Mossack Fonseca is the 4th biggest law firm of the world. The Panama papers are a leak of its record which consists of 11.5 million papers. The record was got from an unidentified source by a German newspaper SüddeutscheZeitung. It shared those papers with the International Consortium of Investigative Journalists (ICIJ) which shared it with all major international partners. These documents reveal the countless means and way through which the rich can exploit secretive offshore tax administrations. There were over twelve national leaders and over 140 politicians and their families and close relatives and friends throughout the world were found using these tax heavens to manage their wealth. “A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin – is at the center of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort wherein 2013 Putin’s daughter Katerina got married.” (Harding 2016)
Although many crooks use to hide their illegal money through these secret companies it is not that all the users of these facilities are corrupt. However, most of the politicians having offshore companies are blamed for corruption like Putin of Russia and Nawaz Shareef of Pakistan. This essay will analyze the situation of the firm’s business of using intermediaries to handle the business document and legal matters on the client’s behalf and how one of the partners of the firm would deal it to behave as an ethical leader. The essay will analyze the obstacles in his behave as an ethical leader and what are the macro and micro ethical leadership strategies that would help him become a successful ethical leader. The essay will also suggest an alternative strategy of ethical leadership if the primary strategy does not work. Finally, I would explain the lesson learned from the essay and summarize the situation. (Harding 2016)
The partner of the firm can have the following three ethical or CSR objectives.
Behave socially responsible by making such a system that the origin of the money invested with the help of Mossack Fonseca is known.
Choosing to become an ethical leader.
And, choosing not to get involved with any kind of action that may lead to ethical or unethical behavior.
Although the first objective of being socially responsible is ethical as well, however as the partner is in a leadership position, so he should also ensure that the people in the firm and other partners are also socially responsible and upholding higher ethical standards. This also means that choosing not to get involved is also not an option because in this way he would become a party in protecting sometimes the illegal money of politicians like Putin of Russia and Nawaz Shareef of Pakistan. Thus the objective which the partner should strive to fulfill is becoming an ethical leader.
There would be several environmental, organizational and individual obstacles in his attempt to become an ethical leader. These are further explained as follows,
The individual obstacles are related to personal benefits that the partner enjoys by serving more and more customers. If they start questioning customers and about the source of their money, they may stop coming to Mossack Fonseca. So he would be compromising on personal income in order to become an ethical leader and it is a tough decision that he would need to take.
There are many environmental factors as well that serves as obstacles. Like,
socially popular but unrealistic laws are passed to generate political popularity and extortion/bribe opportunities, and there are corruption links between political parties and police, prosecuting, judicial, and legislative branches of government, particularly in the nations from which that money comes which Mossack Fonseca helps to manage. So there are opportunities due to the environment to behave unethically and still not being blamed or caught. So in order to become an ethical leader, the partner needs to do extra than the letter of the law. There are practices in the region where the firm is located which are legal but are not ethical if we evaluate them according to modern ethical values.
There are also organizational objectives that may hinder the efforts of the partner to become an ethical leader. This is because the compensation of the partner depends on the business that may be directly affected due to behaving ethically. Moreover, it also feels that the culture of the company is that “it is just a game” and so winning more business and clients is important. The partner would need to overcome these organizational obstacles as well which may be hard to overcome and there can be significant resistance from the other partners of the firm.
Macro Ethics/ CSR Leadership Strategies
The three macro ethics leadership strategies that the partner of the firm could adopt are as follows,
Wealth creation through ethical means
Win-win social contract with employees
And the third one is ignoring and/or cooperating with unethical and/or illegal
Among these three macro strategies, wealth creation through ethical means is although desirable but it would not fulfill the objective of being an ethical leader and moreover, other partners of the firm may not like its personal strategy and resist. Whereas, the partner is already acting according to the third strategy of ignoring and/or cooperating with unethical and/or illegal. This is not an option towards being an ethical leader as an ethical leader should hold the very high standard of ethical behavior. The only feasible and best option is a Win-Win social contract with the employees and other partners of the firm. This is because it would motivate others to act ethically as well as they would get the benefit they desire and all this through ethical and legal means. In the long run, many of the ethical standards are also becoming legal.
