Ethical Leadership in Organizations Essay

Ethical leadership is leadership that is involved in leading in a manner that respects the rights and dignity of others. As leaders are by nature in a position of social power, ethical leadership focuses on how leaders use their social power in the decisions they make, actions they engage in and ways they influence others. Leaders who are ethical demonstrate a level of integrity that is important for stimulating a sense of leader trustworthiness, which is important for followers to accept the vision of the leader. Leaders who are ethical are people-oriented, and also aware of how their decisions impact others, and use their social power to serve the greater good instead of self-serving interests. Motivating followers to put the needs or interests of the group ahead of their own is another quality of ethical leaders. Motivating involves engaging others in an intellectual and emotional commitment between leaders and followers that makes both parties equally responsible in the pursuit of a common goal. Ethical leadership falls within the nexus of inspiring, stimulating, and visionary leader behaviours that make up transformational and charismatic leadership. Ethical leaders assist followers in gaining a sense of personal competence that allows them to be self-sufficient by encouraging and empowering them. What is Ethical Leadership? One typical response to the â€Å"ethics crisis† in business is a clarion call for more â€Å"ethical leadership,† yet there are few explanations of what exactly is meant by the term. Many executives and business thinkers believe that ethical leadership is simply a matter of leaders having good character. By having â€Å"the right values† or being a person of â€Å"strong character,† the ethical leader can set the example for others and withstand any temptations that may occur along the way. Without denying the importance of good character and the right values, the reality of ethical leadership is far more complex and the stakes are much higher. Over the past 25 years, in talking to executives in a number of industries about the problems of how to lead in a world of great change—globalization, democratization, and incredible technological advances—we have identified a number of touchstones for the idea of â€Å"ethical leadership.† Our experience is often contrary to the picture of business executives one finds in public discussion where they are often seen as greedy, competitive, and only concerned with compensation. In fact most executives want to be effective in their jobs and to leave their companies and the world a better place, creating value on both fronts for those whose lives they affect. Our view of ethical leadership takes into account not only the leader but also his constituents (followers and key stakeholders), the context or situation that the leader and constituents face, the leader’s processes and skills, and the outcomes that result. Leaders are first and foremost members of their own organizations and stakeholder groups. As such, their purpose, vision, and values are for the benefit of the entire organization and its key stakeholders. â€Å"Leaders see their constituents as not just followers, but rather as stakeholders striving to achieve that same common purpose, vision, and values. These follower and stakeholder constituents have their own individuality and autonomy which must be respected to maintain a moral community.† Ethical leaders embody the purpose, vision, and values of the organization and of the constituents, within an understanding of ethical ideals. They connect the goals of the organization with that of the internal employees and external stakeholders. Leaders work to create an open, two-way conversation, thereby maintaining a charitable understanding of different views, values, and constituents’ opinions. They are open to others’ opinions and ideas because they know those ideas make the organization they are leading better. Characteristics of Ethical Leaders In today’s turbulent world, ethics and values are present at a number of levels for executives and managers—leaders who devote their time and energy to leading the process of value creation. This broader concept of ethical leadership empowers leaders to incorporate and be explicit about their own values and ethics. The following list provides a framework for developing ethical leadership. It is based on the observations of and conversations with a host of executives and students over the past 25 years, and on readings of both popular and scholarly business literature. Written from the perspective of the leader, these ten facets of ethical leaders offer a way to understand ethical leadership that is more complex and more useful than just a matter of â€Å"good character and values.† â€Å"It is important for leaders to tell a compelling and morally rich story, but ethical leaders must also embody and live the story. This is a difficult task in today’s business environment where everyone lives in a fishbowl—on public display. So many political leaders fail to embody the high-minded stories they tell at election time, and more recently, business leaders have become the focus of similar criticism through the revelations of numerous scandals and bad behaviours. CEOs in today’s corporations are really ethical role models for all of society.