Preparing Ethical Leaders for the Business Community: Ethical vs. Unethical Leadership in Practice - Research Paper Example

Preparing ethical leaders for the global business community: Ethical vs. Unethical Leadership in Practice In orderto understand ethical leadership a number of researchers have conducted studies. Ethical leadership carries an importance which requires the writers analyze its effects in more depth. Leaders are required to understand and implement the ethics code of the organization. The concept of ethical leadership is not limited to the organization or employees but also takes in the society at large, stakeholders and environment. A business must be operated in a manner that does not harm anyone morally and ethically. This paper aims to understand ethical leadership in depth and provides examples of how ethical and unethical behaviours of leaders persist in today’s globally diverse business environment. Introduction: Increasing business competition, globalization, immigrations and technological advancements have changed the course of business. The way of conducting and managing businesses has been changed dramatically. It has become vital to understand the change required, incorporate it in the plans of business and efficiently implement the change needed. However, the idea of change and maintenance of loyalty among stakeholders is a very complex and complicated task. The increasing diversification around the globe has changed the communication, management and leadership techniques to continue with their effects. Business owners are now required to keep in view the needs of the diverse workforce, customers, suppliers and other stakeholders. Business management and leadership has become a more complex phenomenon to deal with. More ethical and moral concerns are rising with the advancements and changes in business environment. Researchers are taking greater interest than ever in understanding the ethical issues that are continuously increasing. Ethical crisis has been taking more attention than ever knowing its devastating effects not only on the employees but also on customer behaviours, government perceptions and overall performance of businesses. It is important to understand the concept of ethical crisis and its factors in order to resolve or reduce the threats it brings. Where did ethical crisis come from? Who can resolve the issue arising from it? How? What is the public opinion about leaders? How is it affecting businesses? Can leaders help making the situation better? What are some current examples of ethical business operations and decisions made by leaders? The aim of this paper is to answer these questions and include all possible factors to understand the value of ethics in business. The paper also aims to understand the role of leaders in tackling ethical issues. The paper draws a conclusion to prove the claim that ethical leadership does affect business environment and performance. Ethics in Business: Our decisions, choices and behaviours are greatly dependent on the culture we are living in. The increasing globalization has brought many changes in the culture and living style of people around the world. Almost all countries are affected because of diversification in the population. Businesses are now required not only to consider the needs of local stakeholders but are also required to take into consideration the ethical and moral values of immigrants and minorities. As Buytendijk (2006), states that when the values of stakeholders are different from those of the business leaders, it is probable that the decisions made by the management will be opposed by the stakeholders and further result in the failure of the business. Buytendijk further asserts that ethical crisis emerges when organization’s decisions are quite the opposite of stakeholder’s values. The selfish decisions by business leaders may create a negative image of business in the view of customers, employees, government and other businesses. Business Ethics and Leaders: Leaders are an important part of any business. They are in search of the best way to satisfy the needs of employees, customers, shareholders and other associated bodies. Leaders are responsible for the important decisions of any business. Their aim is to keep the organizational objectives in line with the aims of other stakeholders. Leaders do not aim to take selfish decisions which give advantage to the business but harm employees, environment, legal rules, values or customers in any way. Ethical leadership hence comprises leader’s decisions which are made after considering the effects of the decision on leader’s constituents (employees and stakeholders). Business leaders are greatly responsible to give rise to ethical dilemmas and hence are also able to control them. Decisions of business leaders lead towards a positive or negative attitude of stakeholders. The public opinion about business leaders is not as positive as it seems to be (Dubrin 2001). Public discussions show that leaders wish to increase the organizational wealth in one way or the other. Public opinion about leaders and their aims is flawed as leaders (specifically ethical leaders) are aimed to increase the long term profits for the organizations by creating a good image of business