Last month I attended the National Association for Corporate Director’s (NACD) 2010 Governance Conference in Washington, DC.  The conference attracted over 750 corporate directors who serve on public boards and high-level speakers such as The Honorable Mary L. Shapiro, Chairman, U.S. Securities and Exchange Commission and Duncan Niederauer, CEO, NYSE Euronext.    

There were many conversations regarding the impact of the Dodd Frank legislation, including over 250 rules intended to stabilize our economic system and prevent another financial meltdown.  Shareholders will have greater say and are demanding greater transparency, leading to  increased shareholder communication.

The American public has verbalized their demand for increased communication and their desire for higher standards of corporate ethical behavior. Increasing shareholder value should not be in direct conflict with acting ethically. I continue to write about the importance of establishing trust by acting with integrity.  Ethical behaviors translate to employee trust and satisfaction and to greater client and consumer trust and satisfaction as well. The ability of companies to innovate effectively, comes from teams of people who share information through trusting dialogue leading to better products and services which increase shareholder value. Trust plays an important role in the creation of value both within companies and in our economy as a whole.   

Your job as a leader is to develop and execute strategies.   Most strategies fail in their execution.  Having a clear communication strategy that effectively shares the reason behind your strategies and the importance of ethics and values in the execution of these strategies, enhances the ability of your team to execute effectively.

I’ll give you a perfect example of how strategic communication impacts strategic execution and the culture of your organization. Mary Shapiro was charged with restructuring the Securities and Exchange Commission after the Bernie Madoff scandal — the largest fraud case in American history – as well as restoring investor confidence in the financial system.   The actions she took immediately in her new role expressed her strong commitment to strengthening the SEC culture and refocusing the SEC on its primary mission of protecting shareholders. 

She circulated every letter and legal brief surrounding the Madoff fraud.  This included sharing throughout the organization, horrific letters from families who lost their life savings, to show the pain that was inflicted by the inaction of the SEC.  In addition to reviewing her senior management and enforcement people, she used strategic communication to define acceptable behaviors which set the tone and the expectations of their responsibilities on a going forward basis. 

Harry Markopolos, who received public acclaim for his relentless focus over eight long years, uncovering the estimated $65 billion Madoff ponzi scheme, spoke at The NACD Directorship Forum this November in NYC.  He indicated a sense of confidence that Mary Shapiro could become the best Chairman in the history of the SEC.  He expressed faith that the agency would be significantly more responsive, despite his repeated attempts to tip off the SEC regarding the Madoff fraud.   Chairman Shapiro’s strategic communication strategy has resonated both internally throughout her organization and externally as well. 

An important leadership lesson to be learned is the importance of sharing information and communicating your standards that cannot be violated. If you are unfortunate enough to have fraud occur within your organization, as a leader, you need to express values, show people the impact and humanize the fraud. You need to take a stand that this behavior is not acceptable and will not be tolerated. Once employees digest this information, they will be more careful in how they behave on a going forward basis.  They will make better decisions for your organization.

I’ll never forget a conversation I once had in the wood-paneled boardroom with the CEO of a 100 billion dollar global company. He said that with over 300,000 employees, if his organization were a city, it would have a jail.  It shocked me that he was basically abdicating his responsibility for controlling the activities of his employees. 

It’s up to business to do what’s right with increasing transparency.  Trust can be earned back and good financial results will follow. But government can’t do it all.  Regulation can play a role, but business has a massive role to play in the creation of confidence. It’s time for companies and directors of public boards to broaden their aperature – to focus on their belief in values and ethics.  These leadership principles are likely to be quite indicative of how a company will perform in the future.    

Stuart R. Levine is Chairman and CEO of Stuart Levine & Associates LLC, a strategy, leadership and governance consulting firm.  www.stuartlevine.com.