The softest pillow is a clear conscience.

—N. R. Murthy, founder and CEO, Infosys

Your values are standards of behavior that shape your True North, derived from your beliefs and convictions. Staying centered on those values is not easy because temptations and pressures of the outside world often conspire to pull you away from your True North. Being clear about your values is essential to sustaining your leadership and not getting pulled off course as Rajat Gupta did.

The most challenging test of your leadership comes when you have a great deal to lose by staying true to your values. Upholding your values requires moral courage by taking action for moral reasons despite the adverse consequences. Are there moral issues you would stand up for that could cause you to lose everything you worked for your entire life? For Merck chief executive officer (CEO) Ken Frazier, that answer is yes.

Ken Frazier: Demonstrating Moral Courage

Ken Frazier learned the importance of staying true to your values from his father. “My father was self‐taught, read two newspapers daily, and spoke immaculate English,” Ken says. “To escape indentured servitude, he was sent north by my grandfather, who was born a slave in South Carolina.”

My father was the most influential human being I have ever known. He taught me the most important lesson of my life: “Kenny, what will you do as the grandson of the man who started this narrative of being free and being your own person? You better do what you know is right, and not fixate on what other people think of you.” I learned from my father not to go along with the crowd.

At 15, Ken won appointment to West Point but was denied admission for being too young, so he attended Penn State on scholarship. While there, he decided he wanted “to become a great lawyer like Thurgood Marshall, effecting social change.” At Harvard Law School, he was acutely aware he wasn't from the same social class as his classmates. He notes wryly, “Lloyd Blankfein and I were among few students who ‘were not of the manor born.’”

Upon graduation, Ken joined a law firm with a public service ethos, making partner at age 30. Once again, he found himself crossing social barriers, observing, “I was an African American from the inner city in a firm of lawyers from Philadelphia's upper crust.” His legal work included pro bono efforts, such as teaching Black lawyers in South Africa during apartheid. He says, “My proudest moment came from winning freedom for an innocent prisoner who was on Alabama's death row for 20 years.”

In Alabama, I was a stranger in a strange land. Entering the courtroom that first day, the bailiff told me, “Down here we don't wear blue suits,” which are reminiscent of the Union Army. Next time I wore a gray suit. My client was Bo Cochran, who had been convicted of a crime he never committed. He is one of the greatest people I have ever met because he had no recrimination. In that situation, you are either consumed by bitterness, or rise to a higher state of awareness. I have experienced discrimination and know life is not always fair but feeling victimized gives one a sense of false power. Don't let bitterness control you. That is the opposite of taking responsibility for your life.

Joining Merck in 1992, Ken used his legal skills to help a company creating medicines that save lives. Seeing Ken's potential, Merck CEO Roy Vagelos appointed him head of public affairs after a year. Eventually, Ken became general counsel, where he had to defend Merck against 50,000 lawsuits filed by Vioxx patients after Merck voluntarily withdrew the drug. Plaintiff attorneys saw an opportunity and filed thousands of lawsuits alleging that Merck did sham science. Ken saw this as a test of Merck's values, and he tried the cases individually instead of negotiating a blanket settlement.

When plaintiffs alleged Merck put profits ahead of safety, did low‐quality science, and had questionable integrity, we had to defend Merck science and our values. We lost our first case in rural Texas, as the jury recommended damages of $253 million for one patient. The New York Times wrote, “Merck could find itself bankrupt and can blame it on their lawyer's ineptitude.”

We learned from that experience and started winning cases. After eight consecutive wins, the judge told the parties to settle the remaining cases. We eventually did, but not for anything close to the $30 to 50 billion the plaintiffs were seeking, but for $4.85 billion. Most importantly, we defended Merck's mission and values, our science, and our people.

When Ken was elected CEO, he immediately reaffirmed Merck's mission: “To discover, develop, and provide innovative products and services that save and improve lives around the world.” His strategy to fulfill the mission was to develop transformational medicines focused on unmet medical needs. Yet shortly after becoming CEO, shareholders pressured Ken to cut research to achieve his predecessor's earnings guidance. He resisted that pressure, committed to spending a minimum of $8 billion per year on research and development (R&D), and withdrew earnings guidance, triggering a near‐term decline in Merck's stock.

