Ethical Leadership
Last week, media outlets reported on German prosecutors' efforts to unravel the serious levels of fraud that existed at payments company Wirecard. Before it imploded, the company traded on the German DAX and, at its peak, was valued at north of £2bn.
Behind the scenes, however, lurked a decade of money laundering. The fraud spanned multiple countries and involved several shady characters who were involved in other schemes. Its effects are even more profound considering that Wirecard was a traded company - many would assume that the various checks and balances (financial service compliance, audit services etc.) would guard against financial impropriety.
While scandalous, Wirecard is not the first company to engage in greedy schemes. History is littered with financial institutions that engaged in unethical and illegal practices. Billions of pounds were laundered through financial institutions such as Bank of Credit and Commerce International, Standard Chartered, Wachovia Bank and Danske Bank. Charles Ponzi, Allen Stanford and the notorious Bernie Madoff are others who will go down in history as having bilked people of their hard-earned savings.
Why is it that so many of these big companies have been able to get away with being unethical about their finances? How are leaders not held to account before these things happen?
For many markets and industries (no, it’s not just Finance), business ethics is a “nice to have” rather than a requirement. I define business ethics as business policies and procedures that shape corporate governance, employee experiences, corporate social responsibility (CSR), environmental, social, and governance (ESG) criteria, financial responsibilities and transparency.
Good leaders adopt and demonstrate these values, practices and policies in their leadership practice. With the intention that all stakeholders will see how honest and fair they are.
Integrity lies at the heart of this.
Some organisations create a code of ethics to help guide this. Having worked with a number of clients on what this looks like, I know the narrative usually points to standards of business practice, acceptable behaviours and a framework for professional responsibilities. The knock-on effect is that it helps to shape the organisation’s narratives around financial management and reporting practices, compliance, health and safety expectations, customer service, recruitment and compensation, supply chain practices and diversity, equity and inclusion (DEI)policies.
In addition to a code of ethics, some organisations will develop codes of conduct (that expand on the code of ethics) to clearly state what behaviours are acceptable. I can only imagine what would have happened at Wirecard if policies and processes were rolled out, in line with these codes, to ensure ethical behaviour was the default.
A part of my journey as an executive coach is to encourage those in senior leadership to understand and practice ethical leadership. Putting ethical leadership into practice is essential if you want it to be passed on to successors and cascade down through an organisation.
So how do we keep a check on an organisation's ethical leadership efforts? Here is a checklist for leaders to help see if they're on the right track or not.
As a leader, you are aware of the company values
Your choices and decisions are shaped with these values in mind
You are held accountable by a board or other stakeholders.
Your decisions are seen as honest, fair, and sustainable
You know your organisation’s codes of ethics and conduct and hold them up in your leadership practice
You have a clear ethical framework in your organisation that everyone knows
Your leadership is inclusive
Use these as a starting point to examine where you stand and what needs improving. If you are serious about getting results, regularly revisit these points on ethical leadership by yourself, with your team, your board and your coach.
