Question

Whether it’s Bernie Madoff defrauding investors, Wells Fargo having to respond to creating fake accounts in the names of real customers, or Mylan N.V. imposing huge price increases on its life-saving EpiPen, it seems like there is never a shortage of ethical issues being an important aspect of business. As shown by these examples, unethical decisions permeate different parts of the business and occur for different reasons. In the case of Bernie Madoff, it was the greed of one person using a Ponzi scheme to defraud thousands of customers. In the case of Wells Fargo, the culprits were managers putting excessive pressure on workers to meet new account quotas. The case of Mylan included the dramatic rise in the price of the EpiPen in a short time span and reports that CEO Heather Bresch and other executives received compensation that increased over 700 percent during the same time frame. Adding to the Mylan case was the fact that Bresch is the daughter of West Virginia Senator Joseph Manchin, and prior to being appointed CEO at Mylan, Bresch served as Mylan’s chief lobbyist and helped craft the Generic Drug User Fee Amendments and the School Access to Emergency Epinephrine Act. Where does the responsibility of managing ethical behavior in organizations reside? The answer is everyonein the organization is responsible to act in an ethical manner. The primary responsibility resides, however, with the CEO and also with the chief financial officer, who has the responsibility to oversee financial compliance with laws and regulations. Scott Stephenson, the CEO of Verisk Analytics, recently commented on how he approaches the duality of what he terms a “loose–tight” approach to leadership where he provides his employees with the discretion and responsibility to make critical decisions in crisis situations where ethics might be involved. That’s the loose part. He also works on communicating and building trust in his employees so that he has the confidence they will act responsibly and make the correct decisions in crisis situations. That’s the tight part of his leadership duality.

1. Do you think Verisk Analytics, a technology company that needs innovation breakthroughs, benefits from Stephenson’s “loose–tight” approach? What if Stepheson had been an autocratic leader? Explain your reasoning.

2. What kind of participative leader (described below) does Stephenson seem to be? Explain your choice.

Answer 1

1) Yes, definitely. Verisk Analytics is a technology company which focuses on innovative, breakthrough solutions. In order to facilitate innovation, employees must be given freedom to think beyond horizons to achieve breakthrough outcomes. If they are held tightly and not given liberty to take their own decisions, they may never reach a point of discovery or invention. If Stepheson would have been an autocratic leader, the innovative minded people would have become de-motivated and not able to contribute towards creativity and success of the organization on various fronts.

2) Stephenson portrays democratic leadership style wherein he gives his sub-ordinates freedom to take decisions pertaining to their work. Such that, they can take even decisions during critical times. However he facilitates their learning about how to make decisions effectively and take responsibility of the decisions of oneself. In brief, he believes in employee empowerment rather than an autocratic organizational structure.