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Summer 2006

Of Ethics and Kings

High profile ethics breeches appear with distressing regularity in business news. One such breech is the failure to nurture prosperity for the whole kingdom. This is one of the four primary responsibilities of kingship delineated in Never Rule Without A Magician, A Sage, and A Fool.


Nurture Prosperity

Leaders are ethically bound to nurture wealth within a business AND see that the wealth is fairly distributed among all the stakeholders to the business. Specifically, leaders insure companies make a fair return on goods and services; that shareholders receive a fair return on equity and that compensation systems within the business are equitable.

Fortunately, most business leaders are ethical. Even better, there are stars who go beyond the call of duty and share the prosperity with the community at large. There are CEOs who go to New Orleans and help build houses, CEOs who fund scholarships for employees' kids, and CEOs who quietly fund projects that need the help. We don't often hear of these excellent leaders because they choose to nurture prosperity quietly and deflect the limelight to others. These leaders deserve respect for the great job they are doing with this aspect of leadership.

Unfortunately, some leaders neglect the second half of the duty, fair distribution of prosperity. Ethics breeches occur when the prosperity is not fairly distributed, as in the case of backdating stock options, which gives the executive an unfair price advantage over the average stockholder. A second example is the use of company funds to provide a lavish life for execs. Who can forget the Tyco birthday bash or the Mercedes executive who funded a beach home for his mistress?

The first two examples are clear, being both unethical and illegal. The third example is legal, but is it ethical? The Economic Policy Institute analysis shows that in 1965, CEO compensation was 24 times the average pay. In 2003 it was 185 times the average pay. Are these new CEOs providing 161 times more value than CEOs in 1965? Have stockholders benefited commensurately? Are employees proportionally better paid? If any of the answers are "no" leaders need to look toward their duty to nurture prosperity.

To order Never Rule Without A Magician, A Sage and A Fool please visit www.novakassoc.com

"Clare Novak is a natural storyteller and teacher. In her presentation of the material from 'Never Rule without a Magician, a Sage and a Fool' Clare weaves her leadership lessons through the tales that have had us spellbound over the ages."
--Valeria Maltoni, Coordinator, Fast Company Readers' Network, Philadelphia

• September 19, Fast Company Magazine Readers Group
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• October 19, Philadelphia Area Coaches Association
• November 2, Iacocca Institute, Lehigh University,
• November 7, Garden State SHRM Conference, Long Branch, NJ