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Ethical leadership

EXECUTIVE SUMMARY

In general, most of us believe that ethical leadership is simply a matter of leaders having good character. By having "the right values" or being a person of "strong character," the ethical leader can set the example for others and withstand any temptations that may occur along the way (Freeman & Stewart, 2006). However in reality ethical leadership is more than just having good character and the right values, but it is more complex than that.

Recent scandals at companies such as Enron provide examples of unethical behavior in today's business world and illustrate the need for practitioners and researchers to examine ethical leadership in organizations. The world requires leaders to be able to balance shareholder expectations as well as matching it to public trust. Quoting Els (2009) in Finweek, he mentioned the "Obama effect" where from the outset has emphasized on values-based, ethical and principled leadership and has stood against the influence of special interests. This effect has enormous implications to other leaders and perhaps has resulted in reluctance among some senior executives to take on daunting positions such as CEO where expectations are huge. Previously CEO's are merely acting on to stakeholders expectations where it had to be met almost at all cost. But now stakeholder's expectations have to be matched with public trust.

Leadership ethics used to be about honesty, integrity, fairness, following rules and laws, and being true to our values. Now, in the global marketplace, with fierce competition for business and resources, the scope of problems that can occur in leadership ethics has expanded exponentially. The trend has shown that there's a decline in ethical leadership. Perhaps to be able to understand the decline in ethical leadership perhaps we should look at the possible root cause.

PURPOSE STATEMENT

This article will first look at why ethical leadership fails and how ethical leadership can be developed.

DEFINITION

Before we go further, Yukl & Van Fleet, (1992) define leadership as a process that includes influencing the task objectives and strategies of an organization, influencing people in the organization to implement the strategies and achieve the objectives, influencing the group maintenance and identification, and influencing the culture of the organization. Jex & Britt, (2008) summarizes leadership as a process involving influencing others' behaviors where leadership is viewed as a process and not as an outcome. Leadership requires a variety of skills and they are frequently an important agent of change in an organization.

Ethics (also known as moral philosophy), according to Wikipedia, is a branch of philosophy which seeks to address questions about morality; that is, about concepts like good and bad, right and wrong, justice, virtue, etc. It is a value system by which individuals evaluate and judge the behaviors of themselves and others. The traditional sources of ethical standards are religious, philosophical or cultural/societal value systems. Hurley (1972) describes ethics as "a process by which individuals, social groups, and societies evaluate their actions from a perspective of moral principles and values. This evaluation may be on the basis of traditional convictions, of ideals sought, of goals desired, of moral laws to be obeyed, of an improved quality of relations among humans and with the environment (Cordeiro, 2003).

In combination of both words, ethical leadership according to Brown, Trevino & Harrison (2005) is related to consideration behavior, honesty, trust in the leader, interactional fairness, socialized charismatic leadership (as measured by the idealized influence dimension of transformational leadership), and abusive supervision, but is not subsumed by any of these. They also said that ethical leadership predicts outcomes such as perceived effectiveness of leaders, followers' job satisfaction and dedication, and their willingness to report problems to management. According to this research, ethical leadership is defined as "the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making".

To simplify the definition, ethical leadership is about knowing our core values and having the courage to live them in all parts of our life in service of the common good. Ethical leadership merges ethical decision-making and ethical behavior. The occurrence would be both in an individual as well as in an organizational context. Leaders are responsible to make ethical decisions and behave in ethical ways within his or her organization. Leaders have to see that the organization understands and practices its ethical code.

Reilly (2006) said that all leadership is responsible for influencing followers to perform an action, complete a task, or behave in a specific manner. Effective leaders manipulate process, inspire change in subordinate's attitudes and values, enhance followers' self-efficacybeliefs, and foster the internalization of the leaders' vision by utilizing strategies of empowerment. It is believed that the nurturing facet of leaders can develop organizational cultures and employee values to high levels of ethical concern. Ethical leadership requires ethical leaders. If leaders are ethical, they can ensure that ethical practices are carried out throughout organization.

WHY LEADERS FAIL?

As most of us would agree ethical leaders need strong principles to guide them, however by just having a strong set of values doesn't make oneself an ethical leader. As an ethical leader, the balance of inner and external is extremely important where disproportion may cause more ethical harm than good. This is again re-emphasized with the fact that ethical leadership behavior is affected by organizational processes (Brown, Trevino & Harrison, 2005).

Burke (2004) highlighted that very little research has been conducted on why leaders fail. He said that leaders that fail behave in ways reflective of their personality that limit or derail their careers. These flaws include arrogance, aloofness, perfectionism, insensitivity, selfishness and betraying the trust of others. In order to develop ethical leaders, we should look at the variables that may lead to their failures if not constrained.

