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Ethical Leadership

Ethical leadership is about much more than not breaking the law.

What does it mean for your career in the future of your business? Why does it matter if you can still be law abiding?

Those are a few of the things we’ll be exploring with Rick Swegan, coauthor of the new book, The Practice of Ethical Leadership: Insights from Psychology and Business in Building an Ethical Bottom Line.

What You’ll Discover About Ethical Leadership:

* Why ethical leadership is more than focusing on the bottom line

* Why the practice of ethical leadership presents a moral challenge

* How the younger generation’s demand for social justice creates a sense of urgency for more ethical leadership

* How to quantify ethical leadership

* And much more

Guest: Rick Swegan

Rick Swegan is an author and the founder and principal consultant of ARCH Performance. With a background in human resources and safety, Rick provides consulting to a variety of organizations on the developmental needs of potential leaders.

Rick’s co-author, Claas Florian Engelke, provides consulting services in the fields of leadership advisory, assessment, and development. He invites clients to question themselves in order to foster incessant learning and aspire to be the best versions of themselves.

Their new book: The Practice of Ethical Leadership – Insights from Psychology and Business in Building an Ethical Bottom Line (Routledge, March 28, 2024), offers effective suggestions for developing ethical leaders. Learn more at ethicalbottomline.com

Related Resources:

If you liked this interview, you might also enjoy our other Corporate Governance and Culture episodes.

Contact Rick and connect with through his websites, archperformance.com, ethicalbottomline.com .

And be sure to check out his book The Practice of Ethical Leadership: Insights from Psychology and Business in Building an Ethical Bottom Line

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What Every Smart Manager Needs to Know About Ethical Leadership with Rick Swegan

Ethical leadership is about much more than not breaking the law. So, what does it mean for your career in the future of your business? Why does it matter if you can still be law abiding? Those are a few of the things we’ll be exploring with Rick Swegan, coauthor of the new book, The Practice of Ethical Leadership: Insights from Psychology and Business in Building an Ethical Bottom Line. Stay tuned.

This is Business Confidential Now with Hanna Hasl-Kelchner helping you see business issues hiding in plain view that matters to your bottom line.

Welcome to Business Confidential Now, the podcast for smart executives, managers and entrepreneurs looking to improve business performance and their bottom line. I’m your host, Hanna Hasl-Kelchner, and I’ve got another great guest for you today. He’s Rick Swegan.

Rick helps organizations with leadership development through his consulting work as the founder and principal consultant of Arch Performance. He’s also the coauthor of an exciting new book, The Practice of Ethical Leadership: Insights from Psychology and Business in Building an Ethical Bottom Line. If you’re a regular listener of the show, you know that my latest book, Seeking Fairness at Work, was just released, and there’s a huge overlap with ethics and doing the right thing.

So, I have so many questions and so little time. Let’s get started and have Rick join us.

Welcome to Business Confidential Now, Rick.

Thank you, Hanna. I’m thrilled to be here.

I’m thrilled to have you. I’m really excited about this because I’m curious to hear your perspective about what makes someone an ethical leader, what are the attributes of an ethical leader, and how can an organization be sure they have one in charge?

Boy, it’s a great question. And it’s kind of a $64,000 question. The way I’d respond to that is kind of twofold, Hanna, or actually probably more than that. But first and foremost, I don’t think you can be a good ethical leader if you’re not a good leader in the first place. So, I’ll make that distinction. I think you have to be a good leader.

I think what distinguishes the ethical leader is some additional traits that I think typically organizations don’t look at. And let me name a couple of those.

Yeah.

I think you have to have what I would call a moral mindset, and that sounds esoteric, but what that really means is I could – I need to be concerned about right and wrong. And I don’t think all leaders are. I mean, many leaders, their focus is on the bottom line, not necessarily what’s right and wrong. And I think there’s a distinction there.

