It is important task for leaders to tell a compelling and morally rich story, but ethical leaders embody and live the story. This is a difficult task in today’s business environment where everyone lives in a fishbowl-on public display. Like many political leaders who fail to embody the high-minded stories they tell at election time, and more recently, business leaders are facing similar criticism through the revelations of numerous scandals and bad behaviors. CEOs in today’s corporations are expected to be ethical role models for all of society.
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 starts a new era of “shared responsibility” within the culture of Citigroup where every employee was expected to take ownership for their decisions that affected the enterprise.
Ethical Leader focuses 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.
For Example, 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.4 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.
Ethical Leader can create an environment of living conversation about ethics, values and the creation of value in society
Some business executives opine that having a laminated “values card” in their wallet or having a purely compliance approach to ethics has solved the “ethics problem.” It is sufficient to 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 “soft, squishy” part of management. Nothing could be further from the truth.
Ethical leader creates an atmosphere of equality where each one can raise his voice. It creates an environment which has 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
Ethical Leaders can 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 “I just want to wish you people good luck.”5 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.
Ethical leader can connect the basic value proposition to stakeholder support and societal legitimacy
The ethical leader can think in terms of enterprise strategy, not separating “the business” from “the ethics.” Linking the basic spirit of the enterprise with the way that value gets created and society’s expectations is a gargantuan task. But, the ethical leader never hides behind the excuse of “It’s just business.”
Despite intense opposition from a number of groups, Wal-Mart CEO Lee Scott won approval in early 2004 to build a new store in a West Side Chicago neighborhood by listening to and engaging stakeholders who would most benefit by the value that this new store would create. Partnering with black community leaders, Wal-Mart appealed to the needs of the community in sections of town where there was a real need for jobs and stores. Ultimately, the support of the community allowed Wal-Mart to win City Council’s approval. Wal-Mart also committed to seeking minority subcontractors to build.
Ethical leaders can 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. In this way, they inform society about relevant actions. They think above ethics and legal, and they recognize that their own values may sometimes turn out to be a poor guidepost
Developing Ethical Leadership by R. Edward Freeman & Lisa Stewart, Institutes for Corporate Ethics
Strategic Leadership and Decision Making retrieved from http://www.au.af.mil/au/awc/awcgate/ndu/strat-ldr-dm/pt4ch15.html
Business Ethics are set of believes which a company follows. In modern time, leading business institutes are stressing on Ethics. Ethical practices are driven by trust, honesty and with the thinking which is above profit. Any business organization can deny to follow ethics as none can be compelled to follow ethics. On short term view, Ethical practices can hamper profit of business but it is believed that ethical practices are fruitful for every business on long term.
This essay focuses on how ethical practices affects stakeholder (customer, government, employee, society, investor etc.) of business. The overall effect of ethical practices on these inter-related results a positive impact on business group.
To understand the importance of ethical practices, we should take examples of Enron, Satyam and Lehman Brothers, Infosys, Berkshire Hathaway and Google. Enron, Satyam and Lehman Brothers are some examples of business groups who fail due to unethical practices despite huge size of business and rapid growth in their business in short times. On the other hand, Infosys, Berkshire Hathaway and Google are some companies who are doing well in their business (even in time of recession).
Ethics plays an important role in retention of customers. The suppliers who adopted ethical practices and demonstrate it, are an attraction for customers. Failure towards ethical practice leads towards loss of market share and popularity which finally causes reduction of revenue and profit. Failure towards adherence to ethical responsibilities proves as an obstruction for achievement of organization’s goal. Adherence to ethical behaviour proves fruitful in terms of customer loyalty, enhancement of brand image, and tiebreaker effects for customer purchasing decisions. It is found that customer’s inclination towards corporate citizenship is increasingly continuously. Good corporate citizenship behaviour improves overall business performance in terms of competitive advantage, higher revenue generation, and better organization reputation.
An employee feels happy when he works for responsible and ethical employer. Deviation from ethical practices causes loss of good staff. In addition to this, an employer also fails to attract best staff for organization if he works unethically. When staff leaves any company it pushes up the costs and efficiency of performance decreases. It is assumed that an organization cannot perform well in the absence of good staff. Research by Walker suggests that level of employee loyalty is directly proportional to organization’s ethics and leadership. It is also found that employee turnover and other cultural issues are proves as the greatest risks in achieving goals of organization. The Walker study also found fairness at work, care and concern for employees, and trust in employees are the major issues from the view of employee’s concern that an organization have to take care for building a culture of stronger and more loyal relationships. For achieving the goals of organization, an ethics-oriented code of conduct should be implemented as first step for consideration of ethical issues during the decision-making process.
Productivity of Staff
Employees of the organizations which works with high integrity, ethical responsibilities and global considerate are insulated from stress and dissatisfaction. They work happily and prove themselves more productive and efficient. Good employee’s performance is treated as source of success for organization. In a workplace which is driven by ethical practices, employees don’t waste their precious time and energy in internal conflict in for of personally as well as departmentally. This behaviour reduces internal friction and conserves a lot of energy which can be used in accomplishment of tasks. High productivity ethical behaviour also empowers teams of organizations to serve customers in a better way and operate with more efficiency. The result can be greater power and influence in the market place.
Reputation of Organization
Organization takes years to build reputation but only one scandal can ruin it. An organization which follows ethical responsibilities is protected from scandals and disasters. More than this, if any scan occurs, then ethical responsible group will respond it automatically in a quick and open way with honesty. People forgive the organizations which are following ethical responsibilities in a right way. On the other hand, people have bad feelings for organizations which are failure due to unethical issues.
Legal and regulatory reasons
An organization which follows ethical principles will make compliance with ethical and socially responsible standards. These standards and compliance are accepted at global level. This environment produces an atmosphere of transparency and accountability. The ethical approach reduces the expenses in legal labyrinth as well as it remove time barrier in business activities. All these activities result in growth at a fast pace.
Ethics programs help avoid criminal acts “of omission” and can lower fines
Ethics programs are able to detect ethical issues and violations in an early stage so that they can be reported or addressed. For example, when an organization is known to an actual or potential violation and avoids reporting it to the concerned authorities, it is treated as a criminal act, e.g., in business dealings with certain government agencies, such as the Defense Department.
When all these related and somewhat overlapping components combine synergistically, they increase the power and influence of individuals, teams, and organizations. Also, most people know that ethical behavior can empower their personal lives as well. All these happening prove beneficial for business on a long term.
Organization Behaviour by Nelson & Quick (2009)
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