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What exactly is responsible leadership? I must admit that during my training as a leadership scholar in the 1990s, this question wasn’t a pressing one. The practitioner-oriented books I relied on while teaching leadership soon after – such as James Kouzes and Barry Posner’s The Leadership Challenge or Lee Bolman and Terry Deal’s Reframing Leadership – focused on performance, people, politics, structure, culture, and vision but didn’t place responsible leadership at the forefront.
However, the world has changed dramatically in the wake of movements like #MeToo and Black Lives Matter, as well as the impact of the COVID-19 pandemic. New priorities, ranging from environmental sustainability to systemic injustice, have fundamentally reshaped the conversation, not only in popular discussions on leadership but also in boardrooms and C-suites. The debate over what a responsible leader should – or should not – be is hotter than ever.
In this edition of I by IMD , we delve into the latest thinking about responsible leadership, both from an academic research perspective and from the point of view of industry. What are the frameworks and approaches out there to help leaders define, understand, and refine their approach? How does the “responsible leader” respond to the challenges of the hybrid world of work, the platform economy, multi-generational workforces, and employee well-being?
In my opening article, I offer a short history of the way the archetypes of leadership have evolved and, with them, our understanding of corporate responsibility. Nicola Pless and Thomas Maak explore the different orientations of the responsible leader in an insightful, research-backed read that asks: are you an idealist, an integrator, an opportunity seeker, or a traditionalist? Mias de Klerk shares a manifesto for the responsible leader as part of an engaging overview of the field of study, and James Welch suggests five ways for leaders to build a lasting organizational legacy, not just short-term wins.
When it comes to the day-to-day realities of responsible management, Ronit Kark, Sabine Sonnentag, and Laura Venz have summarized their fascinating research into the positive and negative impact that leaders can have on the ability of employees to recover from work each day –and the ramifications therein. Katharina Lange provides helpful perspectives on how better to manage the diverse expectations of different generations at work, and Sebastian Reiche looks at ways to safeguard “proximity” between organizations, leaders, and ever-changing hybrid workforces.
In the magazine’s general section, we are delighted to share Bloomberg’s insightful findings about global attitudes to corporate reputation – a curtain raiser for our March edition, which will focus on the crisis of trust. In the wake of the US election, IMD President David Bach investigates the implications of a changing geopolitical landscape for business, while Stefan Michel – who is taking over the reins from me as Chair of the I by IMD Editorial Advisory Board – urges us to reframe the megatrends that are likely to continue to shape our world.
It seems obvious to say that 2025 will likely prove to be another disruptive year for leaders and organizations, but it is likely to be just as full of opportunity, too. We hope this edition of I by IMD provides food for thought as we head into the new year and will prove a valuable guide for the challenges you face today and in the future.
Anand Narasimhan, Dean of Research
04 [In good company]
Many new businesses have few employees, no community roots, and rely on Big Tech for survival. How does this square with the demands for responsible leadership, asks Jerry Davis. [ Responsible leadership ]
Our experts offer clear insights and valuable guidance on how to define ‘responsible leadership’ and make it work for you, your people, and the planet.
Cover-Illustration: Jörn Kaspuhl
07 Anand Narasimhan outlines the changes in our perceptions of responsible leadership over time and explains why understanding these archetypes can inform your approach.
10 Understanding your leadership style and how to blend different approaches will enhance your ability to respond to new challenges, write Nicola Pless and Thomas Maak
14 Mias De Klerk proposes a framework for becoming a caring and ethical leader in an increasingly turbulent and complex world.
20 James Welch introduces a five-step approach to help leaders foster sustainable legacies and social progress while ensuring a financially sound future.
23 Today’s workforce often includes a mix of freelancers, temps, and contractors. Sebastian Reiche sets out four work models to keep these disparate elements motivated.
