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ENT80010 | Leadership | Societal Attitudes Towards Businesses

Case Study:

CEO: power, accountability and transparency. Source: White Paper on Corporate Governance and Leadership, 1st international Forum, Paris of The Council on Business and Society The purpose of this assignment is to combine the theories of leadership presented in the first half of the course with concepts of power, politics, corporate social responsibility and governance presented during the second half of the course.
 
1: The case study details some bad behaviour from CEOs that leads them to being singled out as villains who steal from the company or shirk their responsibilities. Using ideas about ethics and good governance, explain how a board of governors rnight prevent such bad behaviour in the CEO?
2: The case study argues that the CEO is the focal point in a company's governance - the ultimate decision maker responsible before all stakeholders. Explain, in detail and supported bV theories from the module, how a high performing CEO should be leading by example.
3: The case study suggests that CEOs must leverage the loyalty of their employees and help them feel they belong. Examine how he might achieve that through some or all of the following concepts: organisational climate, organisational community, teamwork, diversity, flexibility, organisational culture and/or organisational change.

Answer:

Introduction

There is interlinking between the businesses and Society which is responsible for influencing the Global Agenda. In the current assignment, discussions are made to understand other societal attitudes towards businesses that govern aspects of wealth and job creation. There has been a fall in the consumer loyalty among the masses toward corporations as well as the executives working in it due to leadership prices which are complemented by aggressive media which in turn influences the consumer by the spread of information as well as viewpoints all over the internet. The leadership is under scrutiny and is responsible for the sustainable strategy of the business and its social impact.

Responsibilities of the board of governors to prevent the unethical behaviour of CEO’s

The CEO of a company is the top executive who is responsible for making the management decision. However, they are also answerable to the board of governors who represent the stockholders and the company owners (Sigurjonsson, Schwarzkopf & Bryant, 2018). The board is responsible for setting the long-term goals and objectives for the organisation and oversees the growth of the company. It should be kept in mind that the board of governors has the authority to dismiss a CEO and approve a replacement. This means that the board of governors is responsible for playing a key role in preventing the unethical behaviour of CEO and Management (Carroll & Buchholtz, 2014).

The first impertinent thing for the Board of governors to do when facing anethical crisis is to ask the right questions to the management and the CEO in power. This will enable them to understand the impact of the actions of the management on the reputation of the company, the lon


g-term impact, cumulative effects of the actions on the shareholders and stakeholders of the company. Asking the right questions will also help in understanding the perception of the objective parties in case the scenario change. The board is also responsible for determining if the actions undertaken by the management are technically correct or ethically permitted (Rashid & bin MohdHarif, 2015).

It is necessary for the board of governors to understand the ethical, integral and cultural issues pertaining in the company. In many cases, these controls fail as they are not sufficient enough or are subject to management override. Which is why the controls need to be audited independently. In order to assure and measure the reputation, Integrity as well as the risk culture by Board members it is necessary that the assurance report reaches the board of governors without being tampered with by the management.

The board of governors can also effectively utilise an executive session which involves questioning and information gathering as a preventative method to cease the unethical actions taken by CEO and management. It is necessary for the Board of governors to have an authority to obtain information pertaining to ethics and work culture by conducting interviews with any individual working in the company (Beach, 2015). The board should also look forward to obtaining assistance from external sources that can help in monitoring the same. If the board of governors cannot override the management, this effectively means that the board of governors is acting along with the management.

Another way in which the board of governors can restrict the unethical behaviour of Management and CU is by controlling pay for conduct as well as performance. It is understandable that pay incentives are very strong driving factors and they can be useful for implementing ethical behaviour as well. In several cases, it has been observed that the board underutilizes their payment mechanism to exhort a control over the management. Implementing pay practices will become an incentive for Risk-taking and complimenting them with ethical conduct can help in reigning in the management (Yadav, 2017). The word means to assess the conduct and risk that have been undertaken by the management before assigning bonuses.

Another way in which the board of governors can effectively minimise the unethical behaviour of CEOs is to introduce a board member who is not chosen on the basis of the pre-existing relationships. Board members having pre-existing relationships will not be asking the right questions or taking the tough decision as they are bound by their relationships. Hence it is necessary to appoint Board members who do not have any pre-existing relationships with the management or the other governors present on the board. This may also include the appointment of female Board members.

How do high performing CEOs lead by example?

The role of a chief executive officer is a very tough one. There is often a misalignment between the ideologies of the board of governors pertaining to Ideal CEOs and the actual qualities of a CEO who is responsible for leading the company to a high level of performance. It has been observed that the successful chief executive officer has very specific traits that are critical to their ability and performance (Clarke, 2015). If the board of governors focuses on these four specific traits, they are more likely to hire an individual who is better suited for the company and will be able to lead the same by example.

