The heart of leadership is ethics

Professor emeritus Dr. phil., Dr. h.c. Heidi von Weltzien Hoivik (BI Norwegian Business School) was asked to give a presentation at the worshop "Which Future for Business Ethics Research?" organized by EBEN Italy on the 25th of last September. She chose as her title: "The heart of leadership is ethics". The content of her speech is summarized in the following dialogue.

You have chosen to call your presentation “The heart of leadership is ethics”. How do you define leadership and ethics?

I chose this title on purpose, because I wanted to indicate from the very beginning that I do not see leadership separate from ethics. Ethics is an integrated part of leadership.

Let me explain. When you look into academic research on leadership in general, you will find extensive publications. Some are concerned with how organizational goals can be achieved while others are trying to explain the difference between leadership and management. Managers are primarily interested in achieving business objectives, while leadership is more about vision, innovation or creativity, and how to deal with employees as human beings. But all research views leadership in an instrumental way, a means to an end.

Having said that, it is not always easy to distinguish leadership and management one from the other. The distinction seems artificial.

Ethics, on the other hand is often implied or presumed when talking about effective or good leadership, since it is about knowing the right thing to do and doing it.

Joanne B. Ciulla in 1998 published a very important book with articles about the missing link and called it “Ethics: The Heart of Leadership”. Being an ethicist she was looking hard to find evidence.

How about leadership theories? Are there any theories you can call normative leadership theories?

Two leadership theories come into mind. One is “servant leadership” developed 1977 by Robert K. Greenleaf and the other is “transforming leadership” by James McGregor Burns, 1978. Burns theory rests on the normative assumption that there is an innate moral relationship between leaders and followers that rests on shared values.

What is your understanding of moral or ethical leadership?

[This reflection was my contribution to a paper of a colleague of mine, but was not credited] The importance of moral leadership has over time been met with varying degrees of acceptance in the West. In 2000 Gilbert W. Fairholm in his work Capturing the Heart of Leadership attempted to define leadership by pointing out that there is a spiritual dimension of leadership. Therefore, when linked to spirituality, moral leadership has been viewed as the means by which religious beliefs impact leaders, the workplace and even society.  The link to religion in the Western world often has placed morality and even wisdom into the private sphere, making it implicit and thus excluding it from being discussed openly as relevant to management and business altogether. (Collier and Esteban 2000, Painter-Morland 2008, Pruzan 2011). People have shied away from this perception.

On the other hand we know of leaders who freely admit that they are driven by a more intrinsic and contagious commitment to values (Bouckaert 2011).  And here we find ‘the missing link’, the normative core, or the link to ethics or morality in various philosophical traditions. However, this kind of thinking, as said, has not fared too well in a world of business or at business schools where rationality, efficiency and the pursuit of material goals have dominated economic thinking both in theory and practice. Kenneth Goodpaster ((Goodpaster 1994) labels this ‘teleopathy’ , a form of “goal sickness” (p.54) which leads to a dispassionate posture, also referred to  as a detachment of head from heart. 

What can be done to build a bridge between – moral leadership and economic rationality? Are there universal features? How about virtues?

Martha Nussbaum’s (Nussbaum 1993) reading of Aristotle gives us the following insight, which describes moral leadership’s universal features: “…Aristotelian virtues, and the deliberations they guide, unlike some systems of moral rules, remain open to revisions in light of new circumstances and new evidence. In this way, again, they contain the flexibility to local conditions that the relativist would desire – but, again, without sacrificing objectivity. Sometimes the new circumstances may simply give rise to a new concrete specification of the virtue as previously defined. All general accounts are held provisionally, as summaries of correct decisions and as guides to new ones”. (p 259 /260 ). In other words moral leadership is not based on a set of for ever defined rules, but is dynamic, flexible and part of a continuous learning process, but not relativistic. Interestingly, this understanding is close to what we also find in Confucianism and Daoism.

Did not Adam Smith already say something about how man should not only think of himself but have the interests of others in mind?