26 Leaders must respect boundaries to help employees recover from workplace stress, according to research by Ronit Kark, Sabine Sonnentag, and Laura Venz
29 David Wagner introduces ‘community-centricity’ – an inspirational idea for companies to evolve their focus on customers to include economic and societal impact.
32 Understanding generational differences is crucial to unlocking potential, retaining talent, and becoming a more effective leader, argues Katharina Lange
36 Henry Ford and Elon Musk have much in common – both industry titans with a lust for power. Ford eventually came unstuck, but who will rein in Musk, asks Michael Skapinker
39 [Brain circuits] Making all employees feel valued is the mark of an inclusive leader. Wei Zheng, Haoying Xu, and Peter G Dominick offer a quick diagnostic to see if you make the grade.
40 [Strategy] Paul Strebel, Angeliki Papasava, and Patrick Reinmoeller explain how their easy-to-use tool can help leaders assess stakeholder impact on the creation and destruction of value.
44 [The human factor] Fostering a ‘we’ culture of sharing, respect, and gratitude can help leaders make their organizations shine in an inclusive world, writes Shelley Zalis
46 [In focus] Are the powerful few that shape a nation’s economic and political fortunes creating value for society or hoarding it for themselves? To find out, explore our visual guide based on data from the Elite Quality Index.
48 [Corporate reputation] Anne Kawalerski, Michelle Lynn, and Elisabeth Oak share insights from a Bloomberg Media study and explain how leaders can positively influence corporate reputation.
52 The implications of generative AI for ‘knowledge’ work are more profound than many of us might think. Organizations need to wake up, writes Michael Yaziji
55 The American Arbitration Association has taken practical steps to harness the power of generative AI. Bridget McCormack and Jen Leonard give their verdict on the results.
58 Women worldwide are ideally equipped to lead the drive for an ethically driven ‘fair AI’ for the benefit of all, suggests Rupa Dash.
62 [CEO dialogue] Heineken CEO Dolf van den Brink tells Jean-François Manzoni why a good leader needs to be authentic and comfortable in their skin.
64 [World view] David Bach assesses how companies can adapt to a new era of economic nationalism, trade disruption, and political uncertainty in the wake of Donald Trump’s election victory.
68 [Sustainability] When it comes to sustainability, effective leadership, a clear narrative, and a shared vision are vital for bringing lasting change, argue Julia Binder and Knut Haanaes.
71 [In the mind’s eye] Case studies are classic teaching tools for sharpening analytical skills in business schools. But, says George Kohlrieser, the most important case study is you.
72 [Leadership] The art of ‘reframing’ can help unlock your thinking and help you cope with a world in flux, explains Stefan Michel
76 [Governance] Su-Mei Thompson warns of the perils of failing to adequately scrutinize marketing strategy.
78 [Coaching corner] The newly appointed CFO of a large company needed to change her leadership style to climb the career ladder. An executive coach equipped her with the tools required.
79 [The forecaster] Why is Hermès outpacing Nike, and what’s driving the success of Roche and NVIDIA? The Future-Readiness Indicator suggests ‘thoughtful restraint’ is the key, reveals Howard Yu
82 [CEO questionnaire] Tiina Alahuhta-Kasko, President and CEO of the Finnish lifestyle design company Marimekko, reveals what inspires her in our rapid-fire question-and-answer session.
84 [Afterword] David Bach reflects on the lessons learned and the challenges faced during his first 90 days as IMD President.
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PUBLISHER
International Institute for Management Development, Ch. de Bellerive 23, P.O. Box 915, CH-1001 Lausanne | Switzerland
EDITORIAL ADVISORY BOARD
Anand Narasimhan (Chair) Professor of Global Leadership and Dean of Research
Christine Batruch Sustainability Advisor, Lundin Group; President, Bohdan Hawrylyshyn Family Foundation
Vincent Bieri Co-Founder Nexthink; Member of the Board of Advisors Trust Valley
Jean-Philippe Bonardi Professor of Strategic Management and Dean at HEC Lausanne, University of Lausanne
Stuart Crainer Thinkers50 Founder and author
Michel Demaré Chairman of IMD; Chair of the Board at AstraZeneca Plc. and Nomoko AG; member of
the supervisory boards at Vodafone Group Plc and Louis-Dreyfus Company International Holdings B.V.
