Ethics & Employees
On this pages
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"News International repeatedly made misleading and exaggerated claims regarding the ‘investigations."
Report by the UK House of Commons Culture, Media and Sprot Committee into Phone-hacking and News international
The Committee has held extensive televised hearings into various aspects of the News International phone-hacking scandals and on may 1, 2012 it published a report that exclusively cocnerned the issue of whether witnesses have previously misled a select committee of the House of Commons.
A major conclusion supported by the majority of the memebrs of the Committee is: "On the basis of the facts and evidence before the Committee, we conclude that, if at all relevant times Rupert Murdoch did not take steps to become fully informed about phone-hacking, he turned a blind eye and exhibited wilful blindness to what was going on in his companies and publications. This culture, we consider, permeated from the top throughout the organisation and speaks volumes about the lack of effective corporate governance at News Corporation and News International. We conclude, therefore, that Rupert Murdoch is not a fit person to exercise the stewardship of a major international company."
In addition to the investigations by Parliament, News International's phone-hacking is currently the subject in the UK of the Metropolitan Police’s Operation Weeting investigation, as well as a separate inquiry by Strathclyde Police and Lord Justice Leveson’s public inquiry into the culture, practices and ethics of the media.
Excerpts from the report:
Despite the professed willingness of witnesses from News International to assist the Committee, the company has continued to downplay the involvement of its employees in phone-hacking by failing to release to the Committee documents that would have helped to expose the truth.
The willingness of News International to sanction huge settlements and damaging, wide-ranging admissions to settle civil claims over phone-hacking before they reach trial reinforces the conclusion of our 2010 Report that the organisation has, above all,
Corporately, the News of the World and News International misled the Committee about the true nature and extent of the internal investigations they professed to have carried out in relation to phone hacking; by making statements they would have known were not fully truthful; and by failing to disclose documents which would have helped expose the truth. Their instinct throughout, until it was too late, was to cover up rather than seek out wrongdoing and discipline the perpetrators, as they also professed they would do after the criminal convictions. In failing to investigate properly, and by ignoring evidence of widespread wrongdoing, News International and its parent News Corporation exhibited wilful blindness, for which the companies’ directors—including Rupert Murdoch and James Murdoch—should ultimately be prepared to take Responsibility
The integrity and effectiveness of the Select Committee system relies on the truthfulness and completeness of the oral and written evidence submitted. The behaviour of News International and certain witnesses in this affair demonstrated contempt for that system in the most blatant fashion. Important lessons need to be learned accordingly and we draw our Report to the attention of the Liaison Committee which is considering possible reforms to Select Committees.
When asked if he agreed with the judge in that case that this “discloses a remarkable state of affairs at News International”, Rupert Murdoch replied “no”. He appeared to see nothing unusual in News International failing to investigate or take action when a senior employee was cited by a High Court judge as resorting to blackmail in the course of his employment. This wilful turning of a blind eye would also explain Rupert Murdoch’s failure to respond (or to have another executive respond) to a letter sent to him in New York by Max Mosley on 10 March 2011, inviting him to order an investigation at News
Another example of Rupert Murdoch’s toleration of alleged wrongdoing is his reinstatement, on 17 February 2012, of journalists who had been arrested. This is in contrast to most organisations this Committee can think of, which would have suspended such employees until the police had confirmed that no charges were being brought.
Rupert Murdoch told this Committee that his alleged lack of oversight of News International and the News of the World was due to it being “less than 1% of our company” This self-portrayal, however, as a hands-off proprietor is entirely at odds with numerous other accounts, including those of previous editors and from Rebekah Brooks, who told us she spoke to Rupert Murdoch regularly and ‘on average, every other day’. It was, indeed, we consider, a misleading account of his involvement and influence with his newspapers.
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American authors Robert Hoyk and Paul Hersey view business ethics from the perspective of personal behavior. Much has been written on best practices for creating an ethical culture in the workplace, a solid organizational structure that supports trust among colleagues, and legal compliance. Although all these areas are important to corporate ethics, Hoyk and Hersey have published a book which paints business executives as ordinary individuals with the same human flaws as the rest of us. They argue that situational pressures in the workplace bring out these flaws. The following article from Hoyk and Hersey explains how their new book can help business executives make ethical decisions in the face of business pressures.
