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Enhancing Organizational Performance

The Moral Worth of a CEO

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There is an old tale, coming out of the middle ages (13th century) that describes the difficulty in understanding or knowing about a concept without a framework that lays the foundation upon which understanding can be based. This story tells of a traveler, a man, who is making a dangerous ocean passage with his infant son. Their ship is wrecked in a severe storm, the man, carrying his infant son are the only survivors. They are washed up on a deserted island. Without any books, drawings or other possessions of consequence, the man and his son still somehow manage to survive. The years go by, with just the two of them on the island, and one day the son turns to his father and asks, “Dad, where did I come from?” The man struggles to convey to his son the concept of a woman and the process of reproduction. The ideas were absolutely meaningless to the son, since he has no concept of woman, never having seen a women or even the image of a woman, and he has no basic frame of reference upon which to base his understanding.

CEO’s have taken a lot of heat over the last few years, whether it is for exorbitant salaries, perks of the office, stock options, or other activity that pad their own wallets, seemingly at the expense of other constituencies who rely on the organization (e.g. investors, employees, customers, suppliers, communities, perhaps the planet itself). They have also taken heat for off-shoring jobs, layoffs/downsizing, lack of job creation, having a short-term orientation, which goes along with a lack of vision, a lack of sensitivity, a willingness to cut on product and process safety issues, and poor skills in general on decision-making. Many of these criticisms are tinged with more than a hint of CEO’s having morality issues, that they are in it for their own personal benefit, rather than for the benefit of those whose interests they are supposed to be looking after.

Whose interest comes first and foremost? Is it the CEO him or herself, employees, investors, customers, suppliers, communities, the general public/society? Are CEO’s supposed to weigh the greater good when making decisions, or should the emphasis be based on the notion of protecting the rights of the individual or a particular group, such as investors, or should they make decisions based on the Aristotelian concept of best fit? Are they forever relegated to a balancing act, compromising and leaving everyone somewhat less than fully satisfied?

What is an appropriate frame of reference upon which we can evaluate a CEO, or any manager within an organization regarding their morality or ethics? And without a framework to build upon, how do we judge the morally correct and incorrect things to do? The different answers that are likely to come from answering the questions posed suggest that evaluating the morality of a CEO is difficult, since there is no commonly agreed to framework to base an understanding upon. What is the right thing to do, what is the wrong thing – well it depends on who you happen to be talking to and their point of view.

We could likely all agree that CEOs should not commit murder or rape for instance, but that is not what we are talking about here. We are after much more subtle morality issues, like when is it ok to layoff or fire people, to renege on a contract, to off-shore jobs, to close a plant, to pay a bribe or do special favors, to pick cheaper product or production options that might increase the likelihood of death or disaster, or perhaps simply the durability of a product, etc.

There are a number of approaches one could take in evaluating morality, and at least three major ones come to mind immediately. First there are the concepts of distributive justice, which attempts to be independent of organizational context. These include the notions of utilitarianism (managing for the greater good), libertarianism (a don’t tread on me kind of approach), meritocratic philosophy (giving everyone an equal starting point, then rewarding performance), and the difference principle (acknowledging that the starting points will never be equal, so provide equal opportunity). Other approaches are imbedded within the context of the organization itself and would include attainment of triple bottom-line goal metrics, which are ratings of organizational performance on people, planet and profit. And there is the adherence to an organizationally defined value system defining what the organization stands for and how it will treat its’ customers, employees, communities, suppliers, the planet etc.

We could start by looking at the stakeholders to which CEO’s have a legal obligation. They have, for instance, a fiduciary responsibility to the owners or shareholders who hired them. They also have statutory obligations and regulations that must be fulfilled. Sometimes there is a contract with the employees of the organization that must be followed. But legal obligations are thoroughly grounded in the mores of our society at one point in time, as legality is a shifty substance, with different interpretations over time and geography. It used to be legal in the USA for instance to dump raw wastes into rivers and streams, even if it was never an environmentally sound practice. And of course there are businesses that have moved some of their operations to third world countries where it is still legal to dispose of such waste, circumventing current USA environmental laws, enabling them to operate in a more profitable fashion. Is that moral? If it is not ok to dump the raw waste in the USA, why is it ok to dump it elsewhere?

From my own research over the years it is very apparent that the interpretation of morality or ethical behavior within a corporation varies by position and level within the organization itself. Blue collar workers are much more likely to classify reductions in benefits, salary freezes, layoffs, and a lack of control over schedule as not ethical. Among professionals the interpretation of ethical or moral behavior tends to revolve around doing what you committed to doing, promises made and not violating agreements and contracts. More senior managers will view it as adhering to legal standards. So adding to the difficulty of determining performance on morality is the various interpretations of moral and amoral behavior even within the same organization with everyone creating their own framework.

Looking at owners or shareholders, customers, employees of various levels, communities’ etc. one might rapidly come to the conclusion that an obligation to one group or subgroup, and maximizing their interests, may not be in the best interests of another group. One can only maximize a group’s benefit at the expense of others, a zero sum game.

As an aside: Those of us who are of the belief that the planet exists simply to provide for humans might argue the point, but the argument could be made that this planet is the bearer of many species, all of whom could theoretically lay claim that they have as much right to exist as humans do, if they could so argue. And so our obligation to the planet is not merely an obligation to diversity of species for the reason that said diversity benefits mankind, or an obligation to preserve the planet for future generations of humans, or that by taking care of our environment we can maintain our population, or create a healthier environment for ourselves and our children. Our obligation to Earth runs much deeper than long-term exploitation for human success. As the species that has made it to the top of the food chain, able to kill or exploit any other species that resides on this planet at will (with the exception of some bacteria, viruses and assorted others), we have an obligation as planetary caretaker to look after the Earth for the planet’s sake itself.  We are not mere residents of this planet. We have the power to shape this planet and with great powers come great responsibilities. Playing this out, just as you now can be charged with crimes against humanity for gross violation of human rights, in the future perhaps you could be charged with crimes against the Earth for the gross violation of planetary standards.

One approach that might be used in evaluating the morality of the CEO includes their adherence to achieving goals on what is known as the triple bottom line (TBL), which has been described as people, planet and profit. The people component is how employees are treated, the planet component is operating the business in a sustainable, environmentally friendly fashion and profit is furthering the value of the organization and the money that is made for the investors and owners of a business. If the organization achieves it goals in each of these three areas, it could be stated that the organization and hence the CEO is operating with high ethics or morality. But of course that depends on exactly what goals are set in each of the areas.

Another approach that some organizations have used revolves around the creation of values statements around how they are going to behave as an organization and how they expect their people to behave. These definitions are usually defined by a senior group within the organization and take shape based upon the individual values systems of the senior management team. An organization’s stated values provide a common definition and understanding of what is morally acceptable behavior and what is not. These value statements provide a framework. Organizations with these frameworks in place, I have found, are better equipped to quickly adapt and address new and challenging conditions that arise, since a common understanding is in place regarding what would be acceptable courses of action, or not, when addressing the challenge.

The bottom line, so to speak, at the moment is that CEO morality is an exceedingly difficult and slippery concept to grab hold of and tends to most often be measured by a “knowing it when I see it” mindset, rather than as a rigorously measured or defined construct, but adding rigor, a common framework to the construct can be of great value to the organization and to those constituents who interact with it.


© 2010 by Jeffrey M. Saltzman. All rights reserved.

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Written by Jeffrey M. Saltzman

November 4, 2010 at 9:04 am

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