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Make America Ethical Again

Ethical breaches are all too commonplace in leadership today--even expected. It is especially disturbing in the public sector, where principles like truthfulness, public service and transparency are eroding to such a bewildering extent in the Trump Administration. Just one result is the recent conflict between officials in the White House and the Office of Government Ethics, which led to the disclosure of ethics wavers. It seems we are on a path to ever lower standards of ethical behavior at the highest levels of our government.

In the private sector, bad ethics are bad for business. Consider Volkswagen, which in 2015 soared to become the best-selling automaker in the world. Their ethical faux pas led to over $20 billion worth of settlements and devastating damage to their brand and value. Their fraudulent emissions will have air quality and human health effects for years to come. And, imagine what it would feel like to work for Volkswagen right now.

As an executive coach, I always encourage clients to be ethical. My reasons are not just moral: it turns out ethical leadership is more effective than unethical behavior. It creates healthier, more productive organizations that are better able to achieve their goals.

Research supports this. For example, it’s been proven that what people want from their leaders —more than anything —is honesty. Jim Kouzes and Barry Posner, authors of The Leadership Challenge, have found that honesty trumps all other qualities, even competence, intelligence, and vision. This is based on extensive research, spanning 35 years and a diverse range of industries and countries.

A culture of honesty and trust leads to a striking array of positive outcomes.  In his excellent Havard Business Review article, “The Neuroscience of Trust,” Paul Zak points out, “Employees in high-trust organizations are more productive, have more energy at work, collaborate better with their colleagues, and stay with their employers longer than people working at low-trust companies. They also suffer less chronic stress and are happier with their lives, and these factors fuel stronger performance.”

Another way to think about ethics is to ask how well our organizations contribute to the long-term well-being of society and the planet. That is, sustainability is a surrogate for ethics. So, how do sustainability efforts impact organizational success?

Here again, research shows that strong ethics are good for performance. In 2015, Oxford University and Arabesque Partners conducted a meta- analysis of 200 sources and found that strong sustainability and ESG practices result in better operational and stock price performance and lower cost of capital.1

A similar 2015 report of over 300 sources from IO Sustainability and Babson College showed that “Corporate Responsibility (CR) practices have great potential to deliver financial returns on investment (ROI) as well as related business and competitive benefits.”2

By contrast, there appears little if any evidence supporting the opposite (and commonly held) view that being loose with ethics makes it easier for companies to be profitable.

1 Clark, Gordon L., Feiner, Andreas, and Viehs, Michael, From the Stockholder to the Stakeholder: How Sustainability Can Drive Financial Outperformance (March 5, 2015). Available at SSRN: https://ssrn.com/abstract=2508281 or http://dx.doi.org/10.2139/ssrn.2508281

2 Rochlin, Steve, Bliss, Richard, Jordan, Stephen, and Kiser, Cheryl Yaffe, Project ROI Report: Defining the Competitive and Financial Advantages of Corporate Responsibility and Sustainability (July 9, 2015). Available at: http://www.issuelab.org/resource/project_roi_report_defining_the_competitive_and_financi al_advantages_of_corporate_responsibility_and_sustainability

Fortunately, the vast majority of leaders have high ethical standards. But given the correlation between ethics and success, one wonders: Why do some leaders fail to exhibit ethical behavior? Perhaps they do so because they seek personal gain, or short-term gain for one group rather than the long-term good of the whole.

Or in some cases, maybe they just don’t know any better.

It’s important that we hold leaders, including President Trump, to high ethical standards. As a society, we cannot become complacent and accept poor ethics as the norm, in the public sector or the private. The success of our institutions and our planet depend on it.

Eric Nitzberg is the founder of Sierra Leadership, an executive coaching and leadership development firm that helps mission-driven, socially conscious business leaders achieve their goals. He can be reached at eric@sierraleadership.com.