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TheIns(tuteforSustainable

Leadershippromotesthescienceand

prac(ceofsustainable

leadershipthroughresearchand

educa(on.Photo:H.Bergsteiner

NEWSLETTER

From theeditor’s desk In this issue, we consider the failure of ethics in the Australian banking sector, following comparable failures in the US, UK and parts of Europe. In addition to a failure of ethics, we note a major failure of accountability in this sector. This must change. In our Research Watch, we look at some research into action that people can take when facing unethical situations. ISL continues its work in Thailand, China and Europe, as well as in Australia. There is much to do! Gayle Avery

INSIDE…Exposingmisleadingcountryrankings:

OurlatestresearchUpdateonThailand:Collaborations

Presenta+onatNIDA:SufficiencyThinking

Execu+veeduca+onatCEIBS,China:HighPerformanceLeadership

MastersstudentsatZHAW,Zurich:GlobalPerspec(vesonLeadership

ResearchWatch:Takingac(oninunethicalsitua(ons

During 2018, Australia hasbeen held spellbound byreve la+ons o f uneth ica lbehaviour across its bankingsector.Mul+pleunprofessionaldealings by mul+ple financialins+tu+ons have damagedmany clients, driven farmersunnecessarily off their lands,ruined re+rees and smallbusiness people - apparentlyalsochargingdeadpersons.The revela+ons have beenmade to a Royal Commissionenquiring into the financesec to r that the federa lg o v e r n m e n t r e s i s t e dins+tu+ng un+l it had nochoice. A decade aWer theglobal financial sub-primec r i s i s (GFC ) , one cou ldlegi+mately ask: How couldthis happen in a country

whosebankssurvivedtheGFCalmostunblemished?Considered the most severefinancial crisis since the GreatDepression of the 1930s, theGFC of 2007–2008 resulted inthe failure of large financialins+tu+ons and in taxpayerbailouts ofmajor corpora+onsconsidered “too-big-to-fail”.The crisis also affected manysma l l e r bu s i ne s se s andindividuals, and led the worldeconomy to contract. Thatcrisis had many root causesb u t w a s e s s e n + a l l yprecipitated by US banks dueto the collapse of the UShousingbubble.Sincethenenquirieshavebeenheld invariouscountries inanadempt to hold directors andothers accountable. However,

few individuals have beensanc+oned, instead mostlyshareholders and taxpayershave borne the costs of thismis-management and failureof ethics. Australian firmsappear to be implemen+ngmore transparent governancemechan i sms t o r e s to reaccountability rela+onships.However, some concerns ariseabout the genuineness ofthese ini+a+ves vs merecompliance with regula+ons(e.g. Williams, Birmingham &Shimeld, Managerial Audi+ngJournal,2015).It remainstobeseenwhethertheRoyalCommissionwillholdthe affected bankers toaccount or if it will becomeanother arena in which banksare“too-big-to-bepunished”?

