Leadership ethics – are they a problem or a benefit?

 

Leadership and Ethics: A deadly mix

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Like any other veritably sexy glass of alcohol concoction, leadership vodka and ethics triple sec are a match made in cocktail heaven. Pouring these two together is a sure-fire way to euphoria. But before any notion of drunken superficiality seeps through the mind, let us first look into the two faces of why these two are a deadly mix (Metler & Rosson).

 

Leadership without Ethics: “The dark side of the Force”

Leadership ethics in today’s corporate world have recently took center stage when several high-ranking officials of colossal corporations were tangled in a web of highly publicized scandals involving billions of dollars and their hard-earned reputations (Metler & Rosson).

Several somber samples of harrowing leadership ethics failures: Tyco International former Chief Executive Officer (CEO) Dennis Kozlowski, former Chief Financial Officer (CFO) Mark Swartz, and former General Counsel Mark Belnick were indicted for stealing an estimated $600 million, majority of which came from fraudulent sale of the company’s stock; television mogul Martha Stewart’s embroilment in ImClone Systems’ stock sales just hours before its stock value dipped significantly in the market; and of course the infamous Enron scandal of artificially inflating the energy giant’s profits, for which its former CFO Andrew S. Fatow was indicted on 78 federal counts of masterminding that grand scheme of hiding the company’s debt from its board and employees (Baley, 2004).

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Taking further investigation on Enron’s debacle proved that there was involvement between insiders in the company and its auditing firm, the then Arthur Andersen LLP (Metler ; Rosson). The consulting firm’s tolerance and eventual connivance that directed to the cover-up was more of a profit-driven purpose for a potentially huge sum of $50 to $100 million in consulting fees (Abelson, 2002).

Harry Onsman aptly likened the “the dark side of leadership” to George Lucas’ Star Wars stalwart villain, Darth Vader. He also cited the negativisms involved in leadership are self-exaggeration, abuse of power, narcissism and self-deceit. The categorization of a leadership’s negative traits such as the following (James, 2002)

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Mirroring – the self-serving tendency of leaders to satisfy its followers’ perception of his/her personality for his/her benefit and not the organization’s;

Narcissism – a fantastical view of one’s self-importance to the organization, making the leader’s decision-making abilities detrimental to the business;

Alexithymia or emotional illiteracy – apathy for others’ situation or lack of compassion and empathy; and

Fear of letting go – the desperate clinging to a leader’s position and power; the thought process wherein the leader deems no one is better than him/her in running the organization (think Miranda Priestly in The Devil Wears Prada).

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We have to emphasize that ethics is a personal issue. No matter how stringent instituted legislation or regulations are, business leaders will always have the power of personal discretion over a huge range of issues including, finances. The figure that follows is a representation of The Leadership Diamond methodology, as discussed in Koestenbaum (2002). This strongly illustrates leadership ethics as a personal responsibility. Those are aimed primarily for the individual’s mindset.

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Figure 1. The Two Sides of Leadership.

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John Dienhart also concurred on the theory that ethics are a personal preference when he wrote:

“Ethical cultures have fewer people willing to cooperate with unethical schemes and more people willing to challenge and report it. Another benefit is that the company will attract people who share its mission and values, and drive out those who do not.

The driving force of ethical culture is and will always be the people who make up that culture. However, corporate-ethics programs, their officers, and staff play a critical role in promoting an ethical culture and ensuring that everyone in the company supports the culture through their actions and choices.” (Dienhart, 2004)

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These must be reasons why we were led to believe that what these leaders have done were not just mere personal acts of greed (Metler ; Rosson), but rather lapses in ethical values deeply anchored in their subconscious. Moreover, extreme leadership without any ethical implications can spell the difference between effective organization and disaster. Careful analysis also shows that without ethics intact, the path leadership takes will apparently lead to self-destruction through time.

Leadership vodka will always be intoxicating by itself. A glassful of it has no same potency with a glass mixed with an ample amount of ethics triple sec.

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Leadership Ethics: A healthy dose

We have seen the not-so-grand effects of leadership sans ethics, now let us delve into what leadership looks like when it subscribes to values and ethics.