Yes, Adam Smith (Smith 1975 (1790)) in his Theory of Moral Sentiment offered the following advice with regard to virtue: “man, ought to regard himself, not as something separated and detached, but as a citizen of the world, a member of the vast commonwealth of nature” and “ to the interest of this great community, he ought at all times be willing that his own little interest should be sacrificed” (p.140). Clearly for Adam Smith prudence goes well beyond self-interest maximization even though it is helpful for the individual, but “humanity, justice, generosity, and public spirit, are the qualities most useful to others” (p. 189). In other words, leadership is not possible without ethics. We can also call it wise leadership

Does this not really mean that ethical or wise leadership is not only a characteristic of willing individuals, but also a prescription of how this can be accomplished?

I can draw up a rather simple comparison: Being a moral leader and doing, acting with moral leadership are one. You cannot separate them. Below is a brief illustration:

The resulting organizational culture, imbued with moral leadership, enjoys the following :

• Understanding of the interdependence with stakeholders
• Learning environment
• Respect and trust
• Cooperation
• Responsibility and accountability

In addition, quite often one will find that in such a culture feedback is welcome , and learning from mistakes is encouraged. Employees and leaders in such an environment nurture a culture of seeing the other and of listening. Involvement and teamwork are common features. The resulting organizational energy is creating further development of individuals together with the respective organization.

This sounds like an ideal organization. Is it really possible to find examples?

Yes, there is plenty of evidence. However, when looking at concrete cases one often finds that initially there are sacrifices involved in order to achieve a long- term goal. Something has to give before something else can be achieved. Here is one example from my own research:

Stormberg A/S (Hoivik and Mele 2009) is a Norwegian Clothing company producing and selling outdoor and sports clothing, founded in 1998 by Steinar Olsen. In 2012 the annual turnover was NOK 286 million. It manufacturers all its clothes in 14 factories in China, mostly in Shanghai and Ningbo but the designs of the collections are carried out in Norway. In Norway Stormberg has 50 stores and plans to open another 14 before the end of 2013.

From its very beginning, Stormberg had a clearly formulated value based mission statement –“vi bryr oss” – (we care), which has recently been extended to “vi skal gjøre verden til et bedre sted” (we want to make the world a better place). The four values chosen for the company are: honesty, courage, including, sustainable. In order to give work a deeper meaning, Olsen´s strategy from the very beginning has been to involve his employees in all major decision-making processes:

“My employees and I don’t believe we can change the world. We know we can change the world, or at least a small part of it. We know that through our caring, several hundred workers in Chinese factories have a better day at work, we know that by caring about safety in the children’s clothing we produce, the accident rate in daycares has been reduced. We know that by caring for each other in Stormberg we have created a pleasant and safe workplace for everyone, including those who are otherwise on the outside.” ( interview with author)

Talking with Mr. Olsen, one arrives at the conclusion that he sincerely believes in people and in their ability to contribute with their own unique resources if only given the opportunity. Olsen’s sense of caring is fundamental to his notion of understanding ethical leadership and social responsibility. For him “social responsibility” in companies is fundamentally simple. It is about caring, about having the courage to do things in a simple yet different way” (Hoivik and Melé 2009). One example is his hiring policy, where he involves the employees in the recruitment and training process of former prisoners and drug addicts. This has had an impact on the organizational culture. This practice helps to create, build and strengthen positive capacities in others as well. The value added to the organization is heightened awareness of the need to care and a greater capacity to dare to be different. It fosters a shared set of understandings of how ethics and business can work together both inside and outside the company.

Olsen’s view is in line with the Norwegian traditional understanding that business organizations need to engage in the development of society in which they want to do business, since business is influenced by the society in which it operates, and that societal problems often affect the efficiency and effectiveness of business activity (Freeman and Vea November 2003). Consequently, Olsen’s view, based on justice and care, seems oriented towards the common good, yet understanding the common good heuristically as the shared good in a free society.

