Ethics in The Board - Room

Ethics in the Board Room:
Requires Both Creative

and
Critical Thinking Skills
Yocam Publishing LLC
PRESENTED BY
Eric Yocam, DBA, MS

Topics
Summary
Ethical Decision-Making: A Personal Plan
A Leaders Personal Critical Thinking Steps
Domestic Regulation Landscape
Domestic Regulations
Opportunities for Relevant Self-Regulation
Conclusion
Copyright 2010 - All rights

reserved to Yocam Publishing LLC 2/20/2010 2
Summary
This presentation provides an analysis and
planning of a personal approach to an ethical
decision-making opportunity
a personal plan to process, analyze, and reach a decision

on an ethical business issue by applying a critical thinking
model to decision-making
possible regulations which may either impact or be

impacted by an ethical business issue where the
regulations are domestic in origin with an opportunity for
self-regulation by industry leaders

Ethical Decision-Making: A
Personal Plan
In order to become a better leader, a person must consider making a
change to the their own assumptions of ethical decision-making
For example, a person might consider the use of critical thinking when coping
in situations that requiring ethical decisions. A leader should rely on critical
thinking skills for ethical decision-making when serving as a compass to
others
A place to start is to borrow the legal reasoning process where eight

steps make up the critical thinking process and applying this process
to business ethics decision-making (Kubasek, Brennan & Browne,
2003, p. 3)
For example, a leaders personal plan to process, analyze, and reach a

decision on an ethical business issue might be best demonstrated in a leaders
ability to think critically when dealing with the ethical issue and dilemma that
has present itself or that has been encountered

Ethical Decision-Making:
A Personal Plan Continued
A brief review of the discussion in chapter 1 of the Kubasek, Brennan, and
Browne (2003) text on applying the critical thinking model to decision-
making as outlined in The Critical Thinking Steps discussed in Chapter 1 (p.
6-11) is best demonstrated with an outline for a personal plan where the
same legal reasoning process can be used as follows
finding the facts
determining the issue
identifying the reasons and conclusions
relating the relevant rules of law
understanding ambiguity
inking ethical norms
suggesting legal analogies
discovering any missing information
For example, a number of potential ethical concerns a leader might

encounter include labor relations, business conduct, Sarbanes-Oxley Act of
2002 compliance, and actions related to competition

A Personal Plan Continued (2)
One perspective on critical thinking is that
it is a personal endeavor requiring both
effective communication and problem-
solving abilities and much practice
For example, as people are better able to

evaluate critically sources of information on-line,
the concern shifts from just finding information
to determining the meaning and valued of
information (Harley, Dreger, & Knobloch, 2001)

A Personal Plan Continued (3)
Robotham (2004) offered this perspective:
Effective learning needs to achieve transference
of knowledge from the artificiality of a training
course, to practical applications where the trainee
adapts acquired knowledge to the perceived
needs of the particular program or situation
So for a leader to be better able to apply what he

or she has learned to successfully master the
leaders acquired knowledge, the leader must
practice the techniques of critical thinking

A Leaders Personal Critical
Thinking Steps
A leader must consider critical thinking when
understanding the root cause for change and when
applying ethical decision-making to a business condition
The leader must use critical thinking when

understanding the root cause in situations of ethical
dilemmas due to constant change
A way to better cope with change is for the leader to

understand the root causes that create the uneasy
feeling
A root cause can be either internal or external (Wong, 2003)

Thinking Steps (2)
For example, at times, a leader might become overwhelmed
with internal factors such as procrastination, linear thinking, risk
aversion, and stress. At other times, a leader might become
overwhelmed with external factors such as the amount of
available information and speed of change
White (1997) proposed that critical thinking skills are

required for uncertain times
By using critical thinking, the leader can focus, reduce stress
and deal with the vast amount of information
The leaders ability to simplify a complex problem is an

excellent way to address to speed of change as well as
a greater ability to cope with it (Wong, 2003)

Thinking Steps (3)
A leader must use critical thinking when addressing
ethics in strategic decision-making (BleeDorn, 1993)
For some people, creativity remains an elusive phenomenon
that is hard to explain. For others, creativity provides an
opportunity to use their decision-making ability (McFadzean,
1999)
What about creativity and critical thinking?

