This is the part of a series of posts featuring earlier content from the Vital Integrities Blog along with updated information and opinions.

Here's an excerpts from a March 2005 post:

Fifteen months ago, Boeing's board fired its CEO after two highly publicized scandals. Hoping to repair its ethical image, the board lured former Boeing president Harry Stonecipher out of retirement and gave him the CEO position. Said Stonecipher at the time, "We need to strengthen our reputation with our customers, employees, investors and the communities in which we operate." On Monday, the board acted again, this time tossing out Stonecipher for having an extramarital affair with a company office manager.

"The Board concluded that the facts reflected poorly on Harry's judgment and would impair his ability to lead the company," said Boeing's Chairman Lew Platt. That goes without saying. But now the board should turn its attention to its own poor judgment.

Stonecipher retired from Boeing in June 2002. Four months later, Boeing's chief financial officer Michael Sears had illegal discussions with Air Force acquisitions official Darleen Druyun. The discussions, which centered on Boeing potentially hiring Druyun, took place while she was awarding billions of dollars worth of Pentagon contracts to Boeing. A year after Stonecipher's departure, a federal grand jury indicted two former Boeing officials for illegally acquiring proprietary documents from competitor Lockheed Martin and using them to win a government rocket-launch contract in 1998.

While Stonecipher and Boeing's board would like us to believe the affair was a one-time act of poor judgment by an otherwise ethical leader, we can't ignore that Stonecipher oversaw the company during and immediately before the uncovered illegal activities took place. It would be naïve to discount a correlation between his recent bad behavior and his leadership of a company prone to unethical business practices. By allowing an old fox to guard the chickens, Boeing's board undermined any effort to restore leadership credibility.

A few months after that post, student-loan lender First Marblehead's board fired CEO Daniel Meyers for giving expensive gifts to a Bank of America executive. BofA was a major client of First Marblehead and Meyers appeared to be enticing one of its decision makers to send more business his way with a pricey watch and other lavish gifts totaling $32,000. Meyers claimed that he purchased the gifts with his own money; nevertheless, the board concluded at the time that he had violated a company ethics policy and sent him packing.

Last week, First Marblehead rehired Meyers as chief executive, asserting that Meyers is the best person to lead the company out of its current financial crisis. Explaining the board's change of heart, a company spokesperson described Meyers' gift-giving transgression as a judgment lapse, rather than a policy violation.

Is First Marblehead's board putting financial results before ethics? Maybe. If the recent wave of corporate scandals has taught us anything, it's that a leader's lack of judgment is what causes ethical missteps and, eventually, financial meltdowns. When you already know a fox makes bad moral decisions, why give him a second chance to guard the hens?

Labels: credibility, integrity, leadership, trust

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Imagine checking your voicemail messages and hearing the following company-wide broadcast:

"This is the corporate communications officer with some great news for all employees. Management has just announced that third-quarter earnings per share were sixty cents, an increase of 11 percent over fifty-four cents per share for the same period last year. Third-quarter profits rose 35 percent. The company earned $73.8 million in the quarter; that’s up from $66.4 million from a year ago. Excluding discontinued operations, we earned $59.1 million. Best of all, ROA was 1.75 percent and ROE was 21.6 percent. Management thanks you for your contribution to these results."

Messages like this appear in employee voicemail and e-mail boxes every day, as part of corporate communication programs. In their efforts to improve communication, companies feed employees the only information they know how to convey: their financial data. But does knowing that the corporation's faceless stockholders earned six cents more per share because you knocked yourself out meeting departmental goals inspire you to work even harder?

Try reframing the message to make it meaningful to all employees:

"I have interesting news for all employees, customers, and stockholders. Management has just announced that third-quarter sales were higher than last year. That means more customers are choosing our products over our competitors. They obviously appreciate the superior quality you put into every item, and they value the outstanding customer service you provide every day. In addition, third-quarter profits rose 35 percent. Higher profits reflect your commitment to workplace safety. By keeping one another safe, you've eliminated costly accidents and increased productivity. And I'm happy to say we've accomplished these results while further reducing emissions into the environment. You should be proud of your achievements."

In truth, few employees understand the significance of terms like ROA (Return On Assets) and ROE (Return On Equity); maybe a handful know how to calculate it, and of that handful, one or two can imagine how their individual efforts might influence the stated figure. So why talk about ROA and ROE at all? Usually, it's because most leaders are at a loss for words, so they use numbers to fill that void.

To be an effective leader, you must be able to communicate inspiring messages that promote the organization's values. Possessing the ability to communicate your vision separates you from the great majority of business leaders -- all those bureaucrats who hide in the shadows, wishing they knew what to say, while relying on their media relations staffs to inspire the troops.

Stop worrying about ROA and ROE, and start measuring your ROV: Return On Vision. Bookmark this post on del.icio.us

NOTE: This is the first of a series of posts featuring earlier content from the Vital Integrities Blog along with updated information and opinions.