The Ethical Executive
Robert Hoyk and Paul Hersey
Hardly a month goes by—or so it seems—without yet another headline about apparent unethical behavior in the executive suite: from criminal misrepresentation, to tax evasion, manipulation of accounts, and a whole smorgasbord of fraud. Are today’s corporate leaders unusually corrupt?
The disconcerting answer, say Robert Hoyk and Paul Hersey, is that “these leaders are no different than you or us. With the advent of Social Psychology, which is the behavior of individuals in groups, we have learned that the influence of the situation often overpowers the influence of personality. Even if we have good ethical values to begin with, given certain situational pressures, every one of us can become unethical.”
In this book, they convincingly drive home this point by describing 45 “traps” into which any one of us can fall. These traps can erupt in any organizational environment. Many of them are psychological in nature, creating “webs of deception” that distort our perception of right and wrong—so we actually believe our unethical behavior is normal and appropriate.
An example of one type of trap is doing is believing. Frequently, we observe our own behavior (what we do or say). In so doing, we influence our attitudes (negative or positive feelings about our action).
When coauthor Dr. Hoyk was in graduate school, his professor of social psychology, Dr. Dalenberg, told the class that early in her career, she had considered walking up and down the isles of the classroom during exams to catch students cheating. She ultimately decided not to do this. Why? She knew that after awhile, her behavior would shape her attitudes—she would probably become more suspicious of her students.
Eric Storch at Columbia University administered a questionnaire to 244 students. Answering the questionnaire anonymously, the college students were asked how often they had copied other student’s work, plagiarized, and cheated on exams. The questionnaire also asked the students to rate their approval on a scale of 1 to 5 (“strongly disapprove” to “strongly approve”) of these three transgressions.
Results indicated that students who reported more academic dishonesty gave significantly higher approval ratings of their dishonesty.
Doing is believing can be summed up as follows: If we choose to act unethically, the act itself will shape our beliefs and attitudes about our transgression. It’s possible—to some degree—that we will begin to see the transgression as more acceptable.
In this unique book, Hoyk and Hersey emphasize that knowledge of the forty-five traps will help the individual stay away from corruption. Voyagers who know the location of quick sand navigate around it. When we clearly identify danger, we can prepare for it and avoid it. Knowledge of these traps will aid individuals at all levels of organizations—from volunteers in nonprofit organizations to CEOs of large companies.
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Excerpts from a new Knowledge@Wharton article.
"Reprinted with permission from Knowledge@Wharton - the online research and business analysis journal of the Wharton School of the University of Pennsylvania."
In light of the recent credit crisis that has taken place in the United States, Knowledge@Wharton has devoted a whole section of articles which provide analysis on different aspects of the crisis. Many financial corporations have suffered enormous losses and undergone substantial changes. Many commentators have focused on the causes and consequences of the crisis. Taking a different track, former Wharton dean Russell Palmer has written an article focusing on the crucial lessons of leadership, the lack of which, in his opinion, contributed to the meltdown.
The following are excerpts from the original article.
"While much of the discussion about the crisis has focused on its causes and the need for regulatory reform, I have a different perspective: I believe the situation offers an opportunity to learn crucial lessons about leadership, and if these are heeded, the U.S. will end up with a financial system that is stronger than ever.
What caused the crisis? In my view, greed was the underlying factor. Wall Street hedge funds and others are looking for any financial machination that they can find to hype their financial returns. The whole mortgage fiasco is just the latest example.
Greed reflects a failure of leadership; turning your head to ignore the high risk because you are making big earnings today certainly shows a lack of leadership. How many people on Wall Street have been subject to less than robust oversight by their organization because they were producing such big contributions to the firm's earnings? Allowing your organization to be a party to contributing to this scheme -- even if you know that you will not be directly affected -- is not a mark of leadership. It is a sign of greed.