Although in some sense Stormberg’s moral leadership approach developed by its visionary founder, Mr. Olsen, he has been able to pass on his passion and motivation to the employees by creating an organizational value based identity. He has been able to transfer and embed his motivation into the company and the employees by caring for employees and adopting a participatory decision making processes, thus sharing responsibility with the employees. Thus the company has both a top-down and bottom-up management approach with a focus on a consensus.

The second example is from the US.:

The Whole Foods case involves John Mackey, its visionary founder and CEO. Starting with only $45,000 he developed the company within 30 years into a business with over 36,000 employees, $5 billion in annual revenues, and a market capitalization of more than $8 billion. According to Sisodia et al (2007) Mackey, who is a practicing Buddhist, also draws inspiration from Adam Smith’s work The Theory of Moral Sentiment and his thinking that human nature is not solely driven by self-interest: values such as sympathy, empathy, friendship, love and the desire to do good are consistently found to be present in the actions of ethical organizational members. Mackey formulated this in the following manner:

“At Whole Foods we measure our success by how much value we create for all six of our most important stakeholders: customers, team members (employees), investors, vendors, communities and the environment ... our potential as human beings, is to take joy in the flourishing of people everywhere.... To extend our love and care beyond our narrow self-interests is neither antithetical to our human nature nor to our financial success. Rather, it leads to the fulfillment of both ... The ideas I am articulating result in a more robust business model than the profit maximization model that it competes against... These ideas will triumph over time, not by persuading intellectuals and economists but by winning the competition test of the marketplace.” (quoted in Sisodia, p. 264)

In 1997 Whole Foods published its Declaration of Interdependence, the purpose of which is to unite stakeholders by highlighting the importance of each group.

As stated on their website - wholefoods.com (here slightly rewritten):

Balancing the interests, desires, and needs of stakeholders ... requires participation and communication by all our stakeholders. It requires listening compassionately, thinking carefully, and acting with integrity. Any conflicts must be mediated and win-win solutions found. Creating and nurturing this community of stakeholders is critical to the long-term success of our company.

Implicit in this Web statement of the company’s ‘Declaration of Interdependence’ are aspects of moral leadership and underlying values that reflect the Buddhist perspective of the founder. For example, ‘interdependence’ is the same as the Buddhist belief in the codependent arising of all beings and phenomena, ie. that everyone is found to be interdependent when one traces the network of causes and effects. Also, the emphasis is on caring and compassion for all relevant stakeholders and involving them actively in the direction and policies of the firm. Every five years the company brings together representatives of each stakeholder group to collaborate in designing the next 5-year strategic vision to shape the future of the company. This policy is highly reminiscent of and similar to the Judeo-Christian injunction, “To love one another as oneself.” [This section was written by me for a paper of a colleague of mine and was not credited.]

The third example deals with how ethical leadership is put to the test when dealing with an ethical dilemma. Bill George, the CEO of a the well known US company, Medtronic, belonging to the health industry, found out that some “promotional funds” had ended up in Swiss bank accounts of its customers. No doubt, business was doing well, and according to their European manager they were doing what everyone else did. However, this was not in line with the mission statement of the company. It stated that the company was committed to “ be recognized as a company of dedication, honesty, integrity, and service”. (Medtronic.com web) The manager involved was fired and “slush funds” were no longer used.

What are new challenges for business in a more globalized world ? Can being moral and moral action work together to create new business?

The key words I have chosen for this reflection are: innovation, intuition, imagination, attention. These concepts are discussed in many different fields of inquiry, such as psychology, social sciences, humanities and even neurobiology. However little has been written about the normative core. Let us review the following:

Innovation is associated with renewal but also with creating something different, even new. (Facebook, Twitter, are very recent examples)

Innovation requires seeing the whole and understanding how human action has an impact on others, including the environment. This is the moral imperative of innovation. Companies will be asked to document as to where they stand.

