Ethical Leadership, defining it 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”…[and] the evidence suggests that ethical
leader behavior can have important positive effects on both individual and
organizational effectiveness(Rubin et al 2010: 216-17).
The financial crisis, economic downturn and repeated scandals involving leaders from
Businesses and government organizations have led organizational researchers to
Re-examine how leaders can enhance employee loyalty and commitment to the
Organization (De Cremeret al., 2011). Brown et al (2005:120) conceptualizes ethical leadership 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”. Customers, employees as well as institutions nowadays are not just looking for an organization to do business with or to work with but they also consider the ethical nature of that institution as ethical managers needs to enhance an ethical culture by behaving in accordance with their own standards (Huhtale et al 2011). This blog shall therefore examine the positive effects of ethical leadership on individuals as well as on organizations, consider why some organizations behave unethically, examine organizations that illustrate this, and draw conclusions with regards to the role of the manager in such organizations.
Huhtala et al (2011) believe that to ensure long-term success in addition to solving additional economic problems in an organization, managers needs the ability to consider ethical issues in their behaviour as Kanugo and Mendoca (1996) indicates that leaders should be a key source of ethical guidance for an organization. Their ethical nature and principles should be able to pull all the subordinates to work and behave in the same manner. When such occur, a two way communication as well as an inter personal relationship can be created (Brown et al 2005) which increase team motivation and hence and increase in productivity and profitability in the organization
Ethical managers extent trust to co workers, creating the conditions necessary to create game changing innovations in the organization by considering solution sharing best practices with workers (Yukl 2010); employees are out in search of such organizations, where they can be able to participate in decision making and have opportunities to put their ideas across. Leaders’ ethical values have the potential to lead to favorable long-term economic outcomes and competitive advantage (Hammann et al 2009)
Ethisphere (2011) in its 2011 world most ethical companies bring out some great advantages of ethical leadership on both the individuals and organizations, this is well illustrated by some of the ethical companies. Ebay Believes that it is only through ethical leadership that trust and transparency can be belt, which is very important to their customers. Pepsi considers ethical leadership as a means to bring dedicated and loyal employees to the company and informs brand identity. Also, Hartford Financial Service Group indicates that ethical leadership is a source of pride for the employees; it builds trust and confident, thereby attracting and retaining new talents into the company. GE and Marriott who are recognized as world most ethical companies indicates that ethical leadership gives them a sources of pride and a high competitive advantage over the others. This is affirmed by Innocent Drinks (2011) who is as part of their ethical nature are also involved in corporate social responsibility and charity and that ethical leadership gives them a competitive advantage.
However, there is a major limitation to ethical leadership; this is because ethical leadership requires both the leader and the followers to be ethical for it to be effective. Where the followers fail to recognize the necessity of being ethical or the ethical nature of their leader, it becomes difficult for ethical leadership to survive. Leaders therefore need to ensure an effective two way communication and interpersonal relationship (Mullins 2010). Worthy of note is the fact that unethical leadership has great consequences on the company as such a situation led to the global financial crisis in 2007 which Mullins (2010) indicates that as a result of the crisis, many global banks and other financial services were brought to their knees-bailed or merged together.
Managers and leaders in the oil and gas industry have a major role to play inorder to ensure an ethical behaviour in the organization. Yukl (2010) enlist a number of actions that a manager can undertake to ensure ethical behaviour in the company which includes; setting an example of ethical behaviour in his actions, facilitate the development and implementation of a code of conduct in the organization, initiate disruptions with both staff and employees on ethical standards, recognize and reward ethical behaviours in the company be able to take ethical risk to advocate moral solutions and problems as well as initiate support services. It should be noted that ethical standards are vital in oil and gas company because unethical behaviours can generate into oil spills, lack of operational excellence and a poor corporate social responsibility which like Mullins (2010) suggest that if a company wants to maximize long term shareholder’s wealth, the company must be and need to do good things for its stakeholders.
Brown, M.E. and Trevin˜o, L.K. (2006), “Ethical leadership: a review and future directions”, Leadership Quarterly 17, 595-616
De Cremer, D., Van Dick, R., Tenbrunsel, A., Pillutla, M. and Murnighan, J.K. (2011), ‘Understanding ethical behavior and decision making in management: a behavioral Business ethics approach’. British Journal of Management 22, 1-4
Ethisphere (2011) Most Ethical Companies [online] available from < http://www.youtube.com/watch?v=l1HYrGsM6Ho > [22 June 2013]
Hammann, E. M., Habisch, A. and Pechlaner, H. (2009), “Values that create value: socially responsible business practices in SMEs – empirical evidence from German companies”. Business Ethics: A European Review 18 (1), 37-51
Huhtala, M., Feldt, T., La¨msa¨, A. M., Mauno, S. and Kinnunen, U. (2011) ‘Does the ethical culture of organisations promote managers’ occupational well-being? Investigating indirect connections through ethical strain’, Journal of Business Ethics 101 (2), 231-247
Innocent Drinks (2011) Ethical Leaders’ Purpose [online] available from < http://www.youtube.com/watch?v=f-lO4FoQNos> [22 June 2013]
Kanungo, R.N. and Mendonca, M. (1996) Ethical Dimension of Leadership, Sage Publications, Thousands Oak, CA
Mullins, L. J (2010) Management & Organisational Behaviour. Essex: Financial Times Pitman Publishing
Mullins, L. J. (2010) Management & Organisational Behaviour. Essex: Financial Times Pitman Publishing
Yukl, G. (2010) Leadership in Organizations, 7th edn. Prentice-Hall, Upper Saddle River, NJ