Much debate has taken place in recent weeks about whether the Federal Reserve, led by Ben Bernanke, and the Treasury Department, headed by Hank Paulson, did the right thing in brokering Bear Stearns to be acquired by J.P. Morgan. Since then, Paulson has proposed several sweeping changes to reform the financial system. It's evident that we need more transparency in the system than we have now. For example, hedge funds are among the least transparent investments that anyone can make. Still, investors keep pumping money into hedge funds because they get such high returns most of the time. In the end, the investors must make their own decisions based on adequate information and take responsibility for those decisions.
With all this as background, let me now turn to some of the main leadership lessons to be learned from the crisis on Wall Street.
First and foremost, integrity is the key to leadership -- and that is not always evident on Wall Street. Something as important as our system for financial transactions and our economy has to be built on integrity and trust as opposed to questionable and disreputable activities. Integrity begins at the top.
Another important leadership lesson involves the role of board members. Too often, in the past, boards of directors have let the CEO escape responsibility by firing a couple of people down the line and going back to work. Boards of directors must provide appropriate oversight, but boards will never know enough about the complex world of finance and the derivatives transactions that are being effected today. Boards need to provide detailed oversight, and so they have the responsibility to see that outside experts are brought in, if necessary, to assess the risk profile of the organization.
Finally, the leaders of these firms must be at the forefront of addressing the crisis and take personal responsibility.
Even though Bear Stearns has gone under, I see no reason why that should happen to the financial system. Strong leadership leads to resilience. Once the system regenerates, in some cases with new leadership, I am convinced that it will be as strong as before, if not stronger."
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Excerpts from a new Knowledge@Wharton article.
"Reprinted with permission from Knowledge@Wharton - the online research and business analysis journal of the Wharton School of the University of Pennsylvania."
No one makes it to the top ranks of corporate management without a healthy amount of self-assurance. Confidence underlies decisive, strong leadership, but does overconfidence lead managers to cross the line and commit fraud?
New Wharton research that combines results from the psychology literature and SEC fraud enforcement records is examining how top executives might be inclined to engage in fraudulent behavior because they are overconfident about their firm's ability to perform in the future.
Wharton accounting professor Catherine M. Schrand and doctoral student Sarah L. C. Zechman are developing a paper titled, "Executive Overconfidence and the Slippery Slope to Fraud" that examines patterns in frauds to determine if some frauds evolve, not out of pure self-interest, but because executives are overly optimistic that they can turn their firms around before fraudulent behavior catches up with them.
Schrand describes the path leading to fraud. An executive believes his firm is experiencing only a bad quarter or patch of bad luck. He also believes it is in the best interest of everyone involved -- management, employees, customers, creditors and shareholders -- to cover up the problem in the short term so that these constituents do not misinterpret the current poor performance as a sign of the future. In addition, he is convinced that down the road the company will make up for the current period of poor performance. It is the optimistic executive or overconfident executive who is more likely to have these beliefs.
"He may stretch the rules just a bit or engage in what you might call a 'gray area' of earnings management. But say it turns out that he was wrong and things don't turn around as expected," Schrand continues. "Then he has to make up for the prior period. That requires continuing fraudulent behavior and he has to do even more in the current quarter."
Keeping Up the Charade
The authors explore the relationship between executive confidence and fraud across industry, firm and individual variables. They found fraud is more likely in industries that are complex and undergoing rapid growth, such as high-tech. Schrand notes that the most meaningful variable in linking fraud to specific industries is high stock-return volatility.
As further evidence, the researchers examined firm and individual characteristics to gauge the effect of overconfidence on fraud. To observe trends, the study compared firms that had been identified by the SEC as experiencing fraud to a matching sample of firms of similar size and in the same industries that had not been sanctioned by the SEC.
Premeditated vs. Accidental
On the firm level, she says, the research focuses on looking at other decisions made by firms exhibiting fraud -- including dividend policy, capital structure and tax strategy -- that also are correlated with executive overconfidence. If overconfidence is the explanation for fraud, then firms at which fraud occurred should make other decisions that reflect overconfidence. Schrand notes as an example that theses firms also tend to pay lower dividends, or no dividends, compared to matching firms. "This finding is consistent with survey evidence about overconfident executives and dividend policy. The idea is that overconfident executives think they have something better to do with the money than pay it out in dividends," says Schrand.
