Ethical leadership is essential, but not enough
by Prof Deon Rossouw | Published on 25 January 2018 for The Ethics Institute monthly newsletter, along with a press release version
The need for ethical leadership is now much clearer and urgent than it has ever been since the dawn of the new South Africa. Unfortunately, it took massive corruption – in which both state-owned entities and the private sector burned their fingers and reputations – to elevate the importance of ethical leadership.
 “It is not only the ethical tone at the top that matters, but also the ethical mood in
the middle, and the ethical groundswell on the ground.”
Ethical leadership is required to turn around the dysfunctional organisations that have fallen into disrepute. It is encouraging to see how the new leadership in the ANC under Cyril Ramaphosa is emphasising the need for ethical leadership and displaying a commitment to root out corruption. These ethical aspirations have already resulted in important changes: bad apples like Richard Mdluli and Anoj Singh are no longer in their positions, the Asset Forfeiture Unit of the NPA has begun seizing looted state assets, and both the board and management of the long-suffering Eskom have been replaced.
Meanwhile, in the private sector, the role of ethical leadership in ensuring the success and sustainability of organisations is now also being duly recognized. The beleaguered KPMG – accused of being complicit in state capture and in covering up questionable practices in SARS – has replaced the leaders under whose watch these unethical practices occurred. Furthermore, they have appointed, for the first time, independent directors to the governing body. The first independent chairman of KPMG, Wiseman Nkuhlu, has made it clear that ethics will be put first in the attempt to restore the integrity of not only the firm, but also of the accounting profession whose reputation has been severely tainted.
Ethical leadership thus matters. It is essential in transforming organisations affected by scandal and corruption into functional and reputable entities. Yet, as essential as ethical leadership is, it is not enough on its own. More is needed.
Clarity about standards
The intention of building an ethical organisation can only be turned into reality if there is clarity about the ethical standards that will guide the organisation. Much like the Constitution offers the ultimate benchmark for South Africans to refer to in matters of rights and conduct, an organisation needs to offer a similar reference point to guide the decisions and behaviour of its own people. The board and management of affected organisations, in particular, need to spell out their ethical vision in a way that is easy to understand and remember. This can take the form of a statement of ethical intent, or an ethics manifesto, that is supported by a set of straightforward ethical values and conduct standards that leave no doubt as to what is being encouraged. It is essential that all members of the organisation be familiar with the ethical vision, values and standards of the organisation, and this can only be achieved through ongoing communication of, and emphasis on, these standards. This applies to suppliers and business associates as well, otherwise they might undermine the organisation’s attempt to restore its ethical integrity.
The right people
Ethical leaders should ensure that the wrong people get off the bus, and that the right people get on (or remain on) the bus. If we glance at the new board of Eskom, for example, this certainly looks like a bus that has a good chance of taking the right direction. Persons who were part of the previous shenanigans in the organisation should be brought to book, which might mean demotion or departure, depending on the seriousness of their involvement in wrong-doing. In a similar manner, those who resisted and fought against the previous wrong-doing should be recognized for their loyalty and commitment to the best interest of the organisation. It is vital that persons in key positions on all levels of the organisation are seen to support the ethical vision and values. It is not only the ethical tone at the top that matters, but also the ethical mood in the middle, and the ethical groundswell on the ground. In fact, there are few things more precious to an organisation than those people throughout the levels who not only personify its stated ethical values, but who can also persuade others to do the same.
Consequence management
An organisation on the road of return to integrity needs to demonstrate that it is serious about living its ethical standards by ensuring that there are consequences for both adherence and non-adherence to them. In most instances, organisations interpret consequence management in a retaliatory manner: for example, they show ‘zero tolerance’ to transgressions and transgressors of their ethical standards. Although it is obvious that transgressions should be dealt with unambiguously to prevent reoccurrence, it is less obvious that such an approach can cultivate a culture of fear-based compliance, where the motivation to uphold standards is purely a desire not to be punished. Such a culture is not conducive to the appropriation of the ethical values and standards that the organisation wishes to promote. Thus, it is important that the negative ‘stick’ part of ethics consequence management is complimented by the positive ‘carrot’, and any persons who exemplify the organisation’s ethical standards should be recognised. It is only through the continuous reinforcement of the right ethical values and behaviour that the organisation can – eventually – become a place where people do the right thing even when no one is watching.
Versions of this article were published in Business Brief and Money Marketing.
Prof Deon Rossouw is CEO of The Ethics Institute. He holds a Doctorate in Philosophy from University of Stellenbosch.