Ethical Leadership

Ethical Leadership

1. Examples of Ethical Leaders- Josh Thain - spent more money than the Obama's getting the whole house redecorated,

2. 'Leaders should be a key source of ethical guidance for employees (Brown, Trevino and Harrison, 2005

3. Leadership has a moral dimension because leaders influence the lives of others, ethical leadership is the influence of a moral person who moves others to do the right thing in the right way for the right reasons (Northhouse, 2009)

4. What is Ethical Leadership? -Honest, caring and principled individuals, who make fair and balanced decisions. Frequently communicate with followers about ethics. Set clear ethical standards. Use rewards and punishments to show that standards are followed. They are proactive role model for ethical conduct - practice what you preach. Ambitious individuals but ambition is for the organisation, not themselves.

   • Why Ethical Leadership? 'Employes in an organisation led by ethical leader will imitate the behaviour of their leader and therefore the employees will be more ethical themselves" (Trevino, Hartman and Brown 2000
     • Ethical Leaders are ROLE MODELS

5. Two pillars of Ethical Leadership

   • 1. Moral Person Traits - Integrity, Honest & Trust Behaviours - Concern for people, Openness, Personal morality Decision Making - Values-based, Fair and Concern for Society
   • 2. Moral Manager - Traits - Role model through visible ethical action Behaviours - Rewards and discipline holds people accountable of ethical conduct Decision Making - communicating about ethics and values
     • Trevino, Hartman & Brown 2000
     • Unethical Leader - weak on both dimension - treat people poorly, strong focus on bottom line, supported by reward systems, manipulative, lack of consistency between actions and words
     • Hypocritical Leader - Talks the talk, they display values of ethical behaviours but they fail to follow through when making decisions. As a result - employees become cynical and don't trust the management.
     • Ethically neutral leader - Managers do not communicate their viewpoint of ethics to employees so they are not aware of the ethical stance

6. Leadership Styles - Transformational Leadership - Charismatic leader, who has intellectual stimulation

   • "Transformational leaders inspire followers to look beyond self-interest and work together in collective purpose" (Burns 1978)
     • 4 dimensions of transformational leadership: 1. inspirational motivation 2. Idealised influence 3. individualised consideration 4. intellectual stimulation
     • "Ethical and transformational leaders care about others, act consistently with their moral principles (integrity) consider ethical consequences of their decisions are are ethical role models for others" (Brown and Trevino 2006)
       • "Ethical leadership is essentially transformational in nature" (Mendonca, 2001)
     • Transformational leaders can be seen as unethical if: 1. they are motivated by selfishness (not altruism) 2. they use power appropriately
   • Focus on higher levels of follower leads in Maslows Hierarchy - esteem, self-fulfilment and self-actualisation (Whetstone, 2002)
   • strong influence

7. Transactional leadership, Management function of leadership with transaction between leaders and followers. Consists of rewarding/ monitoring and controlling behaviour (Parry, 99)

   • Transactional leadership involves aspects of control:
     • 1. Setting standards
       • 2. Performance appraisals
         • 3. Rewards and punishments
     • Transactional standards set clear standards and hold employees accountable for following them (Brown, Trevino and Harrison, 2005)
       • Transactional leaders produce employees who achieve a negotiated level of required ethical performance or compliance *McAlster and Ferrell (2005)

8. Ethical leaders likely to use transformational and transactional leadership to influence followers behaviours (Brown, Trevino and Harrison (2005)

9. Question whether leaders can be held to a higher moral standard then employees?

   • If companies set the moral standards too high, it can have negative consequences as few people will be qualified to be leaders, and will fail to live up to expectations
     • Too low - leaders will simply follow the law/be unethical

10. Why do leaders behave unethically?

    • Personal org success often allows leaders to become complacent and lost competitive advantage
      • Success often leads to access to information, people and objects
        • Success often leads to unrestrained control of organisational resources
          • Success can impact leaders self belief in their personal ability to manipulate/ control outcomes
            • Ludwig &Longnecker, 1993)
    • Ludwig and Longnecker suggest that increasing levels of power, influence status and control can bring increased negative emotional baggage and an increased sense of ego (1993)
      • Leaders feel they are subject to different rules than followers, and consequently make unethical decisions (Banerji &Krishnan 2000)

11. Advice to leaders

    • Build an ethical team around you who will inspire you to lead by example and challenge/ comfort you when needed (Ludqig and Longenecker, 1993(
      • Managers must be more successful at living up to moral standards, because the price of their failure is greater than that of an ordinary person (Maak & Pless, 2006

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