Library » Integral » Enlightened Business Leadership - What the World Needs Now
David A. Schwerin, Ph.D. (www.instituteforethicalawareness.org)
[This is the full text of an article that appeared, edited and in Chinese, in the Green Herald.]
“We are at the end of a difficult generation of business leadership.”
Jeffrey Immelt, Chairman and CEO, General Electric
Despite the recent economic crisis, the vast majority of business leaders make thoughtful, constructive contributions to society. Their valuable innovations and continuous efforts to produce and distribute goods and services more efficiently play a critical role in achieving higher standards of living. Most of their focus, however, is on improving their company’s brand and strengthening their company’s growth prospects. Largely absent are business leaders who are willing to look at the big picture and help formulate, promote and implement policies that are vital to the welfare of the planet.
Without a pragmatic, unifying voice from the business community, policy makers are frequently presented with the opposing views of competing interest groups, each group believing that their ideas are 100% right and the opposition’s 100% wrong. Missing in such an environment is a spirit of tolerance and cooperation that is essential to solve complex, divisive issues. Unable to find a position that is broadly acceptable, decision makers settle for superficial solutions which are ineffective or suboptimal. In addition, groups whose views are disregarded often become belligerent and resort to negative, destructive tactics that hinders the attainment of an equitable and sustainable prosperity.
This article identifies and describes four qualities that business leaders need to cultivate in order to improve the current economic climate and make the world a better place to live and work. A few business leaders who exhibit these traits, and thereby serve as role models, are highlighted under each of the four qualities.
Know yourself. In other words, discover all you can about your beliefs, values, priorities and purpose for living. This dictum was expressed in slightly different terms by Max Depree, former CEO of the Herman Miller office furniture company. According to Depree, “The first responsibility of a leader is to define reality.” More specifically, which objectives are real, meaningful and enduring enough to be worthy of one’s time and effort? What goals can make a meaningful difference to a company’s employees, customers, investors, the community it serves and the eco-system upon which we all depend?
Jack Ma, CEO of Alibaba, takes the need to know oneself seriously. According to an interview he gave to Green Herald Magazine, “many people are too busy walking to stop for a view of themselves.” He believes that a truly successful entrepreneur needs to develop the habit of introspection. Such contemplation helps a corporate leader determine the real purpose for which the company exists. Purpose, according to Ma, determines a company’s greatness and longevity. He believes that companies staffed by people with divergent views on purpose are doomed to fail. A company that is founded on a noble ideal and that creates value for the community is more important than its scale or profitability. Says Ma, “A company making little money is indolent and irresponsible, but companies driven by profit, are also valueless. Money making is not our goal; rather it is a result.”
The more thoroughly individuals know themselves the better they are at making impartial and objective decisions – an essential attribute of any successful leader. If a business leader is blinded by personal interest, resentment or jealousy, his or her assessments can not be objective. Andrew Pettigrew, professor of strategy and organization at the Saïd Business School at the University of Oxford believes that managers need to remain open and engage with people in order to understand the choices and evaluate significant trade-offs such as short-term vs. long-term and rational vs. emotional decisions. Leaders, therefore, need to be aware of their prejudices and biases. Our beliefs are based on assumptions, generalizations, distortions and misconceptions. These cognitive biases govern our perceptions of reality – how we understand the world – and need to be made conscious so we can analyze their accuracy before making decisions. In their book, Born to Believe, Andrew Newberg, M.D. and Mark Robert Waldman list twenty-seven biases that individuals must recognize in order to understand themselves and the accuracy of their beliefs about the world. Because of space limitations, only ten of the biases are listed below. They are all well worth contemplating.
- Family bias – we accept information provided by family and friends without verifying its accuracy.
- Authoritarian bias – we tend to believe people with power and status without checking their sources.
- Attractiveness bias – taller, more attractive individuals are given greater credence because we seek what is aesthetically pleasing.
- Confirmation bias – we tend to emphasize information that supports our beliefs while ignoring contradictory ideas.
- Self-serving bias – we tend to maintain beliefs that benefit our interests and goals.
- In-group bias – we give preference and benefit of doubt to members of “our group.”
- Out-group bias – we reject or disparage beliefs of people outside “our group.”
- Perceptual bias – we assume our perceptions and beliefs reflect objective truths.
- Perseverance bias – the longer we maintain specific beliefs the more ingrained they become.
