Leadership: Trustworthiness and Ethical Stewardship - Essay Example

Leadership: Trustworthiness and ethical stewardship The problem to be investigated is the link that exists between Leadership, Trustworthiness, and Ethical Stewardship in a modern corporation. Currently, in the context of globalization, corporate leaders while trying to achieve success for their organizations within a highly competitive global market are increasingly faced with issues related to a lack of trust and non-committal behavioral attitude observed amongst employees. In such situations if leaders are found to be trustworthy, the level of trust amongst the employees increases. Subsequently such leaders are regarded as ethical stewards possessing an elevated sense of responsibility, thus, establishing a link between trustworthiness, leadership and ethical stewardship (Caldwell, Hayes, & Long, 2010). Comprehending the link that exists between trustworthiness, leadership and ethical stewardship is central to the understanding of transpiring trends within current corporate culture and the patterns for stakeholder requirements within a global market setting. The relationship that emerges from a study of the available literature is based on stakeholder’s specific expectations from an organization which, if adequately addressed, creates a sense of steady reliability between the firm and its stakeholders (Castaldo, 2007). Therefore, this implicates that leaders of a business firm must establish a workplace culture that uses the concept of ethical stewardship to create a feeling of trustworthiness amongst the stakeholders in order to increase its chances of achieving long-term success amidst stiff competition from a global market (Caldwell, Hayes, & Long, 2010). In the modern business world, it is essential to understand the link that exists between leadership bearings, views on a corporate leader’s trustworthiness, and ethical obligations inherent within a psychological agreement that are significant factors in achieving success within various business operations. Concept of leadership The term leadership can be defined as ‘‘the process of influencing leaders and followers to achieve organizational objectives through change’’ (Lussier & Achua, 2004, p. 5). Modern corporate leaders tend to have a strong influence in achieving organizational success and fulfilling business targets. In the context of roles and behavioral attitudes of corporate leaders, Chemers (1997) contended that effective leadership took into consideration three major functions: “image management – “which reflects the leader’s ability to project an image that is consistent with observers’ expectations; relationship development – which reflects the leader’s success in creating and sustaining motivated and competent followers Resource utilization – which alludes to the leader’s capability for deploying the assets of self and others’ mission accomplishment” (1997, p. 27). Relationship development involves forging interpersonal links with others in order to boost the level of commitment and shared ownership. Researchers show that leaders who manage develop close relationships are likely to generate better trustworthiness and higher levels of commitment (McAllister, 1995). Resource utilization involves competent management of available resources by effective managers and taking appropriate decisions that makes appear trustworthy. Here, the competency refers to the use of technical knowledge combined with the skill of making others work, while necessitating the leaders to instill efficacy and collaboration within a corporation. In the context of image management, successful corporate leaders tend to possess a greater fervor for achieving organizational success, instead of focusing on bettering their own personal image. The three major functions of an effective leader as delineated by Chemers (1997) contain traditional leadership notions that are mixed with modern views on corporate leadership. Therefore, to achieve trustworthiness effective leaders must develop an organizational order that would reaffirm the principles and values, which the corporation claims to represent through relationship building, optimal utilization of available resources, and appropriate image management. Concept of trustworthiness The concept of trustworthiness within organizational relationships is an important one, since long-term trust building is necessary for a business firm to achieve sustainable success in a highly competitive global market as it acts like a stabilization factor (Coldwell, Hayes, & Long, 2010). Any relationship that is based on trust can start both contractual and ad hoc interactions faster and with greater ease, since there is a mutual understanding of each other’s expectations, leading to fluid transactions. On the other hand, lack of trustworthiness gives rise to issues related to commitment and other problems that prevent the development of a healthy and long-term relationship between workplace partners. In recent times, there have been many instances where corporate leaders have failed to develop a sense of trustworthiness within the workplace environment, which have led to the firm’s collapse. As, for example, records show that unethical behaviors by some of corporate leaders in ENRON (and other well-known firms in the same industry) led to the collapse of the corporation that financially ruined all internal and external stakeholders, coupled with a fall in business related trustworthiness (Li, 2010). This case demonstrated how the lack of trustworthiness amongst leaders within a handful of companies (operating within the same industry) could affect the entire economic order. The stakeholder factor A stakeholder may be defined as “any identifiable group or individual who can affect the achievement of an organization’s organization’s objectives or who is affected by the achievement of an organization’s objectives” (Freeman & Reeds, 1983, p. 91). As per the Stakeholder theory, besides performing the obligatory duties towards stockholders of a firm, the latter must assume responsible for taking care of legitimate stakeholder interests in the business. The word stakeholder refers to groups or individuals that have the ability to influence the success and long-term survival of any corporation, while the interests of these stakeholders depend on the concerned firm’s performance in the market. There are two forms of stakeholders, internal (employees) and external (consumers, distributors, suppliers, and local communities). Unlike stockholder theory (which takes into context only the interests of stockholders’), stakeholder theory produces an appropriate balance between the rights of a firm’s various stakeholders (Pearlson & Saunders, 2006). For achieving effective results, application of trustworthiness by leaders must be systemic in nature, which means that all stakeholders must confidence in a firm’s trustworthiness for it achieve sustainable market success (Caldwell, Hayes, & Long, 