There are a plethora of reference and self-help books that emphasize the importance of ethics in all organizational leadership. To achieve such nirvana of leadership ideology, the following list describes the six most important values a leader should possess:

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1.      The lone heroic leader is largely fictional. Effective leadership is always plural. Dependency on a single leader may prove to be disadvantageous to an organization. The superiority complex in a leader should not be the cause of an entire organization’s failure due to that leader’s illusion of immaculate judgment. A leader that values other leaders’ as well as other peoples’ opinions is worthy of its position;

2.      The profound purpose for which the organization strives must extend beyond self-interest and beyond individual lifetimes. A leader envisions the company’s long-term goal and aspirations, not only his own;

3.      Trustworthiness implies perfection, but it depends on collaboration and mutual support. Integrity is the keyword to trustworthiness. Sacrificing one’s reputation through reckless impudence may have the leader’s head on the guillotine;

4.      Culture change requires a change in individuals. Leaders should effect changes for the good. And those changes should always start and end with them;

5.      Learning from mistakes should get less priority than learning from successes. It does not mean that leaders should always be successful in every decision they make. However, mistakes should be minimized by learning key areas of successes and why these came about so that in future undertakings, success will also be apparent; and

6.      Virtuousness pays. Of course, ethics should always be a priority for leaders that wield powers sometimes they conveniently mistake as tools for greed.

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An ethical leader may be someone who preaches to the people how to distinguish the difference between right and wrong. But there is much more to it than simply telling others what to do with their lives. Leadership is difficult to define, and moral leadership even harder.

Leadership, even when defined as a collaborative experience, is still about the influence of individual character and the impact of personal mentoring.

Ethics in leadership may also mean mentoring and mentoring may mean that a leader may also be a teacher. As discussed earlier, leaders have moral and social obligations to his/her colleagues. Thus, as people-developers, they have to work closely with their people; teach them the right way of becoming true leaders in their respective fields and ultimately, their organization; and have these taught people help in the growth of the organization the way they were nurtured by their leader-mentors. (Koestenbaum, 2002)

The preceding enumerations reflect the fact that strong leadership skills are not solely based on the leaders’ will to lead, but to lead with an open heart and sound mind. Their souls should always focus on their decisions’ greater purpose of restoring order and taking their organizations’ future into serious consideration without sacrificing firms’ integrity and reputation through selfish acts of imprudence and greed.

The wellness of leadership behaviors may be summarized through the following table:

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The Ethical Leader vs. The Unethical Leader

Ethical Leader Behaviors
Unethical Leader Behaviors
Is committed to high ethical standards which apply to everyone
Is willing to compromise standards based on the situation—top performers and executives are held to a different standard
Uses customer welfare, doing what’s best for the public, as one of the primary standards
Uses the company’s welfare, doing what’s best for them, as the primary standard
Is willing to confront situations where ethics are questionable and confronts ethical issues openly and honestly
Is unwilling to confront ethical issues unless they are safe, uncomplicated, and lack risk, doesn’t make ethics an issue, ignores ethical issues or deals with them in a covert or behind-the-scenes way
Takes timely and appropriate action on ethical issues
Avoids taking action on ethical issues in favor of expediency, or seeks to “soften” the blow by minimizing the impact, takes action only when forced to
Is proactive in heading off ethical problems
Does not deal with ethical issues until there is an obvious and significant problem
Sets an example for others, treats ethics as a priority
Downplays the importance of ethics, treats it as nice to do, not a must do
Treats ethics as a performance measure no different than sales, etc., actively supervises it
Seeks to minimize his/her personal responsibility for supervision of ethical issues and behavior
Learns about the legal and ethical aspects of the business and doesn’t plead ignorance when asked a question
Ignores the legal and ethical aspects, “that’s what attorneys are for,” pleads ignorance of the issues and the regulations or rules
Does not use the excuse that other companies have lower standards
Sets his/her standard at the lowest level of the competition and uses as an excuse that other companies are not taking as high a standard
The cyclical process involved in ethical leadership signifies the perfect match of leadership and ethics towards a successful yet humble interaction in gaining momentum for organizational growth. This process is also the reason why all organizations have their respective Codes of Conduct. These codes determine “the right thing to do”, the basis of distinguishing the ethical from unethical practices within organization. (Barth, 2003)

A concrete example of a Code of Conduct highlighting the organization’s beliefs in lawful and ethical trade is of The Coca-Cola Company’s. We can deduce from this summary that the importance of the cyclical nature of leadership, ethics and people is imperative in running good business. Inter-dependency among the leaders and employees are evidently and clearly outlined. (Barth, 2003)

 

§  Employees must follow the law wherever they are around the world.

§  Employees must avoid conflicts of interest. Be aware of appearances.

