Rob Ford should stay

Toronto, that once sleepy capital of Canadian business, ‘New York run by the swiss’, a city widely seen as boring and ugly (esp. compared to its once-competitor Montréal) – has made global news: A crack smoking mayor! Match that, London, New York or Berlin! All the mainstream media here (and globally) are pretty unanimous in their call for Rob Ford’s resignation, or at least for him taking a break.

That in itself is a reason for suspicion. In my business ethics course this week I had a vivid exchange with my students. We were discussing discrimination and how it is unethical to apply criteria such as race, gender, sexual orientation, recreational habits etc. to job qualifications and hiring. On that note, calls for Ford’s resignation are not very convincing. After all, on many accounts, he has done a good job as Toronto’s major. The city’s finances are healthy; public services are running smoothly, key infrastructure projects, such as the construction of new subway lines have finally taken off; and the major successfully tamed the beast of an otherwise dysfunctional federal/provincial/municipal layered bureaucracy to get even more public infrastructure projects off the ground. This alone, in a city whose infrastructure is stuck somewhere in the 1970s, is reasonable ground to consider him a success on his job.

Of course, there were other things in the past, where arguably Ford violated the terms of his job. Toronto Star investigative reporter Daniel Dale – a former student of us - digged out a number of occasions where the mayor took advantage of his role for personal issues. But nothing really stuck.

As much as some have made an ethical case here against the mayor, I do not think these arguments really touch the heart of the controversy.

Two things spring to mind to any reflective observer. First, much of the vitriol directed at Ford in my view is just based on the persistent WASPy (as in White Anglo Saxon Protestant) subculture of North America. Ford likes to use recreational drugs, has all the wrong, politically incorrect friends and, yes, is probably an alcoholic. Mind you, at least it was not about sex. But in some ways his fate resembles the one of Bill Clinton or Elliot Spitzer: Ford does not live up to the public morality and style, which is deemed politically correct in Canada. It is worth noting that although possession of crack is illegal in Canada, the lack of concrete proof (in terms of physical substance) means that prosecution is unlikely. But the fact that Ford admits to it in public and simply continues with his job just infuriates all those who either have succumbed to this pubic consensus of stuffy morality or otherwise suppress it and live it out in private. After all, Canada’s alcohol consumption is twice the global average and him talking about his ‘drunken stupors’ as a regular occurrence probably just represents an average recreational practice in this country.

Little surprise of course, that much of the hunt on Ford – representing the right wing Progressive Conservative Party – is coming from the ‘liberal’ press here. It not only shows how small ‘c’ conservative even Canada’s liberal elites are but also reveals that all those who hated Ford as a mayor to begin with now take whatever moral resource as their disposal to finally finish him off.

This points to a second observation. Rob Ford epitomizes the aches and tensions of a country which has been the most relaxed and forward looking in terms of immigration. His constituency are the ‘905ers’ based on the area code of Toronto’s suburbia. That is also where he is from. These are mostly people with a first generation immigrant background coming from south and east asia. The other lot,  who hate him and are currently fanning the flames of ousting Rob Ford are the ‘416ers’, those who live in the core downtown of Toronto. None of them voted for Ford and they never felt represented by a fat, white, uneducated, loud bloke from the suburbs.

Ford’s approval ratings have soared in the aftermath of him admitting his drug use. This is no surprise. He represents people who struggle to make ends meet; who are sick and tired of commuting to work in a city with the longest commuting time by far; who get little kick out of taxes being spent on things that do not relate to their everyday struggles; and who know from their own experience that fighting your way out of, say, Bangladesh to Brampton (a 905 suburb) – yes – takes determination, hard work and not too much concern for what their then constituency back home thought of them. Rob Ford, the small time entrepreneur, in his stubbornness just represents them.