† 1. Articulate and embody the purpose and values of the organization. Following a series of unethical activities by Citigroup employees in Japan in 2004, new CEO Chuck Prince fired several executives, publicly accepted responsibility and bowed apologetically to Japanese officials. Not only did Prince’s message resonate within Japan, but it also signalled a new era of â€Å"shared responsibility† within the culture of Citigroup where every employee was expected to take ownership for their decisions that affected the enterprise. 2. Focus on organizational success rather than on personal ego. Ethical leaders understand their place within the larger network of constituents and stakeholders. It is not about the leader as an individual, it is about something bigger—the goals and dreams of the organization. Ethical leaders also recognize that value is in the success of people in the organization. In 1998, in a bold gesture demonstrating how he valued the company’s line employees, Roger Enrico, former Chairman and CEO of PepsiCo, chose to forego all but $1 of his salary, requesting that PepsiCo, in turn, contribute $1 million to a scholarship fund for employees’ children. In a similar manner, the founders of JetBlue began a process of matching, from their salaries, employee donations to a charity. Today, their entire salaries go to the JetBlue Crewmember Catastrophic Plan charity, to assist staff with crises not covered by insurance. The point of these examples is not that ethical leaders donate their salaries to charities, but rather that ethical leaders identify and act on levers, such as employee loyalty, that drive organizational success. 3. Find the best people and develop them. This task is fairly standard in different models of leadership. Ethical leaders pay special attention to finding and developing the best people precisely because they see it as a moral imperative—helping them to lead better lives that create more value for themselves and for others. Finding the best people involves taking ethics and character into account in the selection process. â€Å"Ethical leaders pay special attention to finding and developing the best people† Many CEOs have said to us that judging someone’s integrity is far more important than evaluating their experience and skills. Yet, in many organizations, employees are hired to fill a particular skill need with little regard to issues of integrity. 4. Create a living conversation about ethics, values and the creation of value for stakeholders. Too often business executives think that having a laminated â€Å"values card† in their wallet or having a purely compliance approach to ethics has solved the â€Å"ethics problem.† Suffice it to say that Enron and other troubled companies had these systems in place. What they didn’t have was a conversation across all levels of the business where the basics of value creation, stakeholder principles and societal expectations were routinely discussed and debated. There is a fallacy that values and ethics are the â€Å"soft, squishy† part of management. Nothing could be further from the truth. In organizations that have a live conversation about ethics and values, people hold each other responsible and accountable about whether they are really living the values. And, they expect the leaders of the organization to do the same. Bringing such a conversation to life means that people must have knowledge of alternatives, must choose every day to stay with the organization and its purpose because it is important and inspires them. Making a strong commitment to bringing this conversation to life is essential to do if one is to lead ethically. Most people know the story of Johnson and Johnson’s former CEO Jim Burke and the Tylenol product recall in the 1980s in which, at a great short-term financial cost, he pulled all potentially tampered-with products off the shelves, thereby keeping the public’s trust intact. The less well-known background to this story, however, is critical to understanding the final outcome. Well before the Tylenol crisis hit, Johnson & Johnson had held a series of â€Å"challenge meetings† all around the world, where managers sat and debated their â€Å"Credo,† a statement of their purpose and principles of who they wanted to be as a company. The conversation about ethics at Johnson & Johnson was alive, and in many ways made Jim Burke’s choice about handling the situation clearer than it otherwise would have been. 5. Create mechanisms of dispute. This needs to be made part of the organizational culture, not just a line item in a compliance program document. Some companies have used anonymous e-mail and telephone processes to give employees a way around the levels of management that inevitably spring up as barriers in large organizations. Many executives also have used â€Å"skip level† meetings where they go down multiple levels in the organization to get a more realistic view of what is actually going on. General Electric’s famous â€Å"workout† process—where workers meet to decide how to fix problems and make the company better—was a way for front line employees to push back against the established policies and authority of management. All of these processes lead to better decisions, more engaged employees, and an increased likelihood of avoiding damaging mistakes. In a company that takes its purpose or values seriously, there must be mechanisms of pushing back to avoid the values becoming stale and dead. Indeed, many of the current corporate scandals could have been prevented if only there were more creative ways for people to express their dissatisfaction with the actions of some of their leaders and others in the companies. The process of developing these mechanisms of dissent will vary by company, by leadership style, and by culture, but it is a crucial leadership task for value creation in today’s business world. 