His focus on R&D paid off as Merck scientists created breakthrough drugs, such as Januvia for diabetes, vaccine Gardasil, and Keytruda for cancer. Ten years later, Keytruda enabled former president Jimmy Carter to heal from brain cancer and will become the best‐selling drug in history.

Ken faced his greatest values challenge after the 2017 Unite the Right demonstrations in Charlottesville, Virginia. As part of the President's Council on American Manufacturing, he was deeply troubled when former president Donald Trump said there were “very fine people on both sides,” creating a moral equivalence between White supremacists and counterprotesters.

On Monday, Ken publicly resigned from the council, stating, “America's leaders must honor our fundamental values by clearly rejecting expressions of hatred, bigotry, and group supremacy.” Then the president attacked him on Twitter. In taking a public stand, Ken risked Merck's relationship with the U.S. government, which holds the power to approve and recall its drugs as well as force price cuts.

After Ken's announcement, a remarkable thing occurred. Forty‐two CEOs of major American companies joined Ken in resigning from the president's advisory councils, which forced the president to disband them. Never in U.S. history had the business community united so quickly to deliver such a clear message to an American president, thanks to Ken's remarkable moral courage and leadership.

Retiring as CEO in early 2021, Ken is pursuing his calling to service through the OneTen initiative for business to hire one million Black workers in 10 years. He and former American Express CEO Ken Chenault also led the campaign against the Georgia voting laws that make voting more challenging. They believe that without democracy, capitalism cannot survive.

By staying true to his values under pressure, Ken is a role model for other leaders. He never forgets his father's influence, saying “If he were alive today, Dad would say, ‘The boy did what he was supposed to do.’”

Values, Principles, and Ethical Boundaries

There is no right set of values. One person may value kindness. Another person may value excellence. Only you can decide what your most deeply held values are. When you do, you will be able to align with people and organizations that share similar values.

When you clearly understand your values, your leadership principles will become clear, because they are your values translated into practice. For example, a value such as “Concern for others” might translate into the leadership principle, “Create cultures where people are respected for their contributions, provided job security, and inspired to fulfill their potential.”

After defining your leadership principles, you need to establish ethical boundaries. If moral values inform the positive principles you live by, ethical boundaries set absolute limits on your actions. You will encounter many gray areas in life and work. Where do you draw the line between the actions that are acceptable and those that are not? What lines will you refuse to cross? Let your True North guide your decisions. Developing a clear sense of your True North, values, leadership principles, and ethical boundaries gives you the moral courage to make difficult decisions in complex dilemmas (Figure 5.1).

David Gergen wanted to lead a life consistent with values he learned from his family in Durham, North Carolina. He is the only leader to serve as a senior White House adviser to four U.S. presidents: Republicans Richard Nixon, Gerald Ford, and Ronald Reagan and Democrat Bill Clinton.

Hired as a 28‐year‐old White House speechwriter during Nixon's first term, David was at the center of history as it was being made. “When I first arrived, the power, glamour, and status went to my head,” he says. Years later, he realized how naive and unprepared he was for the events of the next few years, particularly the Watergate scandal.

As a rising star in the Nixon administration, David recalls, “I was grasping for the brass ring and was as ambitious as everybody else, probably more so.” After Nixon's 1972 reelection, he was named head of the president's speechwriting and research team. “It was tempting to fall into the trap of thinking I was important instead of recognizing you're important only because of your position.”

When stories about the Watergate cover‐up emerged in early 1973, David didn't believe they were true. “We were continuously reassured that neither Nixon nor anyone in the White House had done anything wrong,” he explains. “Nixon told us that directly, as did chief of staff Bob Haldeman.” As the Watergate scandal became public in 1973 and 1974, several staff members resigned, but David felt he couldn't leave. “My resignation would have been a public statement about President Nixon's integrity, so I stayed and kept hoping against hope he was innocent.”

David learned of Nixon's guilt just 2 days before the news broke in August 1974. Even then he didn't feel he could leave, lest he be viewed as a rat leaving the sinking ship, especially after Nixon asked him to write his resignation letter. As he watched Nixon fly away from the White House on Marine One, David thought his career in public life was over. He recalls the infamous 1919 Chicago Black Sox World Series team whose players were accused of cheating and banned from baseball for life. “I thought I'd never play again,” he says. “Watergate was an epiphany for me, shattering my notion that in a position of power and glamour, you can rise above being challenged. You can't.”

