A study on Ethical Leadership and Sustainable Enterprise

Ms. Mitika Mahajan

Abstract
"Real leaders concentrate on doing the right thing, not on doing things right." The study made
for Ethical Leadership encourages us to highlight the hidden significance of Ethical Leadership
for business improvements in terms of the pace of achieving organizational objectives. By
secondary research available, we’ve concluded that the business can get pace to achieve success
if it has ethical leaders in hand. It doesn’t mean unethical leaders can’t make profit. But, to
sustain supreme in the market, require ethics in your business. In other words, any action which
is undesirable will not be effective in long-term because there’ll be counter action which negates
the impact of earlier action. Thus, the need for Ethics in Management is due to Environmental
Pressure, Credibility, Morale Consciousness, and legal pressure. This implies that only ethical
leaders can make ethical business. Also, if enterprise does some work for development of ethical
leaders within the business enterprise then organization can have better ROI and secure
maximum market share or reputation. Leaders provide encouragement and support to their
followers.
Keywords: Ethical Leadership, Ethics, Moral Values, Sustainability
Introduction
The entire organizational members have the responsibility to achieve the organizational
objectives which are consistent with the values of the organization and serve their own as well as
society’s welfare. However the primary duty and responsibility to ensure high standards in the
performance and proper direction is of the organizational leader. Organizational leader plays a
vital role in formation of ethical practices in the organization as he is the person who
communicates his ideology in terms of the organizational culture. Thus an organizational leader
must reflect his morals in his behavior as well as the business strategies and policies formulated.
It is noted from different surveys that the organizational leaders do not feel hesitation in doing
unethical practices for the organizational and personal benefits. It must be noted that the
organization should not work for the benefits of its shareholders only, but also for other
stakeholders and the society. The society must not be neglected for own motives
accomplishments.
Because of fluctuating business environment, every organization should have leadership
development strategy as organization’s future depends on them. In fact, Organization must be
able to identify the talented individual and create culture of leadership within an enterprise. As
per rapid changes in 21st century, Leaders must have to acquire new set of skills, creativity,
innovativeness and abilities to survive in an unpredictable environment.
The ancient Indian epic Mahabharata highlights very strongly that the king is especially
accountable for the well-being and happiness of the subjects and the prosperity of his kingdom.
A bad king would destroy the well-being of all people and the kingdom as well. Napolean
articulated his emotional state about the significance of leadership when he said that he would
rather have an army of rabbits led by a lion than an army of lions led by a rabbit. It is largely
recognized and accepted by practitioners and researchers that leadership is important, and
research supports the notion that leaders do contribute to key organizational outcomes (Day &
Lord, 1988). Campbell (1990) identified leadership as one of the job performance dimensions
that attributed to the organizational success. Thus, leadership plays a tremendous role in the
organizational growth and has an impact on its success.
Some statistics which will enlighten this truth:

In recent years, one has been exposed to the collapse of Enron, the fall of the Lehman Brothers,
as well as the housing market crash; all due, in part, to unethical behavior. Green and Odom
(2003) note that the lack of ethical leadership in Enron caused harm to thousands of employees,
invoked greater government regulation, and crippled consumer confidence of the financial
industry (Thompson, 2010).

The examples of organizations exhibiting unethical behavior has caused businesses to reexamine
their strategic direction, helping them learn that ethical leadership is the way which leads to
profitability (Moss, 2002). However, as Thornton (2009) notes, “Now in the global marketplace,
with fierce competition for business and resources, the scope of problems that can occur in
leadership ethics has expanded exponentially”.

A rigorous qualitative study completed by Plinio, Young, and Lavery (2010) found that one of
the most serious problem facing organizations today is impoverished ethical behavior and
nonexistent ethical leadership. Consequently, the authors note that trust in leadership is waning
and the situation is worsened by a weak economy. The authors also noted an alarming increase in
misconduct by employees at all levels.

Today, ethical characteristics of leader behavior are taken into attention within various
leadership styles. For instance, transformational leadership has been described as incorporating
an ethical component. Some authors suggest that transformational leaders could behave either
ethically or unethically, and these different forms are distinguished as authentic (i.e., ethical)
transformational and pseudo- (i.e., unethical) transformational leadership (Barlinget al., 2008;
Bass and Steidlmeier, 1999).

Darcy (2010) confirms that the current climate of organizations is skeptical regarding ethics. In a
qualitative study completed by the author, it was discovered that sixty-six per cent of people
question if ethics within leadership even exists. This is what the author refers to as “a crisis of
trust”. The conclusion of the study found that the biggest problem in organizations and
individuals today is a lack of trust.

Annual fraud survey results conducted by Ernst & Young from November 2011 to February
2012 are shocking. Out of more than 1700 executives, 15% said that they were prepared to make
cash payments to win the business. This figure was 9% in the previous year survey. The study
also found that 81% of the respondents said their companies had anti-corruption policies in
place, but 42% said they had not received training on those policies. These results are not only
for some regions. Overall, 39% of the respondents around the world said corruption occurred
frequently in their country. Ernst & Young explored the results around the world which shows
the need for the change in the philosophy of organizational leaders to attain the business goals
putting the moral values aside.