One of it is power. The more power leaders have, the more they expect others to comply with their wishes. This power has potential for abuse. As Lord Acton stated, "power corrupts, and absolute power corrupts absolutely." In the workplace, it is implied that the greater the power differential between the supervisor and a subordinate, the more likely that the manager will make demands rather than reasonable requests, even though the latter would work just as well and also create a more positive work environment (Johnson, 2001). Power may lead to greed as we all live in a winner take all society where the market economy benefits the few at the expense of the many. A winner-take-all culture encourages widespread cheating because the payoff is so high. In addition, losers justify their dishonesty by pointing to the injustice of the system and to the fact that they deserve a larger share of the benefits. When greed takes over, altruism disappears along with any consideration of serving the greater good.

Another potential variable is communication. Many communication issues center on the people with power and authority, job responsibilities, boundary and confusion as to who is exactly responsible for what. Sometimes, communication also is complicated by diverse personalities and egos. Grievances occur where some people just don't like others they are working with; some people may feel their peers do not share the same level of commitment or passion to their work, and as a result experience frustration and become de-motivated.

Even the most humble of us tend to think we are above average, or believe we are more ethical than most of the people we know where such biases may put us in danger.

We can become overconfident, ignore the risks and consequences of our choices, take too much credit when things go well and too little blame when they don't, and demand more than our fair share of organizational resources. Inflated egos become more of a problem at higher levels of the organizational hierarchy. In organizations, ethical decisions are made within a social context marked by hierarchy (Darley, 2001). Leaders are at the top of the chain and are assumed to have all the answers, so they make most of the decisions. However, in reality knowledge and expertise is spread across people in organizations. But it's the leaders who must be seen to lead and so followers get frustrated because their superior knowledge and expertise is frequently ignored. Another consequence of strict hierarchies is leaders may not make any better decisions than followers, and perhaps make worse ones. Broaden the responsibility around, or using more participatory strategies for decision-making is often more effective.

Internal as well as external pressures sometimes forced leaders to make bad unethical decisions. The list may go on and on. On the contrary, what makes a leader ethical and how can we develop ethical leaders, perhaps we must first look at the traits of being a leader and find the intersection of leadership and ethics.

ETHICAL LEADERSHIP PERSONALITY TRAIT

Researchers have deliberated extensively on whether personality traits are meaningful predictors of leader emergence or effectiveness (Judge, Bono, Ilies, & Gerhardt, 2002; Lord, DeVader, & Alliger, 1986; Zaccaro, 2007). However, none of the study has conclusively able to determine which traits are relevant and as well as why it is relevant (Judge et al., 2002) but extraversion seems one of the most reliable predictors of both.

Personality traits or the big five traits commonly referred as the"Five Factor Model" or FFM (Costa & McCrae, 1992), and as the Global Factors of personality (Russell & Karol, 1994) refers to Openness, Conscientiousness, Extraversion, Agreeableness, and Neuroticism (OCEAN, or CANOE if rearranged).

Walumbwa & Schaubroeck, 2009, has looked at certain distinct personality traits, namely, agreeableness, conscientiousness, and neuroticism that may be expected to reliably predict ethical leader behavior. Agreeableness refers to a tendency to be accommodative, cooperative, pleasant, trusting, and good-natured (Costa & McCrae, 1992). In Walumbwa & Schaubroeck, 2009 research, they have concluded that agreeableness is positively related to ethical leadership based on two reasoning which is individuals high on agreeableness are more likely to use constructive tactics to help others (Jensen-Campbell & Graziano, 2001), as well as individuals high on agreeableness are more concerned about proper and humane treatment of people (Brown et al. ,2005). They are considerate, helpful, honest, decent, trustworthy, understanding, responsive to the needs and wishes of others, and generally likable (Costa & McCrae, 1992). 2000). these behaviors are important for being an ethical leader (Brown et al., 2005; Brown & Trevino, 2006).

Furthermore, ethically-oriented behavior must be constant across time and different situations in order for a leader to develop and maintain a reputation for ethical leadership. Subordinates are less likely to consider a leader ethical if he or she does not behave ethically and promote ethical behavior with a considerable degree of consistency over time and across situations (Walumbwa & Schaubroeck, 2009).