When it comes to looking at the individual characteristics of executives likely to commit fraud, the analysis is not that statistically compelling, Schrand cautions. The psychology literature identifies individual characteristics that are related to overconfidence -- such as commitment to a project -- and characteristics of the decision maker based on his experience, such as past successes, education or military service, and even fundamental traits, such as gender.
The authors also looked into the role of corporate governance as a device to alter the relationship between overconfidence and fraud. They found no significant differences between the fraudulent firms and the matching sample on commonly studied governance features such as block ownership, board size and board composition. The paper says this result suggests executives at fraudulent firms were more overconfident than those at firms where fraud did not occur, and that better governance was not in place to counteract their tendency to commit fraud.
Just because overconfidence might lead to bad decisions in particular circumstances, it should not be the only, or even primary, consideration when evaluating executives, Schrand says, adding that a growing body of literature indicates that confident and optimistic leaders might make what would be viewed as bad decisions in certain circumstances, but overall, they also have assets that any firm needs to succeed. "Given that the firm has to hire the whole person, you might actually want somebody who exhibits this bias. But, you should recognize that the overconfidence, which has its positive aspects, can also have a downside."
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After disclosing his own financial records, the United Nations' Secretary-General is encouraging senior officials to do so as well
Now for the first time, the United Nations is making public the financial disclosure statements of those at the Under-Secretary-General and Assistant-Secretary-General level, or the United Nations’ most senior officials.
Xinhua reported more than 90 senior UN officials have followed the lead of UN chief Ban Ki-moon to disclose their 2007 financial statements. Ban and UN Deputy Secretary-General Asha-Rose Migiro made their financial disclosure statements public in 2007. According to Xinhua, each official's statement must be reviewed by Pricewaterhouse Coopers, a firm hired by the UN to examine such documents, before a public summary is made available.
At a senior officials retreat in August 2007, Ban emphasized his belief in public disclosure:
“Because I believe in leadership from the top, I have made complete, public disclosure of my assets -- in a way that no Secretary-General has done before. I have been loud and clear about honesty: our UN will not tolerate corruption or abuse of power.”
The Secretary General has dedicated a special section on the website to “Ethical Standards,” under his own self-named category. Here, one can view the disclosure statements of both Ban and Asha-Rose, as well as the newly added statements of senior officials.
Public disclosure is not a requirement of the UN Financial Disclosure Program, according to the UN website, and is done so on a voluntary basis. The primary purpose of the program is to ensure that potential conflicts of interest arising from staff members' financial holdings, private affiliations or outside activities can be identified, and advice provided as to how best to manage any potential conflicts of interests in the best interests of the UN.
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At a business leadership conference, sponsored in part by Wharton Executive Education, two speakers, Lee Hecht Harrison and Richard Greene, addressed the issue of how to create an “ethical culture” starting with executive leadership. Harrison redefines “ethics” in terms of “decent” acts. Greene emphasizes how effective public speaking can go a long way in earning respect. The following are excerpts from the summary of their presentations, posted by the Wharton Business School.
Reprinted with permission from Knowledge@Wharton - the online research and business analysis journal of the Wharton School of the University of Pennsylvania., USA
After realizing the need for recognizing the importance of promoting an ethical organizational culture, and adding it to the US Federal Sentencing Guidelines, Lee Hecht Harrison was appointed Worldwide Chief Ethics and Compliance Officer of Adecco, an international human resource management company. In this position, he redefined what it meant for a company to be ethical.
What he concluded mirrors the words of former SEC Commissioner Cynthia Glassman, who said that while the government can mandate ethical compliance, “we cannot legislate ethical behavior.” For Harrison, even the word “ethics” itself seems too abstract; he replaces it with what he sees as a more intuitive, common-sense word: decency.
