The need for ethical leadership in organization

Elma Ocampo Gabriel, BSBA-MA MAPA Ph.D. major in Development Management Divine Word College of Laoag Laoag City, Ilocos Norte, Philippines

“Leading with positive ethical values builds trust and brings out the best in people, which brings out the best in the organization, which leads to great results.”

– Linda Fisher Thornton

Abstract

Ethical leadership requires ethical leaders who have the responsibility for ensuring standards of moral and ethical conduct. Good leadership then, refers not only to competence, but to ethics that transform organizations and people’s lives. Ethical leaders think about long-term consequences, drawbacks and benefits of the decisions they make in the organization. They are humble, concerned for the greater good, strive for fairness, take responsibility and show respect for each individual. Ethical leaders set high ethical standards and act in accordance with them and have the courage and will to apply them for the good of the organization and other people around. Effective leaders also influence processes, stimulate change in attitudes and values, and amplify empowerment and self-efficacy of their followers as they foster the internalization of corporate vision. The more the leader “walks the talk”, by translating internalized values into action, the higher level of trust and respect he generates from followers. Such engagement creates an intellectual and emotional commitment between leaders and their followers that makes both parties equally responsible in the pursuit of common goals.

Keywords: ethical leader, character, leader-follower relationship, ethical behavior, corporate governance, corporate culture, social constructs 

Introduction

Ethical leadership is critical to the success of any business. It is about far more than having an understanding of the right values, or of having a strong character that leads by example. An ethical leader not only has high values and the determination to succeed but also understands the importance of building a strong framework that allows others to follow the examples set so that everyone benefits. Ethical leadership is about striving for the same goal and embodying the same purpose, values and vision. An ethical leader works to create an open conversation, and working practice, that encourages the sharing of ideas, knowledge and vision so that the benefit of the learning is shared. The leader must also compel others to follow the lead that he/she sets by the standards that are reflected in the way they live, influence and inspire.

This article focuses on ethical leadership within the organization. In this respect, the paper analyses various principles of ethical leadership. In addition to this, the paper will define ethical leader and its role fostering ethical behavior and examines the importance of ethical leaders as well as the challenges of ethical leadership to organizations.

 

Ethical Leadership

Ethical leaders speak to us about our identity, what we are and what we can become, how we live and how we could live better (Freeman & Stewart, 2006). Ethics is a philosophical term originating from Greek word “ethos” meaning custom or character. It is concerning with describing and prescribing moral requirements and behaviors, which suggests that there are acceptable and unacceptable ways of behaving that serve as a function philosophical principle (Minkes, Small, & Chatterjee, 1999). Ethical behavior is defined as a behavior which is morally accepted as “good” and “right” as opposed to “bad” or “wrong” in a given situation (Sims,1992). Ethics is the code of values and moral principles that guides individual or group behavior with respect to what is right or wrong. Ethical behavior is both legally and morally acceptable to the larger community (L.K. Trevino, 1986). We define leadership as the art of persuading a follower to do the things, activities, that the leader sets as goals. The role of leaders therefore in the process of directing the individual’s behavior towards a desired goal. Leaders vary depending on the individual leadership style that stems from the personality characteristics. Some leaders, particularly charismatic and transformational, have personal power through which they engage employees, whereas other exert the positional, legitimate power. Leaders are characterized by different values, attitudes, beliefs, conducts, habits and practices and that is to a certain extent dependent upon the organizational, professional or institutional culture. Leadership signifies a relation between a leader and his followers within a situational and organizational context.

Principles of Ethical Leadership

Practitioners and scholars of ethical leadership point to five key principles of ethical leadership: honesty, justice, respect, community and integrity.

Honesty

Dishonest behavior is a form of lying or misrepresenting reality. Dishonest behavior by leadership creates an atmosphere of mistrust and can lead to leadership being seen as not dependable. People will lose faith in dishonest leadership. As a result, it is critical for ethical leaders to behave with honesty.

Justice

Ethical leaders are also concerned with issues of justice and fairness. These types of leaders prioritize treating everyone in an equal manner and placing justice and fairness at the center of their decision-making more broadly. They make a rule of never giving certain individuals special treatment, except when a particular situation demands it for the purposes of justice.

Respect

Leaders who convey respect to their peers and employers approach others with an inherent sense of their worth and value as individuals. Respect means listening carefully to others and confirming their inherent value. Leaders should also mentor others to become aware of their own purpose, values and needs so that ethical qualities spread throughout the organization.

Community

Ethical leaders behave with altruism. They place the welfare of their subordinates high in their esteem, and engage in activities like team building, mentoring, and empowerment behaviors. This means ethical leadership helps to build community. These leaders take into account the values and purpose of their employees as well as of the organization as a whole.

Integrity

Integrity refers to the quality of having a strong moral purpose and being honest. Ethical leaders demonstrate appropriate values to those around them via their own behavior. Leaders who act with integrity can strengthen the organization by attracting talented, ethical hires. People generally want to work for leaders they perceive as acting with integrity. Investors and customers feel the appeal of leadership that acts with integrity and are more likely to be attracted to those organizations.

The Leader’s Role in Fostering Ethical Behavior in Organizations

Basic rules of conduct that ethical leaders should follow in order to be considered true leaders are outlined as follows (Freeman, Martin, Parmar, Cording, & Werhane, 2006):

§ Leader principle: a leader is foremost a member of the company and its spokesman; therefore, his deeds must serve the purpose and benefits of the corporation

§ Constituents principle: leaders respect their co-workers and perceive them as people who share common purpose. Their individuality and freedom are accepted within the borders of ethical behavior.

