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Reinhard Siekaczek, a former midlevel Siemens executive, was not surprised when German police woke him up early one November morning in 2006. He and his colleagues at Siemens had occasionally joked that they might someday share a jail cell and a deck of cards. Siekaczek had been assigned to move millions of dollars into front companies and offshore bank accounts to support the bribery program. He got the job because of his integrity and loyalty to Siemens—he was honest, the kind of man who could be trusted not to take a cut for himself. He knew he was breaking the law, and he suspected that the police would show up sooner or later. He even kept personal copies of !nancial records to ensure that when he went down, he wouldn’t be alone. Siemens ultimately wound up paying $1.6 billion in !nes and at least another $1 billion to clean up the mess. Several executives went to jail (Schubert and Miller, 2008). But the biggest cost for Siemens was the undermining of its image as a company that customers could trust to obey the law and act with integrity.

Siemens’ story is far from unique. The sordid history of Walmart’s Mexican subsidiary, as recounted in theNew York Times, makes Siemens look almost respectable by comparison: “Wal-Mart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance—public votes, open debates, transparent procedures. It used bribes to circum- vent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to out”ank rivals” (Barstow and Xanic von Bertrag, 2012, p. 1).

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As at Siemens, the bribes wentwell beyond pocket change—eight bribes totaling $341,000 to get permits for a Sam’s Club in Mexico City and nine bribes totaling $765,000 to build a distribution center in an environmentally sensitive “ood basin north of the city. Was it a case of rogue executives ignoring the parent company’s ethical stance?Would the executives back at headquarters in Bentonville, Arkansas, have tolerated such blatantly unethical and illegal action? Maybe not, but after a lawyer in the Mexican subsidiary briefed top executives on the bribes, Walmart !rst investigated—and then squelched the investigation: “They did so even though their investigators had found a wealth of evidence supporting the lawyer’s allegations.

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The decision meant authorities were not noti!ed. It also meant basic questions about the nature, extent and impact of Wal-Mart de Mexico’s conduct were never asked, much less answered” (Barstow and Xanic von Bertrag, 2012, p. 1).

As we write in 2017 amid ongoing investigations and shareholder lawsuits, the ultimate consequences of this case are still unknown, but Walmart has altered its compliance practices and spent hundreds of millions of dollars in trying to clean up the mess. Over the years, similar corporate ethics imbroglios (including the Volkswagen and Wells Fargo scandals discussed in Chapter 1) have recurred around the world. What can managers and organizations do about this abysmal state of moral lapse? We argue in this chapter that ethics must reside in soul, a sense of bedrock character that anchors core beliefs and values. We discuss why soul is important and how it sustains spiritual conviction and ethical behavior. We then present a four-frame approach to leadership ethics.

SOUL AND SPIRIT IN ORGANIZATIONS Medtronic states its core purpose as serving patients rather than shareholders. Its CEO from 1989 to 2001, Bill George, was an outspoken advocate of authentic leadership and a vocal critic of short-term thinking. His position on Medtronic’s mission was clear: “Medtronic is not in business to maximize shareholder value. We are in business to maximize value to the patients we serve.” This principle was rooted in Medtronic’s original mission statement, developed by founder Earl Bakken in the 1960s. To reinforce the message, Bakken created the “Mission and Medallion Ceremony.” He met personally with every new employee, reviewed the mission, shared stories of how it played out in practice, and gave the employee a bronze medallion with an image of a patient rising from the operating table and walking into a full life. The tradition continued even as Medtronic grew much larger. During his term as CEO Bill George conducted medallion ceremonies for thousands of employees around the world—sometimes at 2 AM for night shift workers.

Do such noble sentiments make a difference in practice? George thought so. Shortly after he promoted a talented executive to head Medtronic’s European operations, George learned that the individual was maintaining a secret account in a Swiss bank, apparently for making payments to doctors. At Siemens, this might have been just a line item, and the executive argued that American values shouldn’t be imposed in Europe. Not American values, George responded, but Medtronic values, and these were the same everywhere. Though it was painful, he asked the executive to resign immediately, released details to regulators in both the United States and Europe, and publicized the incident so that people inside and outside of the company clearly understood Medtronic’s unyielding ethical position.

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How did this squeaky-clean approach work out for shareholders? During George’s tenure, Medtronic’s share price increased at a rate of 36 percent per year, and its market capitalization rose from $1 billion to $60 billion. Other fast-growth companies in the same period, such as Enron and WorldCom, also shot up very fast—only to crash into bankruptcy. Medtronic, in contrast, had an orderly CEO transition and kept growing.

Some people have such strong ethical convictions that itmatters little where theywork, but most of us are at greater risk—like Reinhard Siekaczek, the honest Siemens executive. His integrity and company loyalty led to a conviction for corruption in one of the biggest ethics scandals in German business history. We are social beings, attuned to cues and expectations from our workplace and our colleagues about what to do and not to do. In recent years one organization after another has lost its soul in the race for innovation, growth, and a rising share price. A company that loses track of any redeeming moral purpose doesn’t provide credible ethical guardrails for its employees. The result is often a spiritual and !nancial disaster.