WHENETHICSFAILBANKINGSECTORENQUIRY

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EXPOSINGMISLEADINGCOUNTRYCOMPETITIVENESSISL’SLATESTRESEARCH

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Instrumentsforrankingcountrieshavemushroomedinrecentdecades,andleadersinmanyemergingeconomieslooktothehighperformersforinspira+on.Unfortunately,thisadmira+onisusuallymisplacedbecausemostrankingssufferseriousmethodologicalandideologicalflaws.Theseflawsdistortmostcompe++venessrankings,andenduprankingtheUSandUKunrealis+callyhighoncompe++veness.Ourlateststudychallengesexis+ngcountryrankings.AWerremovingtheknownflaws,andaddinginsocialandenvironmentalperformanceindicators,were-ranked104countriesusingreliablethird-partydata.WefoundthattheNorthern-Europeancountriescon+nuedtorankhighly,astheydoinmostsurveys,butthecompe++venessrankingsoftheUSandUKfellsubstan+ally.WethusrecommendthatemergingeconomieslooktoNorthern-EuropeancountriesasrolemodelsandnottotheAngloworld.Intherestofthissec+on,wedescribeourstudywhichwaspublishedrecentlyintheJournalofBusinessEthics(youcandownloaditforfree).ResearchMethodWeremovedideologicalbiasandmethodologicalflaws(includingremovingallinputindicatorsnomaderhowplausible),andincludedenvironmentalandsocialindicatorsinourre-ranking.Using2013datanot‘contaminated’byknownflaws,were-ranked104countriesusing29exis+ngeconomic(11),environmental(9)andsocial(9)outcomeindicatorsfromreputablesources,beinginthemaintheWorldBank.Weeliminatedsmallcountries(fewerthan3millionpeople)andcountriesthatdidnotmeetdatasufficiencycriteriafromoursample.Toincreaseourconfidencelevelintheeconomicresults,weexaminedtwomoreindicatorsfortheeconomicdomainthanfortheenvironmentalandsocialdomains.Beforeexplainingtheresults,wedetailthemajorflawsintheWorldEconomicForum’sGlobalCompe++venessReport(GCR),sincetheseexplainthediscrepancy.KeyflawsoftheGCR1.IgnoringenvironmentalperformanceThereisnoscien+ficra+onaleforignoringtheenvironment,asthe2014SustainableSocietyIndex(p.14)states:“Economicwellbeingisnotagoalinitself.Itisaprecondi+ontoachievehumanandenvironmentalwellbeing.”2.Mixingindependentanddependentvariables(inputsandoutputs)JustovertwothirdsoftheGCRindicatorsareinputvariablesratherthanoutcomes.Whileexamininginputfactorscanbevaluable,theyneedtobeclearlyseparatedfromoutcomevariables.Merebeliefthatacertainac+on,ins+tu+on,policyorfactorwilldeliveradesiredoutcomedoesnotmakeitanoutcome.3.IdeologicallybiasedinputindicatorsManyoftheinputindicatorsusedareideology-driven,ratherthanevidence-based.4.Ignoringresearchoutcomesthatundermineneoliberalasser(onsembodiedintheGCRForexample,the2013-2014GCR’sowndatadisconfirmsitsownasser+onthatat-will-firingraisescompe++veness,withanon-significantcorrela+on(rs=0.084)betweentheGCR’soverallrankingsanditsat-will-firingdata.

5.TheGCRusesconflic(ngcompe((venessindicators6.Useofsmallopinion-surveysamplesizes7.QuintupledippingThe2013-2014GCRmeasuresGDP–aninherentlyflawedconceptaccordingtotheWEF’sownchiefeconomist–five+mes!ResultsWeweightedtheeconomic,environmentalandsocialdomainsequallyandobtainedverydifferentresultsfromtheWorldEconomicForum’sGlobalCompe++venessReport(GCR).Scoresonour100-pointscale,where1isbest,droppedsubstan+allyfortheUSandtheUK,whencomparedwiththe2013-2014GCR(alsoconvertedtoa100-pointscale).TheUSshowsthegreatestdiscrepancy.Its2013-2014GCRscoreof5droppedto57inourstudy,followedbytheUnitedKingdom(UK),whichfellfromaGCRscoreof9to40.Therela+velypooroutcomeresultsfortheUSandUKinourstudycanbasicallybeadributedtotheirpooreconomicperformance(US=34,UK=37)andextremelypoorenvironmentalscores(US=97,UK=82).GenerallythemoreneoliberalanAnglocountryisoriented,thelesswellitperforms.Theleading12countriesacrossthethreedomainsareSwitzerland,Norway,Denmark,Austria,Sweden,Germany,Croa+a,theNetherlands,Romania,Chile,IsraelandUnitedArabEmirates.ThehighperformanceoftheNorthernEuropeancountriesisconsistentwithresultsfromvariousinterna+onalrankingsincludingthe2013-2014(andother)GCRs.ThehighperformanceofRomania,ChileandtheUnitedArabEmiratesisduetoarela+velyhighscoreinatleastoneofthethreedomainsandreasonablescoresintheothertwo.ConclusionContrarytoneo-liberalists’asser+ons,onoutcomes,thetruechampionsofcompe++venessaremostlyNorthern-Europeancountries,mostofwhichembracesocial-marketeconomicswithstronggovernment,marketregula+on,andemployeeprotec+onandwelfare.WhateverthereasonsbehindthehighperformanceoftheNorthern-EuropeancountriesandgenerallylowperformanceofAnglocountries,ourdatasuggeststhatemergingeconomiesshouldbelookingtoNorthern-Europeancountriesforguidance.Giventhatmostofthehigh-performingEuropeancountriesenjoylidleunderlyingwealthintermsofresources(unlikeAnglocountriessuchasAustralia,CanadaandtheUS),theirhighcompe++venessisallthemoreimpressive.FindthearScleat:Bergsteiner,H.&Avery,G.C.2018.Misleadingcountryrankingsperpetuatedestruc+vebusinessprac+ces.JournalofBusinessEthics,availableopenaccessathdps://link.springer.com/ar+cle/10.1007/s10551-018-3805-6.

