For what shall it profit a man, if he shall gain the whole world, and lose his own soul?

—Mark 8:36 (King James Version)

Starbucks chairman Howard Schultz asked that question in a memo to his company's leadership team in 2007, wondering if the stores had lost the soul of the past. But for many business leaders around the globe, soul has no place in business, and ethics comes down to the slippery concept of “the morals of the marketplace”—meaning “Anything for a buck,” or “If other people do it, it must be okay.”

That was how German electronics giant Siemens approached the question, “Should we pay someone a bribe if that will help us bring in business?” Under the Foreign Corrupt Practices Act, it has been illegal since 1977 for U.S. businesses to pay bribes to government officials, but in Germany bribes were a legal and deductible business expense until 1999. Like many other German firms, Siemens routinely paid bribes in foreign countries whenever that seemed to be the local custom. When German law changed in 1999, Siemens changed too—not by stopping bribes, but by finding creative ways to hide them.

It wasn't easy to hide more than $1 billion in slush money spread around the globe: $5 million to the prime minister's son in Bangladesh, $12.7 million to officials in Nigeria (government contracts), $14 million in China (medical equipment), $16 million in Venezuela (urban rail lines), $20 million in Israel (power plants), and $40 million in Argentina (a $1 billion contract to produce national identity cards). The $1.7 million to Saddam Hussein and his cronies was modest by comparison. But Siemens leadership was resourceful in hiding the money trail. They stashed funds in hard-to-trace offshore bank accounts and hired local “consultants” with ties to government officials whose job was to put cash into the right hands. To heap camouflage atop the camouflage, Siemens established a toothless monitoring process—which was supposed to ensure that no bribes were being paid—and even ordered Siemens managers who oversaw the bribery to sign pledges attesting that they had not done what they and their bosses knew they had done (Schubert and Miller, 2008).

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 financial records to ensure that when he went down, he wouldn't be alone. Siemens ultimately wound up paying $1.6 billion in fines 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 the New 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 circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals” (Barstow and Xanic von Bertrag, 2012, p. 1).

As at Siemens, the bribes went well 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 flood 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 first investigated—and then squelched the investigation: “They did so even though their investigators had found a wealth of evidence supporting the lawyer's allegations. The decision meant authorities were not notified. 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.

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 it matters little where they work, 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 financial 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 definition 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 confidence 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 officer 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 and Wiersema's The Discipline of Market Leaders (1995) and Hamel and Prahalad's Competing for the Future (1994), linked the enormous success of Southwest Airlines to its strategic prowess. But founder Herb Kelleher 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 overflowing 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 company'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 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 profit 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 profits” 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 again with 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 “solutions”) and two health care giants that put profits 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 flowed 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 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 unified, all-embracing notion of “happiness” (or, more accurately, eudaimonia, perhaps better translated as “flourishing” 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 fulfilling organization. Since the beginning, humanity's philosophical and spiritual traditions have proffered wisdom to guide our search for better ways to accomplish both.

We have emphasized the four frames as cognitive lenses for understanding and tools for influencing collective endeavors. Our focus has been the heads and hands of leaders. Both are vitally important. But so are hearts and souls. The frames also carry implications for creating ethical communities and for reviving the moral virtues of leadership. Exhibit 19.1 summarizes our view.

Conclusion

Ethics ultimately must be rooted in soul: an organization's commitment to deeply rooted identity, beliefs, and values. Each frame offers a perspective on the ethical responsibilities of organizations and the moral authority of leaders. Every organization needs to evolve for itself a profound sense of its own ethical and spiritual core. The frames offer spiritual guidelines for the quest.

Signs are everywhere that institutions around the globe suffer from crises of meaning and moral authority. Rapid change, high mobility, globalization, and racial, ideological, and ethnic conflict tear at the fabric of community. The most important responsibility of leaders is not to answer every question or get every decision right. They cannot escape their responsibility to track budgets, motivate people, respond to political pressures, and attend to culture, but they serve a deeper and more enduring role if they are models and catalysts for values like excellence, caring, justice, and faith.