Cynthia Hansen Managing Director of the Innovation Foundation, empowered by the Adecco Group
Prince Michael of Liechtenstein Founder and Chairman of Geopolitical Intelligence Services AG; Chairman of the European Centre of Austrian Economics Foundation in Vaduz; Member of STEP
Ann-Marie Sevcsik Catalyst of social change through innovative partnerships
Michael Skapinker Financial Times contributing editor
Ian Charles Stewart Executive in Residence, IMD; Main Board Director Trustee International
Institute for Sustainable Development; Co-Founder of WiReD Magazine
Su-Mei Thompson CEO at Media Trust
EDITORIAL
Delia Fischer, Matt Falloon, Ken Toner
ART DIRECTOR
Catharina De Gregorio
PRINTING
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Many new businesses have emerged in recent years with few employees, no roots in the community, and heavily reliant on Big Tech for survival. How does this square with the demands for responsible leadership, asks Jerry Davis
Two decades ago, I wrestled with the paradoxes of corporate social responsibility, where businesses were called on to be good citizens who looked after their employees and communities, even as they were outsourcing core parts of their operations and abandoning their attachments to any particular place. Exemplars of good corporate citizenship, such as Eastman Kodak and Westinghouse, fell by the wayside as enterprises with few employees or physical facilities rose. What did this portend for responsible leadership when enterprises were increasingly “placeless” and ephemeral?
Today, a new system is emerging out of the rubble of 20th-century corporate capitalism, where Big Tech controls the pathways of economic and social interaction. The tech giants were briefly threatened by the assertive antitrust agenda of the Biden administration, but the recent US election is likely to leave them unfettered. At the periphery is a burgeoning sector of millions of tech-enabled smaller enterprises, which exploded during the COVID-19 pandemic. Their existence depends fatefully on tools provided by Big Tech. Call it sharecropper capitalism (or techno-feudalism, as the economist and politician Yanis Varoufakis labeled it). At the same time, we are seeing the hardening of national boundaries and perhaps a reversal of globalization. What this means for corporate responsibility will be decided in the coming years.
In our 2008 article for the Stanford Social Innovation Review , my coauthors and I had drawn attention to a defining feature of 21st-century corporate capitalism: the “responsibility paradox”. On the one hand, global corporations had become intangible and dispersed, with operations and legal identities spread around the world and the increasingly pervasive use of outside contractors. As we pointed out: “Tommy Hilfiger had its corporate headquarters in Hong Kong, its legal incorporation in the British Virgin Islands, its shares on the New York Stock Exchange, its annual meeting in Bermuda, and most of its manufacturing in Mexico and Asia. Likewise, Royal Caribbean International has its headquarters in Miami; registers its ships in the Bahamas, Malta, and Ecuador; and is legally incorporated in Liberia, where it is subject to neither Liberian nor US income taxes.” Corporations were skilled at fine-tuning their legal domiciles and corporate boundaries to avoid taxes and unwanted regulations, all in the name of creating shareholder value. They were, as Martin Wolf put it, “rootless cosmopolitans”.
On the other hand, corporate leaders faced rising pressures for social responsibility. “Socially responsible” investment had grown from a fringe movement to a major force in the capital markets. Activist shareholders demanded transparency from corporations. Consumers held companies accountable for environmental and human rights issues in their supply chains and even for the actions of countries that housed their operations. Tax authorities questioned why many major companies claimed so much of their global profit in Ireland.
The dilemma was acute: corporations were increasingly vague enti-
ties, yet stakeholders demanded accountability. How were leaders of 21st-century enterprises going to address this challenge?
