Reformation versus Revolution: Late Night Thoughts on Sustainability and the True Nature of Leadership

Posted in The Strategist on July 15th, 2004

One of the more interesting philosophical debates among those with an interest in sustainability pits what I will call the reformers against the revolutionaries. Let me explain. The reformers believe that while there may be a few genuinely bad companies out there, it is absolutely possible to reform the majority and weave sustainability into day-to-day business. The revolutionaries, as the name suggests, are skeptical (or worse) about the corporation and believe we must forge a bold new future with new types of social and commercial enterprise.

I thought of this last week as I read Janet McFarland’s useful column in the Globe and Mail, “The corporate call for integrity seems little more than lip service” (see www.globeandmail.com for details). You see, I have long placed myself in the reformer’s camp. In fact, I have been quick to defend the majority of corporations and have suggested that the Achilles heel of the sustainability movement is its too frequent insistence on seizing the moral high ground and preaching to the converted. What about the other 80 or 90%? While I’m not yet ready to declare myself a revolutionary, Ms. McFarland’s column gave me pause and reminded me that my reformation argument rests on an important assumption about corporate leadership that is too often ignored or overlooked. Put simply, unless and until corporate boards and the CEOs they hire accept responsibility for the behaviour of their firms, our ability to institute reforms that foster sustainability will be gravely compromised.

In the lingering fallout from the collapse of Enron, Adelphia, WorldCom and others (will the ripples from this story never cease?); CEO ignorance is becoming a trendy excuse and defense tactic. And so it is that Ken Lay, at once both notorious and pathetic as the fallen chief of Enron, can claim that he knew nothing about the financial transactions and accounting practices that ultimately sunk his company. Further, he can protest that his personal wealth has been “diminished” to some $20 million and that he is therefore also a “victim”. What is going on here? What do such claims of ignorance say about how we should think about and measure CEOs? I respectfully submit that the fundamental measure of a CEO is his or her ability to lead. But what, ultimately does this mean?

In business, as in so much of life today, we emphasize outcomes in thinking about leadership – increased sales, reduced costs, shareholder value, and so on. We also, it must be said, value power and charisma and associate this with leadership. Our implicit or explicit evaluation of corporate leaders and our apparent willingness to worship at the cult of celebrity leaders (think Donald Trump) only reinforces this view. The methods through which outcomes are achieved, however, has tended to receive rather less attention. In particular, the moral principles that underpin the ideology of leaders are a subject that cries out for discussion and debate.

If we are interested in creating genuine financial and social wealth or well being, if we are interested in sustainability or social responsibility, why wouldn’t we see the imperative of exploring the moral dimension of boards and CEOs? As Ms. McFarland aptly put it, morality “is not endlessly flexible”. More broadly, Miles Little, Director and Founder of the Centre for Values, Ethics and the Law in Medicine at the University of Sydney, reminds us that merely thinking about leadership in the instrumental sense of being the means through which followers achieve a particular interest (shareholder value comes to mind) is to focus too narrowly on “the kind of leadership that can have an ideological base without necessarily having a moral one. Leadership without a moral basis is almost always potentially disastrous.”

The news is not all bad. Just as Camus generously and wisely noted that in a time of pestilence there are more things to admire in men than to despise, I passionately believe that there are many more good companies than bad. I further believe that more and more companies and organizations are thinking about the moral dimension of governance. Viewed in this light, sustainability or social responsibility can become an emergent property of doing business or exercising leadership. Canada is especially fortunate in this regard. The most recent KPMG – Ipsos Reid ranking of Canadian corporations noted that the two companies which score highest for corporate governance, RBC Financial Group and BCE Inc., also top the social responsibility rankings. RBC also happens to be Canada’s most respected corporation overall.

And what might all of this mean for my reformer versus revolutionary argument? I’m still a reformer at heart (or maybe a quiet revolutionary) who draws inspiration from RBC, BCE and others like them, but I have a renewed appreciation for the need to frame the sustainability challenge properly – it’s about leadership, writ large. It’s about catalyzing individuals to work as one team to create genuine wealth. It’s about sharing credit among the team. And it’s about taking responsibility for the results.