organizations and providing better products and services to the customers. Ethical leaders do not take any step or decision that may put any of the stakeholders in a disadvantageous position. Moreover, ethical leaders do not have an inflexible approach of imposing their views and decision on others but they have a flexible approach of acquiring others’ ideas, reviewing them, analyzing the outcomes of those ideas, making necessary changes and implementing them. Ethical leaders aim to incorporate the values of stakeholders, their needs and aims in their decisions (Fredrick & Hornett, 2004). Ethical Leadership in Practice: Ethical leaders must follow the linear model for ethical decision making. This model involves 4 steps to be followed by the leader. The first step requires the ethical leader to analyze his actions and choices to realize the impacts of those choices, decisions or actions on others. This component of the linear model is known as moral sensitivity. After analyzing the positive and negative impacts of their actions, leaders move towards making a moral judgment. This component is dependent on the results of moral sensitivity element of the model. The judgment is based on the positive and negative impacts of the actions or decisions under consideration. Ethical leaders make judgements that are more beneficial for others rather than for their own benefit. Their moral judgement is then followed by moral motivation that the leaders gain as a result of a right decision. This motivation leads them towards a moral action. Moral action refers to the implementation of the decision or idea which has gone through the first three stages successfully. In order to understand the concept of ethical leadership in business practice, it is logical to use some examples. There are many examples available to understand the concept of ethical leadership as adopted by many leaders in the modern business environment. E.J. Ajax and Sons, Inc. is crucial in providing evidence of ethical leadership in practice. The Ajax metal stamping is a reputable company for supplying metal stampings from Minnesota. The distinction of this organization is the excellent culture they have adopted. The owners of this organization have established an excellent reputation especially by employing funds for the welfare of employees and the community they are working for. An ethical leader has excellent communication skills and has information about the employees working under his surveillance. The owners of E.J. Ajax and Sons, Inc. have a regular communication with the employees working in their organization. The leaders of E.J. Ajax and Sons, Inc. provide educational facilities to the employees and training for their safety in work premises. The owners of this organization continue to spend funds on education and training of employees because this results in better performance of the employees, reduced employee turnover rates and employee satisfaction. In addition, this investment in training programs lead to flawless work performance resulting in customer satisfaction. Hence, one may argue that the decisions made by E.J. Ajax and Sons, Inc. follow the 4 components model. The leaders of this organization have moral sensitivity, make moral judgements and are morally motivated to take moral actions. The organization spends around 7 percent of payroll for their education and training of employees. The senior leaders provide guidance to the employees personally, for their educational choices and assess their performance (Weinstein, 2009). In addition the ethical responsibility of providing safety to the workers and people is also met by the leaders of this organization. Ajax leadership also provides clear rules on zero tolerance for violation of safety regulations. The leaders of Ajax value their employees and people. Appraisal programs to motivate workers and incentives for the workers are incorporated in their plans. Periodic medical tests including drug tests also ensure organization’s commitment and concern with the employees and other stakeholders. Rehabilitation programs for alcohol or drug abusers are the evidence of their ethically responsible leadership style. They are not only ensuring their organization’s success but also keeping the success of their employees under consideration. Ethical leaders do not only consider their personal interests while making decisions but also think about the organization. Their aim is not to keep the business running but to provide an environment of ease, comforts and psychological comfort to the stakeholders. The ethical responsibility of the organization is also kept in view while investing funds in any programme. The ethical responsibility of any organization involves the safety of environment, people and surroundings. In order to ensure this safety, many leaders implement strategies that encourage environment friendly procedures. Some leaders also incorporate investments in environmental safety programs in their plans. CEO Lee Scott of Wal-Mart aims to become the greenest retailer. In order to achieve this goal, he has taken major steps. Scott’s goals include the aim to reduce solid wastes by 25%, make investments of around $500 on sustainability programs and reduce packaging wastes. Scott also aims to reduce