“Our willingness to be decent at work cannot depend on whether business is up or whether we’re in a bad mood or whether it’s raining. Decencies don’t amount to anything unless we take the trouble to make them come alive through concrete acts in all kinds of weather,” Harrison said.
For those at the top, this can mean such actions as being the first to volunteer for ethics training; honoring those with unglamorous jobs, like office cleaning; and listening to people at all levels of the organization.
He also counseled executives to avoid the trap of “executive pomposity.” Being generous with praise and recognition will earn leaders what Harrison calls “psychic income.” At the end of the day, said Harrison, the words of poet Maya Angelou ring true: People will forget what you said, they will even forget what you did, but they will never forget what you made them feel.”
Stirring up feelings is one skill Richard Greene, public speaking coach, believes is lacking among many individuals today. The first task of a speaker is to realize his or her purpose in speaking, wither it involves addressing several prospective customers across a boardroom table or a convention of thousands. One of the biggest pitfalls for speakers in a corporate communication setting is perceiving a speech or presentation as a performance. The best communicators have understood that public speaking is not a performance; it’s about making a connection with others, Greene said.
Greene offered advice that can be summed up in four words: “it’s not about you.”To read the entire summary, see the posting on Wharton's website.
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A Report by Representatives of leading U.S. business ethics organizations that came together under the auspices of the Fellows Program of the Ethics Resource Center. This is the first cooperative study of its kind by these institutions:
From the report: - A close look at ethics and compliance programs across companies suggests that
there is wide disagreement about the best way to situate a CECO. Conversations
Today, many organizations are choosing to consolidate the critical responsibility for ethics and compliance programs under a chief ethics and compliance officer (CECO).But the specific roles and reporting lines for this relative newcomer among corporate management positions are not always clearly defined; many CECOs report feeling set up for failure due to insufficient authority or inadequate resources.
This paper is intended to serve as the starting point for a dialogue within corporate management circles—particularly among CEOs, boards of directors and the CECOs themselves—about the proper placement, qualifications, and responsibilities for a leader of the corporate ethics and compliance function. This paper also provides resources and identifies additional steps for further examination of this critical management function.
The Bottom Line: CECOs Add Value
CECOs whose roles are clearly and properly defined and who are empowered to
• Help provide shelter from severe sanctions in the event of legal/regulatory difficulty;
The Cornerstone: A Clearly Defined Role
To truly be a value-added function, the CECO must have a well-defined role and be endowed with adequate resources. This demands a balance between tailoring the job to an organization’s unique characteristics and providing the CECO with the basic authority and tools that should be universal for all who hold such positions.
At minimum, a CECO should be:
The CECO also must have the financial and human resources necessary to comprehensively promote standards, educate the workforce, and respond to potential violations in a timely manner.
Assuring Access and Independence: Reporting Relationships & Accountability
A CECO’s line of reporting is perhaps the single biggest influence on his or her credibility and authority within the organization. Ideally, the CECO will have:
• Employment decided and terminated only at the direction of the board of directors;
The CECO position should be augmented by the board’s appointment of one independent director or member of the audit committee, knowledgeable about business ethics and compliance, with accountability for ethics and compliance.
Responsibilities: Being a Full Member of the Executive Team
A CECO should be a full member of executive leadership, expected to:
• Oversee assessment of organizational risk for misconduct and noncompliance;
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“Never has it been more important to know what is on the minds of corporate leaders. Companies are being driven by short-term demands while the challenges of a rapidly changing world require them to address long-term issues. In this climate, the role of business is being redefined..,”
So begins Step Up: A Call for Business Leadership in Society, a January 2007 report by the Boston College Center for Corporate Citizenship (BCCC) based on the interviews of 48 top executives—including 26 CEOs—representing 27 major multinational companies including IBM, Citigroup, GE, Nestle, and Verizon. EthicsWorld has featured research showing the importance of leadership in building and managing ethical companies (see Moral Management). However, BCCC’s report reveals a surprising level of ambiguity in the minds of corporate executives on broad ethical issues. The report highlights areas where further discussion, innovation, and clarification are needed. The following are some of the reports key findings:
How Executives Define Business’ Role in Society
”Each executive interviewed chose the definition they said best describes how business relates to society:
27% In pursuing private profit, companies should take care to protect the environment, uphold the rights of workers, and be a good neighbor to communities.
