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The Five Dimensions of Responsible Leadership

Since the 2008 financial crisis, the global chorus of voices questioning capitalism has grown steadily louder. It is difficult indeed to reconcile neoliberal optimism about homo economicus with the precipitous slide of the global economy, and the folly of the subprime lending bubble. And the problems that have deepened in the last six years — income inequality, unemployment, the threat of environmental crises brought on by human activity — do not track with the neoclassical notion of the benign, self-correcting global market.

An article in the September 2014 edition of McKinsey Quarterly, of all publications, crystallized this crisis of conscience, calling into question “our long-held assumptions about how and why the system [i.e., capitalism] works.”

Unfortunately, the odds are against us progressing from questioning the status quo to changing it, unless a completely new leadership style centering on global responsibility becomes the norm in the business community.

At this point, many executives may object, “Why say that I should be responsible? The common good is the responsibility of governments, not business.” And of course, government plays a vital role, through passing legislation such as Dodd-Frank in the United States to rein in rogue industries and prohibit certain practices. But compliance with the law is not the same as responsibility. If mere compliance were the sum total of an enterprise’s ethical obligations, it would not take long before businesses transgressed the spirit of the law with creative workarounds — as we have seen in the financial sector with Dodd-Frank and Basel III.

As decision-makers within our primary value-creating institutions (i.e., companies), business leaders wield immense power and influence, to be used for good or ill. In many of the emerging markets where companies expect future growth to be concentrated, business may be better able to effect necessary change than a government struggling to retain power or mired in corruption. The 2014 Edelman Trust Barometer argues that “business must lead the debate for change”, because of the two categories of mistrusted leaders, businesspeople are the least mistrusted.

In any case, it would behoove business leaders to stay ahead of the responsibility curve, as my recent experiences in China prove. Just a few years ago, raising the topics of bribery and corruption among groups of Chinese MBA and Executive MBA students elicited a rapid-fire stream of excuses:

It has always existed, even before Confucius. It is the tradition in this culture; a “norm of reciprocity”

Nothing is wrong with it: everyone does it, everywhere in China

In China: there is no alternative, if you want to do business

But President Xi Jinping didn’t share this resigned attitude towards bribery, a practice estimated to cost the Chinese economy well over US$100 billion annually. Soon after he assumed power in November 2012, he launched a high-profile crackdown that has led to tens of thousands of party members being investigated or sanctioned (prison, death penalty). Earlier this month, as I was in China, I could observe that  the tune in the business community had changed considerably: Many state-owned enterprises had even stopped sending managers to EMBA programmes, for fear the connections they made there with private-sector peers might nurture corrupt alliances.

Of course, complacency about unethical behaviour is not unique to China, nor is the possibility for that complacency to be rudely disturbed when the political winds shift. For everyone’s sake, it’s best to root out complacency and cultivate responsibility, particularly among leaders.

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Henri-Claude de Bettignies, pictured above, is The Aviva Chair Professor of Leadership and Responsibility Emeritus and Emeritus Professor of Asian Business and Comparative Management at INSEAD. This post is excerpted from an article at INSEAD Knowledge, based on themes developed in a Public Lecture at the HEAD Foundation in Singapore, November 4, 2014.

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