2010). In such cases, the leaders must first develop a high level of trust with the internal stakeholders or employees. An employee’s loyalty for his firm and a feeling of job satisfaction leads to an improved perception in the trustworthiness of a corporation. The employees must feel that their leaders are taking responsibilities and acting ethically, which would add to their confidence and increase their loyalty towards the firm (ibid). When internal stakeholders feel that the firm is trustworthy (and is hence secure and satisfied), it automatically reflects on the external stakeholders, making them feel the same about the corporation. The other important stakeholder, who requires a sense of trustworthiness when dealing with any business firm, is the consumer (external stakeholder). For consumers, two levels of trustworthiness must be established. The first one concerns expectancies or beliefs about the products and services offered by the firm. If the firm matches up to that expectancy, the next step is to be consistent in delivering that same quality each time the consumer buys products or avails services from a firm, which leads to the consumer sticking to that particular brand. Thus, developing trustworthiness with stakeholders (internal and external) is an important aspect in achieving success for any business firm. Ethical implications and models used by corporate leaders in business transactions Under the stakeholder theory, within business exchanges personal relationships develop between stakeholders and corporation (and amongst the stakeholders too) during various transactions, which create certain complicated ethical issues. Here, the chief issues lie in such questions as: How much benefit is available to the stakeholders from personal relationships developed between members that are interacting? Whether certain personal relationships benefit a particular stakeholder while harming other stakeholders involved with the same firm Stakeholder theory takes into consideration the fact that leaders are ethically obliged to ensure that rights of all stakeholders are balanced and legitimate interests of all are taken into account during decisions making processes (Smith, 2003). Ethical stewardship refers to a higher sense of obligation where managerial motivations are aimed at organizational benefits rather than procuring personal benefits (ibid). Thus, ethical stewardship theory was based on the notion that a corporate leader was ethically obliged to optimize sustainable creation of wealth that would benefit the firm’s stakeholders and overall society. At a standard level, ethical stewardship is committed towards achieving wholesome growth and welfare of the firm’s stakeholders, respecting and taking care of obligations that establish new opportunities, while modifying age-old practices of command-and-control form of leadership. Within market environments, four main constraints tend to shape and guide business exchanges on ethical lines that a corporate manager must keep in mind during decision-making processes (Lessig, 1999). The first such constraint is the existing legal order of a country that is government imposed and hence generally fixed in nature. The second in order is the market, which operates by regulating prices of services and goods offered, and tends to fluctuate. The third one is the architectural constraint which comprises man-made restrictions, physical restrictions that contain the free movement of business exchanges. The last constraint consists of existing social norms that encompass informal reflections of the local community comprising of certain specific well-defined values and rules with expectations that community members would follow these norms. Walstrom (2006) in his researches that explored various factors, which influenced ethical decisions made by corporate leaders, derived two main factors: Social factor that comprised of socio-cultural and religious values; and The legal or governmental factor comprising of laws, judiciary and administrative bodies. Bommer, Clarence and Tuttle (1987) in their paper added four other factors that affected the ethical decision-making processes by corporate leaders: Personal factor that comprises of position within a corporation, motivation, personal targets, and demographics Professional surroundings Private factor that comprise of families and peer groups and their leverage, and Workplace environment that comprises of corporate policies, goals, and work culture. Unlike Walstrom’s model that focused only on legal and social factors, Haines and Leonard (2007) contended that private and personal factors tend influence the ethical decisions by corporate leaders. Thus, from the above study, it can be suggested that leadership, trustworthiness and ethical stewardship are closely linked elements. The basic link between them is established through trustworthiness which is necessary to balance relationships between stakeholders and corporate leaders. For developing trustworthiness, the leaders must develop programs on ethical stewardship and merge them with a firm’s workplace culture. The leaders must also manage ethical stewardship programs by following directives outlined in these programs and by reflecting the ethical principles through their own activities. The ethical stewardship programs must be promoted in order to develop a feeling of trustworthiness amongst stakeholders, and the ethical stewardship program must necessarily be integrated into a firm’s culture so that internal stakeholders (employees) comprehend what the corporation expects from them. The leaders and all stakeholders must support trustworthiness in all relationships, in order to maintain the power balance in business exchanges, and if a balance between the three elements were not maintained, the company would fail to sustain successfully within a highly competitive global market. References Bommer, M., Clarence, G., & Tuttle, M. (1987). A behavioral Model of Ethical and Unethical decision-making. Journal of Business Ethics, 6(4), 265-280. Caldwell, C., Hayes, L., & Long, D. (2010). Leadership, trustworthiness, and ethical Stewardship. Journal of Business Ethics, 96(4), 497-512. Castaldo, S. (2007). Trust in market relationships. Northampton, MA: Edward Elgar Publishing, Inc. Chemers, M. (1997). An Integrative Theory of Leadership. Mahwah, NJ: Lawrence Erlbaum Associates. Freeman, R., & Reed, D. (1983). Stockholders and Stakeholders: A New Perspective on Corporate Governance. California Management Review, 25(3), 88-106. Haines, R., & Leonard, L. (2007). Individual characteristics and ethical decision-making in an IT context. Industrial Management & Data Systems, 107(1), 5-21. Li, Y. (2010). The case analysis of the scandal of Enron. International Journal of Business and Management, 5(10), 37-41. Lessig, L. (1999). Code and Other Laws of Cyberspace. New York: Basic Books. Lussier, R., & Achua, C. (2004). 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