There have been many theories of creativity with varying
degrees of emphasis placed on the personal characteristics
of creative individuals, or the dynamics of the social and
motivational forces influencing creativity (Buck, 2003)

Thinking Steps (4)
Again, what about creativity and critical thinking?
Some theories stress personal growth or self-actualization
(Couzins & Beagrie, 2005). Others theories stress the
historical views of human behavior
Interestingly, the common denominator in the

theories is that creative thinking skills can be
developed or even learned
For effective leadership, the leader must rely on both

creative and critical thinking skills when addressing
ethical issues as part of the strategic decision-making
process (BleeDorn, 1993)

Thinking Steps (5)
A simple two-step personal critical thinking process
where the leader must continue to develop critical
thinking skills especially when dealing with ethical issues
and dilemmas as they are encountered
First, a leader must focus on determining the quality of link

between reasons and conclusions is reflective of good business
practice in the leaders opinion
Second, the business and the legal system are coupled in that, as
a business manager, the author needs to not only understand the
legal landscape in which the leaders business resides but also
possess an ability to incorporate critical thinking into the leaders
ethical decision-making in order to become a better leader

Domestic Regulation Landscape
Over the last decade corporate governance has become an interesting area of
concern for company shareholders and shareholder activists given the
increasing pressure for government regulation and for self regulation
The company board of directors and associated company shareholders are two
groups that have become more acutely aware of both the Sarbanes-Oxley Act
of 2002 and the use of the business judgment rule
Interestingly, business judgment rule has important influence with class-action

lawsuits and the corporate board of directors
First, the United States Congress enacted the Sarbanes-Oxley Act of 2002 and
equipped the Securities and Exchange Commission (SEC) to enforce and address
financial stewardship concerns by shareholders with a companys leadership
(Creech, 2006)
Second, the business judgment rule is a good faith effort to obtain information to
avoid class-action law suites by shareholders (Hall, 2004)

The Sarbanes-Oxley Act of 2002 is a domestic
regulation that is making business leaders more
accountable in terms of corporate governance
Over the last decade there has been greater attention

paid to corporate leadership and governance given the
significant failures in the boardroom from by companies
such as Enron, WorldCom and Tyco
The rapid growth of the Internet since 1995 has allowed

individuals to gather information about corporate
performance as more corporations use the Internet to
disseminate financial Information

Continued
The board of director position is becoming more complicated in terms of
legal and required time for due diligence in light of Sarbanes-Oxley Act of
2002 compliance
Even though the business judgment rule is not necessarily a regulation

strictly speaking, the court does consider the rule and has seen a greater
use of the business judgment rule (good faith effort to obtain information)
to avoid class-action law suites that are becoming common place
In the United States business law, the board is the corporations ultimate
authority
For example, a potential risk is that with most companies, existing

directors, advised by management, control board nominations whereby
the companys shareholders have no input (Time to boot celebrities,
enact board reforms, 2005, p. 22)

Domestic Regulations Continued
(2)
The pressures of the Internet have forced change not only
with the retooling of people's skill sets that are necessary to
build this new online economy but also the 24/7 demand by
stakeholders for ever increasing information about the
companys performance (Langry, Mahesh & Harman, 2005)
In terms of offering stakeholder value the companys

leadership must drive ethical decision-making with cross-
functional interaction
differentiated activities of the different functional teams emphasizing

solid ethical business conduct approach throughout every level within
a the companys everyday mode of conducting business to achieve an
optimal return (Afuah & Tucci, 2003) for the companys shareholder

(3)
The virtue ethics model supports corporate
governance with the idea for creating the
greatest good for the overall stakeholder
collective (Caldwell & Ranjan, 2005)
Virtue ethics can be considered a normative ethics

perspective
Virtue ethics drives desirable character traits in a
person (McAdams, Freeman & Pincus, 1995, p. 43)
Aristotle argued that virtue ethics is the enabling of a
person to live according to reason (Velasquez, 1998, p.
132)

(4)
The companys board of directors must consider a focus on
stakeholder theory out of the on the three leading normative
business ethics theoriesstockholder, stakeholder, and social
contract (Hasnas, 1998)
Stated differently, a combination of virtue and ethical theory helps with a

persons decision-making (Velasquez, 1998, p. 138)
For example, a board of directors can capitalize on their

companys strength with stakeholder theory includes financial
success factors, legitimate interests of all stakeholders beyond
the stockholder theory, fiduciary relationship, balanced approach
to conducting business, respect for persons, and closed
feedback with group participation on decision that might or
might not impacting their welfare (Hasnas, 1998)

Opportunities for Relevant Self-
Regulation
Lavelle
(2002) suggests a that we have a broken corporate
governance system undergoing radical repairs in the post-Enron age
In his yearlong study, he sheds insight into the best and worst
boards of directors
The best boards include 3M and Intel.
In contrast, the worst boards include Apple Computer and Conseco.
However, the most improved boards include Cendant and Walt
Disney
Backin the 1970s Vance (1978) suggested for highly successful

companies, about one-fifth of the directorate talent accounts for
technical expertise, while managerial experience accounts for about
one-third

