In breaking it down, one might want to define both words and merge them to enable a clear meaning of Ethical leadership. Ethics might be identified as standards, values and convictions that characterise good and bad conduct. Leadership could be known as a special ability to control, assist and influence individuals to act towards achieving a particular goal, mission and vision. In connecting these definitions, Ethical Leadership might be understood as the ability to control and influence people to achieve a particular goal with positive values and standards to uphold and live up to in the process. However, the center for Ethical Leadership defines Ethical Leadership as “knowing your core values and having the courage to live them in parts of your life in service of the common good”(Center for Ethical Leadership 2014).
According to Rubin et al. (2010:216-17), “an ethical leader behaviour can have important positive effects on both individual and organisational effectiveness”. This explains that it is the duty of a leader to create ethical rules or code of conducts in order to have a psychological contract with their employees on expected ethical attitudes or behaviours and be a model by inculcating these ethics in making decisions and running the organisation.
It can be said that the behaviours and attitudes of the employees in handling internal and external affairs of a particular firm, establishes the ethical nature of the business in the organisation, therefore internal unethical interactions might lead to unhealthy competition and bad teamwork among employees. Externally, unethical dealings with external associates could destroy business. Furthermore, the effect and importance of an ethical reputation cannot be underestimated because, if a company does not value its customers and community, it might lead to difficulty recruiting good employees from that community and customers might stop patronising which could make the company go out bust.
A typical example of the effect of unethical business conduct is that of Enron scandal. It is known that in 2001, Enron suffered a loss of investor trust, their credit worthiness lost value which led to bankruptcy. It was also announced that most of their leaders were imprisoned and convicted for money laundering, conspiracy, insider trading and bank fraud (Forbes 2013). This scandal was said to have also affected their accounting firm by the name of Arthur Anderson, which went out of business. There are many other examples.
It is said that there are two fundamental theories regarding ethics: deontological or duty-based and consequentialist. The former holds that “ethics are concerned with what people do, not with the consequences of their actions” (BBC 2014). Thus the right action might be said to be determined strictly by the moral value of the action only, despite its outcomes. Duty-based ethics is involved with people’s intentions and motives, provides assurance in decision-making, ensures that specific acts are always wrong, and puts into consideration human rights. However, this method could be overly rigid, leading to clashing roles that could destroy communities. On the other hand, consequentialist ethics focuses on the consequences of the decisions only and if they are most correct. Its been said that “the more good consequences an act produces, the better or more right that act” (BBC 2014). Consequentialism could be quite flexible and applied to all moral predicaments depending on the approach a person takes. This theory of ethics could be slow or completely not feasible since the result of each likely act must be thoroughly researched and compared (act consequentialism). Alternatively, rule-based consequentialism crirticises actions or decisions depended on a set of moral laws which predict the “goodness” of the outcome. This approach is much more feasible but also a little bit rigid, since general rules do not apply to every circumstance.
Due to the limitations of consequential and deontological theories, overtime, various more feasible approaches to ethics in business. In my opinion, I believe the best approach to ethics could be developed from the 10 characteristics of good ethical leaders that have been developed by Freeman and Stewart (2006: 3).
1. Articulate and embody the purpose and values of the organisation.
2. Focus on organizational success rather than on personal ego.
3. Find the best people and develop them.
4. Create a living conversation about ethics, values and the creation of value for stakeholders.
5. Create mechanisms of dissent.
6. Take a charitable understanding of
7. Make tough calls while being
8. Frame actions in ethical terms..
9. Know the limits of the values and
ethical principles they live
10. Connect the basic value proposition to stakeholder support and societal legitimacy.
From this, it is evident that the need for ethics in the corporate world and the world at large cannot be ignored or insignificant.
BBC (2014) Consequentialism [online] available from <http://www.bbc.co.uk/ethics/introduction/consequentialism_1.shtml> [25 July 2014]
BBC (2014) Ethics Guide [online] available from <http://www.bbc.co.uk/ethics/introduction/duty_1.shtml> [25 July 2014]
Center for Ethical Leadership (2014) Ethical Leadership [online] available from <http://ethicalleadership.org/about-us/philosophies-definitions/ethical-leadership> [25 July 2014]
CNBC (2014) Premier, Providing Ethical Health Care: Survey [online] available from <http://video.cnbc.com/gallery/?video=3000259002> [25 July 2014]
Ethisphere (2014) World’s Most Ethical Companies- Honorees [online] available from <http://ethisphere.com/worlds-most-ethical/wme-honorees/> [25 July 2014]
Forbes (2013) 5 Most Publicized Ethics Violations By CEOs [online] available from <http://www.forbes.com/sites/investopedia/2013/02/05/5-most-publicized-ethics-violations-by-ceos/> [25 July 2014]
Freeman, R. and Stewart, L. (2006) Developing Ethical Leadership [online] available from <http://www.corporate-ethics.org/pdf/ethical_leadership.pdf> [25 July 2014]
List25 (2014) 25 Biggest Corporate Scandals Ever [online] available from <https://www.youtube.com/watch?v=LrJaOOGJLW0 > [25 July 2014]
Rubin, R., Dierdorff, E., and Brown, M. (2010). Do Ethical Leaders Get Ahead? Exploring Ethical Leadership and Promotability. Business Ethics Quarterly, 20 (2), 215-236.