Consequences of Unethical Leadership Behaviors

By Team Journey:

Simonette P. Elgert and Carolyn J. Sucaet

10-25-12

“Universal values such as love, compassion, justice, freedom, honesty, faithfulness, responsibility and the like are not really “optional” any more than gravity. We can choose to ignore them and not bow to them, but if we do, there are inevitably consequences (Cloud, 2006, p.245).”

Consequences of Unethical Leadership Behaviors

Such is the case of a few select high ranking business leaders who damaged or destroyed their reputations and careers as the result of unethical personal motives.

Will present the profiles of four CEOs and their fates as the result of their unethical professional choices.

Will present additional consequences of unethical leadership behavior.

Consequences of Unethical Leadership Behaviors

Bernie Ebbers, ex WorldCom CEO

Bernie Ebbers built WorldCom, a small Mississippi long distance reseller, into a national corporation.

In 2005, Ebbers was convicted of conspiracy, securities fraud, and false regulatory filings for his role in a massive accounting fraud.

The fraud at WorldCom topped $11 billion. Nearly 17,000 employees lost their jobs.

Ebbers was sentenced to 25 years in prison and will remain imprisoned until the age of 85

(Associated Press, 2005).

Dennis Kozlowski, ex Tyco CEO

In 2005, Kozlowski was convicted of grand larceny, conspiracy and fraud for charges he looted millions of dollars in bonuses, loans, and other payments from the global products and services company he once headed (McCoy, 2012).

He was sentenced to 8 1/3 to 25 years in prison.

On April 5, 2012, denied early release by a New York state parole board (De La Merced, 2012).

Kozlowski stated, “Back when I was running Tyco…I had a strong sense of entitlement and a sense of greed…and I stole money from Tyco. I’m very sorry I did that (McCoy, 2012)”.

Currently resides in a minimum security prison in New York City and participates in a work release program.

Chung Mong-koo, Chairman Hyundai Motor Group In 2006, Chung Mong-koo, chairman of

Hyundai Motor Group, was charged with misappropriating 130 billion won ($136 million) and breach of trust, causing more than 400 billion won ($429 million) in damages to companies in the Hyundai group (Fackler and Sang-Hun, 2006).

Mong-koo was found guilty of embezzlement and breach of duty but was pardoned by the South Korean President in 2009 (Ruddick, 2010).

In order to earn leniency, in 2006, he pledged to donate $462 million to charity, and scholarships for children from low income families.

Frank Quattrone, Qatalyst Group

Frank Quattrone, a star technology banker, was charged by a federal court for obstruction of justice after blocking an investigation of Credit Suisse’s IPO (initial public offering) practices in 2003 (Kimes, 2010).

He was accused of handing out shares to friends and clearing out paper trail. He was convicted in 2004.

In 2006, an appeals court overturned his conviction and in 2007, all charges were dropped.

Quattrone was back into the banking world in 2006. He started a new firm called Qatalyst Group.

Consequences of Management Fraud

Shareholders: corporate fraud reduces stock values and overall value of the company.

Home community losses: unemployment, loss of endowments for schools and arts, loss of tax revenue, decreased demand for secondary businesses such as restaurants and gas stations.

Employee loss of jobs, retirement savings, and reputations.

A fraudulent company taints their resume to the point that some employees find it difficult to find alternative employment.

(Zahra, Priem, and Rasheed, 2005)

A Perfect Storm

Chandler (2009) compared the unethical behavior of leaders to a “perfect storm.”

“It occurs when a conflux of factors interact between leaders, followers, and the situational context catalyzed by a critical incident or trigger event that pulls everything into its center, similar to the vortex of a tornado.”

Conclusions

The four examples of business leaders reviewed here demonstrated: Greed Sense of entitlement Ultimate decision making power

Making the wrong choices can have an exceedingly high corresponding price and ultimately may cost the unethical leader everything they have acquired including their personal freedom.

References

Associated Press. (2005, July 13). Business on NBCNEWS.com. Retrieved from http://msnbc.msn.com/id/8474930/

Chandler, D. J. (2009). The perfect storm of leaders’ unethical behavior: A conceptual framework. International Journal of Leadership Studies, 5(1), 69-93.

Cloud, H. (2006). Integrity. New York, NY: Harper.

De La Merced, M. J. (2012, March 16). Dennis Kozlowski’s homecoming,

of sorts. The New York Times. Retrieved from

http://dealbook.nytimes.com/2012/03/16/dennis-kozlowskis-homecoming-of-sorts/

References

De La Merced, M. J. (2012, April 5). Kozlowski is turned down for parole. The New York Times. Retrieved from http://dealbook.nytimes.com/2012/04/05/kozlowski-is-turned-down-for-parole/

Fackler, M. & Sang-Hun, C. (2006, May 17). Chairman of Hyundai is charged with theft. The New York Times. Retrieved from http://www.nytimes.com/2006/05/17/business/worldbusiness/17hyundai.html

Kimes, M. (2010, October 25). The return of Frank Quattrone. CNN Money. Retrieved from http://www.techfortune.cnn.com/2010/10/25/the-return-of-frank-quattrone/

References

McCoy, K. (2012, April 12). Ex-Tyco CEO Dennis Kozlowski begged parole board for mercy. USA Today. Retrieved from http://www.usatoday30.usatoday.com/money/companies/management/story/2012-04-11/dennis-kozlowski-parole-hearing/

Ruddick, G. (2010, February 08). Hyundai boss Chung Mong koo hit with 60m fine. City Reporter (Automotive). Retrieved from: http://www.telegraph.co.uk/finance/newsbysector/…/Hyundai-boss-Chung-Mong-Koo-hit-with-60m-fine.html

Zahra, S. A., Priem, R. L., & Rasheed, A. A. (2005). The antecedents and consequences of top management fraud. Journal of Management , 31 (6), 803-828.