Robert PrenticeCould Eliot Spitzer, Jeff Skilling, Dennis Kozlowski and former congressman Anthony Weiner be fundamentally moral people? Professor Robert Prentice, who presented a McCombs Alumni Knowledge To Go webinar on June 14, thinks they are.

There is no shortage of scandals created by our leaders in recent memory; just recall the savings and loan scandals in the ‘80s, the Enron era scandals in the ‘90s and the very recent subprime debacle. Robert Prentice, professor of business law and faculty director of McCombs Business Honors Program, believes that the results of these meltdowns, the latest coming close to causing “a world-wide depression”, show that “ethical behavior is essential to the effective functioning of American capitalism.”

For a number of reasons, we are all vulnerable to making bad decisions that seem totally out of our character. Prentice says that most people that are basically good people think they can only make good decisions. But he believes we are all subject to errors in decision making.

Prentice’s main interest is ethical leadership.  He says ethical behavior must be modeled by our leaders to create an ethical organization. They must “walk the walk”. But he says that leaders, by their very nature and position, tend to behave in a way that is often unexpected. 

Studies show that we all believe we are better performers than our peers. Research indicates that eighty percent of drivers surveyed say they are above average drivers. A similar study of college professors showed that ninety-four percent of them thought they were above average classroom teachers.

A very high percentage of people also believe that they are more moral than the rest of the population and 92 percent say they think they have good character. This can result in decisions that are not carefully thought out.

According to Prentice, this degree of overconfidence is particularly troublesome for those at the top.  He asserts that “Leaders, having had much success, have even more confidence in themselves and their character” than the average person.

Prentice also explores a leader’s vulnerability to a self-serving bias. Everyone has the tendency to interpret information in a way that bolsters their beliefs. “This is why some of us listen to FOX News and others listen to CNBC” says Prentice. “It causes people to conclude that what is best for them is ethically permissible”.

And unfortunately, research indicates that just by virtue of their lofty position, executives feel they are more entitled to certain resources than their subordinates. Recall Dennis Kozlowski’s $6,000 shower curtain?

Prentice says that leaders often have a history of doing good – and because of their frequent good deeds they believe it is permissible to go the other way, on occasion. Ken Lay, indicted CEO of Enron, famously said that rules “are important, but you should not be a slave to rules, either.” Lay, a former philanthropist of the year in Houston, helped create the code of ethics he had just violated.

A fourth problem with ethical leadership is moral rationalization. Brain studies indicate that the emotional part of the brain precedes the thinking part of our brain when we ponder a problem. Most of our leaders are extroverts, according to Prentice, who can be impulsive and this leads to decision making that is often not well considered.

Professor Prentice offers three suggestions to avoid leadership missteps.

1. Be vigilant:  keep your ethical antennae up so you can spot ethical minefields before you enter them.
2. Be wary:  remember that even the best intentioned people are prone to ethical missteps. 
3. Be humble:  Confucius says “Humility is the solid foundation of all virtures.”

Listen to Professor Prentice’s full webinar and view presentation slides at the Knowledge To Go website.