From this perspective, agreeable leaders are more likely to be perceived as engaging in ethical leadership, even though their needs for affiliation may sometimes lead them to make less principled decisions when a more principled decision would go against the grain of popular opinion (Walumbwa & Schaubroeck, 2009). Thus, Walumbwa & Schaubroeck, 2009 has predicted a positive relationship between agreeableness and ethical leadership on the basis of the behavioral tendencies within the domain of agreeableness that are more consistent with conventionally defined ethical behavior (e.g., interpersonal sensitivity, generosity, trust). Therefore, we can much say that in order for us to develop ethical leaders, we should be on the lookout for individuals with high agreeableness as such behavior is likely to contribute to perceived ethical leadership.

One of the best predictors of performance at workplace is conscientiousness (Barrick & Mount, 1991). It is also one of the most commonly studied traits in work psychology amongst the five-factor model personality constructs (Bono & Judge, 2000). According to Walumbwa & Schaubroeck (2009) conscientious individuals experience a high degree of moral obligation; they value truth and honesty, are less easily corrupted by others, and maintain a high regard for duties and responsibilities. Individuals high on conscientiousness display traits such as achievement striving, carefulness, dependability, self-discipline, thoroughness, responsibility, deliberation, and persistence (Costa & McCrae, 1992). These imply there is a relationship between conscientiousness and the behavior pattern that is required to be perceived as an ethical leader (Walumbwa & Schaubroeck, 2009). Many other findings from researchers such as Hogan & ones (1997) mentioned that conscientious individuals are goal and detail oriented and typically are well organized, ambitious, and strong willed. Brown et al. (2005) has term ethical leaders as displaying normatively appropriate behaviors; these behaviors include openness and honesty, reliability and truthfulness; all these being the feature of conscientiousness. All these theories have supported that there are possible link between conscientiousness and ethical leadership behavior. However, Walumbwa & Schaubroeck, (2009) did make reference that no previous research that has examined conscientiousness as an antecedent of actual perceived ethical leadership behavior. Nevertheless, we can strongly use conscientiousness as the trait to cultivate and develop an ethical leader.

Neuroticism refers to the tendency to have a negativistic cognitive style and to focus on self-perceptions that are unfavorable (Walumbwa & Schaubroeck, 2009). Brown and Trevino (2006) suggested that a more neurotic individual is less likely to be perceived as an ethical leader, because he or she will tend to be "thin-skinned and hostile toward others". This is implied that individuals with high neuroticism may not be an effective role model. Other research such as Barrett & Pietromonaco, (1997) mentioned that neurotics are more defensive in their social interactions and are prone to interpersonal conflicts (Brissette & Cohen, 2002). It is therefore plausible that leaders who score higher on neuroticism are likely to be rated lower on ethical leadership, because ethical leadership requires an ability to communicate in a manner that engages followers and influences them to take seriously communications about proper conduct and sanctions for ethical and unethical behavior (Walumbwa & Schaubroeck, 2009).

As mentioned earlier, Walumbwa & Schaubroeck, (2009) has looked at certain distinct personality traits that may be expected to reliably predict ethical leader behavior. However, they did not propose relationships between ethical leadership and openness to experience or extroversion because to them it is implied that these personality traits as more related to "charisma" which is not a part of the ethical leadership construct. In their theory, a leader can be highly extraverted and open to new experiences completely apart from ethical consideration. Although they are unable to identify a rationale for studying the two remaining Big 5 personality traits, Openness and Extraversion, perhaps it may be that these or other traits facilitate the ability to convey ethical authority.

Another factor that may impact ethical leadership will be the relationship between the need for power and ethical leadership itself. In McClelland's (1975, 1985) theory of motivation, he has specified that individuals are driven by three main motives— the power motive (the need to influence others), the achievement motive (the desire to accomplish something better or more efficiently than it has been done previously), and the affiliation motive, (the desire to have positive relationships with others). McClelland further distinguished, with regard to the need for power, between individuals who use power for self-aggrandizement (personalized power) and those who use power with greater inhibition and desire to use it for the benefit of others (socialized power). Research suggests that leaders with higher power inhibition are more effective (McClelland & Boyatzis, 1982; McClelland & Burnham, 1976) where it has been positively related to respect for institutional authority, discipline and self-control, caring for others and concern for just reward (McClelland, 1975, 1985). Thus, leaders with high power inhibition who are oriented toward using power for others' benefit will be more attractive than those whose need for power is self-serving (Brown & Trevino, 2006).

