- Defining ethical leadership
- Requirements for ethical leadership
- Benefits of ethical leadership
- Ethical leadership & organizational culture
- Managing ethical business conflicts


[SLIDE 1]

Leadership is the ability or authority to direct or guide people toward a goal. An organization cannot be successful without effective leadership. Leaders must model ethical behavior and make ethical decisions for the company. An organization's leadership is responsible for developing its ethical culture. An organization's corporate culture often evolves to reflect the conduct of its leaders. If management models ethical behavior, subordinates are likely to emulate this behavior. However, if an organization's leadership does not model ethical behavior, the corporate culture is unlikely to evolve to reflect ethical values. An organization's leadership can greatly influence ethical decision making because they have a lot of power to motivate subordinates and to enforce the organization's policies and norms. 

Normative myopia occurs when managers overlook or stifle the importance of core values in their business decisions. Normative myopia occurs for three reasons. First, managers believe that normative values do not apply to their managerial decisions. Second, managers believe that values and facts can be separated from their business decisions. And third, managers believe that normative values should not be part of the business decision-making process. This results in managers rationalizing unethical behavior. For example, a top-performing salesperson who uses unethical tactics may be overlooked because of that person's contribution to the organization.


[SLIDE 2]

While character and competence is an important part of ethical leadership, managers also need certain skills to lead and guide subordinates. These skills are acquired through years of training, experience, and modeling leadership best practices. There is not a single quality that anyone can point to that makes a good leader. Rather, leadership requires different sets of skills depending on the company and specific situations.

Although the specific skills a leader needs will vary depending on the situation, there is a general set of requirements that have been identified that contribute to good leadership. These skills include (1) modeling organizational values, (2) placing the needs of the organization ahead of their own interests, (3) training and developing employees, (4) understanding employee values, (5) establishing reporting mechanisms, (6) recognizing the limits of an organization's rules and values, and (7) not turning a blind eye to observed misconduct. Many of these skills can be developed through a mix of experience and training.


[SLIDE 3]

There are many benefits of ethical leadership for an organization. For example, ethical leadership directly impacts a company's culture. Leaders are responsible for monitoring and communicating a company's values. This ensures that the organization's employees are aware of those values and have a clear understanding of what constitutes a violation. Leaders who model ethical behavior and want their subordinates to model that behavior often reward ethical behavior exhibited by others. Some reward ethical behavior when it is observed, and others create systems to reward ethical behavior. Such reinforcement promotes and encourages ethical employee behavior. 

Another benefit of ethical leadership is that it can lead to higher employee satisfaction. Research has demonstrated that people prefer to work for companies that are ethical. When people work for these companies, they are more likely to stay instead of seeking employment elsewhere after a period of time. This is beneficial to the organization because a company can save money by not having to train new employees as often. It also leads to an increase in worker productivity.  

When management models ethical leadership, it can create strong relationships with external stakeholders, like customers. Customers prefer to do business with companies that they consider to be ethical. Also, many clients will pay a premium to purchase products from companies that are environmentally conscious. 

Yet another benefit of ethical leadership is that it can potentially increase a company's stock value. Investors prefer to buy the stock of companies that are perceived to be ethical. Reputation matters, and investors know that if anything negative is published about a company by the media, it can cause that company's stock value to plummet. And when negative publicity occurs due to unethical conduct, it can sometimes take years for a company to regain the public's trust.


[SLIDE 4]

Every organization has its own culture. Organizational cultures develop regardless of whether or not there is effective leadership. Whether this culture is ethical, however, often depends on its leadership. If an organization's leadership models ethical behavior and implements policies that foster ethical behavior, the organization's culture will most likely be ethical. However, if an organization's leadership is tolerant or indifferent towards misconduct, its culture will be one where employees cut corners or engage in risky behavior to further their careers. 

When a company's leaders implement an integrity-based approach, they model ethical behavior and take responsibility for the organization's ethical culture. In this approach, leaders also hold employees accountable for displaying ethical behaviors and practices. In organizations that adopt integrity-based approaches, their top management, human resource managers, and board of director members are involved with the company's ethics and compliance program. This type of approach also helps management understand where unethical behaviors and practices are occurring. 

Leaders can be placed in one of three categories: (1) the unethical leader, (2) the apathetic leader, and (3) the ethical leader. An unethical leader is someone who is usually egocentric and often does whatever it takes to achieve his or her objectives. Unethical leaders consider laws to be guidelines and they often search for loopholes or ways to bypass laws and regulations. Apathetic leaders are those who do not care for ethics within the company. This doesn't necessarily mean they are unethical people, however. Apathetic leaders usually do not display any passion for the organizations they work for. Finally, ethical leaders are very conscientious of making ethical decisions. And if an ethical issue occurs, they typically address the issue as soon as possible. Ethical leaders are those who care very much about ethics within the organization. They model ethical behavior for their subordinates and listen to the concerns of those they supervise to make sure ethical issues are addressed before they have a chance to grow to become larger problems.


[SLIDE 5]

An ethical business conflict is a conflict that occurs when there are two or more positions on a decision that are different from an organization's goals. These conflicts can emerge for different reasons, like when employees are not comfortable with coworkers' decisions. Ethical conflicts are not always a bad thing, however, because they can be used by an organization to identify ethical issues. For an ethical issue to be resolved, it must first be identified. Once an ethical issue has been pinpointed, it can then be determined who is responsible and whether the organization's management was involved in any way in the misconduct. 

It is unlikely that ethical issues will be reported to management without a system in place for reporting the issues. Examples of communication systems include hotlines, feedback forms, and suggestion boxes. Even with employee training and communication systems in place, however, if management does not act on ethical issues when they are reported, it can cause harm to the organization. If employees realize that their concerns are not being addressed, it could result in conflict. 

Training employees to handle conflict situations when they occur is another way to manage these situations. In some cases, management may not have to get involved in a situation if employees are trained to handle it themselves. Employees can be trained to react in one of five ways when conflict occurs: (1) ignore the issue, (2) confront the other person, (3) report the issue to management, (4) report the issue by hotline, or (5) report the issue to the appropriate external authority (whistle-blowing).