25% A company should lead with its heart and nurture its soul as it makes money. It should inspire other companies to aim high. It should do more than simply avoid doing harm; it should consciously seek to do good.
15% Unprincipled capitalism ultimately inflicts damage on all its stakeholders. The good company leads by demonstrating the moral principles of capitalism, and by showing the connection between those principles and financial success.
6% The private search for profit advances the public good. An executive's duty is to create wealth for investors. Society is best served when a company does well.
4% Private enterprise best serves the public good when it is subject to public intervention (e.g. taxation, publicspending, regulation). It is government's role to correct market failures. Business should not decide matters of public policy."
Dynamics Driving Change
The executives identified four major dynamics that are driving the change in the business-society relationship: globalization, corporate governance, a new social contract, and the role of government.
Limits on Corporate Responses
The CEOs identified 7 factors which they believe most limit current corporate responses to CSR:1. Making Values Meaningful - While there was much discussion about companies “living there values,” many CEOs were hesitant to go into detail about how these values are implemented, managed both on a day-to-day basis and in times of ethical crises. The report highlights confusion over how to build values-based organizations – it points out an stalemate between the recognition that values cannot always be codified and the reality that without rules and means of measurement, they are difficult to administer in corporate cultures that stress efficiency and productivity.
2. Rules Based Enterprise – Many of the interviewees believe business is becoming too regulated, hindering efficiency.
3. Limitations of Corporate Responsibility - Reflecting the above resistance to regulation – many executives believe CSR should be a voluntary initiative.
The current structure of many companies narrows corporate social responsibility: “Major companies have various offices and officers to deal with that relationship [business and society] , from the general counsel, to the community affairs office, to lobbyists, and so on. Corporate responsibility is only a small part of this, and may not even be referred to at all when confronting major aspects of the business-society relationship such as corporate taxation, tort reform, and investments. For the most part, it offers little practical guidance about wrestling with the negative externalities of efficiency and competitiveness (e.g. the consequences for workforce consolidation), even though companies frequently deal with the consequences of this (e.g. severance packages, placements), and they are an important element of how companies are perceived."
4. Company Resources Alone are Never Enough – to effectively tackle many issues, even when business' work together.
5. Influence of Ownership - The report notes that many of the executives talking in terms of values-based companies are mostly in charge of private firms or partnerships. As articulated by Unocal Chairman and CEO Chuck Williamson: “On the one hand, you’ve got Wall Street squeezing you harder and harder for shorter and shorter term performance. On the other hand, you have a broader constituent base that wants more than financial results. … Most CEOs will tell you, ‘This is damn hard work.’”
6. The Media and Others - Executives said that the black-and-white way that the media and others, such as academics, cover the business-society relationship limits their flexibility in dealing with social issues. For instance, academic ecnomists often treat corporate attempts to consider environmental or social concerns as a waste of money while the media often demonizes companies for their impact on larger society.
7. Leadership - “Part of what we see today is executives who want to address societal issues because they are important to their companies and business as a whole, yet hesitant to take it too far because of the reaction that may come from investors, analysts, board members, or the media. As a result, more often than statements about leadership, what one hears from executives is a desire to achieve what they can while keeping a low profile.”
What Needs To Be Tackled
The report lists four themes that must be tackled in order to clarify confusion over the business-society relationship:
For the full report, including a list of executives interviewed and quotes in each of the above sections, visit BCCC's website.
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How Workplace Wellness Programs Can Prevent Chronic Disease and Increase Productivity
In a new report - Working Towards Wellness: Accelerating the Prevention of Chronic Disease - developed in conjunction with the World Economic Forum’s Working Towards Wellness initiative to increase business engagement in preventing chronic diseases - PriceWaterhouseCoopers (PWC), a professional services firm, describes how and why the business world should help prevent chronic diseases by implementing workplace wellness programs. "With the commitment of business leaders, workplace wellness strategies and collaboration of public-private partnerships," it argues, "the epidemic of chronic disease can be managed effectively. In doing so, employers can enhance the productivity of the workforce, reduce the growing burden of healthcare costs, make the workplace more attractive and build a better and more healthy global community.”