Regulation (2)
So how far have we come with corporate governance?
There is a real opportunity for the board of directors from companies in all
industrial sectors to impose self-regulation
The traditional perspective on corporate governance comes from both agency

and stakeholder theories and supports the idea that the board of directors act
on behalf of all the stakeholders of the company (Caldwell & Ranjan, 2005)
The board of director position is becoming more complicated in terms of legal

and required time for due diligence in light of Sarbanes-Oxley Act of 2002
compliance combined with a greater use of the business judgment rule (good
faith effort to obtain information) to avoid class-action law suites that are
becoming commonplace
In the United States business law, the board is the corporations ultimate
authority

Regulation (3)
For example, a potential risk is that with most companies,
existing directors, advised by management, control board
nominations whereby the companys shareholders have
no input (Time to boot celebrities, enact board reforms,
2005, p. 22)
Peter Cornelius (2005) describes the boards role offering

this rationale:
In the broadest sense, corporate governance can be

defined as the stewardship responsibility of corporate
directors to provide oversight for the goals and strategies
of a company and to foster their implementation

Regulation (4)
Do we need leaders in the Board Room?
So it is not necessary to be in a formal leadership position

to exert leadership behavior
The distinguishing factorbetween leadership and

management is that effective leadership precedes
effective management
Leadership is the ability to influence, motivate, and enable

others to contribute toward the effectiveness of the
organizations of which they are members (Shriberg,
Shriberg, Lloyd, 2002)

Regulation (5)
Corporations, whether for-profit or nonprofit, require a
governing board of directors
The key factors behind director effectiveness include

good governance requiring leadership and the collective
wisdom shared between directors and management with
improved managerial judgment
The threat of shareholder litigation in state courts is an

additional motivation for directors to engage in active
governance of the corporation as well as directors
accountability in decision-making requiring management
to achieve markers relative to these goal and plans

Regulation (6)
Do we need ethical leadership in the board room?
A directors ability to server on the board of directors of a company

is a tremendous honor and a tremendous responsibility
The real opportunity lies in each companys board of directors to

impose self-regulation through examining the impact a directors
effectiveness in leadership and decision-making skills in the
governance and wealth maximization of the companys shareholder
By imposing self-regulation, the companys board of directors can

ensure that each directors responsibility to uphold the integrity of
the directors position in the areas including agency theory,
corporate governance, leadership, business ethics, and legal
compliance.

Conclusion
This presentation provided an analysis and planning of a
leaders personal approach to a business ethical decision,
and a brief discussion of potential relevant industry
regulations
The regulations are domestic in origin with opportunities for

relevant self-regulation that is within the grasp of industry
leaders providing the combine ethics in their leadership
style and decision-making best practices

References
Afuah, A., & Tucci, C. L. (2003). Internet business models and strategies (2nd ed.). New York: McGraw
Hill.
Bleedorn, B. (1993). Toward an integration of creative and critical thinking. The American Behavioral
Scientist, 31(1), 10.
Buck, S. (2003, September). Building capacity through leadership development programs. Journal of
Family and Consumer Sciences, 95(3), 8.
Caldwell, C., & Ranjan, K. (2005). Organizational governance and ethical systems: A covenantal
approach to building trust, Journal of Business Ethics, 2(58), 249-259.
Cornelius, P. (2005). Good corporate practices in poor corporate governance systems; some evidence
from the global competitiveness report. Corporate Governance. 5(3), 12-23.
Couzins, M. & Beagrie, S. (2005). How todevelop your self-awareness. Personnel Today, 31.
Creech, D. (2006). Sarbanes-Oxley and Cost Engineering, Cost Engineering. 48(7), 8-12.
Hall, L. (2004). Can fairness opinions protect the board from liability? Corporate Board. 25(144), 22-25.
Harley, B., Dreger, M., & Knobloch, P. (2001) The postmodern condition: students, the web and
academic library services. Reference Services Review, 1, 23-32.
Hasnas, J. (1998, January). The normative theories of business ethics: A guide for the perplexed.
Business Ethics Quarterly, 8, 19-42. Retrieved
From
http://web.sau.edu/RichardsRandyL/business_ethics_filing_cabinet_normative_theories_of_business_e.ht
m
Kubasek, B. A., Brennan, B. A., & Browne, M. N. (2003). The legal environment of business (3rd ed.).
Upper Saddle River, NJ: Prentice-Hall.