Almost immediately, David's phone stopped ringing. “Suddenly, you realize how fast it all comes and goes,” he says. During the lonely and depressing days that followed, David was buoyed up by people who stood by him—mostly his old friends from Durham and college classmates. “When you're in trouble and all your defenses get stripped away, you realize what and who really matters,” he says. “That's when you turn to your roots and your values.”

“Since that searing experience with Watergate,” David concludes, “I have always favored transparency.” His Watergate experience shaped his assertiveness in advising Presidents Ford, Reagan, and Clinton.

I frequently disagree with those I work for, because Watergate's lessons are so vivid in my mind, reminding me to stay true to my values. Nixon did not have a moral compass, and everything went off track.

As founding director of the Center for Public Leadership at Harvard Kennedy School since 2000, David has inspired and prepared more emerging leaders for public service than anyone else. His breakthrough book, Hearts Touched by Fire, calls to the new generation to make this world better by living their values. In the section “Find Your True North,” David writes,

Emerging leaders must settle upon the values and beliefs that will guide them through life. Through the centuries, leaders have been judged by their character, courage, and capacity. Those remain core values in navigating through today's rough waters.

Organizational Values

Are your moral values aligned with your company's values? It is essential to ask this question before taking a job, but it is difficult to know the differences between the organization's stated values and its actual values. You only learn that from working in the organization. One way to determine the organization's true values is to look at the character of its leaders and the decisions they make. Do they put the company's values ahead of making money in the short‐term?

Narayana (N. R.) Murthy is an entrepreneur who built his company around ethical values. In 1982, N. R. and younger colleagues founded Infosys Technologies and built it into India's leading information technology outsourcing company. Infosys gave N. R. the platform to translate his values into practice. “Our dream was to demonstrate you could run a business in India without corruption and create wealth ethically,” he says.

From the outset, N. R. wanted to create India's most respected company but ran into difficulties starting his business while adhering to his values. Because he refused to pay bribes, Infosys had to wait a year to install telephone lines. But he stayed the course. “What drains your energy or enthusiasm is not the fiscal problem, but violating your value system,” he says.

Leaders with values and principles are less likely to get bullied or pushed around because they can draw clear lines in the sand. We believe the softest pillow is a clear conscience. I feel fortunate we have never lost sleep because we did something wrong.

Eventually, the demands for bribes ceased. “If you refuse to buckle on the first couple of transactions,” he says, “they will go trouble someone else.”

Complying with your value system enables people to have high aspirations, self‐esteem, confidence in the future, and the enthusiasm to take on difficult tasks. Leaders must “walk the talk” and demonstrate their commitment to the value system. There is a direct correlation between the value system of our company and the success we have had the last 40 years.

While N. R. Murthy started a company based on values, IBM CEO Sam Palmisano shifted the company's culture from “management by objectives” to “leading by values.” In doing so, he united IBM's diverse organization. Taking over from Lou Gerstner, Sam did not merely reiterate the values that founder Thomas Watson established. Instead, he initiated a 3‐day company‐wide workshop in which all employees collaborated in determining what IBM's values should be. In announcing IBM's 2003 Leading by Values initiative, Sam wrote:

Many people these days have lost faith that business, government, or any other institution can be run with enduring, commonly held beliefs. Maybe people wouldn't feel that way if more people, not just the leaders, declare what they believe in, and take meaningful steps to put their values into practice. These must be genuinely shared values. They can't be imposed top‐down.

For Sam, values are key to building a winning culture. During IBM's values jam, he posted, “The old model of the heroic superman is increasingly archaic. Never confuse charisma with leadership. Successful leaders today are part of the global community, building sustainable cultures.”

Set Ethical Boundaries

Your ethical boundaries set clear limits on what you will and will not do under pressure or rationalizing marginal decisions. If you establish clear boundaries early in life, your moral compass will kick in when you reach your limits and tell you it is time to pull back, even if the personal sacrifices are significant.

That's what Enron leaders Ken Lay and Jeff Skilling lacked as they veered from deal‐making into dishonesty. Ultimately, they made a series of aggressive accounting decisions to inflate short‐term profits. A rising stock price rewarded their decisions, but they later paid an enormous price as Enron imploded. Ken Lay died, and Jeff Skilling wound up in prison.