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UPDATEONTHAILANDCONTINUINGOURCOLLABORATIONINRESEARCH

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Onour latest visit to Bangkok inMay, ISLmetwith colleaguesfromMahidol,ChulalongkornandNIDAUniversi+es.Wewere delighted tomeetwith these colleagues to con+nuediscussions on many research concepts, projects andpublica+ons.Thereisnoshortageofopportuni+estoengageinlarge-scale collabora+ve research projects in the area ofsustainability.Meanwhile,wearecollabora+ngonpublica+ons intheareaofsustainableleadershipandsufficiencythinkingwithseveralThaicolleagues.Onear+cleconcernstheapplicabilityofsustainableleadership prac+ces in Thai SMEs. Another details the journey

individuals and groups are likely to go along in transformingtheir thinking and behaviour towards becoming moresustainable. This journey is illustrated by examples from localsubsistence farmingcommuni+esaswellasna+onaleduca+onpolicy.We are also advising Dr Priyanut Dharmapiya and Dr MollySaratun on their book about the substan+al achievements ineduca+on for sustainability (EfS) across Thai public schools. Atlast count, 23,000 schools have been cer+fied as “SufficiencySchools”overthepastdecade,withveryposi+veacademicandsocialresults.

EXECUTIVEEDUCTIONATCEIBS,CHINAHIGHPERFORMANCEANDSUSTAINABLELEADERSHIP

Harry Bergsteiner andGayleAverywere again invited as guestprofessors at Zurich University for Applied Sciences. About 20mastersstudentsjoinedthethree-dayclasslookingatarangeofglobal perspec+veson sustainable leadership. ISL’s researchoncountry compe++veness (see Research Watch page 2) showsthatSwitzerlandisaveryhighperformer.However,theseSwissstudents were highly cri+cal of their country, arguing that itmust do even beder on sustainability than it currently does.Perhaps this open, cri+cal attude explains why Switzerlandperformssowellonmanyglobalmeasures.

Photo: The class evaluated Swiss companies on theirperformanceontheSustainableDevelopmentGoalsSDGs,withvariableoutcomes.

PRESENTATIONATNIDA,THAILANDSUFFICIENCYTHINKINGLastMay, ISL discussed Sufficiency Thinkingwith academics andresearch students at NIDA (Na+onal Ins+tute for DevelopmentAdministra+on)attheircampusinBangkok.We were very warmly welcomed by the Chairman of theUniversity Council, Dr Chirayu Israngkun na Ayuthaya, and theDeanoftheGraduateSchoolofDevelopmentEconomics,DrNadaChunsom,amongotherdignitaries.We presented two models: one on the Sufficiency EconomyPhilosophyandtheotheronthechangeprocessaspeoplemovetowardssufficiencythinking.AWerwards wemet with a group of NIDA academics to discusstheirresearchprojects.

MASTERSSTUDENTSATZHAW,SWITZERLANDGLOBALPERSPECTIVESONSUSTAINABLELEADERSHIP

ISL presented its regular 4-day program on “High PerformanceandSustainableLeadership” lastMayat thehighly rankedChinaEuropeInterna+onalBusinessSchoolinShanghai,.2018 celebrates the 10th year this program has been offered,several+mesinsomeyears.Par+cipants include high level execu+ves and par+cipants fromCEIBS’Execu+veMBAprogram.

Pictured,ltor:DrHarryBergsteiner,DrChirayuIsrangkunnaAyuthaya,DrGayleAvery,DrNada

Chunsom.