In June 2004, I wrote the following about Starbucks:

Starbucks Coffee Company epitomizes the principle that companies should Live By The Values They Profess. One example is in the way the company purchases coffee. Last year, when prices of commercial-grade arabica coffee sold in commodity markets for 55 to 70 cents per pound, Starbucks regularly paid negotiated prices averaging $1.20 per pound directly to coffee farmers. The practice helps improve conditions for farmers in coffee producing communities and helps maintain long-term customer relationships on which the growers can depend.

At Starbucks, the values listed in its mission statement define the company's culture and guide the behavior of its employees. According to Starbucks chairman Howard Schultz, "If people relate to the company they work for, if they share an emotional tie to it and buy in to its dreams, they will pour their heart into making it better." The employees, or partners as Starbucks refers to them, seem to agree: 78 percent of the company's partners say the organization's values provide meaningful direction in their jobs at Starbucks.

Starbucks takes commitment to its core values to a higher level. Employees are encouraged to hold their leaders accountable by expressing their opinions on whether or not the organization's practices are consistent with its mission statement. All concerns are shared with Starbucks leaders and employees can expect a response. In addition, the company publishes a Corporate Social Responsibility Annual Report, listing initiatives, programs, and activities that demonstrate how Starbucks provides social, environmental, and economic benefits to the communities in which it operates. It takes the added step of hiring a certified public accounting firm to verify the report's contents.

Why are company values so important? Job candidates are less likely now than ever before to select an employer based simply on financial rewards. The emphasis now is on values. Today, people seek out employers with values consistent with their own, and look for ways to satisfy their interests and needs by aligning with the mission of an enterprise. Those organizations that recognize the role of values in leadership, and who Live By The Values They Profess, will win the war for talent, both in attracting and retaining the best workers.

Some things have changed at Starbucks since I wrote that post. Most conspicuously, a sluggish economy has impacted the company's sales, leading to announcements of intentions to close nearly 600 stores and eliminate almost 1,000 jobs. But despite its financial struggles, Starbucks has not forgotten its values. Believing that "coffee farming must be profitable to be sustainable," Starbucks continues its practice of buying directly from growers. In 2007, the company paid an average $1.43 per pound for its coffee, compared to a commodity-market price average of $1.14. Back in 2004, the company paid twice the market price, a greater spread than in 2007. However, while commodity prices fluctuate constantly, Starbucks gives farmers steady and predictable increases. As for its reputation as an employer, Starbucks' is still topnotch. The company has appeared in Fortune's list of "The 100 Best Companies to Work For" an impressive nine times, including in 2007 when it ranked fifteenth overall.

In Starbucks' Corporate Social Responsibility Fiscal 2007 Annual Report, Howard Schultz writes, "Although we haven't always been perfect, we have always been dedicated to being the kind of company that is trustworthy and authentic. Even during this time of change for our company, one thing that will never change is our long-standing commitment to conducting business in a responsible and ethical manner."

Now, as then, Starbucks' leaders Live By The Values They Profess. Bookmark this post on del.icio.us

"Name nearly any scandal, incompetence or hiccup suffered by the financial industry in the past decade or so, and the chances are Citigroup will have been at its forefront." –Wall Street Journal, August 12, 2008

If you are looking for an example of corporate leadership NOT to emulate, you need look no further than Citigroup's senior management team. The leaders of this financial giant seem intent on squandering the trust of employees and customers alike. Consider these latest lawsuit settlements:

Last week, Citigroup subsidiary Smith Barney paid $33 million to settle a gender bias lawsuit covering more than 2,400 female brokers. Plaintiffs accused the company's leaders of favoring male brokers in new client assignments, which in turn prevented female brokers from competing fairly for pay and promotions. The settlement calls for Citigroup to alter the way it assigns new clients to brokers and to send its managers to diversity training every other year. Don't expect the company's leaders to learn from this mistake, however; Citigroup settled a similar suit by female brokers in 1997.

Two weeks ago, Citigroup agreed to buy back $7.5 billion in auction-rate securities from individual investors and pay $100 million in fines to settle state and federal claims that the company falsely sold the risky securities as safe, money market-type investments. In addition, Citigroup must begin "restoring liquidity" to institutions holding about $12 billion of the instruments when the auction-rate securities market collapsed earlier this year.

On its Web site, the company says, "Citi aspires to the highest standards of ethical conduct" and claims to be a place "where opportunities to develop are widely available to all -- regardless of differences." But as these cases reveal, Citigroup's corporate culture has failed to evolve from a male-dominated, anything-to-make-a-buck environment despite a barrage of legal challenges in recent years. As a result, Citigroup's leadership continues to pay out billions of dollars in settlements while ignoring the ethical lessons imparted by angry employees and regulators. Bookmark this post on del.icio.us