There are unethical practices going on in the organizations are now understood but one even
more dreadful survey results show that even whistle blowers are not accepted. According to the
2011 National Business Ethics Survey, 65% of workers reported which is all time high in the
past years. From this reported whistle blowers more than 22% said that they have faced some
kind of revenge after whistle blowing. Moreover the results show that the pathetic ethical culture
companies’ share has been noted 42%, compare to 35% - two years ago.
These survey findings expressed that the ethical leadership development is necessary for the
ethical business practices in the organization. This task can be done by the organizational leaders
i.e. Executives.

Ethical Leadership

Ethical Leadership, as presented by Pickett (2001), is an incorporation of organizational theory

that delivers a contingency model permitting organizations to strategically develop the types of
socially responsible consequences that are based on internal climates, environments and decision
making processes and abilities.
Based on the Ethical Leadership model, an argument is made for restructuring management and
leadership thought. In other words, organizational behaviours are altered to the desired
outcomes, based on individual organizational norms and mores. It is in this capacity that each
individual organization will “fit” their management and leadership needs to their desired
outcomes. Ethical Leadership creates a synergistic combination of managerial and visionary
leadership, which serves to enhance organizational survival, growth, and long-term viability of
an organization.
Ethical leadership is not limited to the moral leadership. It is beyond that. Ethical leadership
means not only work morally but also legally. Green management can be part of ethical
leadership. Ethical leadership means ‘leading ethically’. Leading ethically refers that a leader has
to work ethically and direct other employees to work ethically. Therefore we can say that it has
two dimensions: one is to work ethically and second to lead ethically as to lead employees you
must reflect your ethics in your actions.

Components of Ethical Leadership

Purpose: The reason behind each and every action for the organization as well as the society.
Knowledge: The leadership must be done by evaluating the information and the consequences of
their actions.
Authority: To make any decision the leader must possess enough authority to enquire and take
corrective actions.
Trust: Trust is the most important part as the leaders inspire other employees to act in such
manner. Without trust the authority can’t develop ethics in employees. Employees must trust the
leaders for the right actions.
Ethical leadership can be understood trough different predefined theories, models and
customized approaches. Researchers in the field of applied psychology define ethical leadership
as the demonstration of appropriate conduct through personal actions and relationships and the
promotion of such conduct to subordinates through two-way communication, reinforcement, and
decision making.
Current Challenges of Ethical Leadership
Walton (2008) identified forty-five traps within ethical leadership in the research. The author
labeled these traps into three distinctive categories, primary, defensive, and personality.
A primary trap is initiated from an external source, whereas, a personality trap is one that
originates from within. The author poses a solution for leaders to identify the source of the trap
and, in doing so, the leader will be better able to avoid ethical complications. However, the
author acknowledges the difficulty leaders have avoiding these common ethical traps.

Ward (2006) examines the reason for ethical failures in leader. During the study, the author
found that ethical failures do not occur because of selfishness, but rather out of ignorance. The
author notes that often time an individual who holds a role of leadership may feel excused from
moral requirements that others follow. The reasoning behind this is because the leader senses the
role of leader separate from his or her self. When this occurs, a leader is more likely to excuse
oneself from acting ethically in the role. The author’s solution for leaders is to gain more
knowledge in the field of ethics.

Darcy (2010) proves that the present environment of businesses is doubtful regarding ethics. In a
qualitative study completed by the author, it was revealed that 66% of people question if ethics
within leadership even exists. This is what the author refers to as “a crisis of trust”. The
conclusion of the study found that the biggest crisis in organizations and individuals today is a
lack of trust. Lack of trust can be characterized to what Frank (2002) calls the “shadow side” of
leadership. These shadows include the negative influences of “power, privilege, deception,
inconsistency, irresponsibility, and misplaced loyalties”. Unluckily, over time followers become
exposed to the consequences these shadow behaviors cause, and lose trust in the integrity of their
leader.
Analysis from available research
It has been sort out that knowledge of ethics made stage to understand ethical leadership and its
implementation would be possible. As Pickett (2001) suggests that Ethical behavior of leaders
are based on internal climates, environments and decision making processes and abilities. Also,
he has developed an EL model for restructuring management and leadership thought.
Furthermore, added that EL creates equilibrium for managerial and visionary leadership which
would be helpful to enhance organization survival, growth and long-term viability of an
organization.
The ethical leaders’ behavior is based on leader’s personality traits. And every enterprise has to
select and develop managers for ethnicity towards work; it is important as unethical leaders can
be costly and damage the reputation of an organization. By various definitions, one can
conclude that ethical leadership is grounded on moral values, individual personality traits and
perception of ethics. Lack of trust is one of the important factors for ethical leadership as
identified by Darcy.
Ethical leadership is important for survival of business as followers follow their leaders. This
ignites that every organization has ethical leadership culture for sustainable.
Conclusion
The new Ethical Leadership style is ever evolving as ethical dilemma forces leaders to reassess
existing situations. Today’s research on Ethics more emphasis on Ethics within Individual leader,
Ethical Leaders influencing followers and challenges for being Ethical Organization. There are
still many untouched areas within Ethical Leadership and novel study needed to cultivate more in
Ethical Leadership. We have here attempted to aware about the importance and new leadership
style as an Ethical Leadership. It may be difficult for implementing ethical leadership as surveys
showed a dramatic figure for unethical business successes. But it for short-term, if anyone want
to sustain in long-term and want to enjoy the position as market leader for their targeted
business, then they’ve to be ethical one day. Ethical Leadership offers a synergistic combination
of managerial and visionary leadership which serves to enhance organizational survival, growth,
and long-term viability of organizations.
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