We concluded that global corporations would likely be governed by different standards for different issues. Environmental and product safety standards would be most assertively regulated by the EU because any company that did significant business in Europe would find it easier to raise the bar for their global operations to the European standard, which was generally the highest legal requirement. Corporate governance would be driven by the US because global corporations were attracted to the vast and liquid American capital markets and would be willing to accept the requirements this imposed – by 2005, all but two of the 25 largest global corporations were listed on the New York Stock Exchange, and thus subject to American securities regulation. Lastly, we predicted that international NGOs would be the dominant force in shaping human rights standards.
In the nearly two decades since our article was published, the trends we highlighted have metastasized with the relentless digital revolution. Identifying the stakeholders to whom businesses are responsible has grown more puzzling as company boundaries have become ever more provisional, enabled by new technologies and lax regulation. The responsibility paradox has grown even more acute.
Traditionally, the list of corporate stakeholders included employees, customers, investors, suppliers, the communities where operations were located, and the public. However, the 1990s brought widespread “Nikefication”, in which corporations contracted out core parts of their operations to external vendors around the world. This started with garments but spread to electronics and even heavy industries like autos. And it has not been limited to production: companies contracted out payroll, accounting, IT, and other professional services while new software-as-aservice (SaaS) providers proliferated.
Were corporations responsible for employees of vendors one or two steps back in the supply chain? What did Tommy Hilfiger owe to its “communities” in Hong Kong, Mexico, or the British Virgin Islands? What does a lawn care company owe to the anonymous town that hosts the server farm leased by its HR partner? Nikefication has expanded to the point that many enterprises today have almost no employees and no physical establishments. Even auto companies like the late Fisker Automotive contracted out so much of their work that the corporation had fewer than 1,000 employees.
The iPhone arrived just as our article was published, and smartphones quickly became ubiquitous. This enabled new business models that further accelerated the hollowing out of the corporation.
Take employment. GPS-enabled smartphones and lax regulation enabled a model of engaging labor that explicitly relied on classifying workers as contractors and not employees to escape obligations for safety, eq-
‘Identifying the stakeholders to whom businesses are responsible has grown more puzzling as company boundaries have become ever more provisional, enabled by new technologies and lax regulation’
uity, and fair pay. Uber is the most visible example of this tech-enabled, employee-lite model, but many others exist. According to its most recent annual report, the food delivery platform DoorDash has more than seven million “dashers” (non-employee delivery drivers) but only 19,300 employees globally – its labor force includes 350 contractors for every employee. Of course, the business model requires excluding contractors as “stakeholders,” so the circle of obligation is fairly narrow. More traditional employers have adopted a similar approach to limiting headcount. In 2019, the New York Times reported that Google had 102,000 employees but 121,000 temps, vendors, and contractors (TVCs). In other words, most of those who worked at Google were contractors and not employees, and the compensation, benefits, and basic efforts at inclusion were notably lower, with TVCs prevented from accessing the internal jobs board. Lax disclosure requirements in the US do not allow us to report just how widely this core/periphery employment model has spread, but the economic benefits are clear. According to the New York Times: “OnContracting estimates that a technology company can save $100,000 a year on average per American job by using a contractor instead of a full-time employee."
The same technologies enabled the astounding growth of geographically dispersed distribution channels such as Amazon at the expense of local retailers. At the time we were writing, Amazon was a fledgling endeavor and not the globe-straddling behemoth of today – at the start of 2005, the company reported just 9,000 full-time and part-time employees. It has since grown to become a universal distribution method for physical products, enabling companies like the maker of the Instant Pot to contract out all aspects of production, marketing, sales, and delivery. Today, Amazon has over 1.5 million employees and countless contractors, making it the world’s second-largest company (behind Walmart). The pandemic substantially boosted delivery-based retail and encouraged the proliferation of online-first enterprises. Meanwhile, Main Street stores and mall anchors such as Sears, JC Penney, Toys R Us, and dozens of others slipped into bankruptcy or liquidation. Retail has become increasingly placeless, too. »
Smartphones and other mobile technologies changed finance, from touch-free payments and Venmo to stock trading apps like Robin Hood. Regulatory changes enabled businesses to raise capital online without going to a bank or a CDFI – again, challenging the locavore model of the community bank. Lastly, in the capital markets, we have seen the rise to dominance of giant index funds such as BlackRock and Vanguard, while campaigns by activist hedge funds bent on enforcing shareholder value have multiplied.