What do the former CEOs of McDonald's, Intel, Hewlett‐Packard, Best Buy, and Boeing have in common? Steve Easterbrook, Brian Krzanich, Mark Hurd, Brian Dunn, and Harry Stonecipher all violated their company's values by having inappropriate relationships with company employees. As CEO, each was charged with enforcing the company code of conduct, which expressly banned such behaviors, while they were terminating employees who violated their codes.

Why would these talented leaders knowingly violate company values? There are two explanations: either they thought they could get away with it without anyone knowing, or they were above the rules, given their importance to the company. Neither reason holds water. CEOs know all their actions ultimately become public, so their behavior must be beyond reproach. Their boards of directors had no choice but to use the same standards to their CEOs applied to everyone else. In doing so, they maintained the company's integrity.

Leaders can ascertain whether their actions exceed their ethical boundaries by using the Wall Street Journal test. Before proceeding with any action, ask yourself, “How would I feel if this entire situation, including transcripts of my discussions, was printed on the Journal's front page?”

If your answers are negative, it is time to rethink your actions. If they are positive, you should feel comfortable proceeding, even if others criticize your actions later. When you operate with integrity, you will be comfortable having the media or anyone else examine your words and actions.

Testing Your Values under Pressure

It is relatively easy to practice your values when things are going well. To understand your values, examine situations when you were tested under pressure. What behaviors do you regret? Were you honest even if it came at great personal cost? Or did you dissemble or stretch the truth?

When you are forced to make values‐based decisions with a lot to lose, you learn what is most important in your life. With reflection, you can assess whether your moral values match your actions. With resolve, you can commit to overcoming vulnerabilities that could cause you to stray. You will have many opportunities to realign your values with your True North and live out your values.

Like Ken Frazier, today's leaders face increasing challenges to their values. Should they speak out to defend their values, or remain silent while hiding behind their public relations departments? CEOs and leaders today are public figures, and the media analyzes every word they say—or fail to say. Let's look at how some leaders have addressed such challenges.

Sallie Krawcheck has been called Wall Street's most powerful woman, but more importantly she stands out as a leader who places client's interests ahead of making money, although it cost her job. She says, “The wealth management business is a noble calling because you have the opportunity to help families figure out how to live the life they want.”

Sallie has few kind words for the Wall Street culture, though, saying that short‐term financial pressures have destroyed the financial industry's focus on its mission. “The financial services industry could have made an enormous difference but got caught up in the short‐term game, not its mission to serve clients.”

During the 2008 global financial crisis, Sallie was under enormous pressure at Citi. She advocated returning client funds on certain products, bluntly asserting Citi had broken clients' trust by pushing high‐risk investments that were mischaracterized as low risk. When Citi CEO Vikram Pandit vehemently disagreed, Sallie had the courage to tell Citi's board of directors, “We must do the right thing for our clients.”

This is going to hurt the quarter, but in the long run we'll have a more valuable company. If we don't do it, clients are going to be angry as they should be, and they're going to leave us. We must have a long‐term perspective and do the right thing for our clients.

In taking this position, Sallie was guided by her moral values. The board sided with her, but Pandit fired her days later. She says she knew taking this moral stand would get her fired, but doesn't regret taking controversial positions, saying “My ability to see things differently is why I succeeded.”

Today, Sallie runs Ellevest, an investment platform and financial literacy program “built by women, for women” to help close gender wage gaps and support female entrepreneurship. Sallie had the moral courage to put her job on the line to stay true to her values. She paid a high price but has no regrets.

Delta CEO Ed Bastian also paid a price by standing up for his values. Troubled by the shooting massacre in Parkland, Florida, Ed decided to eliminate Delta's discounts for National Rifle Association (NRA) members for its annual conference in 2018. Outraged, Georgia legislators voted to punish Delta, whose headquarters are in Atlanta, by eliminating a $40 million jet‐fuel tax break the airline traditionally received.

During this time, Ed came under tremendous pressure from gun‐rights activists who called for the public to boycott Delta and conservative news articles that accused him of “treating conservatives differently” and finding their views “deplorable.” Despite the backlash, Ed defended his actions, saying, “Delta's values are not for sale.” Ed's values prevailed, and later the Georgia legislature came around, voting to retroactively restore Delta's tax break.

