where concerns can be voiced openly.

What role does the leader's acknowledgment of their own imperfections play in ethical leadership?

Acknowledging their own imperfections allows leaders to be more relatable and approachable, fostering an environment where mistakes can be discussed and learned from, rather than hidden or rationalized.

Outlines

00:00

👨‍🏫 Ethical Leadership and Organizational Culture

The first paragraph discusses the importance of ethical leadership in shaping a firm's culture. It emphasizes that leaders' personal conduct significantly influences the ethicality of the firm's culture. Ethical leaders not only act as role models but also actively communicate and manage the organization's culture to encourage ethical behavior among subordinates. The paragraph highlights the impact of leaders' actions on the moral compass of adults, who often look to leaders for guidance in moral dilemmas. It also points out the tendency for unethical actions to be more readily copied by subordinates. The dangers of overconfidence in leaders and the 'instant entitlement bias' that can lead to self-serving behaviors are also discussed, with examples of leaders who have fallen from grace due to unethical actions.

05:01

🤔 The Perils of Power and Ethical Blindness

The second paragraph delves into the ethical challenges faced by those in positions of power, such as top corporate officers and high-ranking government officials. It describes how these individuals can develop a sense of entitlement and exemption from rules that apply to others. The paragraph provides examples of leaders who have rationalized unethical actions by focusing on their perceived rights and the greater good of the organization. It also touches on the tendency of leaders to be 'tone-deaf' to ethical issues and to develop self-serving rationalizations for their actions. The importance of self-awareness, acknowledging one's own shortcomings, and creating a culture where employees can voice concerns is emphasized. The paragraph concludes with the idea that leaders should strive to do the right thing, recognizing that power can be morally perilous if not handled with care.

Keywords

💡Ethical Leadership

Ethical leadership refers to the ability of a leader to guide and influence others based on strong moral principles and values. In the video's context, it is the foundation for creating a firm culture that promotes ethical behavior. The script emphasizes the impact of leaders' personal examples on the ethicality of the firm culture, highlighting how leaders' actions are copied by subordinates.

💡Organizational Culture

Organizational culture is the shared values, beliefs, and norms that shape the behavior of individuals within an organization. The script discusses how effective ethical leaders manage and communicate the culture to encourage ethical actions among employees, underlining the importance of culture in driving ethical conduct within a firm.

💡Moral Compass

A moral compass is an individual's internal guide for distinguishing right from wrong. The script notes that most adults lack an adequate moral compass and often seek guidance from their leaders in moral dilemmas, indicating the reliance of employees on their leaders' ethical judgment.

💡Unethical Actions

Unethical actions are behaviors that go against moral principles and societal norms. The video script points out that leaders' unethical actions are more readily imitated by subordinates, which can lead to a toxic environment and a negative ethical climate within an organization.

💡Overconfidence

Overconfidence is an excessive belief in one's own abilities or ethics, which can lead to a lack of self-reflection and ethical mistakes. The script uses examples like Ken Lay and Jack Abramoff to illustrate how overconfidence in one's ethics can result in unethical behavior and downfall.

💡Instant Entitlement Bias

Instant entitlement bias is a cognitive bias where individuals, upon being labeled as leaders, feel entitled to a larger share of resources. The script cites studies showing this bias and uses the example of Tyco's former CEO to demonstrate how this bias can manifest in real-life situations, leading to unethical behavior.

💡Self-Interest

Self-interest refers to the tendency to prioritize one's own needs or desires over those of others. The video script discusses how being in a position of power can make it easy to serve one's self-interest, potentially leading to unethical decisions that may seem justified to the individual.

💡Social Networks

In the context of the video, social networks refer to the connections and relationships that individuals, particularly leaders, have within their organizations. The script mentions a study showing that people at the center of social networks, like CEOs, are more likely to mistakenly believe that others agree with their ethical decisions, which can lead to a disconnect from the ethical perspectives of others.

💡Ethical Climate

Ethical climate is the collective perception of what is considered ethical behavior within an organization. The script highlights that the actions of leaders significantly impact the ethical climate, and that unethical actions can create a negative environment where rules are disregarded.

💡Self-Serving Rationalizations

Self-serving rationalizations are justifications individuals make to convince themselves that their actions are justified, often focusing on their rights and ignoring the rights of others. The script points out that leaders are often tone-deaf to ethical issues and use such rationalizations to justify their unethical actions.

💡Tone Deaf

To be tone-deaf to something means to be insensitive or oblivious to it. In the context of the video, leaders being tone-deaf to ethical issues means they are not attuned to the ethical implications of their actions, which can lead to a failure in recognizing and addressing unethical behavior.

Highlights

Effective ethical leaders act ethically to inspire others and manage their organization's culture to promote ethical action by subordinates.

Leaders' personal examples have the biggest impact on a firm's ethical culture.

Most adults lack an adequate moral compass and look to their leaders for moral guidance.

Unethical actions of leaders are copied by subordinates more readily than their ethical actions.

Non-ethical bosses create a toxic environment where people try to bend or break rules.

Many people are overconfident in their own ethics and fail to self-reflect, leading to ethical mistakes.

Leaders are particularly vulnerable to acting unethically due to their overconfidence from past successes.

Instant entitlement bias causes leaders to take a larger share of resources, as seen in lavish corporate lifestyles.

Leaders at the center of social networks mistakenly believe others agree with their ethical decisions.

High-ranking officials sometimes believe rules do not apply to them, leading to illegal actions.

Leaders often have self-serving rationalizations for their unethical actions that disregard others' rights.

Achieving high social status can make leaders morally perilous due to increased self-interest.

Leaders must be aware of the consequences of their actions and the networks around them.