I think you have to have the ability to think and process information in a critical way. You have to be able to critically reason about the dilemmas you’ll face as a leader. You have to have a degree of empathy. I need to be aware of how others perceive me. So that’s kind of the emotional intelligence quotient. And I think you have to be willing to take a stand.

And that the last one, taking a stand probably in the current environment is the most controversial. So, I’m not sure I answered all your questions there because you threw a couple at me.

Yeah, I know it’s a compound question and it’s unfair, but I knew you could handle it. Rick. [Laughter] Absolutely. You covered a lot of really good points, and I’m really interested in this one about willingness to take a stand.

Yeah. Let me step back from that. And I say that that’s controversial. But I’ll give you an example of what I mean by that. In the book, and I’m in Pittsburgh, which is kind of the home of Dick’s Sporting Goods, if you know the company, and Ed Stack, who was the chairperson of Dick’s at the time all this occurred. And Dick sells a lot of weapons for hunting historically and historically sold the AR-15 as well.

And after one of the shootings, I can’t remember if it was Parkland or the one in Connecticut, he made the unilateral decision that he was going to pull the AR-15, the assault weapons out of his store, thought that it contributed to a climate of violence, contributed to, obviously, the mass shooting craze that we’ve gone through and still are going through and made the unilateral decision, even though it would hurt his bottom line and would potentially turn off customers, that the right thing to do was not to sell assault weapons. That’s what I mean by taking a stand.

Not all organizations, in my experience, are comfortable with that. Many of the organizations, and you can see this in the business literature, will say explicitly, “Don’t take a stand because you potentially offend customers,” etcetera. I think personally and all my research supports this, the ethical leaders take a stand and in fact, are being encouraged to do so more and more by Gen Z and the newer people that are coming into the workforce where they want an environment where the organization stands for something greater than just the bottom line.

Well said. I’m wondering, though, what your thoughts are about so many companies, especially large companies, they have compliance officers or ethics policies and even small and midsize companies, they maybe assume that their managers are acting ethically.

You know, the Dick’s Sporting Goods example that you just shared, we’re talking about a CEO. I mean, things stop at his desk, right? But there are people that don’t have quite as much power or influence in the organization that maybe are at odds with the CEO, who is focusing strictly on the numbers and the profitability. And some of these ethical decisions may not be profitable in a financial sense, but perhaps a moral sense.

What is it about the practice of ethical leadership that makes it so challenging for our moral compass?

Well, I think it’s multiple things. And I think you raise a really good question and actually several really good questions. I think the challenging component on that is historically, we haven’t asked business leaders or businesses to focus on what we refer to in the book as the ethical bottom line because the orientation has been completely on the bottom line, if you will, the traditional metrics that most businesses use, what we think is occurring, and this is really the case for ethical leadership, is couple things:

One is there’s increasing data that supports the notion. It comes from an organization by the name of Ethisphere that suggests that the organizations that are more ethical perform better than on traditional metrics. I think that’s compelling. I think the second part that’s compelling is the demand from the younger generation, and there have been articles in HBR and other places suggesting that the younger generation really wants their organizations to take a stand on a number of social issues, social justice issues, etcetera.

And then thirdly, and this is in my mind, the most compelling, if you look at the negative implications, and I’ll use this specific example here and talk about Boeing, for example, for a minute, if you betray the trust that the consumer has in you through unethical actions or actions that endanger the lives of people, the results of that are devastating.

You and I can’t sit here and predict what’s going to happen to Boeing at this moment, but you’ve got a series of – some of which are catastrophic incidences, you’ve got a series of incidents that are clearly related to quality and massive breach of trust by the flying public. I mean, I don’t know about you, but I personally, I’ve never done this before and I travel a lot, have started to look at what airplane I’m on because I’m nervous as anybody is.

And my point with all that is to say the impacts of failure to be ethical are drastic, in my humble opinion. And I know you and your own experience are focused on fairness. I know you’re involved with teaching business ethics, or at least associated with the Journal of Business Ethics. I think the whole notion of creating ethical leaders and leaders who will drive companies forward and make the right moral choice, perhaps that in sacrifice a few points on the bottom line, more and more is – are going to be the organization that appeal both to consumers and to employees moving forward.

