Executives Have To Practice Moral Management

December 8, 2000

University Park, Pa. --- For business executives to be true ethical leaders, they have to be both moral people and moral managers, otherwise employees will assume that they are ethically neutral and care only for the bottom line, a Penn State researcher says.

"It isn't enough for an executive to have a reputation for personal integrity. That communicates to employees what the executive is likely to do -- a good start, but it does not necessarily tell workers what they themselves should do. Executives need to focus on moral managing -- taking the ethics message to the rest of the organization," says Dr. Linda Klebe Treviño, chair of the Department of Management and Organizational Behavior in Penn State’s Smeal College of Business Administration.

"The CEO's challenge is to make ethical values stand out from a business landscape laden with messages about beating the competition and achieving quarterly goals and profits," Treviño notes. "Executives who fail to do so risk being perceived as indifferent to ethics, and the more pervasive signals about financial success take over by default."

Treviño, Dr. Laura Pincus Hartman, associate professor of management at DePaul University, and Michael E. Brown, Penn State graduate student in business administration, conducted interviews with 20 senior executives and 20 corporate ethics officers. They published their findings in the paper, "Moral Person and Moral Manager: How Executives Develop a Reputation for Ethical Leadership," recently in the California Management Review.

A number of the executives interviewed cited former Sunbeam chief of "Chainsaw Al" Dunlap as a prime example of unethical executive leadership on both levels. He was unethical on a personal level, engaging in emotional abuse of employees and operating by virtual intimidation. At the same time, Dunlap resorted to dishonest management practices, exaggerating sales and earnings reports and presenting a falsely optimistic picture of the company's financial health to Wall Street analysts. In the end, the board of directors had to fire him. Dunlap's behavior as Sunbeam CEO has since warranted a book titled "Mean Business."

In contrast was Johnson & Johnson CEO James Burke, who brought together 28 senior managers to study the corporate credo of values and to make changes, if they saw fit. Through this collaborative effort, Johnson & Johnson revised its credo of values, and Burke made sure that the new version was enforced. The company's heightened stress on ethical conduct stood it in good stead during the Tylenol crisis of the 1980s, Treviño says.

Burke's successor, Ralph Larsen, also placed a high priority on the credo of values, which includes the following tenets: "Behaving with honesty and integrity. Treating others with dignity and respect. Applying Credo values. Using Credo survey results to improve business. Balancing the interests of all constituents. Managing for the long term."

"As a component of ethical leadership, personal morality certainly cannot be disregarded," Treviño notes. "When we asked whether personal morality was linked to ethical leadership, most executives answered yes. One of them responded: 'You cannot be an ethical leader if your personal morality is in question ... To be a leader ... what you do privately reflects on that organization. Secondly, to be a leader you have a greater standard, a greater responsibility than the average person would have to live up to.'

"However, ethical leadership demands that executives move beyond private morality and assume the role of moral manager," says the Penn State management researcher. "As a moral manager, the CEO is the organization's Chief Ethics Officer, whose job it is to create a strong ethics message that gets employees' attention and influences their thoughts and behaviors."

Moral managers can stress the role of ethics first by serving as authentic and persuasive role models. This has to be done in a manner that is continually visible to employees, who judge by deeds, not words or intent. An ethics policy that prohibits employees from accepting any kind of gift from a prospective client loses all credibility when employees see senior executives sitting in a client's box enjoying a free professional football or basketball game.

"Second, moral managers need to talk about ethical values from the top, not in a sermonizing way, but in a way that explains the values that guide important decisions and actions," says Treviño,. "Third, using rewards and discipline effectively may be the most powerful way to send signals about desirable and undesirable conduct. That means rewarding those who accomplish their goals by behaving in ways that are consistent with stated values and disciplining employees at all levels when they break the rules.

"Ethical leadership pays dividends in worker pride, commitment, satisfaction, comfort and fun -- all particularly important in a full employment economy in which good companies strive to find and keep the best people. It may be more important now than ever in this new organizational era where more employees are working independently, off site and without direct supervision. In these organizations, values are the glue that can hold things together," she adds.

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Contacts:

Paul Blaum (814) 865-9481 (o)

Vicki Fong (814) 865-9481 (o)/ (814) 238-1221 (h)

EDITORS: Dr. Treviño, is at (814) 865-2194 or (814) 238-0029 or at by e-mail;

Mr. Brown is at (814) 863-0597 or by e-mail.