The three possible micro strategies under the Win-win social contract are,
A reasonable compromise between extremes
The reasonable trade of different resources
And experimenting for example through a new social contract.
The tradeoff among the different resources is not desirable because it would not help in attaining ethical leadership, the ultimate objective. In the same way, experiment with a new social contract may not work because it would not provide any incentive to work ethically if the employee is not properly trained in ethics.
So the ideal micro strategy here is the reasonable compromise between extremes. Under this strategy, the employees and other partners would be made realized with the benefits of being ethical. If there is fear that illegal money would no more be managed through them, they may look for business elsewhere, for example, they could open a new office in London and or New York. Being 4th largest law firm in the world would support their operations and they may get new business from the new location as a result which may offset the loss due to new business practice. As a result, the profitability of the partners would not be disturbed and the employees would not be laid off and can be adjusted at the new locations. This would help the partner becoming an ethical leader being involved in the ethical business only. This would also provide him peace of mind that he is doing only the legitimate work.
Why May The Plan Fail?
The plan may also get fail. The reason for failure could be that the partners and/or employees do not support the partner. In the extreme case, they may even force him to resign as well. In this case, the partner should have some contingency plan ready so that he can be successful in fulfilling his objective of becoming an ethical leader.
The contingency plan is very important in order to become successful if the primary macro and micro strategies fail before achieving the desired objective. The following three alternative strategies can be adopted to overcome the new situation,
Methods for resisting win-lose methods used by more powerful against less powerful.
Power based leadership methods
And Top down compliance code.
Top-down compliance code may not work because there are other partners in the firm having the same rights and power. Then, the power based leadership methods may not work for the same reason. So the best method, in this case, is Methods for resisting win-lose methods used by more powerful against less powerful. Under this method, the partner can adopt the following three suitable micro strategies,
- Parity building alliance-exposure-transparency inside or outside the organization with the power manager, media, regulator-prosecutor.
- Networking with other less powerful
- Research and data based exposure of conflicts of interest between special interest lobbying and the common good.
Among these three micro methods, parity building alliances option may not work because the firm knows all the laws and weaknesses and are exploiting those weaknesses to conduct business. So regulators may not be able to do anything for that matter until unless they change the law.
Research and data based exposure of conflicts of interest between special interest lobbying and common good may be a good option as it would directly address the root cause, and may force the firm to act ethically. This is a much viable option because it would be chosen as an alternative option and the other partners of the firm may not ready to cooperate with the partner. This micro strategy seems the best option as in case of option 2, Networking with other less powerful people may also give benefits as a partner can raise voice against the illegal practice of the firm. However, it is not the best option. And the best micro option is “Research and data based exposure of conflicts of interest between special interest lobbying and the common good.” In this way, the partner would be able to fulfill his primary objective of being an ethical leader.
This case has taught many valuable lessons. We learned how people in power in developing and poor countries exploit the faith of their countrymen and do corruption and then seek the help of the law firms in establishing offshore companies. Although there is legitimate money in the offshore companies are many, there is a general perception that most of the money managed through this law firm is illegal. Panama papers are 11.5 million papers containing information about this money and named many of the people that apparently looted their nations. The essay analyzed the obstacles in his behave as an ethical leader and what are the macro and micro ethical leadership strategies that would help him become a successful ethical leader. The suggested macro strategy is the Win-win social contract with employees and the suggested micro-strategy is the reasonable compromise between extremes. Under this strategy, the employees and other partners would be made realized with the benefits of being ethical. If this strategy fails because other partners do not support him, he may follow the contingency strategy. In this situation, Research and data based exposure of conflicts of interest between special interest lobbying and common good would be the best option as it would directly address the root cause, and may force the firm to act ethically. As a result, our individual would be able to fulfill his objective and thus he would also become an ethical leader.
Harding, L. (2016). What are the Panama Papers? A guide to history’s biggest data leak. the Guardian. Retrieved 24 July 2018, from https://www.theguardian.com/news/2016/apr/03/what-you-need-to-know-about-the-panama-papers