I agree with you, and I certainly hope that’s going to be the trajectory of behavior in organizations to be doing the right thing, not just what they could get away with because the law hasn’t caught up with it. Now, the law is so reactive. Something bad happens and go, “Oh, there should be a law. Oh, wait, there’s not. They got to go create one.” So, it’s always reactive in that regard. And which you’re asking about really is for people to be proactive in terms of the moral right thing to do.

Yeah. And I think to the point that you were raising earlier about compliance and ethics offices, I think that part of any organization is vitally important. You need to have, obviously, compliance with laws, regulations, whether those are environmental or whatever, that’s important. I think it’s important to have an ethics office that defines right and wrong, has codes of conduct, etcetera. But honestly, I am real skeptical and you may be as well, we can have all those things in place and people may still behave unethically.

I think back to my days when I was working in a corporate environment and everybody went through training on sexual harassment, which I think is an ethical issue, obviously, and everybody had to pass a test about certain knowledge base around sexual harassment, what it was, what it wasn’t, why it was inappropriate. But I don’t think it changed behavior necessarily.

And at the end of the day, in my humble opinion, two things change behavior in an organization. One is the leadership from the top, and second is the culture that the leader engenders, perpetuates, and reinforces. If I had to make a choice, what I would do with an organization, I do two things.

One, I would hire ethical leaders and that can be done. And then secondly, I would spend a lot of time as the leader because I think it’s the leadership task to create a culture that’s ethical so that I know down to the bottom line and to the smallest part of my organization that people are going to behave in a manner that suggests they’ll do the right thing when they’re making decisions. And it’s easier said than done. It’s a tough task.

You covered a lot there, Rick, and I certainly agree with you about ethics not being able to be outsourced to an ethics officer any more than human relations. The human resources can be outsourced to the human resources department because those are relationship issues. They’re individual judgment issues, and you need the right people to have the right mindset.

So, two things come to mind in what you just shared with us. And one is how do you go about finding ethical leaders?

Because in an interview, everybody’s putting their best foot forward. It’s like dating. It’s like, “Yeah. Hi, I’m lots of fun.” And the thing is how do you really get to that? And then even once you do think you have the right team in place, how do you measure it in the bottom line?

Because it’s not so easy to quantify, but you really want a fully loaded cost in terms of being able to evaluate, like the Boeing situation, what have these bad decisions costing us? Now some are easy to put numbers on, but some of them, in terms of the engineers that weren’t listened to and the impact on their level of employee engagement to the point even became a whistleblower and then unfortunately committed suicide right before his trial, those kinds of things; how do you quantify that? How do you measure it and include it in the evaluation of what it’s costing the company?

Yeah. So, let me start with your second question first in terms of how to measure it. And I’m not sure, honestly, you can completely. I do think you can get a baseline assessment. And this I know is one of your areas of expertise as well. Get a baseline assessment of what is our culture at this point in time. And from that, then you can continue to measure that on an annual basis or on a regular basis just in the way many organizations measure employee engagement.

You can quantify the culture on a couple of different levels. You can say, what do the senior leaders say it is, what do my mid-level leaders say it is, and what do my employees say it is? And what you’re looking for there is where are the deltas? What are the differences between here’s what I perceive as the CEO and here’s what my employees perceive. And I can work on that. I can create change just as I can create change around employee engagement.

So, I think that baseline data to say what is our ethical culture is the absolute critical first step. And I think the follow-on assumption is if we have an ethical culture, if we continue to focus on right and wrong, it’s an insurance policy, in effect, to say the odds of us doing something like Boeing decreased dramatically because we are focusing on ethics on a daily basis.

So that would be the step one, I would say. The second part of your question was how do you hire or find ethical leaders? And you referenced an interview process. That’s my particular area of expertise. I would say there are four or five things you can do on that.

