On Wednesday, April 10, 2013, 150 members and CFO guests of the CFO RoundTable gathered to hear thoughts on ethics and leadership from Dr. Joseph Weiss, Ph.D., Professor of Management from Bentley University.
(For links to Dr. Weiss’s presentation and Bentley University’s Center for Business Ethics, click here)
Dr. Weiss explains the moral dimension of
leadership through ethics
“I teach business ethics, and have been told that’s an oxymoron,” joked Dr. Weiss as he opened his presentation on ethics and its practice in business today. And while he discussed that courage, authenticity, trust and fairness were all important components of ethics, perhaps the most important was caring, as the act of caring is the moral dimension of organizational leadership and culture.
Dr. Weiss also stressed the absolute importance of the CFO role in nurturing a culture of ethics in a company. “After all,” he stated, “everything you [the CFO] do is important, especially when it’s with other people’s money.”
We then moved on to discuss occupational fraud, the most prevalent ethical risk seen in today’s organizations (manifested as asset misappropriation, corruption, financial statement schemes, etc.). However, while all vary in their degree of impact and size, one thing remains true – all fraud involves a violation of trust.
Over 150 CFOs gathered on Wednesday,
4/10/13, at the CFO RoundTable’s monthly
So how much does occupational fraud add up to? According to some studies cited in the presentation, a typical company loses up to 5% of its annual revenue to fraud. Further, more than 77% of this fraud were reported to be committed by accounting, operations, sales and executive management. And lastly, 87% of occupational fraud is committed by first-time offenders.
And while most occupational fraud is on the smaller side, and doesn’t always grab headlines, there are exceptions to the rule. Take for example, Enron, whose corruption along with others, led to the regulation of ethics through the Sarbanes-Oxley Act and federal sentencing guidelines.
However, while the regulations are out there and enforced, Dr. Weiss noted that the most effective means to prevent fraud is to create a culture of ethics and moral dimension within your own company. This means that by creating and nurturing a culture in which anyone can voice what they see as wrong-doing, either through fraud hotlines, confidential disclosure to management, etc., fraud can be mitigated further.
Of course, this culture of ethics starts with its leadership. And the new reality for ethical leadership is no longer controlled, closed-door management; rather, an open, collaborative and diverse environment, where a company and its employees has a shared sense of a higher ethical purpose and humility, regardless of the role they hold. Essentially, ethical leadership is an influential relationship among leaders and followers who intend real changes and outcomes that reflect that shared purpose.
And how do you know whether your leadership style fits this new reality? Dr. Weiss suggested an exercise where you imagine that you’re shadowed by someone for 72 hours, who takes notes on your leadership and management style. Would those notes support your collaborative, transparent and supportive style, or would they show something a bit different?
|Ultimately, what does ethical leadership mean for a CFO? It means keeping the interests of your customers, board, employees and other stakeholders above the interests of any one individual executive. It means fostering trust through actions, including open, welcome collaboration, transparency and responsiveness. And most importantly, it means being courageous enough to stand up in the face of suspected fraud, no matter how big or little it may seem. Because no matter the size of the fraud, it will threaten and crack the trust of everyone who touches your company.
To download Dr. Weiss’s slides from his presentation, please click here.
To learn more about the Bentley University Center for Business Ethics, its upcoming events and publications, please click here.