Business leaders of the 21st Century have the dual responsibility of ensuring profitability of the businesses which they lead as a Legal duty to their Corporation in particular and shareholders in general plus they also have a Kantian duty to act in the best interest of their stakeholders.  The stakeholders can be loosely defined as anyone or group of people affected by a business’s actions or inaction.  This includes its shareholders, suppliers, customers, government, people living in the area where the business obtains its resources and groups interested in environmental sustainability.

Resolving the dilemma of the conflicting objectives of the shareholders and stakeholders is a challenge for the leaders as at times the objectives seem to be mutually exclusive. This can be resolved by staying true to Kant’s three maxims as modified based on the situation by Jeremy Bentham’s principle of maximisation of good for the greatest number of people. This would ensure that the leadership provided is ethical.

Providing authentic leadership to business is very also challenging based on the human nature to engage in herd-think. This allows glaring errors to be passed off as everybody was doing it. This was observed in the packaging and selling of CDO’s of Sub-prime mortgages, when any ration person could have realised that this financial toxic waste would explode, the only variable being when?  This is also aggravated by the proliferation of business guru’s who come up with models and theories which are adopted as fads by business leaders and discarded or discredited as fast as they are adopted, without really understanding the theory and whether it can be applied to their business or giving the model/theory the required time to realise its benefits.

Business leaders have to return to the basic’s of why they are in the business they are in when setting corporate strategy as guided by their mission statement, which should not only be observed per the letter but also in spirit. It should be mutually owned by all in the business with the Board of Directors who are the business’s leaders setting the right tone. When setting Corporate Strategy business leaders should be guided by “doing the right thing” for all stakeholders. If only shareholder interest are taken into account then there inevitably be sub-optimisation of the long term value of the business. When business do the right thing for all stakeholders and this is signalled appropriately to the markets, the value of the business is maximised, as a business value is clearly linked to its reputation in the market.

I would concluded that authentic and ethical leadership will lead to sustainable business of the future.

One thought on “How can leaders provide authentic and ethical leadership while meeting the demands of their stakeholders and ensuring the profitability of their business?

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