Apple CEO Tim Cook has been unwavering in his company's commitment to protect its users' privacy. Apple has access to an enormous reservoir of personal data from its users' phones, iPads, and computers, but Tim says the company won't access it: “We're not going to traffic in your personal life. Privacy to us is a human right, a civil liberty. This current situation is so dire that some well‐crafted regulation is necessary.”

In 2015, Tim said of Facebook and Google, “Prominent and successful companies built their businesses by lulling their customers into complacency about their personal information. They're gobbling up everything they can learn about you and trying to monetize it. We think that's wrong, and it's not the kind of company Apple wants to be. We could make a ton of money if we monetized our customer. We've elected not to do that.”

Asked how he would respond if he were CEO of Facebook, Tim says, “I wouldn't be in that situation.”

Emerging Leader: Jonathan Lee Kelly

Jonathan Lee Kelly grew up in Greensboro, North Carolina, in a working‐class Black family that lived in an integrated neighborhood. His family, church members, and teachers all played important roles in his development as a leader.

Jonathan graduated from Wake Forest University and later Harvard Business School, where I was his mentor. He has strong values, self‐confidence, and an ability to make people feel comfortable. When Jonathan launched his investment holding company, Asymmetric Holdings, he incorporated values imparted by his childhood and early work experiences into three leadership principles for his company.

Bill's Take: Testing My Values

I have tried to live my life following a strict moral code, but at several key points fidelity to my values was tested under pressure.

As president of the microwave oven division of Litton, it took me a while to realize the corporation made its numbers by creating excess reserves for acquisitions and later booking them as profits as needed to make quarterly targets. When I overheard Litton's CEO tell another GM, “I know you have to do what you have to do to get the business, but if you ever put it in writing again, you're fired,” that's when I knew I had to leave.

I joined Honeywell because of the leadership of Ed Spencer, a great global leader who never wavered from his unbending commitment to values and integrity. Serving as president of Honeywell Europe, I learned firsthand how to navigate ethical challenges in Russia, Saudi Arabia, and Nigeria without bending your standards.

My decision to join Medtronic was based, in large part, on the inspiration I felt by its mission and the alignment I felt with its values. Thus, I was shocked to discover that leaders in our international division didn't take these values seriously. When internal audit reports revealed repeated violations of company standards overseas, I decided we had to make significant management changes, including retiring the international head and replacing him with Art Collins.

Art cleaned up the unethical behavior by replacing the heads of Europe, Asia, and Latin America, as well as several other countries, with leaders who were committed to strong values. When Art became my successor, he never deviated from these high standards. During the company's rapid growth phase in the 1990s, Medtronic's values were invaluable in introducing new employees to the company's culture.

As we strive to follow our True North, it is important to acknowledge just how easy it is to get on a slippery slope that pulls us off course. Pressures to perform, rewards for success, and our ingrained fear of failure can cause us to deviate from our moral values. By adhering to our True North, we can live our values as moral leaders.

Idea in Brief: Live Your Values

Recap of the Main Idea

• Your values are standards of behavior that are important to you; they are derived from your beliefs and convictions.
• There is no right set of values; only you can decide what your most deeply held values are.
• Staying true to your values requires moral courage—the courage to act for moral reasons despite the risk of adverse consequences.
• Leadership principles are values translated into action and act as a set of standards you use in leading others.
• Ethical boundaries are limits placed on your actions, based on your standards of ethical behavior.
• Being clear about your values, leadership principles, and ethical boundaries is essential to becoming an authentic leader and following your True North.

Questions to Ask

1. Recall a personal situation in which your values conflicted with each other. How did you resolve this conflict? How pleased were you with the outcome?
2. Recall a situation in which your values were tested under pressure. To what extent did you deviate from your values? What resources did you call upon? What would you do differently if you had to do it all over again?

Practical Suggestions for Your Development

• List the values that are important to your life and your leadership; rank them in order of their importance to you.
• Use the Wall Street Journal test to consider whether your actions are ethical by asking, “How would I feel if this was printed on the front page of the Wall Street Journal?”
• Evaluate whether your values are aligned with your company's values by looking at the character and decisions of its leaders. Are they willing to put the company's values ahead of short‐term profit?