We have arrived at a place where enterprises can snap together the parts needed to do business without making permanent commitments to any particular community or set of employees. Traditional notions of stakeholders appear poorly suited to the contemporary business enterprise. What's a leader to do?
Corporate responsibility in a sharecropper economy
It may be even worse than we think. The pandemic may turn out to have been a major turning point in the organization of the American economy and, with it, the meaning of corporate responsibility.
Lockdowns and work-from-home/school-from-home mandates meant that vast swaths of the population connected with the outside world primarily through platforms like Google, Amazon, and Facebook using tools created by Apple and Microsoft (GAFAM). Big Tech's inescapability was reflected in their stock market valuations, as GAFAM made up more than one-quarter of the value of the entire S&P500. (The S&P500 makes up 80% of the value of the US stock market, which in turn makes up 60% of the world's stock market value). Big Tech ruled everything around us, following its own peculiar codes, and often controlled by billionaire founders with absolute voting control over the board.
Far less visible was a dramatic surge in new business creation that started during the first year of the pandemic. The rate of startups for “real” businesses that actually employed people had been in decline since the late 1970s. Yet the US Treasury reported 19 million new business applications since the end of 2020; five million were for new employers. The Biden Administration oversaw an unprecedented increase in small businesses. The US has spawned a vast new lumpen bourgeoisie.
But many of these startups were a different breed: tiny tech-enabled enterprises that looked more like Fisker than General Motors. Their employment rolls were modest, and they commonly contracted out large parts of their work (often to other tiny startups). Crucially, their ability to operate frequently relied heavily on Big Tech. They might use Microsoft software tools and cloud services and Apple hardware, advertise on Google and Facebook, and distribute their goods on Amazon or the Apple or Android (Google) app stores.
The operations of this new sharecropper economy and, increasingly, our society hinges on Big Tech firms, monopolies that control indispensable information-based products and services. Big Tech is global, yet without any particular “home” to speak of, having fully mastered the dark arts
‘In 2020, an Irish Microsoft subsidiary with no employees reported profits equal to three-quarters of Ireland's GDP’
of nationality arbitrage. (In 2020, an Irish Microsoft subsidiary with no employees reported profits equal to three-quarters of Ireland's GDP.) They exemplify the responsibility paradox, with no fixed community or even nationality. Milton Friedman argued that the social responsibility of business was “to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom”. But which society is our guiding light today? And whose laws and ethics – the US, Ireland, the EU, China, or perhaps E-Estonia?
The same goes for the millions of tiny enterprises Big Tech has enabled – app developers, small retailers, micro-professional services firms, and so on. Like the giant GAFAMs of this world, these small enterprises are relatively placeless and ephemeral. Few people are demanding more accountability from them, and many may operate from suburban homes, just nodes in a network of contractors.
Neither of those business models fits the idea of corporate responsibility that evolved in the 20th century. But both are certain to be challenged by the return to economic nationalism embodied in recent elections around the world. It seems the boundaries among nations may be hardening around us. It may be time for another revolution in thinking about corporate responsibility. ■
JERRY DAVIS is the Gilbert and Ruth Whitaker Professor of Business Administration and Professor of Sociology at the University of Michigan’s Ross School of Business. He has published widely on management, sociology and finance. His latest book is Taming Corporate Power in the 21st Century (Cambridge University Pre ss, 2022), part of the Cambridge Elements Series on Reinventing Capitalism.