Intuition is linked to feelings, empathy, social and moral intelligence which combined with acquired knowledge can yield a different perspective. An example here is social entrepreneurship. Other examples are micro loan schemes, the cheap use of mobile phones in developing countries in order to further small business initiatives.

Imagination is creating an image, a picture of something new. Moral imagination is part of it. For example, in managerial decision making, moral imagination entails perceiving norms, social roles, and relationships entwined in any situation. Developing moral imagination involves heightened awareness of contextual moral dilemmas and their mental models, the ability to envision and evaluate new models that create new possibilities. It requires the capabilities to reframe the dilemma and create new solutions in ways that are novel, economically viable and morally justifiable. (Werhane, 1999, 93)

Attention is linked to understanding the nature and inter-relationship of different elements. For example, CSR worldwide attempts to improve the relationship between business and society, by seeking to understand how the two are interlinked and interdependent. When attention is paid to what responsibility implies, companies can manage these difficult relationship in a sustainable manner. During the last 15 years more and more companies have understood the unique value of a sustainable stakeholder relationship.

All the above are in essence elements of moral leadership and moral creativity, since all require seeing how the “others”, individuals, organizations, societies and the environment are being impacted by business actions. Corporate Social Responsibility, we would claim, requires moral creativity. The multiple challenges which businesses face in a global environment have made it mandatory to further develop our thinking and reassess previous assumptions of responsible business. Philanthropy is no longer sufficient, neither is risk management. Time has come to foster a more normative creative approach that is dynamic, continuous, progressive and innovative. Creative value management depends on paying attention to all values that are at stake.

A very challenging and rather innovative approach is suggested by Wayne Visser (2011). He views the development of CSR, and CSR leadership as an ongoing process, requiring both creativity and moral conviction. The moral conviction in part rests on the notion that business survival depends on a continuous striving for sustainability. Does this notion not remind us of our previous discussion of creativity as a moral action? This requires leadership, moral leadership.

To summarize the main points of my presentation, I offer two elements to what I view as ethics, being the heart of leadership:

• Being – informed by values, emotional and reasoning capability, caring, visionary, proactive and innovative
• Doing – informed by relationship with all stakeholders, wanting to achieve the best for all and the common good

Leading an organization, a small or a large business or a major international corporation requires both being and doing of the leader and his followers where ethics is an integrated part. The time for defending amoral business – business neutral to ethical norms - is definitely over. Leaders who do not understand the core or heart of leadership, being ethics, will not be able to develop sustainable business in the long run.

Please give us your thoughts on the future of business ethics.

Let me start with a focus on teaching business ethics. My experiences from 30 years of teaching have convinced me that the best route to take is to integrate discussions of ethical dilemmas in all disciplines. There is not a business area taught at a business school where ethical cases do not happen. The greatest challenge, however, is helping the faculty to become comfortable discussing ethical decision-making.

Furthermore, it is important to use real cases, preferably from one’s own country, because examples – for example from the US - are often less relevant to the local environment, unless of course they deal with global issues. For example, the legal system of the US is different from Europe, a fact that is often overlooked when discussing cases.

The goal when teaching business ethics is to teach students to learn to think differently. They must leave the “economic man “ paradigm aside, replacing thinking solely about efficiency and profit maximization with a focus on long- term goals, sustainability and responsibility for the greater good. This also entails accepting that “this involves costs”, both financial and personal when making tough choices.

The second challenge is to involve leadership at a business school. One has to convince deans who are always interested in developing a relevant curriculum to attract business students. Business schools and businesses have to rethink how they “do business “in a more global context. It is wise to start this process at a business school.

Kofi Anan said in conjunction with the launch of the Global Compact:

“Without the private sector, sustainable development will remain only a distant dream. We are not asking corporations to do something different from their normal business; we are asking them to do their business differently." Kofi Annan, UN Secretary General (Global Compact 1999)

Allow me a final comment: The focus on Corporate Social Responsibility since 2000 was a promising route both for research and teaching. No doubt, business led the way and researchers followed suit.