- Uncertainty bias – we prefer to believe or disbelieve rather than remain uncertain.
Cultivate generosity. Selfishness is often cited as the primary cause for many of our recent economic problems. Many people feel that greedy, shortsighted, reckless conduct has become widespread in all professions. People who understand themselves realize they are merely a tiny part in an unending chain; all links in the chain must be respected and nourished if the economic and ecological systems upon which we all depend are to flourish. Being generous is simply an acknowledgement that those who are thriving need to help those who are struggling. As Jeff Immelt, CEO of GE said in the December 9, 2009 speech cited above, “Ethically, leaders do share a common responsibility to narrow the gap between the weak and the strong.” Moreover, business leaders need to view problems in an integrated way instead of approaching difficult issues as if they were isolated conditions. Climate change, for example, is not just an energy issue but one that impacts food security, water supply, land use, air quality and biodiversity. When species become extinct, for example, the food chain is affected in ways we are just beginning to comprehend. The systemic consequences are more pervasive and severe than we are able to imagine.
One businessperson who has devoted most of his time and money to helping others is Hal Taussig, founder of Untours, a successful travel business. In 1992 he and his wife, Norma created the Untours Foundation, funded by 100% of the profits from Untours. Over the years the foundation has provided millions of dollars in low-interest loans to entrepreneurs worldwide. The foundation’s motto is to give a person “a hand up, not a hand out.” He wants to give the economically disadvantaged the capital and skills to become self reliant, successful individuals. Taussig is equally concerned about the impact businesses have on the environment. Accordingly, he loaned money to the Landless Workers Movement of Brazil which has reclaimed land for over one million landless Brazilians. Taussig was one of the first to try micro-lending including high-risk loans requiring no collateral. In 1999 actor Paul Newman and John Kennedy, Jr. presented him with George Magazine’s “Most Generous Company in America” award.
Despite receiving many awards, Hal Taussig lives a simple, frugal life based on the philosophy that you don’t need a lot of material things to be happy and have a rich, fulfilling life. Peter G. Peterson co-founded the Blackstone Group after a distinguished career in politics and investment banking. Deeply troubled by his fellow countrymen’s unsustainable spending and borrowing habits, he donated one billion dollars to the Peter G. Peterson foundation to focus on fiscal sustainability challenges. Peterson believes his foundation must educate people about the perils of rampant overspending and the need for shared sacrifice. This means telling people the truth – they will have to give back some of the (unfunded) benefits they were promised because it is foolhardy to keep ignoring the long term consequences of imprudent decisions. In other words, Peterson believes, we can no longer “pretend we can sustain the unsustainable.” Giving away one billion dollars, which represents the vast majority of his net proceeds from the Blackstone public offering, was not as hard as it might seem. First, it was for a cause he sincerely believed in. Second he had observed that of all the billionaires he admired - Warren Buffet, Bill Gates, Michael Bloomberg, George Soros – all got great pleasure from giving their money away. Says Peterson, “I have far more than enough.”
Act courageously. Making unpopular decisions that may expose a business leader to criticism or hinder his company’s short term results takes a great deal of courage. But there are times when the desires of special interests must give way to the needs of the whole. Jeffery E. Garten, former Dean of the Yale School of Management has written in The Politics of Fortune: A New Agenda for Business Leaders (2002), about leaders in the past who, “rose above the interests of any firms or industry and focused instead on the public interest through a pragmatic business lens.” We desperately need more leaders in the business community to lead by example. As Gandhi said, “You must be the change you want to see in the world.” Successful businesspeople need to take the lead in: restructuring compensation packages so they only reward long-term performance, shouldering more of the tax burden, speaking out for the less fortunate and accepting short-term sacrifices that strengthen the viability of the economy and the sustainability of the environment. They also need to support politicians that act courageously by making the hard choices they might otherwise like to avoid.
Leaders at Apple and Ikea recently took principled positions that were not only costly but exposed them to considerable criticism. Apple quit the U.S. Chamber of Commerce because of the Chamber’s opposition to federal efforts to limit greenhouse gases. The Chamber is the world’s largest business federation, representing some 3 million business members. Apple is not only speaking out about the Chambers shortsighted stance but is using a “life-cycle analysis” to calculate CO2 emissions for each of its products, from production to transportation to consumer use and recycling. According to Apple, “No other electronics company reports this information (the carbon footprint for each of its new products) at the product level, but we think they should.”
