Ethical leadership in the boardroom

As the corporate landscape evolves, and organisations strive for success in an ever-changing world, the importance of instilling a leadership ethic at all levels becomes increasingly paramount. Contemporary boards are tasked with fostering a culture of leadership that goes beyond the executive suite, yet they often face challenges in doing so. This article explores these challenges and presents insights for modern board members to overcome them, using a recent historical example to illustrate a path to successful leadership transformation.

The Challenge of Instilling a Leadership Ethic

Contemporary boards are confronted with several hurdles when instilling a leadership ethic within their organisations:

1. Cultural Inertia: Many organisations have deeply entrenched cultures that resist change. Inculcating leadership values and ethics can be met with resistance from employees who are accustomed to the status quo. Conversely, this can be protective – a strong cultural bias towards ethical behaviour can stop unethical behaviour before it gains traction.

2. Short-Term Pressures: The relentless pursuit of short-term results can undermine the long-term focus necessary for a robust leadership ethic. Boards often grapple with the tension between immediate gains and sustainable leadership development; a tension often created when the board’s requirement to ensure shareholders returns are maximised conflicts with the requirement to ensure future shareholder’s value is protected.

3. Leadership Skill Gap: Identifying and nurturing leaders at all levels is challenging. Not all employees desire to assume leadership roles, and organisations may lack comprehensive leadership development programmes.

4. Compliance vs. Values: Boards often prioritise compliance and risk management over ethical leadership. The focus on avoiding legal issues can overshadow the importance of fostering an ethical culture. Too often, compliance is easy and safe; regulations dictate decisions and replace strategic planning, which is unstructured and difficult.

A Recent Example: The Boeing 737 MAX

The Boeing 737 MAX crisis is an illustrative example of the challenges faced by contemporary boards in promoting a leadership ethic. This crisis revealed a series of deficiencies in Boeing's leadership culture that ultimately led to two tragic crashes, resulting in significant loss of life and immense damage to the company's reputation.

Boeing's board and senior leadership were grappling with challenges that are common in many large organisations. They faced immense competitive pressures, had short-term financial goals, and grappled with a complex regulatory environment. However, they also encountered issues specific to their leadership ethic:

1. Overemphasis on Profitability: Boeing was heavily focused on delivering a competitive aircraft. However, this led to shortcuts in the aircraft's development process, ultimately compromising safety for short-term financial gains.

2. Ineffective Communication: There was a lack of transparent communication between the technical teams, regulators, and management. Critical safety information did not flow as it should have, indicating a breakdown in the leadership's duty to prioritise safety and ethics. Arguably, it also highlights the board’s failure in their duty of oversight—itself a symptom of ineffective communication.

3. Insufficient Accountability: The board was slow to hold senior executives accountable for the failures related to the 737 MAX, and the lack of a robust ethical leadership culture allowed these issues to persist.

Overcoming the Challenges

To overcome the challenges of instilling a leadership ethic, contemporary boards could consider the following strategies:

1. Leadership Development Programmes: Boards should invest in comprehensive leadership development programmes that identify potential leaders and provide them with the necessary skills and values. Directors should also remember that their own leadership skills will set the tone for the company, and that their own professional development as leaders must not be ignored.

2. Clear Ethical Frameworks: Establish clear ethical frameworks and codes of conduct that guide decision-making at all levels of the organisation, emphasising integrity, transparency, and accountability. As a fish rots from the head, too often a company’s ethical tone is set by the board and the executives; this is where the framework is most important.

3. Balancing Short-Term and Long-Term Goals: Boards must strike a balance between short-term profitability and long-term sustainability. Ethical leadership prioritises the latter, and boards should ensure this is reflected in the company's mission and strategy.

4. Effective Oversight and Accountability: Implement robust oversight mechanisms, including regular evaluations of leadership's adherence to ethical principles. Boards must be willing to hold executives accountable for ethical lapses. This is the highest priority for a board, and their own accountability is the centrepiece of effective oversight.

Conclusion

Instilling a leadership ethic in contemporary organisations is a complex and ongoing challenge. The Boeing 737 MAX crisis serves as a stark reminder of the consequences when leadership values are not prioritised. However, it also offers valuable lessons for boards and organisations seeking to navigate these challenges successfully. By investing in leadership development, fostering a culture of ethical decision-making, and balancing short-term pressures with long-term vision, boards can build organisations that thrive in today's dynamic world while upholding the highest ethical standards. In doing so, they not only protect their organisations but also contribute to a healthier, more sustainable corporate environment.