§ Outcome principle: a leader connects values to stakeholder support as well as societal legitimacy. Company mission, vision, values and goals (strategy and tactics) are outlined within an understanding of ethical ideals

§ Processes/skills principle: the leader is open to different opinions and ideas, views and creates an atmosphere of dynamic and fruitful communication

§ Situation/context principle: moral judgements are used to make ethical decisions and when crossing the boundaries of different ideas. The ethical leader knows the limits of the values and ethical principles they live.

§  Ethics principle: a leader understands leadership and ethics as an integrated process and frames actions and purposes in ethical terms.

Importance of Ethical Leaders in Organization

Ethical leaders can help establish a positive environment with productive relationships over three levels: the individual, the team and the overall organization. Nurturing the relationships at each of these levels can lead to the following outcomes and benefits:

1.    The Well-Being of the Individual

Ethical leaders who lead by example may influence others to do the same. Positive communication among co-workers may help influence job productivity and attitude. Employees who work under an ethical leader are often more likely to keep their jobs because the ethical leader may be strict about the rules but he or she is also considerate about the needs of the employees. They work towards creating a working environment in which the employees can thrive on the benefit of the company and its shareholders, thus also benefiting the employees in the end.

2.    The Energy of the Team

Ethical leadership can also involve the management of conduct and collaboration within a team. Employees who are treated well are more likely to focus on their work, thus ensuring that they generate as much output as expected of them by the organization. This ensures that under their ethical leader, the employees are able to devote themselves all to the company in return for the leader’s consideration and efforts.

3.   The Health of the Organization

The importance of maintaining a positive attitude in the workplace has a lot to do with improving the overall health of the organization. When people can show respect for one another, and can value other’s opinions, it may help create a productive working environment. An ethical organization can occur when communities of people work together in an environment of mutual respect, where they can grow personally, build friendships and contribute to the overall goal.

Challenges of Ethical Leadership

As a concept of management, ethical leadership faces a lot of challenges including corporate culture, corporate governance, and social constructs.

An organization’s corporate culture is the way in which people inside the organization interact especially as far as decision making is concerned. Companies having a bureaucratic nature tend to rely on the top tier management to make all the crucial decisions and pass the orders down the corporate ladder to the implementation points. This means that among other things, the managers in these organizations have the autonomy to make any decisions without involving their employees. This kind of power is a factor for unethical behavior, thus presenting a challenge to ethical leadership within the organization. If presented with a tough situation, the leader here is likely to resort to unethical solutions provided it would get them out of the predicament and no one would have the right or grounds to question them.

Corporate governance refers to the system of checks and balances within an organization where the shareholders, leaders, and employees are all organized to ensure effective management of the company’s activities. A company with good corporate governance is likely to have a comprehensive network of checks and balances at every level of operation. This is done in order to ensure that all the decisions being made are agreed upon by more than two individuals. Companies whose corporate governance is somewhat flawed, are unable, however, to keep their leadership in check as they tend to consolidate the   decision-making powers at the top. In such organizations, it is much easier for the leader to act unethically as they are able to make autonomous decisions and follow-up decisions in order to cover up their misconduct. This opportunity is yet another challenge to otherwise ethical leader if presented with the right conditions.

Social constructs also impede ethical leadership by invoking the biases of the leader. For example, in the society where gift giving is acceptable, the business leader is likely to be affiliated with the entity that has the ability to offer the best or most expensive gift. The fact that this gift is given after the tender or partnership has been awarded further allows for justification, which is yet another primary factor in fraud and unethical behavior. This generally means that in order to eliminate unethical leadership, all these gift-giving expectations must be shunned so that business interactions are conducted based on merit and not on the partner’s gift-giving capacity.

Conclusion

Ethics are the foundation of great leadership and ethical leadership is essential for today’s leaders. This article presented the opportunity to understand the fundamental of ethical leadership, importance and the critical role that ethical behavior plays in every leadership position. This goes to show that when a leader and their company consistently do the right thing, employees will be aware of the foundations of their leadership. Management’s actions convey to the rest of the company that the leaders act with integrity. This, in turn, means employees will be more pro-active about communication, including when things go wrong. In addition, if employees recognize responsible leadership in their supervisors and the company, they are more likely to believe that they will receive fair treatment, will be motivated to live up to the company’s values and will be more willing to take extra-role responsibility and risks, resulting in the overall improvement of the organization’s performance – hence a closed reciprocal loop is formed between individuals and organizations.

References

Blanchard, K. H., & Peale, N. V. (1996). The power of ethical management: Ballantine Books.

Block, P. (1993). Stewardship: Choosing service over self-interest. San Francisco: Berrett- Koehler. 

Bown, M. E. (2007). Misconceptions of Ethical Leadership: How to Avoid Potential Pitfalls. Organizational Dynamics, 36(2), 140-155.

Brown, M. E., & Trevino, L. K. (2006). Ethical leadership: A review and future directions. The Leadership Quarterly, 17(6), 595-616. 

Freeman, R. E., Martin, K., Parmar, B., Cording, M., & Werhane, P. H. (2006). Leading through values and ethical principles. In R. J. Burke & C. L. Cooper (Eds.), Inspiring Leaders, Routledge Publishing. Oxford, UK.

Minkes, A. L., Small, M. W., & Chatterjee, S. R. (1999). Leadership and business ethics: Does it matter? Implications for management. Journal of Business Ethics, 20(4), 327-335.

Murphy, P. E., & Enderle, G. (1995). Managerial ethical leadership: examples do matter. Business Ethics Quarterly, 5(1), 117-128.  

Sims, R. R. (1992). The challenge of ethical behavior in organizations. Journal of Business Ethics, 11(7), 505-513.

Trevino, L. K. (1986). Ethical decision making in organizations: A person-situation interactionist model. Academy of Management Review, 11(3), 601-617.