However, there are pitfalls: If the focus is on reporting numbers (using accounting principles), there is no real change.

Change and development are dynamic processes, which must be captured in a narrative, not in statistics. Again, the mind set has to change. Only then progress can be achieved.

Additional references:

Bouckaert L., (2011), Spirituality and Economic Democracy, in Zsolani L. (eds.) Spirituality and Ethics in Management, Springer, Dordrecht.

Collier J. and Esteban R., (2000), "Systemic Leadership: Ethical and Effective",

The Leadership and Organizational Development Journal, vol. 21, n. 4, pp. 207-215.

Freeman R. E. and Vea J. M., (November 2003), “A Stakeholder Approach to Management: The State of Art”, Presentation to Flemish Netwok for Business Ethics, Levian.

Goodpaster K. E., (1994), "Work. Sprirituality, and the Moral Point of View." International Journal of Value-Based Management, vol.  7, pp. 49-62.

Hoivik  von Weltzien H., (2002), Accessing, managing and sustaining moral values in organisations. A case study, in Hoivik  von Weltzien H. (eds.), Moral leadership in action, Edward Elgar, Cheltenham.

Hoivik von Weltzien H. and Melé D., (2009), "Can a SME Become a Global Corporate Citizen? Evidence from a Case study", Journal of Business Ethics, vol. 88, pp.  551-562.

Hoivik von Weltzien H., (2011), “How can SMEs in a Cluster Respond to Global Demands for Corporate Responsibility”, Journal of Business Ethics, vol. 101, pp. 175-195.

Hoivik von Weltzien H., (2011), “Embedding CSR as a  learning and knowledge creating process: the case for SMEs in Norway”, Journal of Management Development, vol. 30, pp. 1067-1084.

Ihlen Ø. and Hoivik von Weltzien H., ( 2013), “Ye Olde CSR: The Historic Roots of Coprporate Responsibility in Norway”, Journal of Business Ethics, vol. 127, n.1, pp. 109-120.

Nussbaum M., (1993), Non-Relative Virtues: An Aristotelian Approach, in Nussbaum M. and Sen A. (eds.), The Quality of Life, Clarendon Press, Oxford.

Painter-Morland M., (2008), “Systemic Leadership and the Emergence of Ethical Responsiveness", Journal of Business Ethics, vol. 82, pp. 509-524.

Pruzan P., (2011), Sprirituality as the Context for Leadership, in Zsolani L. (eds.) Spirituality and Ethics in Management, Springer, Dordrecht.

Sisoda R., Seth J. and. Wolfe D.B, (2007), Firms of Endearment. How World-Class Companies Profit from Passion and Purpose, Prentice Hall,  Upper Saddle River.

Smith A., (1975, ed .or. 1790), The Theory of Moral Sentiment, Clarendon Press., Oxford.

Visser W. (2011), “The Ages and Stages of CSR. Towards the Furture with CSR 2.0”, CSR International Paper Series. 3.

Visser W., (2011), “The Nature of CSR Leadership. Definitions, Characteristics and Pardoxes”,  CSR International Paper Series, 4.         

Werhane P., (1999), Moral Imagination and Management Decision Making, University Press, Oxford.

Dr. phil., Dr. h.c. Heidi von Weltzien Høivik is professor emeritus of Business Ethics and Leadership at the Norwegian School of Management. She is a Fellow of the Harvard Executive Program of the Institute of Education Management, and a Fellow of the Harvard Program of International Negotiations. She has served as executive member of the Caux Round Table, of Transparency International Norway and of the International Society for Business, Ethics and Economics (ISBEE). For eight years she was president of the European Business Ethics Network (EBEN) and was honored for her work with an honorary doctorate degree. Among her publications her book Moral Leadership in Action, Building and Sustaining Moral Competence in European Organizations (2002) stands out.

She still works as a consultant to business organizations and is a sought after speaker at international conferences.

She can be reached by e-mail: Heidihoivik [at] me.com.