The Wheatley Institution

Lectures on Ethics and Leadership

Peter Tufano
September 6, 2013

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Peter Tufano, Said Business School

I think of responsible leadership at three levels. First, is the individual, second, is the organization, and third, [is] the broader system. When we talk about responsible leadership, we first deal with individuals. It should really be about individuals [and] individual behavior. As schools generate and create more people who are going to be responsible leaders, we need to get them thinking about what that means to discuss these questions openly.

There is however this unfortunate nature versus nurture debate, and the question of how much can we change personalities, especially personalities by the time they arrive at a school at [any] age. There is also this fundamental: People’s intentions are different [from] their actions. So it is true that we can get people sensitized in order to behave and think certain ways; we might even be able to get them to say and do those things, but it’s often very difficult to have them do it. You can think about that in terms of dieting, controlling finances, and other things that we all know we should do. You could come away from all that dispirited, [wondering] where that leave[s] us if personalities can’t change and if people are more well-intentioned than they are well-behaved.

The next level is not about individuals, but organizations. I will confess that I’ve been reading some very good work done at NYU about organizational design, so give credit where credit is due. We might not be able to change people that easily, but certainly as a business school we should be thinking about how we might change organizations to lead to responsibility, [to] encourage people to make more responsible choices, to hold responsible for their choices, and to reduce the number of situations where people are put into almost impossible choices. How [then] might we foster some of this responsibility within the organizations that we help to lead? I also give another confession, I am an economist and that confession is a confession, a financial economist. Despite that fact that I’ve spent my entire professional life as a financial economist, I find that economics in and of itself is problematic in this regard. In particular I think about the world of finance on Wall Street where I’ve spent part of my life when I was not an academic. Because the value system that comes out of economics focuses primarily on economic gain, rather than other consequences it in some ways is very dispiriting on the conversation that we’re having. Often you find that you get the behaviors that you’re not hoping for but that are unintended when you reduce a problem to a single dimension. It focuses only one stakeholder. I preached for many years shareholder value-maximization, which makes the other shareholders and stakeholders seem unimportant. It focuses on money as the primary way to induce behavior. We know from research, that doesn’t work. While it sounds bizarre to business school, Ignatius had written this warning about riches to honor to pride; it almost sounds like a path to success at a business school. In Ignatian philosophy, rather than that being a way to success, that’s actually a way to failure. [Much] of what we teach about is the transition from riches to honors to pride.

What do we do about that? What are the levers that we have when we think about organizational design? Well I think the first thing is whom do we promote? Whom do we hire? How do we reward people? Whom do we reward? Under what circumstances do we reward them? How do we organize them? What messages do we send? How do we discipline people when they do the wrong things? How do we reward them when they do the right things? How do we organize the firm? I don’t have answers to these questions, but while it is true that we can focus on individuals all the time, if we go up one level and think about organizations, there are certain types of organizations are better able to support people to make responsible decisions. How do we find those organizational traits that might help us all in our search to make better decisions?

If we start with individuals, then we go to organizations, and then we go up to the next level—that next level is systems. None of us own systems, but we do affect them. Rules of the game are a series of laws and regulations as well as social norms that determine the playing field on which we act. Most of us are not in a position to write rules and laws, nor do we set social norms. Having said that, they are so important; what can we do about that? When we go and play football or soccer it is not appropriate to bring a crowbar onto the field and to whack the other players. We all know that that rule isn’t one to be obeyed, or that’s not a good thing to do. Somebody sets the rules. Some of those rules are written down and some of them are not written down. We people who study laws and regulations, we have people who study social norms, and we have people who study reputation, which is the embodiment of the social norms. What then is the role of a business school and a university in this search for responsibility? We have incredibly powerful platforms; we have convening power; we have alumni; we have a voice that’s very strong. It is important for us to be able to identify and kind of nudge norms along wherever we can by, for example, Charles explaining, despite the fact that he’s the head of the Rhodes Trust, what the shortcomings are of the man who in fact allowed so many people to flourish, and what do we learn from that. I think it’s our job to do all that we can to get these issues to the fore, then also to try to highlight organizations and individuals who have done remarkable work, as opposed to simply those who have made the most money, which is the norm.

Therefore, as the dean of a business school, this is unusual talk because we love our donors and they’re remarkably important, but we should celebrate all sorts of folks. I think celebrating responsible leadership itself today is the embodiment of that.

Now you’ll note that I’m intentionally short because I’m really just a filler for the next speaker. I am going to use that as a transition to explain why we’re here and to introduce the next person up. As a dean, one of the things you’d like to do is set the tone from the top and to focus on things that you think are really important, and no kidding, I spent my Saturday along with asking some of my good friends to spend their Saturdays and hoping that you would all come out because I think that this is a really important thing for us to be talking about. In thinking about responsible leadership, I had the luxury of thinking about who I might like to honor in this time for this series that we’re going to be doing over many years I hope. I was personally thinking of all of the people I’ve worked with over the years, I’ve worked in consulting and a little bit in architecture, in financial services and in academia, and I’ve worked with a tremendous number of great people, people I admire greatly, but I came back to one person. I said, you know, if I have to name this after somebody, I’d really like to name it after Kim.

Now I was a young professor when I went to Harvard Business School, I guess by definition that’s true. And Kim was a senior professor and later on became a dean and I worked for him in a variety of capacities. What I saw was somebody who quietly and steadfastly kept us pointed towards true north, making sure that we did the right thing, quietly and without making a big deal of it, keeping the mission of the organization in front of us at all times (sometimes to our chagrin because each meeting would begin with the mission of the Harvard Business School). I saw somebody who wasn’t afraid to make hard decisions. I learned a tremendous amount, so it was with some great trepidation that I picked up the phone one day and asked Kim if he would come to Oxford to be honored by us despite the fact that this is his first visit to Oxford. Much to my pleasure, he said yes. And it’s much to my pleasure that I can introduce you to Kim B. Clark the person after whom this fellowship in responsible leadership is named.

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