Many would scoff at the notion that organizations possess soul, but there is growing evidence that a bedrock sense of values and identity is a critical element in long-term success. A dictionary de!nition of soul uses terms such as “animating force,” “immaterial essence,” and “spiritual nature.” For an organization, group, or family, soul can also be viewed as a resolute sense of character, a deep con!dence about who we are, what we care about, and what we deeply believe in. Siemens lost it and had to struggle to regain it. Walmart is still struggling. Medtronics deploys a chief ethics and compliance of!cer and mandatory training in corporate integrity to buttress continuing commitment to its core values of customer focus, candor, trust, respect, courage, and accountability.

Why should an organization—a company, a school, or a public agency—be concerned about soul? Many organizations and management writers discount or scoff at the idea. As an example, two best sellers on strategy, Treacy andWiersema’sTheDiscipline ofMarket Leaders (1995) and Hamel and Prahalad’s Competing for the Future (1994), linked the enormous success of SouthwestAirlines to its strategic prowess. But founderHerbKelleher offered a very different explanation for what made Southwest work, one that featured people, humor, love, and soul. “Simply put, Kelleher ‘cherishes and respects’ his employees, and his ‘love’ is returned in what he calls ‘a spontaneous, voluntary over”owing of emotion’” (Farkas and De Backer, 1996, p. 87).

At Southwest, soul and the “Southwest spirit” are shared throughout the company. Kelleher claimed that the most important group in the company was the “Culture Committee,” a 70-person cross-section of employees established to perpetuate the com- pany’s values and spirit. His charge to the committee was to “carry the spiritual message of Southwest Airlines” (Farkas and De Backer, 1996, p. 93). There were plenty of skeptics, and

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a competing airline executive grumbled, “Southwest runs on Herb’s bullshit” (Petzinger, 1995, p. 284). But, as we write in 2017, Southwest is the only airline in the industry that has turned a pro!t for 44 consecutive years.

A growing number of successful leaders embrace a philosophy much like Kelleher’s. Ben Cohen, cofounder of the ice cream company Ben & Jerry’s Homemade, observes: “When you give love, you receive love. I maintain that there is a spiritual dimension to business just as there is to the lives of individuals” (Levering and Moskowitz, 1993, p. 47). Howard Schultz of Starbucks echoes those sentiments in his emphasis on culture and heart.

Evidence suggests that tapping a deeper level of human energy pays off. Collins and Porras (1994) and De Geus (1995) both found that a central characteristic of organizations that succeeded over the long haul was a core ideology emphasizing “more than pro!ts” and offering “guidance and inspiration to people inside the company” (Collins and Porras, 1994, pp. 48, 88). When they are authentic and part of everyday life, such core ideologies—love at Southwest, maximizing value to patients at Medtronics—give a company soul.

Soul and ethics are inextricably intertwined. Recent decades have regularly produced highly public scandals of major corporations engaging in unethical, if not illegal, behavior. It happened in the 1980s, a decade of remarkable greed and corruption in business. It happened againwith the spate of scandals in 2001 and 2002 (Enron,WorldCom,Tyco, and the like), and in the subprime mortgage mess of 2007–2008. In recent years, the rogues’ gallery included Toyota (cooking the books), FIFA (bribery and fraud in connection with marketing rights to soccer games), Volkswagen (cheating on emissions tests), Wells Fargo (fake sales of “solu- tions”) and two health care giants that put pro!ts ahead of patients: Johnson & Johnson (dubious marketing and defective products) and Hospital Corporation of America (HCA) (inducing patients to undergo unnecessary and dangerous cardiac procedures).

Efforts to do something about the ethical void in management have ebbed and “owed as dishonor comes and goes. One proposed remedy is a greater emphasis on ethics in business schools and training programs. A second proposed remedy is corporate ethics statements. A third is stronger legal and regulatory muscle, such as the United Nations Convention Against Corruption (signed by more than 140 nations), and “SOX”—the controversial Sarbanes-Oxley Act of 20021—which mandated a variety of measures to combat fraud and increase corporate transparency.

These are important and useful initiatives, but they only skim the surface. Solomon calls for a deeper “Aristotelian ethic:”

There is too little sense of business as itself enjoyable (the main virtue of the� “game” metaphor), that business is not a matter of vulgar self-interest but of�

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vital community interest, that the virtues on which one prides oneself in personal life are essentially the same as those essential to good business— honesty, dependability, courage, loyalty, integrity. Aristotle’s central ethical concept, accordingly, is a uni!ed, all-embracing notion of “happiness” (or, more accurately, eudaimonia, perhaps better translated as “”ourishing” or “doing well”). The point is to view one’s life as a whole and not separate the personal and the public or professional, or duty and pleasure (1993, p. 105).

Solomon settled on the term Aristotelian because it makes no pretense of imparting the latest cutting-edge theory or technique of management. Rather, he reminds us of a perspective and debate reaching back to ancient times. The central motive is not to commission a new wave of experts and seminars or to kick off one more downsizing bloodbath; rather, “It is to emphasize the importance of continuity and stability, clearness of vision and constancy of purpose, corporate loyalty and individual integrity” (1993, p. 104). Solomon reminds us that ethics and soul are essential for living a good life as well as managing a ful!lling organization. Since the beginning, humanity’s philosophical and spiritual traditions have proffered wisdom to guide our search for better ways to accomplish both.

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