Entrepreneur or Leader

Are You a Good Leader?

You will be if you draw on key ethical principles. Here's how to do it, whether you're a CEO, a banker, an entrepreneur, or anyone else in business

By Bruce Weinstein, PhD

"Never underestimate the other guy's greed." This isn't just a classic line from the 1983 Brian De Palma film, Scarface (written by Oliver Stone). It also reflects the attitude that has caused the economic disaster we're now clawing ourselves out of.

Isn't it time for a new way of thinking?

I propose the following leadership guidelines for C-level executives, investment bankers, entrepreneurs, and everyone else whose decisions can affect the financial well being of other people.

1. WHAT'S GOOD FOR THE GANDER IS GOOD FOR THE GOOSE.

At a time when companies are slashing their labor forces and freezing salary increases, and when some employees are being asked to take lower-paying positions, it is deeply unethical for leaders to retain their sky-high compensationand to expect enormous bonuses. They should follow the example of Michael Kneeland, CEO of United Rentals, who recently asked for, and was given, a 20% pay cut. Let's hear more reports like this one.

2. KNOW YOUR PRODUCT.

According to a recent three-part story in The Wall Street Journal, the willingness of investors to buy and sell financial products whose complexity they didn't fully understand was one of the primary catalysts of the bust. From our current sober perspective, it seems unbelievable that self-identified experts could be involved in transactions with so much at stake and at the same time be ignorant about exactly what it is they were buying or selling, but this is what happened, and on a grand scale, no less.

Because money was being made in these deals, no one thought to question what was going on or had the strength of character to speak up about any suspicions. However, knowing your product isn't a nicety of doing business. It is an ethical obligation—to your company, your clients, and yourself.

3. WINNING (AT ALL COSTS) IS FOR LOSERS.

Most of us were taught that we should treat people the way we'd like to be treated ourselves. However, too many business leaders have failed to take this seriously. Instead, the guideline seems to be, "Get all you can by any means necessary." Look at credit-card companies that charge exorbitant interest rates, changing customers' fees without telling them why. These companies defend such practices on the grounds that they will lose their competitive edge if they don't play hardball.

This kind of leadership is shortsighted, unfair, and ultimately bad for business, since the consequences will be more federal regulation and oversight. Good leaders know that if they don't regulate their businesses themselves, someone else will.

4. TELL THE TRUTH.

A leader has an ethical obligation to be honest with stakeholders about issues that directly concern them. One of these issues is the leader's own health. Consider the recent 10% drop in Apple stock after CEO Steve Jobs announced that he was taking a five-month medical leave of absence. Because Jobs battled pancreatic cancer several years ago, there was speculation that his cancer had returned, even though Jobs had announced earlier that he was merely suffering from a "hormone imbalance." While stockholders may have punished Jobs for his announcement, he did the right thing in saying he was taking a leave for medical reasons. There is no shame in being ill, and true leadership involves being forthcoming about one's illness—and anything else that can affect the flourishing of the organization.

5. PREVENT HARM.

When you can reasonably foresee that a decision is likely to hurt people and you make that decision anyway, you're being both irresponsible and stupid. For example, subprime mortgage lenders and brokers who lend money to people likely to default are enriching themselves at the expense of the rest of us, since the federal government may be called upon for financial rescue.

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