Three Keys To Staying Ethical In The Age Of Madoff

By Umaimah Mendhro and Abhinav Sinha

Lessons from executives who kept themselves clean in Pakistan and India, where corruption is the rule.

What separates a Rod Blagojevich from a Patrick Fitzgerald? A Bernard Madoff from a Warren Buffett? What makes such people, at either extreme, so different from any of us? Everything--and not too much.

As citizens of Pakistan and India who are students at Harvard Business School, we spent a considerable amount of time over the past several months interviewing and drawing lessons from 12 leaders in Pakistan and seven in India who are carrying the torch of ethical business behavior. Come factory shutdowns, forced resignations or life threats, they've been standing up against corruption in environments where corruption is the rule.

Conventional wisdom and our own preconceptions hold that a mix of many complex, research-worthy characteristics and influences separates the highly moral from the corrupt. What we found suggested, to the contrary, that it all comes down to three simple things: honesty in use of language; insistence on proper behavior, even ahead of proper values; and a refusal to allow for gray areas.

The highly moral leaders we interviewed, whose colleagues think of them as somewhat crazy and unreasonable, have created personal identities, personal brands of sorts, for always standing up for the right thing. We call them "ethical mavericks." They are moral absolutists. To them, wrong is not defined by context, bribery not by the amount of money involved, and corruption not by how seemingly innocuous an act may be.

One of them, the founder and chief executive officer of a family-owned private business in Pakistan, had to face a formidable client who would not sign a contract until he was "paid a commission." Unwilling to give in, this CEO ended up losing more than 95% of his business and running up losses in the millions of dollars over two years.

He didn't fire a single employee, though. Nor did he try to evaluate the price his organization would have to pay for not being corrupt. And in time, he not only turned his company around but used its down period to train all his top managers to enter a new, and now highly profitable, line of business.

These ethical mavericks all use language to achieve clarity. When we asked the CEO of one of the largest retail businesses in Pakistan why no one before him had raised a red flag about the questionable practices carried out by his company, he said it was because no one thought to call what they observed "unethical" or "wrong"; they just called it "aggressive selling." In other words, corruption remained unquestioned not because people were malicious or greedy or poor but because corrupt behavior came wrapped in smooth, palatable jargon.

The CEO of a major software company in India not only clearly identified corruption at an individual level but also ensured that he communicated it to his entire organization. He not only stood up against corruption at different times during the evolution of the company but also let his employees know the costs the company had borne because of the stands it had taken. All of his employees are shown interactive videos about real, individual experiences.

The ethical mavericks also let their life experiences reinforce their values. Experiences happen, they say, and they confront you with choices about what you want to stand, and be known, for. "A victory against corruption is the best boost for an individual to pursue the right path," said the CEO of a large agribusiness concern in India.

Here are the three lessons we came away with after interviewing our ethical mavericks:
--Call corruption corruption. One of the most important things a leader can impart to his or her organization is an honest and explicit use of language. Corruption comes with many names, new and old. Ferret out the corrupt behaviors concealed in talk of complex derivatives, tax savings and import surcharges. Watch out when people discuss innovation, strategic business practices and competitive advantage. Use your power of language. You've been practicing it since you were two.

--Enforce behavior that creates new values. Behavior results from values, yes. But values can result from behavior too. Use experiences to enforce behavior that creates strong values. We met a young government official in Pakistan who had to spend time shadowing his manager and supporting him in weeding out corrupt employees. He credits his now deeply held opposition to corruption to that one experience.

And, most important:

--Give up on the security of wavering. There are no gray areas when it comes to corruption. Moral absolutism may sound like an archaic and austere concept, but it's a quality all these ethical mavericks share, and it's exactly what is needed to establish a clear, strong, unwavering voice for doing the right thing, especially when the costs are high.

In these difficult times, we can all benefit from more clarity in our language, a hearty dose of accountability in our actions and a handful of unwavering, stable guideposts. The world needs more credible, confident, nonconformist leaders who are worth following.

Source : Forbes.com