Today we share with you the first article of our new Compliance Principles series, which will highlight key operational concepts associated with ethics programs, management issues concerning ethics, and other themes in the realms of business ethics. The articles in this series have been generously provided by guest contributors and we thank them for sharing their knowledge with us.
Douglas Roy – Ph.D. Candidate
John Cook School of Business – Saint Louis University
and Brendan M. Keating, VP – IntegTree LLC
Links Between Ethics and Leadership
Business ethicists increasingly highlight the importance of proper ‘tone at the top’ in establishing a healthy, ethical business climate. Leadership is a fundamental duty of management, therefore strong ethical leadership is a necessary pre-requisite in creating an organizational culture in which ethical behavior and business practices can flourish. In essence, ethical leadership is leadership that is directed by respect for ethical beliefs, values, dignity and rights of others. It calls to mind concepts such as trust, honesty, consideration, charisma and fairness.
Concerns about ethics and leadership have dominated recent headlines about business and shaken public confidence in many organizations, and the historical, spectacular ethical lapses resulting in the implosion of Enron, Arthur Anderson, WorldCom, and Tyco come to mind. These catastrophic outcomes are directly linked to the lack of ethical leadership at these firms, and conversely the presence of strong ethical leadership can offer enormous boons to your organization; ethical leadership predicts outcomes such as perceived effectiveness of leaders, followers’ job satisfaction and dedication, and their willingness to report problems to management (Brown et al., 2005). These benefits flow from the fact that in the workplace, leaders should be a central source of guidance. Yet we know little about the ethical dimension of leadership. Most attention to this topic has relied upon a philosophical perspective, focusing on the question of how leaders ought to behave. Although much has been said about the importance of ethical leadership, the topic has received little systematic scholarly attention (Ciulla, 1998).
A common refrain is that leaders’ ethics exert a significant influence on the ethical climate of the organizations they head. For instance, the results of research done by Schminke et al. (2005) suggest that organizational leaders play an important role in the ethical climate of the organization. Despite this seemingly widespread knowledge, leaders often underestimate their influence (Trevino et al., 2000). It is important for leaders to recognize their influence in shaping the ethical climate of an organization. Their influences extend beyond the personal ethics of firm employees. “The results indicated that leader moral development exerts an influence above and beyond that of the average moral development of firm employees.” (Schminke et al. 2005 p.148) Mentoring or pairing young managers with more senior leaders who have reputations for ethical leadership could be a means in which to develop ethical leadership. By this method, a solid ‘tone at the top’ of the organization can filter down through the ranks to individual team leaders and supervisors.
The practical implications for businesses come down to concerns of problem avoidance and maintenance issue. Company management may not always recognize that they are facing a moral issue. Rarely are ethical implications obvious, nor are observed issues necessarily easy to resolve. Ethical decisions are ambiguous, and the ethical decision-making process involves multiple stages that are fraught with complications and contextual pressures. “The notion that being ethical is simple also ignores the pressures of the organizational context that influence the relationship between moral judgment and action.” (Trevino & Brown, 2004 p. 71)
Top leadership sets the pace and vector of the company, so it is only natural that such leadership guides the ethical compass as well. Researchers have begun to study the phenomenon of ethically framing issues, and they refer to it as moral awareness, ethical recognition, or ethical sensitivity. “The use of moral language has been found to influence moral awareness.” (Trevino & Brown, 2004 p. 70) Using moral language in company policies and procedures can set the tone for ethical execution and the individual interpreting the guidance would be more likely to think about issues in ethical terms. This is important because outright unethical individuals are relatively rare. When thinking about what is right, individuals tend to look outside themselves for guidance; searching for consensus and context. “Most unethical behavior in business is supported by the context in which it occurs-either through direct reinforcement of unethical behavior or through benign neglect.” (Trevino & Brown, 2004 p.72)
In sum, the importance of ethical leadership in shaping business culture cannot be overstated. Managers and supervisors serve as powerful role models for their subordinates, and the examples that they set – for good or ill – will leave a lasting impression on their workforce and their business culture as a whole.
Below please find article references, as well as additional sources of information on the importance of ethical leadership, and how to foster this value in your workforce.
Ethical leadership References
Brown, M. E., Treviño, L. K., & Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational behavior and human decision processes, 97(2), 117-134.
Ciulla, J. (1998). Ethics, the heart of leadership. Westport, CT: Quorum Books.
Schminke, M., Ambrose, M. L., & Neubaum, D. O. (2005). The effect of leader moral development on ethical climate and employee attitudes. Organizational Behavior and Human Decision Processes, 97(2), 135-151.
Trevino, L. K., & Brown, M. E. (2004). Managing to be ethical: Debunking five business ethics myths. The Academy of Management Executive, 18(2), 69-81.
Treviño, L. K., Hartman, L. P., & Brown, M. (2000). Moral person and moral manager: How executives develop a reputation for ethical leadership. California Management Review, 42, 128–142.
Treviño, L. K., & Weaver, G. R. (2003). Managing ethics in business
Watts, T. (2008). Business Leaders’ Values and Beliefs Regarding Decision Making Ethics. Lulu.com.