Putting the Power Back in Pensions

Pensions are a primary source of retirement savings throughout the nation. Poor management decisions, recessions, and cronyism have depleted these funds to a point where they now become a significant risk, not only to those who rely on them, but to the local economy as well. Chicago recently became aware of the devastation of their policies when faced with a pension budget shortfall of $6 billion that neither they or the State of Illinois can afford. Difficult choices will need to be made that will likely upend entire networks of people and companies that need and profited off these pensions.

The problem with pensions is that when they go South there are few win-win situations, and reform comes with a significant cost; especially to those of older age. The cost either falls on the states, on employees, or on the national economy. As the risk of multiple pension implosion rises at a time when national debt is high, the Great Recession is coming to a close, and international strife is present it becomes necessary to tackle this problem succinctly.

It is difficult to truly wrap one's arms around this problem unless a thorough investigation is conducted to understand not only the underlining mechanics that led to the decisions which created the cash shortfall.  Only through understanding, official integrity, and strategic implementation can new approaches to retirement planning be implemented for the benefit of its most important beneficiaries.

Honest conversations are difficult because they run into the very fabric of how we view our economic and political system. There is a high level of potential fallout from questionable decision-making that is likely to be embarrassing and minimized by internal social networks. Companies could potentially close their doors and thousands of people may march on the street in complaint of the swooshing away of their concerns.

Accountability can be difficult when an entire region has a stake in how the system operates. Whether one is a judge or a janitor the money from these funds fuels the economic and political engines of the area making it challenging to find buy-in for reform; the problem turns into a crisis before action is taken. Political parties are so heavily invested in the outcome and their interpretation of events that few can rise above the rhetoric to make decisions in the best interest of all stakeholders.

Busted pension systems does allow academics an opportunity to research how and why these pension funds go bankrupt  to ensure that sound management principles are developed for future decision-making. With the support of the Justice Department, and those who support the greater good, poor decisions can be analyzed, and new "red flags" created. Academics can use this information to develop stronger models and test those models to help teach students how to handle responsibilities throughout their careers.

A thorough investigation requires the analysis of tens of thousands of documents, interviews, and comparing successful pensions with the pensions in question. Chasing specific rabbit holes to understand individual transactions is beneficial but so is taking a meta-data approach that allows research the ability to see where all these rabbit holes were dug can reveal important information. It is a mammoth undertaking but when you consider the billions of dollars lost, and the growing concern of pension problems in other areas, it is a small drop in the bucket.  

Putting the power back in pension funds means freeing them from the many interested parties that seek personal gain and ensuring a proper team of diversified and qualified professionals are in place to create checks-and-balances on official's decisions. That diversified team should be made of people that represent different political, ethnic/racial, and industry backgrounds. Their ability to see the problem from multiple vantage points makes all the difference in the success of new strategic choices.

Pension reform is a painful process of changing minds about responsibility and how to handle that responsibility. It doesn't matter if a person is a recipient of pension monies,  works for the pension system, is a political candidate, a business that receives investments, or a taxpayer that has to bail out the system because all have a vested interested in protecting our futures. Reform is in the best interest of everyone!

Pension change relies on leadership that takes the high road even when no one else is listening and there is little support for change. It is about making decisions that others are afraid to make and working toward something more idea. A leader's greatest asset is to stand back from the rhetoric, assess the situation, and create a group of collaborators that are connected by the same end goals. Putting power into pensions is about solving problems before they become unmanageable and finding new ways paths for the future.

Leadership and Moral Reasoning Set the Standards for Others

Moral reasoning is as important today as it was in the past. It could be argued that with the growth in society and the increase in the size of structures that moral reasoning is even more important today. Business and civic leaders that have obtained and support moral reasoning are at a higher level of development than others. It is these highly developed people that should be leading organizations to new levels of performance. A paper in the Journal Business Ethics: A European Review helps highlights how moral reasoning impacts intra-firm networks and the values others maintain (Kulkari & Sobodh, 2014).

Human development and moral reasoning move together hand-in-hand. People who are less developed have a harder time thinking beyond what is of benefit to themselves. The authors have used 6 stages or moral reasoning where the stages 1-4 are primarily concerned with fear, self-interest, and following the rules for personal gain. Only in stages 5 and 6 can one claim moral leadership that thinks beyond oneself and into the greater purpose of action.

Law helps us define what societal expectations are and provide guidelines for citizens to follow. Organizations are bound to follow these laws in employment practices, pollution, operations, etc.. to ensure that their practices do not damage society.  Most business leaders follow these rules based upon self-interest and the fear of punishment. This is necessary to keep everyone in good order and society moving forward.