Ikea recently decided to suspend further investment in Russia due to widespread corruption and continual demands for bribes. The announcement came after a radio interview with Ikea’s 83 year old founder, Ingvar Kamprad, where he said that Ikea decided not to solve problems by pushing money under the table. This decision wasn’t easy as Russia is a perfect market for Ikea’s reasonably priced home furnishings. Other Western business executives have complained about the corruption in Russia but most have decided to put profits ahead of principle and silently tolerate the situation.
Embrace change. Resisting change and adhering to the status quo are common attitudes in business today. With everything constantly changing - new markets to understand, new competitors to deal with, new products to develop, new personnel to train, new bosses to appease – opportunities for decision-making abound. Maintaining the status quo is not only unwise but unfeasible. Since change affects people differently, some may be advantaged and others disadvantaged by shifting conditions. Those feeling deprived may try and maintain the status quo and a leader must learn to tolerate and dispassionately confront malcontents and the obstacles they erect. It is usually helpful to try and anticipate objections so that those opposed to changes can be placated and their protests minimized. Finally, change does not happen quickly or easily so leaders must learn to transcend the feelings of frustration that occur when things don’t happen in exactly the way or in precisely the timeframe something is desired.
Two organizations that have embraced change, one with some reticence and the other enthusiastically reflect the need and advisability to remain flexible and adaptable. Until recently many considered Wal-Mart to be a strong proponent of the status quo. As a result, Wal-Mart faced a great deal of negative publicity related to mistreatment of workers and suppliers and detrimental environmental policies. While some progress has been made with regard to employees and suppliers, Wal-Mart’s greatest transformation has come with a new vision of its environmental opportunities and responsibilities. It has equipped stores with solar panels, integrated wind power into its energy load and made its huge fleet of trucks more fuel efficient. In addition, it has committed to locally grown produce, which reduces the distance food travels and, therefore, the amount of energy needed to get the produce to their stores. It has also undertaken several significant initiatives to reduce waste and improve energy efficiency. Most recently it has used its influence to require its vast network of suppliers to provide a sustainability score so shoppers can tell at a glance how each product stacks up based on a sustainability index it is creating. This will be analogous to a nutritional label on food. Wal-Mart’s metamorphosis from an environmental oppressor to an environmental ally has been enormously successful and helped the company not only to improve its image but to increase sales and reduce costs. Change – even by a huge company – can be implemented on a massive scale if the leaders of the company are solidly behind the actions and their motives are sincere.
Meaningful change can also be facilitated by less well-known business leaders. Jay Coen Gilbert and Bart and Chrissy Houlahan built a successful sports apparel company. After selling the company they joined with Andrew Kassoy and created a non-profit organization to promote a new type of corporation designated by a single letter, “B,” which stands for benefit. “B” corporations are ones that create benefits for everyone, not just for themselves. When I interviewed Jay Coen Gilbert for this article he made it clear that their vision is to “create a new economic sector that uses the power of business to solve social and environmental problems.” Their trademarked motto is “the change we seek.” More specifically, a “B” corporation is one that does business in a more sustainable, less wasteful way and that treats all its stakeholders fairly. To be designated a “B” Corporation a business must attain certification by answering about 200 questions to assess the company’s effect on its stakeholders. In addition, a company seeking certification must amend its articles of incorporation to document their dedication to stakeholder interests and to preserve these policies even if new investors or management takes over. The rating system was developed by the non-profit B Lab which then advocates for and supports these companies. Since B Lab’s creation in 2006, 240 companies from around the U.S. have been certified. They represent 54 industries and have around $7 billion in assets. How far this movement will go is yet to be determined but the concept illustrates how visionary ideas can spread and offer the potential for improving the world in a major way.
Every country faces some or all of the following challenges: pervasive poverty, pollution and corruption; inadequate health care, education and energy resources. Every one of these issues affects businesses. Today’s business leaders, who have practical experience solving problems and making operations more efficient, must be willing to subordinate their short-term, narrow interests and work toward solving problems that affect the welfare of all people. Leaders who understand themselves, want to share their bounty, are willing to risk derision, and know that the status quo is untenable are the ones that need to step forward. We can solve our problems but we can’t do it without farsighted leadership and we cannot afford to wait.