DEVELOPING ETHICAL LEADERSHIP

We have so far looked at the personality traits and understanding the positive relationship or negative relationship to develop ethical leadership as well as the need for power. To develop ethical leadership other external elements in an organization such as a clear cut code of ethics is a must. The code will have to be cascaded down to the employees within the organization including customers, vendors, suppliers, contractors, government officials as well as the business community at large. It is important for the ethics codes to be clear, and to ensure that all employees understand what is expected of them. The code will be the guideline to serve the organization's formal commitment to conduct themselves professionally at all times and do business in a transparent, appropriate and fair manner. Most importantly, the code should convey to both employees and parties doing business within the organization that the organization and the employees shall under no circumstances allow the ethical principles to be compromised or tainted. This code should assist all employees in living up to the set high ethical business standards and to conduct themselves appropriately at the work place, while performing their daily duties in that organization.

Code of ethics may also address issues of culture. While recognizing there are many factors in cultural dimensions that may influence ethical decision-making, an organization may wish to emphasize on formal codes of ethics in some countries and more informal ones in other countries. What a leader might think is the right thing to do may not be appropriate in another culture thus ethical leaders should be more culturally sensitive.

However, it is known that ethics codes cannot do our questioning, thinking, feeling, and responding for us (Pope and Vasquez, 1998). Such codes can never be a substitute for the active process by which the individual therapist or counselor struggles with the sometimes bewildering, always unique constellation of questions, responsibilities, contexts, and competing demands of helping another person. Highly structured, mandated ethics programs being applied to corporate settings may prove to be of some operational value but are not adequate to address the broad moral challenges faced in organizational life today. Ethics must be practical.

Another critical component to ensuring ethical leadership within the culture is hiring, developing, and promoting those people who will embrace the ethical standards. As we may know, an organization may have an elaborate ethics codes, but, in the end, it will boil down to the people's behavior. If the workplace learning and performance function is to live up to its full potential of strategic relevance to organizations then systems and processes must be put in place to create and sustain companies ethical values, culture and climate.

Decision-making guidelines can assist us in making better ethical choices. Formats incorporate elements that enhance ethical performance while helping us avoid blunders. Step-by-step procedures ensure that we identify and carefully define ethical issues, resist time pressures, investigate options, think about the implications of choices, and apply key ethical principles.

One such guideline is Kidder's Ethical Checkpoints where it acknowledges that ethical issues can be "disorderly and sometimes downright confusing." They can quickly arise when least expected, are complex, may lack a clear cause, and generally have unexpected consequences. However, Kidder argues that there is an underlying structure to the ethical decision-making process. His nine steps or checkpoints may assist us through the confusion and generate a well grounded solution. Another possible ethical decision making guides include Nash's 12 questions. Nash's 12 questions draw on traditional philosophical frameworks that avoid the level of abstraction normally associated with formal moral reasoning. One other possible frame work is the Potter's Box. Ralph B. Potter, Jr. developed Potter's Box that is used to make decisions by utilizing four categories which Potter identifies as universal to all ethical dilemmas: Facts, Values, Principles, and Loyalties.

However, it is more important to have a systematic approach rather than stressing on any particular format. Perhaps, an ethical leader may not always make the perfect choice and decision, the fact that they have analyzed their decisions will lead to improved decision-making and a more ethical organizational environment.

CONCLUSION

Various factors moderators and mediators influence ethical leadership. Looking back at the personality traits, where Walumbwa & Schaubroeck, (2009) has accentuated that further research needs to be done when it comes to the relationship between work contexts that may influence leaders' ethical behavior. Brown and Trevino (2006) suggested that ethical leadership becomes more prominent to followers in ethical organizational climates, and differences in moral socialization processes within organizations may lead people with similar character traits to differ in ethical leadership later in their careers. These give the impression of two possibilities whether it is practical for organizations to invest in developing ethical leaders or whether ethical leadership can only be enhanced by more carefully selecting for predictive traits.

Personality constraints may limit the extent to which ethical leadership can be developed in organizations through appropriate socialization and training. However, as Brown (2007) observed, the character of leaders is only a partial explanation for the misdemeanor of some leaders that have been widely reported in recent years. The domain of ethical leadership does not seem to require a highly engaging style as compared to transformational or charismatic leadership. As a consequence, individuals with different personality types, such as introverts and extroverts, may all have the potential to be quite effective at ethical leadership. A practical implication is that developing climates and systems that are more supportive of ethical behavior will be a far more practical approach than relying on the selection system to identify and attract persons who can be developed into very ethical leaders.

In summary, as an ethical leader, it requires a commitment to examining our own behavior and values, and the willingness and strength to accept responsibility for the effects of our actions on others, as well as on ourselves. A "responsibility principle" is a necessary ingredient for "managing for stakeholders" to be useful in today's business world. Ethical leaders must consider and take responsibility for the effects of their actions on customers, suppliers, employees, communities and other stakeholders. If business were simply concerned with shareholder value, then this "responsibility principle" would be unnecessary, other than the responsibility to shareholders.

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