One is you create a structured interview process that looks at how people behaved in ethical situations in the past, and that can be done and can be structured and can be reasonably objective. Secondly, you can look at personality factors and other variables that can be mapped onto ethical leadership and what you expect from an ethical leader? Can they think critically? You can measure that. Do they think about moral issues? You can measure that as well.

And thirdly, you can add in case studies and you know this from your own experience or moral dilemmas that ask people to respond, give their statement, their belief, their sense of direction, which give you real insight into how they reason about moral issues. Do they reason about moral issues, and are they able to think rationally about that and independently and take a stand?

So, I think the bottom-line answer, twofold. One is assess the culture. And secondly is bring more tools to bear on the selection of your leaders and you can evaluate their potential to be ethical leaders.

Excellent. Those are great suggestions. I appreciate your mentioning that. Your book, The Practice of Ethical Leadership, what prompted you to write that?

[Laughter] It’s a great question, and it’s a long answer. The short version of it is when I was in graduate school years ago, I, first of all, was exposed to Lawrence Kohlberg, who did a lot of work on moral reasoning. I became intrigued by the question of how do people reason about moral dilemmas and the differences among that. And then secondly, I spent the first portion of my career in higher education, primarily working in small liberal arts schools, and I was always struck by, “Why were they different?”

I mean, you would go on a campus and immediately it felt different than other places I was. There was an ethos and a culture.

So, I came from those two perspectives of being concerned – interested in how people reason about moral issues. Secondly, perceptually, I thought there were differences in culture, and then I had the experience with my coauthor several years ago. Now, we met. He’s German, younger than I am, lives in Berlin. We met through work, and he asked then a triggering question about, “Gee, are you interested in this?”

And one thing led to another, and that being the book and the authorship. And I think honestly, I’d say, honestly, we started the book at the point where when Trump was still president and the country was becoming more and more divided, which probably provided some impetus to it as well. So, that’s the shortest version I can make of what’s a longer story.

And it’s a longer story only because my co-author and I have met twice physically. That was five years ago. We wrote the whole book without seeing one another, which was an interesting experience as well.

What a journey.

[Laughter] Yeah, it was. It’s been endlessly fascinating.

Very good. Well, in the time that we have left, Rick, what is the most important thing you would want our listeners to know about ethical leadership?

I would go back to kind of where we started, Hanna, and say that it’s needed. And I would say it’s needed at three levels. I mean, we need ethical leaders in in our businesses. I think there’s a strong case to say that we need ethical leaders in our nonprofit organizations as well, and we tend to omit that. But if you look at ChatGPT and just go in and ask AI, “Tell me about scandals in the nonprofit arena,” they’re every bit as devastating, if not more so in that arena. So, we certainly need that there.

I’m not going to make a political statement per se, but I think we need leaders on the national stage who have the ability and willingness and the moral courage to take a stand, regardless of their position, regardless of where they fit on the political spectrum. But we need leaders on the national stage who will do the right thing. So, I think there’s compelling reasons all around us to be engaged with it. Right?

Let me close with a thank you and reinforce that notion, Hanna, if I can, just when I speak to groups and you go out and say, “How many of you consider yourself ethical, law-abiding people?” Everybody raises their hand. But people continue to do bad things. And so how do we deal with that is really the question of the day. So, thank you so much for your time.

Thank you. I think that’s well put too about they think they’re doing the right thing and being able to prioritize so that they minimize risk and maximize opportunity long term for the organization. That’s really, I think what it’s about.

So, if you’re listening and you’d like to know more about Rick Swegan and his work at Arch Performance and his new book, The Practice of Ethical Leadership: Insights from Psychology and Business in Building an Ethical Bottom Line, that information, as well as a transcript of this interview, can be found in the show notes at businessconfidentialradio.com.

Thanks so much for listening. Be sure to tell your friends about the show and leave a positive review. We’ll be back next week with another information packed episode of Business Confidential Now.

So, until then, have a great day and an even better tomorrow.

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