So what does this amount to? On day one of his election I thought Rob Ford was a disaster. Mostly because I believe in Toronto’s potential as a great global city that deserves a mayor of a different stature and outlook. But at the same time I also believe that a mayor has to represent the city that voted him in. And boy, Rob Ford fits that bill. So rather than trying to get this ugly representation of what Toronto actually looks like out of sight, the real smart reaction to this scandal would be to say that Rob Ford – with all his preposterous faults – is the one that the people of Toronto chose to represent them. So lets allow him to continue to represent us. And if we don’t like what we see - until we can vote him out - maybe we find the courage to address the underlying issues. Rather than killing the poor guy who currently just displays them.

DM

Photo by Eric Parker, reproduced under the Creative Commons license.

Canada's corruption problem

Barely a day goes by at the moment here in Canada without a new twist or turn in a corruption story hitting the headlines. Last week we got news of SNC Lavalin offering an amnesty for any employees providing information about their huge ongoing bribery scandal. The police also announced last week their intent to extradite Dr Arthur Porter for his part in allegedly receiving $22m in return for granting a contract to SNC to build the McGill University Health Centre in Montreal.

Meanwhile, Stephen Harper's government is embroiled in a major, and very persistent, scandal involving an attempted cover-up of some dodgy expenses claims by a conservative senator. This involved Harper's (now resigned) Chief of Staff giving a "gift" of $90,000 to Senator Mike Duffy to reimburse his questionable claim and stave off any further the investigation. Oh, and who can ignore the now internationally ridiculed mayor of Toronto, who in the wake of allegations about him being caught on video smoking crack, has now had 5 members of his administration resign or get fired for, so far, unspecified reasons. Add to that the other revelations trickling out of the ongoing Charbonneau Inquiry into corruption in Quebec, and a second Laval city mayor in a matter of months accused of taking bribes and clearly all is not well in the country formerly known for peace, order and good governance.

On the face of it, Canada has a serious corruption problem. So it was refreshing to hear last week at the aptly timed Spotlight on Anti-Corruption organized by Transparency International Canada that actually, with respect to upholding its obligations for combating international bribery, Canada is actually in the midst of a major upswing. Following years of apathy and a failure to prosecute any violations of the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, in the last few years we have seen the setting up of a dedicated and fully resourced police department responsible for anti-corruption, and since 2011 the first handful of persecutions. Remarkably, the Canadian police are now investigating no less than 35 cases of alleged bribery by Canadian companies overseas.

The general consensus among the anti-corruption community here is that, if not a leader, Canada is no longer a laggard. So one way of explaining away what might seem like a major corruption problem is to put it largely down to increased enforcement and in general a greater attention to corruption in the country. As delegates at TI's Spotlight event last week put it, the 'moral compass' on corruption has shifted for the better.

This view has some truth to it. But in our view, there is more to it than that. After all, the corruption that is hitting the headlines is of a very specific variety. It's not just petty corruption but is in fact involving some of our most senior business and political leaders - CEOs, hospital directors, city mayors, even the PM's office. And many of these leaders are not seemingly ready to take a public stand condemning the practice and doing all they can to root it out. SNC Lavalin is still aiming for a 'rogue employee' defense, whilst the approach of Harper's government seems to be one of secrecy and a refusal to admit any kind of wrongdoing.

This is the kind of corruption that in terms of 'tone at the top' is sending a very dangerous message to the rest of us that no amount of increased enforcement is going to compensate. Corruption, these leaders are implicitly saying, is something we are immune to.

So what is to be done? Well, rather than necessarily seeing this as an intractable problem, all the attention around corruption at the moment also offers a couple of important opportunities.

First, now is the time for our leaders to take a genuine leadership position on corruption. The public is ready to support it, there is a renewed vigor in the anti-corruption community, and Canada has a genuine opportunity to start staking a place closer to the head of the table rather than just aiming for not being quite so bad.

Second, now is also the time for a rethink about the regulatory environment around corruption. The Corruption of Foreign Public Officials Act was a good start and the amendments proposed in the 2013 Bill S-14: Fighting Foreign Corruption Act will make some incremental improvements. But as several delegates at the TI Spotlight pointed out, one reason why the US and other countries are so much more effective at prosecuting corruption is that they can also prosecute through civil law through the SEC. This makes the burden of proof lower and the likelihood of a successful prosecution higher. Institutions like the Ontario Securities Commission should be playing a much greater role in enforcement. Consider that 70% of all of the equity raised for the world's public mining companies happened on the Toronto Stock Exchange last year. This is a real concentration of financing for a major corruption risk industry which means that greater devolution of powers to prosecute corruption here could help enhance the reputation of an industry integral to Canada's economic prosperity.

