business essay sample

business essay sample

The Role of Ethical Leadership in Business Success

1. Introduction to Ethical Leadership in Business

Given the recent business scandals such as the collapses of Enron, Tyco, and WorldCom, it is imperative to determine whether business scandals are related to the individual leaders or to institutional macrostructures. What can leaders do to prevent unethical and illegal behavior that occurs in business? Although stakeholders must be sensitized and organizations must develop and promulgate ethical cultures, effective leadership is the most successful way of preventing unethical behavior (Trevino et al., 2000). What could be more important for “getting leadership right” than cultivating a cadre of leadership talents who are not only highly competent (performing effectively), but also fully engaged in the business as committed stewards of the organization, partaking the foundations of a high-performance model by appropriately stewarding critical stakeholders, including shareholders (Freeman, 2010; Simons, 2008)? In the absence of ethical leadership, the assumption is that efforts to establish ethics-disclosure requirements, ethical principles, and moral standards for business action are important but insufficient because in the end, the ethical quality of organizations is determined by the characters of their leaders (Adler, 2004).

Narvaez, 2008; Schein, 2010. Ethical leaders serve as role models in the organization by behaving in ways that reflect cultural norms and values and exhibit pride, enthusiasm, cooperativeness, and teamwork while also providing empathy and compassion to those they are leading (Yukl, 2013). Employees will follow the ethical leader because they exhibit honesty, trustworthiness, integrity, fairness, and concern for others, creating an environment based on ethical and moral behavior and are motivated to do the right thing. Ethical leadership can help sustain ethical outcomes (Reed et al., 2014).

2. The Impact of Ethical Leadership on Organizational Culture

Ethical leadership role models, which embody the values or principles that the leader believes are important. When people respect and trust their leaders, they are more likely to emulate their leader’s behaviors, values, and actions. Specifically, openness, honesty, integrity, and consistency play vital roles in ethical leadership. Employees will recognize leaders’ actions as examples of how to behave. The interactions between ethical leaders and employees create the organizational culture. Organizational culture is a shared set of beliefs, values, attitudes, and customs that shape the behavior of people in the organization. The leadership style is a determining factor in the creation of the organizational culture. With a consistency of purpose and message, organizations can establish a consistent “personality,” making any culture of the organization.

The central purpose of ethical leadership is to facilitate ethical organizational culture. Through the everyday gestures of ethical leadership, leaders can promote an organizational culture that encourages correct behavior among employees. Fostering ethical conduct is a leader’s personal responsibility because ethical behavior flows from the leader’s inner sense of right and wrong. Leaders face ethical dilemmas individually based on the situation and their values. The way they deal with these situations affects employee decision-making opportunities and the organization as a whole. Ethical leadership calls for embodying, teaching, and rewarding ethical principles.

3. Ethical Decision-Making in Business Operations

We find these principles of ethical, discerning decision-making as practical in business leadership as they are in our personal lives and in public policy-making. Ethical decision-making in business life and in everyday life needs to look beyond the surface of the available data and see the moral complexity of real-world problems. It needs to listen to many voices and consider a lot of different sources of information. It needs to pull really hard to eliminate bias. It needs to be able to identify what really matters most morally. It needs to help the leader think through both likely conflicts of interest and other ordinary moral challenges of maintaining cooperation within and between groups. When conflicts of interest show up, ethical leadership calls for identifying any structural barriers to principled decisions and looking toward creative ways to resolve seeming moral conflicts, to make fair decisions, to abide by them, and to set up mechanisms for holding the organization and its leadership accountable.

Ethical decision-making and ethical leadership in real-world businesses involve taking the time to listen to other people, known and unknown, and to understand the complexity of the situation. In real-world businesses, leaders often don’t have the luxury of finally getting to a decision that results in the right or noble thing being done in time to respond to competitive pressures, technological changes, or demands from shareholders and customers who are anxious about performance. A VUCA world pressures leaders to maintain a feedback loop around crucial ethical decisions and to anticipate the most likely pain points and trade-offs in day-to-day operations. This scorecard can be used to alert leaders to likely issues that will need their leadership attention if they are to provide organizational moral leadership context for employees during this routine work, and to engage with boards appropriately about these strategic risks.

4. Case Studies of Successful Ethical Leadership in Business

Again in 1942, IBM chairman Thomas J. Watson remarked that ‘IBM salesmen were operating as unofficial ambassadors of the United Nations’. This progress was reinforced with a strong commitment to recruiting and training all IBM employees equally, a guarantee to provide training for all employees with the right skills, a broad package of employee benefits and different types of social track records around the globe; and the radical step of prohibiting IBM employees from taking bribes, not just in their roles for IBM but especially for any other business. IBM specifically banned corporate political contributions and refused to run advertisements in states where it was applying for invitations. The company avoided acting against racial segregation and produced a careful and rapid response to calls by academics and concerned shareholders to openly end its corporate relationship with the South African government.

IBM is a long-term example of a successful business with a culture formed from ethical leadership. The notable contributions of an ethical organization were recognized in the early twentieth century with the introduction of stockholder representation, employee consultation, the idea that the state should constrain chronic short-termism, and principles of respect and justice for those involved. Each of these principles has some founders who saw key social responsibilities as a more efficacious form of self-interest. The idea of responsible business was then supplemented through a variety of widely recognized forms of ethical commitment. In IBM, the corporate welfare system was depicted as part of a ‘family’ relationship between employer and employee.

5. Conclusion and Future Implications

The report also suggests the potential value of qualitative and quantitative research into the effects of ethical leadership on business success and that of the parts that integrity management, corporate culture, governance, diversity and inclusion, external stakeholder trust and engagement, and the communication and enforcement of ethical expectations may play in driving ethical and moral corporate behavior. Optimum means to educate, encourage, and define leadership conduct in the processes to select, develop, promote, and replace corporate leaders should also be independently researched, as should methods to judge their efficacy. Furthermore, useful feedback from business leaders with experience of operating in industries where the focus is on the wider stakeholder community is needed.

With the evolution of the kind of leadership required in business, the report suggests that measuring the ethical conduct (actions, not words) of leaders and candidates for top positions is essential, as is setting expectations on ethical conduct at all levels within the firm, leading by personal example and walking the talk, and creating the means to effectively communicate concerns in a safe and confidential manner. Leaders that exhibit integrity, have a sense of a greater good, and demonstrate clear moral values and ethical principles would appear to be the ideal for such business entities. With the rise of the knowledge worker in the innovation-driven economy, the leader’s role, irrespective of its fine focus, will have had to broaden to one that actively energizes, challenges, and rewards employees. Advances in the ability to measure “softer” aspects of business may follow.