Doing the Right Thing As a Business Leader

For decades, the academic debate on leadership remained confined to the a analysis of the leader-followers relationship. Rivers of ink were spilled detailing the recipes applicable in these situations. Leadership models have all been based on the same questions: what shall a leader do to influence his/her followers and obtain obedience in their minds and hearts? What leadership styles are preferable in given circumstances? What kind of behavior should the leader display over time, in order to ensure a durable relation with his/her collaborators?

All of this no longer suffices, because such questions avoid the complexity of problems that managers have to face today. Contemporary business leaders want to understand how they should act in a complex and uncertain environment. For these reasons, the traditional literature on leadership has evolved toward the study of behavioral models that go under the rubric of responsible leadership. It is not only about followers obeying a leader, but it's about the coordinated action of various actors in the firm being oriented toward the future and the long term. A responsible leader operates daily to do the right thing. "Doing the right thing" is a tough standard to live up to, which presupposes an inspirational model of reference.

For example, many global companies are implementing managerial policies that should be introduced all over the world: one of these, frequently cited in internal audit manuals is that of not employing minors. Let's imagine that in a country where the company operates, outside its factory gates there are crowds of hungry residents waiting for a job who do not have papers to prove their age: the local leader has the arduous task of applying the rule. If, to further complicate the picture, we are in an environment dominated by drugs and crime, the local leader, who's unable to determine the young person's age, must decide whether to give him a job or pave the way for the latter's criminal career.

Responsible leadership entails being aware of the consequences of one's decisions, insofar as they have an impact on any stakeholder of the firm. Also, it means to involve stakeholders in the construction of a positive dialogue with the company.

In order to solve these dilemmas, responsible leaders can draw inspiration from approaches based on the analysis of the consequences of certain business decisions, or a model based on non-negotiable ethical values upheld by the company, from which the right thing to do can be derived. In the former case, a cost/benefit analysis helps finding the best decision, but only if a monetary value can be given to all the factors in the problem. In this respect, excessive reliance on monetization and pricing in decisional models has come under criticism. In the US, for instance, the justice administration has experimented with the outsourcing of prisons to private firms. In California, some of these private companies have gone as far as offering prisoners who must serve long sentences a cell upgrade for $82 a night: a kind of service differentiation that is useful to generate additional resources. The inmate thus benefits from a more comfortable accommodation by paying hotel-like rate. Still in the US, there were was wide debate on the government program that grants citizenship to foreigners, as long as they have invested at least $500,000 in US territory and created at least 10 jobs in a high-unemployment area. Another hotly debated case is that of Indian women renting out their wombs: they are ready to give birth to somebody else's child for $6,250.

Market mechanisms have virtues and vices. Among the former, there is the transparent allocation of resources on the basis of economic need. Among the latter, there is the increase of inequality. «In a society where everything is for sale, life is harder for those of modest means. The more money can buy, the more affluence (or the lack of it) matters» (Sandel, 2012). Secondly, the risk of abuse and corruption is apparent: «Markets not only allocate goods, but express and promote certain attitudes toward the goods being exchanged (...). Hiring mercenaries to fight our wars might spare the lives of our citizens but corrupt the meaning of citizenship. Economists often assume that markets are inert, that they do not affect the goods they exchange. But that is not true. Markets leave their mark. Sometimes, market values crowd out nonmarket values worth caring about» (Sandel, 2012).

"Some years ago, the University of Maryland sought to combat a widespread cheating problem by asking students to sign pledges not to cheat. As an inducement, students who took the pledge were offered a discount card good for savings of 10 to 25% in local shops. No one knows how many students promised not to cheat for the sake of a discount at the local pizza place. But most of us would agree that bought honesty lacks moral worth" (Sandel, 2009).

Morality thus means to act out of duty, not self-interest. The approach based on values treats people like ends in themselves, and not means to an end. According to such approach, the dilemmas of responsible leadership can be solved by asking shareholders and management what kind of priority they intend to give to the values and ethical principles by which the company conducts its business. The right thing to do depends on respecting the fundamental values that act as Kantian imperatives, on meeting the non-negotiable moral obligations that are foundational for an organization's business culture. Today and tomorrow's leaders have the unenviable task of addressing hitherto unexplored moral dilemmas and conflicting courses of action.