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Photo: Olga Mirkina

RESEARCHWATCHTAKINGACTIONINUNETHICALSITUATIONSWe summarise some research ar+cles on dealing withunethical situa+ons. The first study looks at calling outpoten+ally unethical behaviour even when the issuesseemminor.Thenextdealswithwhistleblowingandthethirdaddressestheroleofby-standers.Condemning unethical behaviour even whentransgressionsseemtocreateliZleharmAcross six studies, people judged crea+ve forms ofunethicalbehaviourtobelessunethicalthanlesscrea+veforms of unethical behaviour, par+cularly when theunethicalbehavioursimposedrela+velylidledirectharmonvic+ms.Asaresultofperceivingbehaviourstobelessunethical, people punished highly crea+ve forms ofunethicalbehaviourlessseverelythantheypunishedless-crea+ve forms of unethical behaviour. They were alsomore likely to emulate the behaviour themselves. Thefindingscontributetotheorybyshowingthatpercep+onsofcompetencecanposi+velycolourmorality judgments,even when the competence displayed stems fromcommitnganunethicalact.Thefindingsarethefirst toshow that people are judged as morally beder forperforming bad deeds well as compared to performingbad deeds poorly.Moreover, the results illuminate howthecharacteris+csofanunethicalbehaviourcaninteractto influence the emula+on and diffusion of thatbehaviour.Ar+cle: ScodS.Wiltermuth, LynneC.Vincent&FrancescaGino.2017.Crea+vityinunethicalbehaviouradenuates condemna+on and breeds social contagionwhen transgressions seem to create lidle harm.Organiza(onal Behavior and Human Decision Processes,139,106-26.Whistleblowing behaviour in public and privateorganisaSonsWhistleblowing refers to the disclosure by organisa+onmembers of illegal, immoral, or illegi+mate prac+ces topersonsororganisa+onsthatmaybeabletoeffectac+on.MoststudiesonthetopichavebeenconductedinNorthAmerican or European private sector organisa+ons, andlessaden+onhasbeenpaidtoregionssuchasTurkey.Inthis study, the researchers study the whistleblowinginten+ons and channel choices of Turkish employees inprivateandpublicsectororganisa+ons.

Usingdatafrom327privatesectorand405publicsectoremployees,theauthorsfindthatpublicsectoremployeesare more idealis+c and less inclined to whistleblowexternally and anonymously. Higher idealism amongpublicsectoremployeesdoesnotmoderatetheseeffects.Theauthorsfindthatprivatesectoremployeesaremorerela+vis+c, and that they are more inclined towhistleblow through external and anonymous channels.Morerela+vis+cprivatesectoremployeesaremorelikelyto prefer external whistleblowing; however, whetherprivateorpublicsectordoesnotmoderatethepropensityt o w h i s t l e b l o w a n o n y m o u s l y . A r + c l e :Dilek Zamanvlı Nayır,Michael T. Rehg& Yurdanur Asa.2018. Influence of Ethical Posi+on on WhistleblowingBehaviour: Do Preferred Channels in Private and PublicSectorsDiffer?JournalofBusinessEthics,149(1),147–67.Thebystander’sroleincommerciallifeLiberalist thinking argues thatmoral agents have a right(or duty) to pursue an ordinary life. It also insists thatmoral agents canbebystanders.Abystander is involvedwithmorally bad states of affairs in the sense that theyare bound by moral duty, but for a non-blameworthyreason. A common view on themorality of commerciallifearguesthatcommercialagentscannotandoughtnottoassumethestatusofbystander,whenconfrontedwithchild labour, pollu+on, or other overwhelminglymorallybad states of affairs (oMBS). According to the commonview, the agent will get over-demanded. This is thedis+nc+onbetween(normal)MorallyBadStateofaffairs(MBS)andanover-whelminglybigMBS(oMBS).In this paper, the over-demandingness charge isinterpreted as a cri+cism of the liberalist posi+on.Accordingtothischarge,bystanderstatusmustbegivenupinthemarketbecauseotherwisetheright(orduty)topursue a personal life is crushed. In this paper, theauthors demonstrate that over-demandingness does notmakesenseifbystanderstatusisgroundedinthedutyofbeneficence. It would make sense if the status weregrounded in the duty of rescue but that duty does notapply in rela+on to oMBS. The condi+on of ‘subjec+veurgency’ is not fulfilled. Hence, liberalist thinking canwithstand the charge of over-demandingness andcommercial agents cannot assume a right never toacknowledge bystander status (on account of the over-demandingness argument). Ar+cle:Wim Dubbink. 2018.TheBystanderinCommercialLife:ObligedbyBeneficenceorRescue?JournalofBusinessEthics,149(1),1–13.

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LEARNMOREABOUTISL’sWORKMACQUARIEUNIVERSITYPODCASTONISLHear Gayle Avery’s interview as part of Macquarie University’s Pioneering Minds podcast series about the concepts behindsustainable leadership, and some of the work that ISL has been doing in Thailand on the Sufficiency Economy Philosophy. ShedescribesthefoundingofISLfirstinsideMacquarieUniversity,andlaterasanindependentresearchorganisa+on.VisitusonLinkedin.FollowusonTwider:hdps://twider.com/HoneybeeLeaders