Business ethics covers various aspects of commercial enterprises. The concept deals with the responsibility of businesses to comply with legal, environmental, and socioeconomic requirements. It also deals with the responsibility of a business towards its employees, customers, partners, and the community. Businesses should promote ethical practices through their leaders, workforce, products, and services (Paley, 2007).
Both organizational leaders and employees have a responsibility to ensure that they promote ethical practices through their work. Home Depot is one of the biggest retail shops in the United States that deals with home development products. In the recent past, Home Depot attracted global attention due to its poor economic performance and lack of competitiveness in the market.
Many economic experts criticized the company for its organizational behavior that resulted from poor leadership (Griffin, 2007). Robert Nardelli was the Chief Executive Officer (CEO) and the chairperson of Home Depot from the year 2000 up to 2007 when he resigned.
He was criticized for his leadership style at the company, which allowed its main competitors to gain stability by controlling a sizeable share of the market. Robert’s leadership style was characterized by command and control over stakeholders at Home Depot (Griffin, 2007).
Robert Nardelli worked at General Electric (GE) before he moved to Home Depot. At the time, he had a bad reputation for his imperialistic style of leadership. The Consumer News and Business Channel (CNBC) named Robert among the all-time worst ceos from the United States. At Home Depot, Robert was guilty of leading the business into a pitiable financial situation through a series of bad decisions (Baack, 2011).
First, he alienated the employees, shareholders, and other stakeholders at the business from the decision-making process. Second, Robert rewarded himself with a huge compensation package that did not match the financial situation of the business at the time. The company’s shares were trading lowly in the stock market. Robert did not consider that when he was developing his compensation package.
According to the situational theory of leadership, decision-making in an organizational setting is dependent on the prevailing situation. Leaders should consider how decisions on the situation will affect an organization’s corporate goals, workforce, stakeholders, and overall success (Griffin, 2007).
Robert did not have any prior experience in running a retail business when he took over at Home Depot. This contributed to Robert’s poor leadership record at the company. Robert thought that his business development strategies as GE would also work at Home Depot. One of his first decisions as the CEO was to do away with the sales department.
This was a bad decision because the department was playing a crucial role in attracting and retaining customers (Baack, 2011). This bad decision by Robert created a rift between him and the business stakeholders. The stakeholders felt that he did not have a passion for home development products and running a retail business.
They were losing patience with the declining price of the company stocks at a time when the CEO had already finalized on his mega compensation package (Griffin, 2007). A shareholders meeting held in 2006, increased the pressure on Robert to resign because he failed to respond to crucial questions regarding his style of leadership and the future of the business.
Stakeholders at Home Depot accused Robert of being arrogant, selfish, and inflexible. Others accused him of lacking passion and knowledge of running a retail business. According to the contingency theory of leadership, organizational leaders should have the right competencies that enable them to deal with various challenges in the workplace (Paley, 2007).
Robert did not have the right intellectual qualities to lead a retail business of the magnitude of Home Depot. Although Robert helped the business to improve its sales and profit margins within the first year of his tenure, he failed to maintain that success in subsequent years. Robert compromised his ability to guide Home Depot to success by making several poor decisions that led to a decline in the value of its stocks.
The trait theory of leadership states that good leaders are born and not made. It argues that good leaders have certain inborn qualities that make them right for leadership positions (Baack, 2011). Not everybody can be a good leader if he or she does not have certain qualities. These qualities include the ability to listen, understand, motivate, and solve problems of other people.
A good leader should also have the ability to bring people together for the sake of achieving a shared goal. Robert did not have this trait because he pushed major stakeholders in the business away instead of attracting them to get involved in the decision-making process (Griffin, 2007).
According to the behavioral theory of leadership, a good leader should ensure that his or her actions reflect good conduct. Leaders have an ethical responsibility to ensure that their behavior reflects the corporate values of their organization (Baack, 2011).
The actions of Robert Nardelli as the CEO of Home Depot were unethical because they did not promote the organization’s corporate culture. Also, he ignored the interests and needs of important stakeholders in the business, such as the employees, shareholders, and customers. The leadership style of Robert Nardelli generates two crucial lessons about organizational leadership.
First, organizations are different. Therefore, it is not advisable for a leader to apply a style of leadership used in one organization to manage a different one. Every organization has its own set of demands, thus the need to apply a different style. Second, it is important to have a high level of flexibility to deal with the dynamic nature of organizations effectively.
Baack, D. (2011). Organizational Behavior. New Jersey: Cambridge University Press.
Griffin, R. (2007). Fundamentals of Management. New York: Cengage Learning.
Paley, N. (2007). Mastering the Rules of Competitive Strategy. New Jersey: John Wiley & Sons.