The first important trait is decisiveness. This means that an individual who has the ability to make decisions with speed, as well as conviction, is a very good choice for CEO position. It is not necessary that high-performing executive Undertake great decisions all the time but rather they are very decisive which makes them stand out from the rest. These individuals have the capability of making decisions consistently at a fast pace and with a great amount of conviction irrespective of the situation, incomplete information or unknown realm (Bernstein, 2015). If an individual is in pursuit of a perfect answer to a given situation, they will require a lot of time which will make implementation of the solution even difficult. The decisiveness of the CEO will rub off on the employees which will boost their confidence in taking decisions and necessary action without stalling the company operations.

The next trait that has been identified is thewillingness to engage for impact. The CEO is responsible for setting a clear course for conducting the business and require the support of the employees as well as the stakeholders to continue on this path. This means that high performing CEO maintain a balance between stakeholder priority and business deliverables (Hou, Priem & Goranova, 2017). In order to do so, they require stakeholder insight which is done by analysing the needs as well as motivation. Once the needs and motivation have been identified, the next step is to align the board with the objective of value creation to drive performance. This involves perfect plan execution and implementation of disciplined communication as well as influencing strategies. Individuals who behave likeautocrats do not enjoy a very long stint in a company. This is because they do not enjoy the support of the board or the team members because of their willingness to inflict Collateral Damage (Ellwood & Garcia-Lacalle, 2015). Such individuals are selected as CEO only when the company or the business organisation is in Crisis mode.

Proactive adaptation is another trait of high-performance CEOs. With increasing competitiveness in the Global market, it is important for the business leaders to adjust and adapt to the rapidly changing market situation. It has been observed that CEOs who are flexible are more likely to succeed in the long term (Jenter & Kanaan, 2015). This is because this adaptive individual deliberately invests most of the time to align the long-term objectives of the company. In order to be adaptive, it is necessary for these individual executive officers to analyse and interpret a wide variety of data and relevant information that may or may not be related to the business.

The final trait that has been identified is reliability and ability to deliver. A good CEO is responsible for consistently producing reliable results. A reliable executive officer usually establishes a management system which includes a series of performance metrics, multiple channels of performance monitoring, high and clear accountability as well as ability to rapidly correct the course that they have taken in case of a mistake (Jenter & Lewellen, 2017). Along with these parameters, a reliable CEO is always surrounded and supported by a strong team.

Impact of CEOs on employee loyalty

A CEO is held accountable for transforming business practices by communicating, implementing changes, developing strong teams and personally getting involved in the processes and operation of the company. Hence it is necessary to analyse the impact of the CEO on employee loyalty. The primary impact of a good chief executive officer is that they make the transformation a meaningful one (Hartnell et al. 2016). It is easy to understand that people who believe in a cause will go extraordinary lengths to make it possible. By implementing a meaningful and Powerful transformation, a CEO can reinforce the commitment and loyalty of the employees. The ultimate impact of such a strategy depends on the willingness of the CEO to make personal transformations, engaging employees openly and at a personal level and identify success when it happens (Hollandts, Aubert, Abdelhamid & Prieur, 2017).

A CEO is also responsible for modelling mindsets and behaviours of employees. This means that the CEO must be willing to be portrayed as a role model. This can be only done when the CEO Undertake Journeys of personal transformation. When the employees observe such a kind of behaviour from their boss they are encouraged to restructure theirmindset as well as behaviour. This change in mindset will enable in providing support for the implementation of transformational activities identified by the CEO.

As already mentioned a good CEO is always surrounded by a strong team. Hence it is the responsibility of the CEO to motivate individual employees who can be helpful in building a strong and committed team that is aligned with the goals and objectives of the company (Imaizumi, 2017). Identification of team members requires the CEO to take harsh and tough decisions in regards to individuals who have the motivation as well as the ability to implement and follow through the transformational changes. By correctly identifying the team members a CEO will be able to harness the will and support of a team to undertake transformation.

Incase a CEO is unable to motivate the team members as or the employees in the right Direction they can always utilise the element of fear of their position in the company. However, this leads to the problematic form of employee loyalty (Ordóñez & Welsh, 2015). This means that the employees are forced to accept the visions of a CEO because of fear of their power and not because of their trust in their leader. This will propagate a work environment which will be filled with anxiety and will make the place difficult to work in.

It is also important for the CEO to remember during the team building and development process that they should avoid people who will accept any kind of directive from the boss without offering a perspective that can be different. It is necessary for CEO to appreciate and value the different opinions that the individual team members have (Knox, 2018). It is also advisable for CEO to not scrutinize the ideas and belief of the team members critically but encourage it if it is aligned with the goals and objectives of the company.

It is necessary to keep in mind that loyalty is not a unilateral aspect and requires equal contribution of opinion and respect from both the parties to ensure mutual respect and trustworthiness. If the employee does not believe that the management is doing things which appreciates or values the opinions and loyalty, the CEO will soon find that they are at wit's end. A loyal CEO will enjoy loyal employees who will do anything possible for their Boss voluntarily (Silvestro, 2016).