Beyond self-interest are higher stages of development where moral-reasoning includes doing the right thing in difficult situations. Moral leaders have freed themselves from the constraints of fear to a place where they seek to exceed the standards of law. They understand a greater purpose of keeping society free from unfair actions and immoral decisions that infringe on others.

For example, at the lower levels of human development a CEO may put in place the minimum legal requirements to curb pollution while seeking to skirt as many rules as possible. In the mid levels of development the same CEO may wish to follow the rules strictly and proclaim their business is "Green" as a marketing tool. A highly developed CEO would seek to ensure their business is not damaging the environment based upon moral values while not ignoring the benefits that come from being a good corporate citizen.

Position doesn't necessarily determine morality of the person. A person could be in a position of authority and still stuck at lower levels of development. For example, a CEO may create predatory practices and justify that position as a benefit to stakeholders, a DA could raise their arrest numbers but violate more rights in an effort to "clean up" a city, or a politician could take a bribe and vote on a new project saying it is the best interest of everyone.  Authority and moral development are not tightly associated and often contradict each other.

The journal article highlights the importance of ensuring that those with solid moral reasoning rise to the top of the societal structure. Moral reasoning of the leader impacts the moral value systems of everyone else.  Their behavior and decisions prompt others to act in similar manners creating intra-firm transfers of moral expectations. Those expectations become embedded into the culture of the company (or organization) and become a method of approaching future problems.

Moral reasoning is one part of the assessment of leadership qualities. Those with higher levels of moral reasoning are also more developed as people. They create expectations on those around them who are likely to mirror their behavior and perception. Encouraging high quality people with leadership potential to make their way to the top of organizations helps to ensure that the right expectations of moral reasoning and ethical performance are standardized.

Kulkari, S. & Subodh, R. (2014). Intra-firm transfer of best practices in moral reasoning: a conceptual framework. Business Ethics: A European Review, 23 (1).

Rules or Values in Ethical Development

Developing ethics within organizations is not an easy task. Many companies offer some rudimentary ethics classes in orientation with little to no follow up. As can be expected, these ethical values only last for so long before they are tested and compared against actual working conditions. To develop higher levels of ethical standards among employees it is necessary to ensure that they find a match between their own personal values and the ethical standards.

It is not easy to have employees internalize certain values and maintain ethical standards when other options are available. Connecting employees to their personal value systems and infusing ethical standards into the organization's culture can go a longer way in creating lasting beliefs. Internalized ethical standards rely on employee values, organizational values, and standards coming together with compatibility.

Identity based ethical decision-making combined with rule-making ethical decision-making has a longer positive ethical influence then rule oriented decision-making (Gu & Neesham, 2014). When employees can find a match between their personal value system and that of the employers they are more likely to adhere to those values. When ethics is based in the need to avoid rules then its shelf-life is limited.

Think of how rule and regulations may contain outward adherence based upon fear or self-interest but doesn't move beyond that. An over focus on rules and regulations as a deterrent may bring compliance but not necessarily belief thereby nearly ensuring that problems are repeated. Helping people find shared values that comply with organizational (i.e. societal) beliefs creates a more lasting impact.

After orientation employees look to their peers and other members of their social network to determine how to act in moral dilemmas. Once a company develops a strong ethical culture they create internal social criticism of unethical behavior which improves upon ethical maintenance (Sonenshein, 2005). Having ethical values embedded into the culture can make a huge impact.

People do this naturally in daily life. The values people hold are based upon their upbringing and social networks. Matching internalized values to ethical standards is only one part of the problem. The other part of the problem is ensuring that the social network also accepts those values. When issues arise the social network is likely to be a significant anchor to bounce options.

Strong ethical decisions require both an internalized value system and a social network that believes in and promotes those ethical values. Without these two aspects rules and regulations may create compliance but not a deeper sense of value incorporation. Those who internalize these values are likely to maintain them even when some force is not being used as deterrent.

Long lasting ethical values are based in promoting beliefs within the workplace both on a personal level and a social level to encourage higher levels of ethical performance. Fear of punishment only works for so long and this is one of the reasons why despite renewed focus on ethics there are plenty of scandals to go around. People will judge ethical dilemmas by their own value systems as well as the value systems of their social networks. Longevity in ethical values requires an an alignment of ethical models between self and society.

Gu, J. & Neesham, C. (2014) Moral identity as leverage point in teaching business ethics. Journal of Business Ethics, 124 (3).

Sonenshein, S. (2005). Business ethics and internal social criticism. Business Ethics Quarterly, 15 (3).