6. Take a charitable understanding of others’ values. Ethical leaders can understand why different people make different choices, but still have a strong grasp on what they would do and why. Following twenty-seven years in South African prisons, Nelson Mandela was still able to see the good in his jailers. After one particularly vicious jailer was being transferred away from Robbins Island because of Mandela’s protest and push back, the jailer turned to Mandela and stated â€Å"I just want to wish you people good luck.† Mandela interpreted this statement charitably as a sign that all people had some good within them, even those caught up in an evil system. Mandela felt that it was his responsibility to see this good in people and to try and bring it out. One CEO suggested that instead of seeing ethical leadership as preventing people from doing the wrong thing, we need to view it as enabling people to do the right thing. 7. Make tough calls while being imaginative. Ethical leaders inevitably have to make a lot of difficult decisions, from reorienting the company’s strategy and basic value proposition to making individual personnel decisions such as working with employees exiting the organization. Ethical leaders do not attempt to avoid difficult decisions by using an excuse of â€Å"I’m doing this for the business.† The ethical leader consistently unites â€Å"doing the right thing† and â€Å"doing the right thing for the business.† The idea that â€Å"ethical leadership† is just â€Å"being nice† is far from the truth. Often, exercising â€Å"moral imagination† is the most important task. Mohammed Yunus founded the Grameen Bank on such moral imagination. By taking the standard banking practice of only lending to people with collateral, and turning it on its head, Yunus spawned an industry of micro-lending to the poor. The Grameen Bank’s motto is that poverty belongs in a museum. In addition to having one of the highest loan repayment rates in the banking industry, the bank’s program of lending to poor women in Bangladesh to start businesses has helped millions of them to be able to feed themselves. 8. Know the limits of the values and ethical principles they live. All values have limits, particular spheres in which they do not work as well as others. The limits for certain values, for instance, may be related to the context or the audience in which they are being used. Ethical leaders have an acute sense of the limits of the values they live and are prepared with solid reasons to defend their chosen course of action. Problems can arise when managers do not understand the limits of certain values. As an example, one issue common to the recent business scandals was that managers and executives did not understand the limits of â€Å"putting shareholders first.† Attempts to artificially keep stock prices high—without creating any lasting value for customers and other stakeholders—can border on fanaticism rather than good judgment. Ethics is no different from any other part of our lives: there is no substitute for good judgment, sound advice, practical sense, and conversations with those affected by our actions. 9. Frame actions in ethical terms. Ethical leaders see their leadership as a fully ethical task. This entails taking seriously the rights claims of others, considering the effects of one’s actions on others (stakeholders), and understanding how acting or leading in a certain way will have effects on one’s character and the character of others. There is nothing amoral about ethical leaders, and they recognize that their own values may sometimes turn out to be a poor guidepost. The ethical leader takes responsibility for using sound moral judgment. But, there is a caution here. It is easy to frame actions in ethical terms and be perceived as â€Å"righteous.† Many have the view that ethics is about universal, inviolable principles that are carved into stone. We need to start with principles and values, and then work hard to figure out how they can be applied in today’s complex global business environment. Principles, values, cultures, and individual differences often conflict. Ethical leadership requires an attitude of humility rather than righteousness: a commitment to one’s own principles, and at the same time, openness to learning and to having conversations with others who may have a different way of seeing the world. Ethics is best viewed as an open conversation about those values and issues that are most important to us and to our business. It is a continual discovery and reaffirmation of our own principles and values, and a realization that we can improve through encountering new ideas.