§  Financial records—both for internal activities and external transactions— must be timely and accurate.

§  Company assets including computers, materials and work time—must not be used for personal benefit.

§  Customers and suppliers must be dealt with fairly and at arm’s length.

§  Employees must never attempt to bribe or improperly influence a government official.

§  Employees must safeguard the company’s nonpublic information.

§  Violations of the Code include asking other employees to violate the Code, not reporting a Code violation or failing to cooperate in a Code investigation.

§  Violating the Code will result in discipline. Discipline will vary depending on the circumstances and may include, alone or in combination, a letter of reprimand, demotion, loss of merit increase, bonus or stock options, suspension or even termination.

§  Under the Code, certain actions require written approval by your Principal Manager. The Principal Manager is your Division President, Group President, Corporate function head, or the General Manager of your operating unit.

§  For those who are themselves Principal Managers, written approvals must come from the General Counsel and Chief Financial Officer. Written approvals for executive officers and directors must come from the Board of Directors or its designated committee.

§  If you have questions about any situation, ask. Always ask.

This Code should help guide your conduct. But the Code cannot address every circumstance and isn’t meant to; this is not a catalogue of workplace rules. You should be aware that the company has policies in such areas as fair competition, securities trading, workplace conduct and environmental protection. Employees should consult the policies of The Coca-Cola Company in specific areas as they apply.

 

Leadership and Ethics: A match made in Corporate Heaven

We may now then say that leadership vodka and ethics triple sec are a match made in corporate heaven; working hand-in-hand to produce a deliciously strong bond between leaders and employees, as well as between leaders and other leaders and employees to other employees. The unchartered territory of the future can now be easily foreseen through visionary leaders, whose goals are devoid of unreasonable personal gain; earning their colleagues illusive trust while serving their companies’ interests.

The deadliness of the leadership vodka and ethics triple sec mix lies in the fact that the cocktail is only lethal in excessive amounts. The potency of pure leadership vodka can intoxicate a leader without a ready ethics triple sec to dilute the power of the former. No decent amount of this mixture can prevent any leader to restrain him/her from being intoxicated. However, the mere knowledge of the each leader’s capability to restrain oneself from excessive use and eventual abuse of power should totally rely on that leader’s ethical background. The countercheck from that leader’s colleague should always be in place to avoid further aggravation if and only if that leader shows the weakening of his moral fiber.

Leadership ethics should never be treated as a problem. Debacles such as Enron’s, Salomon Brothers’, Tyco’s and many others could have been prevented had those companies’ leaders have had the courage to muster what is right and just. In short, corporate disasters can be prevented by not merely exercising leadership ethics, but living them out as well by leaders and subordinates alike.

The benefits in store for institutionalizing leadership ethics are, without a doubt, far-reaching. They will prevent companies’ fall from the stock market, take care of the stakeholders’ well-being, and securing the organizations success today and in the future.

 

 

BIBLIOGRAPHY

 

Abelson, R. (2002). NEWS ANALYSIS: THE ENRON COLLAPSE: Auditors under fire after Enron failure: Andersen’s role leads to demands for more scrutiny [Electronic Version]. San Francisco Chronicle. Retrieved March 04, 2007 from www.sfgate.com.

Baley, C. A. (2004). Leadership and Ethics: Grounded Theory Versus Today’s Fad.   Retrieved March 11, 2007, from http://www.iupui.edu/~adulted/mwr2p/program/Proceedings/Baley.pdf

Barth, S. R. (2003). Corporate Ethics: The Business Code of Conduct for Ethical Employees. Boston, MA, USA: Aspatore, Inc.

Dienhart, J. (2004). To Work, Corporate Ethics Must Start At The Top. Puget Sound Business Journal (Seattle)   Retrieved March 11, 2007, from http://seattle.bizjournals.com/seattle/stories/2004/04/19/focus7.html

James, D. (2002). Management – Isn’t That Just A Theory?   Retrieved March 11, 2007, from http://www.aim.com.au/publications/review_mt_uncertain.pdf

Koestenbaum, P. (2002). Leadership: The Inner Side of Greatness, A Philosophy for Leaders. San Francisco, CA, USA: John Wiley & Sons, Inc.

Metler, P., & Rosson, T. Ethical Leadership, Values, and Self-Awareness.   Retrieved March 3, 2007, from http://ourworld.compuserve.com/homepages/tomrosson/ethicalldrshp.htm