Are Today’s Business Graduates More Ethical?

Are business students becoming more ethical? College of business students are starting to see more value in ethics when compared to previous generations and this could have a positive influence on their future decision-making. According to a study by Hollier, et. al. (2013) the infusion of ethics classes in universities are helping students make ethical choices. This will naturally have an impact on the corporate world and the way in which decisions impact environments. 

Ethics is a concept of understanding the differences between right and wrong, a manner of character and the inclusive way in which a person makes decisions. When ethics are lacking people make choices that benefit them the most without considering the larger costs on society or the people who will be hurt by their choices. A lack of business ethics can have a huge impact on the functionality of business and in turn impact societal trust. 

Most colleges focus the far majority of their time teaching how to make money and very little on the ethical consideration of activities. Ethical decision making can have a direct impact on the image of the company and the trust built within society. Ethics classes can help future executives think through their choices and the possible outcomes to proper conclusions.

The classical longitudinal ethical dilemma in the study was:  

A salesman with a competitor has approached the Vice-President of Sales of a larger competitor with an offer to disclose specifics on a bid proposal which both companies have been asked to prepare. The successful bidder will have exclusive contracts with the client. The potential sales related to this client will exceed $2 million over a three year contract period. In return for disclosing his employer's bid data, the salesman wants the Vice-President of Sales to hire/employ him as a district sales manager. If you were the Vice-President of Sales what would you do? (Grant & Broom, 1988; Farling & Winston, 2001).

The past two decades have seen a positive improvement in ethical decision making among students. In 1988 31% of students would accept the offer, 17% in 2001, and 8% in 2011. The trend is clear-students are becoming more ethical. The authors argue that improved inclusion of ethics classes and public awareness of scandals have helped change the landscape for young students. The continued focus on helping students think through their options, providing them stronger frameworks for decision-making, and encouraging higher standards has a positive benefit that makes their way into the business world. 

Farling, M. & Winston, B. (2001). A replication study: attitudes toward ethics: a view of the college student. Teaching Business Ethics, 5,251-266.

Grant, E. W., Jr. & Broom, L. S. (1988). Attitudes towards ethics: a view of the college student. Journal of Business Ethics, 7, 617-619.

Hollier, G. et. al. (2013). College business students attitudes toward ethics. Journal of Business & Behavioral Sciences, 25 (1).

Call for Papers: The Ethics of Business and Leadership in a Transdisciplinary Context

15th to 15th May 2014
Oradea, Bihor, Romania

Type: Conference

Deadline for Papers: 9th February 9^th 2014

The Conference provides a platform for academics and practitioners in the field of business and leadership to interact and debate on the dimensions of ethics in business and leadership in the context of transdisciplinarity and knowledge based society 

Website: http://www.emanuel.ro/ro.academic.conferinta

Improving Business Education through Industry Connections

Business colleges have developed over the past few decades. According to Xie and Steiner (2013), not all of these changes have been for the better. The authors argue that traditional business education has damaged the overall business community and narrowed people into irrelevance. They provide some possibilities for improvement of business colleges within their paper. 

They offer a couple of solutions that include connections between business and business schools, new business education models,  as well as joint creation of knowledge management. Their reasoning is that student’s knowledge should broaden perspectives beyond simple tools of management and should include the overall human elements that enhance understanding further than number crunching. 

Collaboration between Business Schools and Business: In the older models, students were apprentice oriented. Business colleges should make stronger connections to the business community in order to create higher levels of relevant education. The traditional educational model has separated itself from the needs of modern day business management. Professors should be seen as professionals with certain codes of ethics and standards.

Joint Creation of Management Knowledge: There is practical knowledge and academic knowledge. Even though these two forms of knowledge can overlap, they have become more separate in recent decades. Practitioners and academics should work closely to ensure that knowledge is practical and applied in nature. Education should focus on solving practical problems for business managers. 

New Educational Models Revisited: New business education models need to develop that bridges the gaps between traditional education and modern business needs. The student should learn new concepts that applied practically in the real world. Colleges should focus on teaching those skills that are most relevant within the modern business market. 

Interestingly, the report highlights the concepts of the practitioner-academic that creates new knowledge but does so in the context of applied usage of knowledge. Business education and business management should be intertwined to create relevancy in the modern day work place. Data crunching is important but the understanding of human behavior is a primary function of management. Data crunching and soft skills of human management are important co-complimentary skills. Colleges should seek to foster both.

Xie, C. & Steiner, S. (2013). Enhancing management education relevance: joint creation of knowledge between business schools and business. Business Education & Accreditation, 5 (2).