the energy wastes (Durbin, p. 180-185). Unethical Leadership in Practice: There are certain leaders who have been observed to have unethical behaviours, for instance, the former CEO of Adelphia cable TV, John Rigas, who kept his own interests ahead of the organizational success. He kept taking decision for his own welfare and resulted with a liability on the part of Adelphia to pay Rigas a considerable amount of cash, land and other assets. John Rigas, hence, had not accomplished moral sensitivity to an extent which could have allowed him to evaluate and analyze impacts of his decisions on others and organization. Another example of unethical leadership is by the former chairman and CEO of Tyco, Dennis Kozlowski. Leaders have the power to give success to the business or to fail its operations and growth. One right decision may give many opportunities and profits to the organization and a single wrong decision may harm it to an extent that would result in the winding up of the organization (Tyco, 2003). Dennis Kozlowski was held liable for thefts from the company’s funds. A leader ‘s responsibility is to ensure the success of the business keeping morally and ethically sound position of the organization among the general public and other stakeholders. Dennis Kozlowski acted exactly against his responsibilities. He used up cash and assets of around 210 million dollars for personal expenditures. In order to hide this theft, he entered into invalid contracts. The violation of ethical codes and laws led to discouraged shareholder attitudes. Unethical behaviours harm the company and stakeholders the most (Freeman & Stewart, 2006). Discussion: From the above examples and details it is not difficult to judge that ethical leaders are more successful than others. Leaders who keep an eye on the requirements of employees, society and environment are more successful and popular. The organizations having such leaders prosper and become successful. Such organizations are helped and supported by governments, public, customers, employees and shareholders. It has been observed that fraudulent and unethical activities of leaders do not only harm their own reputation but also pose a great threat to the organization’s existence. It is difficult to build a good image but easier to spoil it. Leaders need to be very careful while making decisions. Ethical leadership is difficult to be practiced in today’s globalized environment (Business Roundtable Institute for Corporate Ethics, 2007). Diversified population has made it difficult for the leaders to implement such rules and regulations which fit the demands of all employees. However, the general ethical requirements including the prohibition of fraud, discrimination, mitigation of environment risking factors, increased charity donations, educational facilities for employees, training programs, safety assurance for the workers and customers etc. must be properly incorporated in the code of ethics of the organization. Ethical values of any organization are dependent of the culture of organization. The cultural requirements influence the ethical codes. Ethical leaders are passionate, attentive, active and flexible in their approach. They are ready to face difficult situations and plan for a change efficiently and quickly. Conclusion: This study reveals the importance of ethics in business. Ethical leadership leads to more employee satisfaction leading to better performance, increased productivity and customer loyalty. The better performance, less wastes, more efficient working conditions and customer loyalty increases the profits of the organization. This also generates brand image stronger. Businesses which encourage environmental sustainability programs, charities and donations are generally liked by customers. Governments also help such businesses grow and prosper. In conclusion, we can say that ethical leadership is not only fruitful for the organizational profits but are also helpful for its brand image. Ethical leadership leads to a better environment and reduced social costs. Bibliography: DuBrin, A. J. (2001). Leadership: Research findings, practice, and skills. Boston: Houghton Mifflin. Weinstein, A. C. (2009). Ethical Leaders in Action. The Hill Center for Ethical Business Leadership, volume 2, edition 1. Retrieved from http://ethics.jjhill.org/assets/leaders_in_action/leaders-in-actionV2E1_final.pdf Business Roundtable Institute for Corporate Ethics. (2007). Shaping tomorrows business leaders: Principles and practices for a model business ethics program. Charlottesville, VA: Business Roundtable Institute for Corporate Ethics. Fredricks, S. M., & Hornett, A. (2004). Teaching Ethical leadership in an unethical time. An International Forum for Innovative Teaching, volume 3(1). Retrieved from http://www.ctl.csus.edu/downloads/TSP%20February%202004.pdf Freeman, R. E., & Stewart, L. (2006). Developing Ethical Leadership. Charlottesville, VA: Business Roundtable Institute for Corporate Ethics. http://www.ejajax.com/ “Tyco Executives highlights ethics problems” (2003, October 31). Retrieved on March 7th, 2010 from :http://www.collegiatetimes.com/stories/2346 Buytendijk, F. (2006). The five keys to building a high-performance organization. Business Performance Management, 24-30. Read More