The following summarizes key sections of the report:
The Economic Costs of Chronic Disease and The Business Case for Prevention
According to PWC, chronic disease is the leading cause of death and disability worldwide and caused approximately 60% of deaths in 2005. Furthermore, only 3% of all government health expenditure was directed at prevention and public health in 2004 in the member countries of the Organization for Economic Cooperation and Development (OECD) – a number which many businesses and policymakers acknowledge is insufficient. Because of this and because most of the active workforce (approx. 54% of the global population) spend the majority of the their time at work (the nature of which, the report notes, is becoming more sedentary and unhealthy) businesses have an enormous opportunity to use the workplace to promote long-term behavioural changes that will benefit not only employees and communities – but also their bottom lines.
PWC reports that there are several reasons businesses implement wellness programs:
Standards for Implementing Wellness Programs
PWC argues that preventing chronic diseases requires a strategy that begins with standards for structuring and measuring success. These are:
To access the full report visit PWC's website.
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Research developed in the UK and based upon a broad range of experiences at such major multinational corporations as IBM, Shell, Cargill and Unilever, highlights pragmatic approaches to training executives for managing the challenges of corporate social responsibility – both at headquarters and abroad. The research has been pursued by Director of Research and Development Andrew Wilson, Patricia Hind on Ashridge's faculty, and Prof. Gilbert Lenssen of the European Academy of Business and Society (EABS) and published by Ashridge Business School in the UK in its July 2006 report to EABS, ‘Leadership Qualities and Management Competencies for Corporate Responsibility.’ It is of value to both corporations and to business schools that are now increasing their focus on CSR.
The report argues that in order for a company to be truly responsible, its management must learn to reflexively integrate social and environmental considerations into their everyday business decision-making processes. While organizational culture plays a large role in facilitating ethical considerations, the authors believe companies can also encourage socially responsible decision making by ensuring their leaders and managers possess a certain set of ‘competencies,’ which can be taught and developed.
They argue that there are five ‘reflexive abilities’ which responsible leaders must possess in order to effectively integrate social and environmental considerations into their management: 1. systemic thinking 2. embracing diversity and managing risk 3. balancing global and local perspectives 4. meaningful dialogue and developing a new language and 5. emotional awareness. In the following excerpts from the report, the authors present case studies outlining the way in which several of the organizations studied are training their employees in these skills. Finally, they offer suggestions for business schools on developing responsible leaders.Case Studies in Developing Responsible Leaders
Three Lessons for Business Schools
1. First, drawing from the direct experience of the companies participating in this research, it is clear that management development for corporate responsibility needs to address fundamental questions of how an individual views the world – how he or she ascribes value to certain types of management and corporate behaviour.
Developing a person’s knowledge and skills will inform their world view and values to a certain extent. However, the reflexive abilities identified through this research describe the more fundamental features of an individual’s character and personality. Giving people the opportunity to question, explore and make meaning of the values and assumptions that inform their decision-making process requires a carefully structured process of analysis and reflection – something that is not necessarily compatible with much of the traditional content of management development programmes in business schools.
2. Second, the experience of businesses outlined above suggests that this process cannot necessarily be done in the traditional classroom environment. There is a strong need for greater use of experiential learning techniques – exposing people directly to the situation and giving them the opportunity to reflect and experiment with potential ways of dealing with the experience.
3. Third, it is vitally important that a traditional European business education should avoid what some describe as “cultural imperialism” – inadvertently promoting the social, political and economic norms and values of an Anglo-American business viewpoint. As we reported in Section Four, interviewees argued strongly that responsible leadership requires an appreciation of culture diversity. This view was extended by some to question the use of business models that focus exclusively on maximizing shareholder returns to the exclusion of other stakeholders.
For more case studies and the full report, see Ashbridge’s website.