As the old saying goes, never let a good crisis go to waste.

Photo by IntangibleArts. Reproduced under Creative Commons Licence

Four reasons why we're so hard on our leaders' ethical lapses

The list of prominent leaders being turfed out of office for ethics violations seems to be growing at an exponential rate. Here in Canada, Toronto mayor Rob Ford's ouster this week for breaking conflict of interest rules is no less than the third Canadian city major to bite the dust this month due to questions of integrity (the others, Gerald Tremblay of Montreal and Gilles Vaillancourt of Laval both resigned without admitting any guilt in face of corruption investigations).

 In the last month we've also seen the Director of the CIA in the US, David Patreus resign due to an admission of "extremely poor judgement" in conducting an extramarital affair. The same week, the incoming CEO of the multinational defense company Lockheed Martin resigned over "a close personal relationship" with a subordinate. Even Hurricane Sandy took its toll with the resignation of the CEO of the Long Island Power Authority after thousands of its customers were left without electricity. And over in the UK, the Director General of the BBC resigned this month due to the organization's botched child abuse investigations.

But its not just a sudden blip. Earlier in the year, Bob Diamond, the CEO of Barclays Bank, resigned in the wake of the Libor scandal, adding to a CEO head count that already included the CEO of Yahoo (falsified CV), Best Buy (inappropriate relationship with a subordinate), Nomura (insider trading), Restoration Hardware (relationship with a subordinate), Stryker (extramarital affair with subordinate), and Lotus cars (expenses irregularities). And just to stoke the fires even more, the former CEO of SNC Lavalin who resigned in March (corruption scandal), has just been arrested on fraud charges.

Depending on how you look at it, these various resignations, firings, and now arrests could be seen as a sign that leaders' ethical standards are tumbling fast .... or that our standards are tightening and that tolerance for any kind of ethical violations is shrinking. Regardless, it is always a big decision to terminate the boss, especially given the huge costs involved in terms of severance packages, the loss of valued experience, skills, and continuity - and in the context of public officials, the costs of going through another expensive election. To give a sense of what we're talking about here: Mayor Ford's removal may force a new by-election which will cost the city, and therefore Toronto taxpayers, some $7m. The termination of HP CEO Mark Hurd in 2010 for minor financial irregularities cost the firm a huge $37m pay-off, saw the share price tumble by 9%, and led to a period of significant decline for the firm after Hurd's successors failed to match his winning formula.

So why do we do it, especially when the "crimes" don't always seem to be that big: a fabricated qualification here, a few thousand in dodgy expenses there, a little bit of infidelity with a colleague when you should be home with the family. Are these really worth the trouble and expense of ousting the most important person in the organization? Here's four reasons why they might be.

1. Leaders are the chief ethics officers.
Leaders are ultimately responsible for the success or otherwise of their organizations. And that goes for ethics too. Leaders need to be the guardians of the organization's ethics. So if things go wrong, the logic goes, it is the leader that should be held accountable, regardless even of whether they knew what was going on further down their organization. And if its the leader who's actually breaking the rules, then they are putting their organization at risk ... of scandal, of fines, or of ethical culture problems further down the line.

2. Leaders set the tone.
You can't build an ethical culture if the boss breaks the rules with impunity. Many will argue that termination is too strong for relatively minor indiscretions, but they often overlook the knock-on effect of being seen to be too lenient. Employees throughout the organization can get the message that ethics isn't really taken too seriously and that although you may get your wrist slapped, the rewards in terms of bending the rules may outweigh the costs. Termination makes that risk-reward calculation crystal clear.