Realizing what is morally important and questioning actions is crucial for ethical leadership.

Leaders who admit their imperfections and seek input from others are more effective.

The best companies create a culture where employees can voice their concerns to their bosses.

Transcripts

[Professor Robert Prentice] What does it mean to be an effective ethical leader?

It means at least two things.

First, effective ethical leaders act ethically as an inspiration to others.

No single factor has a bigger impact on the ethicality of firm culture than the personal

examples set by firm leaders.

Second, they communicate and manage their organization's culture so as to promote ethical

action by subordinates.

[Nikki] Most of my managers have always been very ethical, and I've always looked up to

their leadership, but one in particular stood out from the others in that she was always

looking for other people's perspectives.

"How's this going to impact other people?

What are the downstream impacts of this decision that we're going to make, and is it truly

the right one for our company?

For our stakeholders and our client teams?"

Professors Cropanzano and Walumbwa have observed that most adults do not have an adequate moral

compass and therefore "look outside themselves for guidance in moral dilemma situations."

It is the leaders of their organizations to whom they primarily look, and studies show

that few things impact the ethical climate of a firm more than the actions of their leaders.

Importantly, leaders' unethical actions are copied by subordinates even more readily than

their ethical actions.

[Stoica] When you have a non-ethical boss that is always trying to bend the rules or

even break them, that is creating a toxic environment for everybody in the institution

because the more and more people will try to do the same thing.

Although it is especially important for leaders to act ethically, they are often particularly

vulnerable to acting unethically.

Professors Tenbrunsel and Bazerman note that it is clear that most people have high opinions

of their own character and do not realize the substantial gap between how ethical they

think they are and how ethical they truly are.

[Melissa] Like for example, I worked for a doctor in a small practice, and um, he had

a very colorful personality but he was also very unethical about a lot of things because

it was just him, and he was the boss.

And, um, sometimes he would disclose really personal information about patients

to other patients, and to us.

They think that they are overconfident, that they're ethical, and really they're not, or

what they're doing is not wrong.

They rationalize themselves out of it anyways because, you know, for the doctor I worked for,

"He was a doctor, and so he did lots of good things, so it's okay that he did these things." Or, you know,

"He was more educated than all of us, so he knew what he was talking about

and none of us knew."

Believing that we are moral people and will automatically do moral things, many of us

act with little self-reflection and thereby often make ethical mistakes.

Overconfidence renders leaders particularly vulnerable, because they have typically had

great success in their lives.

Think of Ken Lay, former CEO of Enron - minister's son, noted philanthropist... convicted felon.

Or, think of disgraced lobbyist Jack Abramoff - devout Jew, devoted family man... convicted felon.

Another behavioral factor that particularly affects leaders is the "instant entitlement bias."

Studies show that if people are told that they are part of a team and that they should

divide up resources allocated to the team, they tend to divide the resources equally

among team members.

But if they are told that they have been selected as the "leader" of the team, they tend to

keep a much larger share of the resources for themselves.

In real life, leaders often fall victim to the instant entitlement bias, as can be seen

in the lavish lifestyles often lived by corporate bigwigs.

Think of former Tyco CEO Dennis Kozlowski, who spent $2 million of company money

on his wife's birthday party.

[Dillon] It's really easy to serve in one's self interest when you're in a position of power.

If your decisions have always been supported and you've always been praised for being a

fantastic leader and increasing the value of the firm, it could feel like you can do

no wrong in the eyes of the firm.

It could be hard for you to slow down and think about whether you could've made a

better decision or whether the decisions you are making are truly ethical and in the best

interest of the firm and your own value structure, you know, the culture of the company,

and your own personal values.

A study by Professors Flynn and Wiltermuth demonstrated that people at the center of

social networks, such as CEOs, are more likely than others to mistakenly believe that other

people agree with them regarding what is an ethical course of action.

It is often shocking how top corporate officers (like WorldCom's Bernie Ebbers) and high government

officials (like New York's Eliot Spitzer) come to the view that the rules that apply

to everyone else do not apply to them.

For example, when Ken Lay was found to have violated Enron's Code of Ethics by investing

in a company that did more than 80% of its business with Enron, he called suggestions

of impropriety "form over substance."

“Rules,” he said, "are important, but you should not be a slave to rules either."

I had a boss that would always try to embezzle money and also try to force a number of young

people, young volunteers in the institution to make loans with fake papers, and to take

the money and he presented everything as being done for the greater good for the organization.

The higher people go up the chain, the more likely they are to do illegal stuff because

they think nobody is going to catch them.

Professor Dacher Keltner of the University of California at Berkeley, who studies ethical

leadership, further finds that leaders are often tone deaf on ethical issues and that

they have "uniquely self-serving rationalizations for their own unethical actions that often

focus on their rights and crowd out any consideration" of others' rights.

As Professor Zak notes: "Achieving high social status appears to make it not just lonely

at the top but morally perilous as well."

When people talk about power corrupting, it doesn't have to, only if you are not aware

that your actions have consequences, and networks around you, right?

You can't put a price on doing the right thing.

[Carlos] Realize what's important, what's moral, and question your actions to make sure

that all the decisions you're making are leading to an objective that is ethical.

[Claire] I think if a leader sets a tone that they've never made a mistake, they don't struggle

with anything, they're perfect, then, I mean, that's not realistic.

But then how can people come to them when they're feeling less than perfect?

[Arthur] The best leaders are the ones who acknowledge their own shortcomings.

Acknowledge that they do not know everything, and ask those who they serve and ask those

who work for them just to fill them in on what's happening.

The best companies are the ones that create a culture where their employees can voice

their concerns to their bosses, really.