Conclusion

The current assignment has been conducted to analyse the aspects of leadership and governance. Discussions were made pertaining to the role and responsibilities of the board of governors to minimise the occurrence of unethical activities from CEO or the management. The assignment also looks into the different traits of CEO who lead the company by example. Finally, the topic of employee loyalty and the impact of CEO on the same has been also discussed.

References

Beach, L. R. (2015). The human element: Understanding and managing employee behavior. Routledge. London, UK

Bernstein, M. H. (2015). Regulating business by independent commission. Princeton University Press. Retrieved from https://books.google.co.in/books?hl=en&lr=&id=jETWCgAAQBAJ&oi=fnd&pg=PR9&dq=Bernstein,+M.+H.+(2015).+Regulating+business+by+independent+commission.+Princeton+University+Press&ots=fPJtAjp4is&sig=WLui1gNuqDgOoPiyHdYXcSIZgpc#v=onepage&q&f=false

Carroll, A., &Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder management. Nelson Education. Edinburgh, Scotland

Clarke, C. (2015). Ethics and economic governance: Using Adam Smith to understand the global financial crisis. Routledge. London, UK

Ellwood, S., & Garcia-Lacalle, J. (2015). The influence of presence and position of women on the boards of directors: The case of NHS foundation trusts. Journal of Business Ethics, 130(1), 69-84. Retrieved from https://link.springer.com/article/10.1007/s10551-014-2206-8

Hartnell, C. A., Kinicki, A. J., Lambert, L. S., Fugate, M., & Doyle Corner, P. (2016). Do similarities or differences between CEO leadership and organizational culture have a more positive effect on firm performance? A test of competing predictions. Journal of Applied Psychology, 101(6), 846. Retrieved from https://psycnet.apa.org/fulltext/2016-11402-001.html

Hollandts, X., Aubert, N., Abdelhamid, A., &Prieur, V. (2017). Beyond Dichotomy: The Curvilinear Impact of Employee Ownership on CEO entrenchment. Retrieved from https://halshs.archives-ouvertes.fr/halshs-01495427/

Hou, W., Priem, R. L., &Goranova, M. (2017). Does one size fit all? Investigating pay–future performance relationships over the “seasons” of CEO tenure. Journal of management, 43(3), 864-891. Doi: 10.1177/0149206314544744

Imaizumi, M. (2017). Company Culture Drives Productivity: A Study on How Company Culture Impacts the Bottom Line. Retrieved from https://repository.tcu.edu/handle/116099117/19901

Jenter, D., & Kanaan, F. (2015). CEO turnover and relative performance evaluation. The Journal of Finance, 70(5), 2155-2184. Doi: 10.1111/jofi.12282

Jenter, D., & Lewellen, K. A. (2017). Performance-induced CEO turnover. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3035268

Knox, B. D. (2018). Employee Volunteer Programs are Associated with Firm-Level Benefits and CEO Incentives: Data on the Ethical Dilemma of Corporate Social Responsibility Activities. Journal of Business Ethics, 1-24. Retrieved from https://link.springer.com/article/10.1007/s10551-018-4005-0

Ordóñez, L. D., & Welsh, D. T. (2015). Immoral goals: how goal setting may lead to unethical behavior. Current Opinion in Psychology, 6, 93-96. Retrieved from https://link.springer.com/article/10.1007/s10551-018-4005-0

Rashid, S., & bin MohdHarif, M. A. A. (2015). Exploring the Vital Factors Influenced by Outcomes of Employee Engagement: A Qualitative Study among CEO in Malaysia’s SMEs. Management, 4(4), 242-252. Retrieved from https://www.researchgate.net/profile/Safiah_Rashid/publication/293671619_International_Journal_of_Operations_and_Logistics_Management_Exploring_the_Vital_Factors_Influenced_by_Outcomes_of_Employee_Engagement_A_Qualitative_Study_among_CEO_in_Malaysia's_SMEs/links/56baa16408ae2567351edab7.pdf

Sigurjonsson, T. O., Schwarzkopf, D. L., & Bryant, M. (Eds.). (2018). The Return of Trust? Institutions and the Public after the Icelandic Financial Crisis. Doi: 10.1108/978-1-78743

Silvestro, R. (2016). Do You Know What Really Drives Your Business's Performance?.MIT Sloan Management Review, 57(4), 28. Retrieved from https://warwick.ac.uk/fac/soc/wbs/subjects/om/news/mit_sloan_mgt_review_summer_2016_do_you_know_what_really_drives_your_businesss_performance-_1.pdf

Yadav, K. (2017). The Role of Director under Companies Act, 2013. International Journal of Research, 4(17), 4068-4076. Retrieved from https://pen2print.org/index.php/ijr/article/view/11997

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