By KEN COSTA
We need to re-think leadership. The financial crisis and the continuing turbulence have exposed a crisis of values. Acres of newsprint have been consumed with what people did, but little serious consideration has been given to the moral underpinning to their behavior. There can be no lasting restoration of confidence without answering the question: what kind of leadership can take us through the transition to greater stability? I believe the answer is the leader as steward.
We live in a time of turbulence and transition. Mistakes of commercial judgement were made. But the roots of the crisis go much deeper. Finance became dominated by easy money and "originate and distribute"—disassembling and reassembling financial assets such as mortgages in ever more complex ways and passing the parcel as though production could be separated from responsibility.
The market was allowed to become a master instead of a servant. Too often finance ignored the silent partner—that great mass of the population that has been profoundly affected by the crisis but had little say in the decisions which precipitated it. In so doing, the moral, spiritual and financial dimensions of life were artificially sundered apart.
Nevertheless, capitalism did not fail. Rather, the principles
that make capitalism so powerful a moral force—its capacity to promote freedom and improve lives—were neglected. Rewards were not based on genuine risk. Equity was neglected in favour of perverse ingenuity. Short-termism prevailed. Above all, the concept of service was impoverished.
Capitalism was under fire at an autumn protest in Berlin.
Calamitous upheavals such as the near-collapse of the financial system are frequently followed by transitions, a move from one set of attitudes and practices to another set. Critically, they lead to another state of mind—a future quite different from that previously envisaged. We cannot go through a crisis of this magnitude without deep soul-searching. Something went very wrong and we do not wish to repeat it.
Making the transition to where we want to be rather than wherever events take us is the terrain of leadership. But leadership today in any walk of life—business, politics, the military, charities—is fraught with difficulty. The turbulence in the euro zone is just the latest instance of what seems to be an increasingly volatile world in which events can move very fast. Distinguishing the valuable from the worthless in the deluge of information can be hard.
This is an opaque period. Great global trends underlie the confusion: an epochal shift of power from West to East epitomized by a crisis that was made in London and New York and not in Mumbai and Shanghai; a sharpening contest of religious beliefs, although this century will be marked by a rise of faith rather than the march of secularism; and of course the digital revolution, which has turned Facebook's 500 million users into the world's third biggest country. Faced with such forces we must either shape or be shaped.
Leadership falls firmly into the category of things we think we recognize but find hard to define—love, truth, justice, an elephant. A good working summary, however, is that genuinely successful leaders can get a group to achieve an objective, quite possibly an objective they did not think they could reach or even thought they wanted to reach. Under such leaders, we buy into something that is bigger than ourselves.
The legitimacy of leaders comes from their followers. Command-and-control does not work in this Wiki-world of swirling ideas and data that reinforces informal power structures. The potentially undemocratic nature of leadership can be redeemed by the leader's values and behavior—above all, by achievements that followers see as based on good values and as beneficial to them. The leader, in short, is a steward of the community's interests.
Society partly recognizes this. Corporate managers are supposedly the agents of the shareholders. Generals place great store by the welfare of their troops. Religious leaders have certainly regarded themselves as serving their flocks. The integration of leader and servant is a profoundly Christian idea, though it can also be found in other faiths such as Buddhism.
But the steward does not just manage. He or she has a moral obligation to conserve resources for the future, if necessary by making cuts now to generate growth later. The most demanding test of the servant-leader is whether those served grow as people—the opposite of old-fashioned coercive leadership. In this sense, the steward is the moral spirit in action, the self confronting good and evil in the real world.
Stewardship has three elements. First, influence. The steward manages networks of resources and information to effect change. The steward may take the initiative, but it only works if influence is a two-way street.
Second, affluence. Good stewardship is rewarded by material affluence. With it comes moral affluence—a richness of spirit flowing from a constructive reciprocity between the present and the future, the leader and the followers, the self and the still, quiet voice of conscience.
Third, confluence. Leadership has to bring people together, not as a common-denominator consensus, but in a way that enables us to grow as people.
Stewardship might sound unrealistic. But what was the kind of leadership that led us into crisis? We need now to reintegrate the elements that make us human—the moral, spiritual and financial—to make what may be a long transition from turbulence to renewed confidence and greater stability. The leader as steward can take us there.
—The author is Chairman of Lazard International and Professor of Commerce at Gresham College. This article is based on a lecture he gave at the college recently.
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