How to Be a Principled and Purposeful CEO

We started 2021 with optimism fueled by leaving a year of unprecedented events behind us--a global pandemic, strains on mental health, high unemployment, a contested U.S. presidential election, and racial injustice igniting global protests. Then the killing of eight people--six of whom were Asian women--in Atlanta reignited our country's focus on racial inequities and violence that permeate our society. Through these troubling waters, the latest Edelman Trust Barometer reports that society turned to corporate CEOs as the most trusted and competent leaders, surpassing our trust in government, NGOs, and the media. Wait. What?

Just two decades ago, the Enron scandal erupted with the biggest audit failure committed by the now-defunct Arthur Anderson, marking a year cited as "The Fall of the Celebrity CEO." While the Edelman report shows that business has gained trust, the numbers are not especially glowing. Only 61% of employees view business as a mainstay of trust. Further, 56% of global survey participants worry that "business leaders are purposely trying to mislead people by saying things they know are false or gross exaggerations." 

CEOs are our most trusted leaders, and employees are demanding more from them. How can CEOs navigate political, social, and health concerns while delivering profit and good corporate governance? 

An Urgent Call for Principled and Purposeful Leaders

The current climate pulls corporate efforts for an inclusive and ethical culture out of the sidelines and places them in the C-suite. 

We are on board with that aim. Two years ago, Stanford Graduate School of Business (GSB) launched its first Diversity, Equity, and Inclusion (DEI) Report outlining our priorities, reporting on our diversity, and committing to actions for change. We know we are not doing this work in isolation and that we join many organizations developing cultures that foster principled and purposeful leadership. The risks of not doing this work are high.

The Risks of Non-action

We know that when leaders neglect to foster an inclusive and equitable workplace, they can fail to attract, retain and reward the best talent. Decades of social science research shows that bias can influence those decisions, resulting in an uneven playing field.

As workplaces employ an increasingly diverse and global workforce, they must create cultures where all employees can thrive. Yet many cultures favor narrow definitions of workplace success that require some employees, especially those underrepresented in the organization, to pay a tax just to fit in. Or employees might experience slights by colleagues or supervisors. 

Organizations can be seen as a safe harbor for many employees, where they can find support, allyship, and understanding, especially in the face of ongoing societal unrest. Unequipped managers may inadvertently betray employees' trust by ignoring the impact of societal events on their psyche and well-being.

Culture can also create unintended and negative consequences for the business.  For example, culture may actually encourage harmful competitive behaviors such as withholding information, blocking people from meetings, or other even more toxic behaviors that researchers call the masculinity contest culture. 

The risks of inaction are high, but the benefits of capturing employee trust can be even greater. The 2016 HOW report shows that employees who work in high-trust environments are 32 times more likely to take risks that might benefit the company. Experimental research also reveals that a strong sense of belonging is linked to higher job performance and decreased turnover risk and sick days. 

Strategies for upping leadership competencies of inclusion 

Leaders can employ key strategies to enhance their DEI competency and build employee trust. 

Develop a DEI lens: This means considering diversity, equity, and inclusion in key decision-making processes that impact employees. For example, if your company has an internship program, ask how it can contribute to your company's goal of reaching communities underrepresented in your workforce. To succeed, a DEI lens must be integrated into business units and not segregated into isolated DEI roles. 

Question the status quo: Many leaders view inclusion work as an initiative on top of "business as usual," approaching it as something to do to support people who have not felt welcomed into their organization, while the culture and norms remain the same. This approach asks new people to adapt or hide elements of themselves or preferences to fit in. Ultimately, the company loses out on the value of diversity. 

One often overlooked ingredient of inclusion is the courage to change by questioning the way things are, and to question the way things are not. Leaders who develop a DEI lens and then use it to question the status quo will face decisions to leave what they know to adopt new practices, norms, and values. While this may feel risky, the risk may instead be in keeping things the way they are.

Build inclusion into leadership communications: Regular communications from leaders can signal the importance of DEI. Leaders must also fine-tune the message. Research by the VMware Women's Leadership Lab shows the tone of a leader's message can have a huge impact. When asked to evaluate the importance of an issue, participants rated it a low priority when leader messaging downplayed the issue and a high priority when leaders emphasized the severity of the issue. Internal communications play a key role in encouraging engagement in DEI initiatives as well as instilling trust that the company is doing the work necessary to change. Given the high speed of the news cycle, keeping abreast of current events and their impact on employees is an imperative, not a nice-to-have.