References Continued
Langry, B., Mahesh, S. & Hartman, S. (2005). The changing nature of work in the age of e-
business, Journal of Organizational Change Management, 18(2), 132-144.
Lavelle, L. (2002, October 7). The best & worst boards how the corporate scandals are
sparking a revolution in governance. Business Week, 104-111.
McAdams, T., Freeman, J. & Pincus, L. (1995). Law, Business and Society (4th ed.). IL: Irwin.
McFadzean, E. (1999). Encouraging creative thinking. Leadership and Organization
Development Journal, 20(7), 374-383.
Robotham, D. (2004) Developing the competent learner. Industrial and Commercial Training,
36, 66-72.
Shriberg, A., Shriberg, D. L., & Lloyd, C. (2002). Practicing leadership, principles and
applications. New York: John Wiley & Sons.
Time to boot celebrities, enact board reforms. (2005, November 28). Crains Chicago Business,
28(48), 22.
Vance, S. (1978). Assessing corporate performance by boardroom attributes. Journal of
Business Research, 6(3), 203-220.
Velasquez, M. (1998). Business Ethics Concepts and Cases (4th ed.). Upper Saddle River, NJ:
Prentice-Hall.
White, R. (1997). Seekers and scalars: The future leaders. Training and Development, 51(1),
20.
Wong, E. (2003). Leadership style for school-based management in Hong Kong, The
International Journal of Education Management, 17(6), 243247.

2/20/2010
About the Author
Dr. Eric Yocam has accumulated over seventeen years experience in industry.
His pursuit is maintaining lifelong balance between scholar, practitioner and
leader. As a researcher, his research interests are in the areas of information
systems, corporate security, corporate governance, leadership, real option
theory, and fuzzy logic.
Copyright 2010 - All rights reserved to Yocam

He received a doctor of business administration degree (DBA) from the School
of Advanced Studies at the University of Phoenix. His dissertation topic reflects
the area of celebrity directorship, corporate governance and shareholder
wealth maximization. He holds a master of science degree in computer science
from the College of Engineering, Computer Science and Technology at
California State University-Chico, a master of science degree in finance from
the Albers School of Business and Economics at Seattle University, a master of
business administration degree from the School of Business Administration at
the University of San Diego, and a bachelor of science degree in computer
engineering from the School of Engineering at the University of the Pacific.
Publishing LLC
He maintains a number of certificates including Certified Information System
Security Professional (CISSP), Project Management Professional (PMP), Certified
Software Development Professional (CSDP), Certified E-Commerce Consultant
Technical Specialist (CEC), Master Project Manager (MPM), and Registered
Business Analyst (RBA). He also holds a "Certificate of Director Education", a
nationally recognized designation for corporate directors confirmed in 2007 by
the National Association for Corporate Directors (NACD) Corporate Directors
Institute. 28
2/20/2010
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for awareness purpose only
The author and publisher of this

presentation neither endorse nor promote
any of the references found in this
Publishing LLC
publication over any other reference not
represented in this publication
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Ethics in the Board Room:

Requires Both Creative

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Eric Yocam, DBA, MS

Copyright 2010 - All rights

a personal plan to process, analyze, and reach a decision

possible regulations which may either impact or be

Copyright 2010 - All rights

A place to start is to borrow the legal reasoning process where eight

For example, a leaders personal plan to process, analyze, and reach a

Copyright 2010 - All rights

For example, a number of potential ethical concerns a leader might

Copyright 2010 - All rights

For example, as people are better able to

Copyright 2010 - All rights

So for a leader to be better able to apply what he

Copyright 2010 - All rights

The leader must use critical thinking when

A way to better cope with change is for the leader to

Copyright 2010 - All rights

White (1997) proposed that critical thinking skills are

The leaders ability to simplify a complex problem is an

Copyright 2010 - All rights

What about creativity and critical thinking?

Copyright 2010 - All rights

Interestingly, the common denominator in the

For effective leadership, the leader must rely on both

Copyright 2010 - All rights

First, a leader must focus on determining the quality of link

Copyright 2010 - All rights

Interestingly, business judgment rule has important influence with class-action

Copyright 2010 - All rights

Over the last decade there has been greater attention

The rapid growth of the Internet since 1995 has allowed

Copyright 2010 - All rights

Even though the business judgment rule is not necessarily a regulation

For example, a potential risk is that with most companies, existing

Copyright 2010 - All rights

In terms of offering stakeholder value the companys

differentiated activities of the different functional teams emphasizing

Copyright 2010 - All rights

Virtue ethics can be considered a normative ethics

Copyright 2010 - All rights

Stated differently, a combination of virtue and ethical theory helps with a

For example, a board of directors can capitalize on their

Copyright 2010 - All rights

Backin the 1970s Vance (1978) suggested for highly successful

Copyright 2010 - All rights

The traditional perspective on corporate governance comes from both agency

The board of director position is becoming more complicated in terms of legal

Copyright 2010 - All rights

Peter Cornelius (2005) describes the boards role offering

In the broadest sense, corporate governance can be

Copyright 2010 - All rights

So it is not necessary to be in a formal leadership position

The distinguishing factorbetween leadership and

Leadership is the ability to influence, motivate, and enable

Copyright 2010 - All rights

The key factors behind director effectiveness include

The threat of shareholder litigation in state courts is an

Copyright 2010 - All rights

A directors ability to server on the board of directors of a company

The real opportunity lies in each companys board of directors to