3. Leaders personify problems
Many ethics problems, especially when they break into the public domain, get associated with the organization's leader who becomes the public face of the scandal - and often the target of approbation. So any strategy for dealing with the problem has to tackle the issue of the leader. That's why organizations sometimes fire their leaders in the face of ethics scandals - its an attempt to demonstrate that the problem has been dealt with. The reality is rarely so simple, but the optics matter.

4. Leaders already have disproportionate power
Even minor indiscretions can gain a greater significance when its the boss who is involved. We all make mistakes from time to time, but when the leader crosses the ethical line, the stakes are immediately raised because he or she is already in a position of such power. Fiddling the expenses or having an affair with a subordinate are not just breaking the rules; when its the boss whose doing it, its an abuse of power - or even worse, its sending a message that leaders are above the rules that govern everyone else.

Of course, individual cases will also bring up unique reasons specific to that case, but the message here is simple. Terminating the leader may not make sense economically, and it may not even solve the problem ... but it still can make sense if you're looking to build a truly ethical organization.

Image by cali.org. Reproduced under Creative Commons Licence.

Another Summit, The Same Problem?

Upon landing in Toronto Saturday I could already see it: The G20 heads of states are in town and their modest means of transportation were neatly parked at Pearson International Airport: Obama's Air Force One, Two Jumbojets each for the Chinese, Japanese and Saudi-Arabian Heads of state, Merkel's and Sarkozy's relatively modest Airbuses, and – how cute – the Virgin Atlantic A340 which must have shipped the new British PM Cameron to TO. Telling array of status symbols...
It looked somewhat different in downtown Toronto. The entire centre, where the convention place for the G20 is located, was fenced off with a 3m high wall – reminding me of my childhood playing next to the Berlin Wall. There was a sizable number of protesters out there – but many thousands more of police. The city was a fortress.
The G20 is another 'tool' of global governance, similar to the Global Compact. But while the Compact receives only scant attention from the public, the G20 is a major event. It leaves you wondering. For me this reflects, once more, the value and benefits of the UN Global Compact. And indeed also the value of the Summit.
Reflecting back, it is chiefly about two things. The first is to legitimize the social role and responsibility of business within the business community. By getting 8,000 players on board, many of them well known brands, the issues of sustainability/CSR/Ethics are now a legitimate concern in the wider business discourse. Of course there is room for ambiguity about individual companies, their achievements and sincerity. But for me the glass is definitely half full. It is mostly about initiating a process, rather than the concrete outcomes, which we should credit the UN Global Compact for. Andreas Rasche (together with Georg Kell) has just published a fine book on the compact taking stock of its achievements and shortcomings. My colleagues and friends Andreas Scherer and Guido Palazzo describe it well in the book: the Global Compact is one tool of global governance, providing a framework for deliberation and learning around the social role of business in a global economy.
The second point for me is that in particular the summit has very much a ritualistic role. As humans, we need rituals and ceremony to visualize, materialize and provide a cognitive frame to inner processes of commitment, of attitudes and thoughts. This is what weddings, funerals, graduation ceremonies etc. are all about. The summit provides such a frame. The leading persons of organizations attend (in fact a third of attendees in my count were actually top brass), make statements of commitment or achievement, are together in the room, and do so under the auspices of the highest formal political authority on the globe: the UN Secretary General. That is one of the reasons Ban-Ki Moon's remarkable commitment to the Compact is vital.
Contrasting this to the G20 and its outcomes here should make Georg Kell and his team a little proud of what they have achieved. At the G20, leaders have basically decided to land large chunks of their middle class constituents with the burden of the debt, countries had to take on in saving the global financial system. To halve the debts by 2013 boils down to little else. No wonder such an agenda needs fences and thousands of police to be sustained. The level of 'stationary violence' by the state in Toronto this weekend in my modest view was much bigger than the few incidents of vandalism by protestors – as much as we condemn this violence. The G20 is an example of lack of deliberation and democracy at the global level. The UN Global Compact Summit points to the opposite: smaller or bigger steps towards common solutions to pressing issues on the global level.
That is why I think it was worth it.