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INTRODUCTION Leaders are obliged to set a moral example for organizational members and to determine those organizational activities

which may be unfavourable to the values of society in general (Aronson, 2001). Leaders display ethical behaviours when they do what is morally right, just, and good, and help to uplift followers' moral awareness and moral self-actualization. Indeed, ethical leadership encompasses more than the nurturing of ethical behaviours. For example, Butcher (1997) pointed out that, "ethical business leadership requires not only investing in the small trees and experimental hybrids that won't yield a thing in this quarter or the next, but also caring for the soil that allows us to produce such a harvest in the first place". Thus, it is a leaders responsibility to create the right conditions and organizational culture (i.e., an "organizational soil") to foster the development of ethical behaviour in associates.Confucius pointed out that "gentlemen can convince the world only with their noble ethics." Traditionally, leadership has been viewed with the main goal of leaders to increase production and profits. But today the traditional view of leadership is slowly diminishing, as more theorists are emphasizing that leaders also have the responsibility for ensuring standards of moral and ethical conduct in an organization. Good leadership refers not only to competency, but to ethics and transforming people as well.Leaders are considered to be responsible for

motivating followers to perform an action, complete a task or behave in a specific manner. Effective leaders stimulate process, change in subordinates attitudes and values, enhance followers self-efficacy beliefs, and foster the internalization of the leaders vision by using strategies of empowerment. It is believed that the nurturing aspect of leaders can raise organizational cultures and employee values to high levels of ethical concern. Ethical leadership requires ethical leaders. If leaders are ethical, they can ensure that ethical practices are carried out throughout organization. Ethics is predominantly concerned with the impact of an individual's action on others. Frankena (1973) outlined two of the major theoretical perspectives in the ethics field--which are referred to as teleological and deontological theories. The teleological perspective emphasizes the outcomes or consequences of an action when evaluating whether the act is moral. There are various teleological theories in the literature, including ethical egoism, act utilitarianism, and rule utilitarianism. Alternatively, the deontological perspective is primarily concerned with the innate obligations and rights of all the parties involved in decisions, not the overall outcomes per se. Hunt and Vitell (1986) argued that the crux of the deontological perspective is whether or not a behavior or act is inherently right. Such determinations are made based on moral principles or guidelines.


Ethical leadership is leadership that is involved in leading in a manner that respects the rights and dignity of others. As leaders are by nature in a position of social power, ethical leadership focuses on how leaders use their social power in the decisions they make, actions they engage in and ways they influence others. Ethical leaders demonstrate a level of integrity which helps the followers to trust the leader and his vision. These are critical and direct components to leading ethically. The character and integrity of the leader provide the basis for personal characteristics that direct a leaders ethical beliefs, values, and decisions. Individual values and beliefs also impact the ethical decisions of leaders. Leaders who are ethical are people-oriented, and also aware of how their decisions impact others, and use their social power to serve the greater good instead of self-serving interests. Another good quality of an ethical leader is to motivate the followers to put the needs or interests of the group

ahead of their own. Motivating involves engaging others in an intellectual and emotional commitment between leaders and followers that makes both parties equally responsible in the pursuit of a common goal. These characteristics of ethical leaders are similar to inspirational motivation. Inspirational motivation involves inspiring others to work towards the leaders vision for the group and to be committed to the group. Similarly, ethical leadership falls within the nexus of inspiring, stimulating, and visionary leader behaviors that make up transformational and charismatic leadership. Ethical leaders help followers in acquiring a sense of personal capability that allows them to be self-sufficient by encouraging and empowering them. In organizational communication, ethics in leadership are very important. Business leaders need to think about how their decisions will affect other people apart from looking for their own benefit. The best leaders use their values and their ethics and preach them in their leadership style and actions. It consists of communicating complete and precise information, where there is a personal, professional, ethical, or legal obligation to do so (McQueeney 165). While practicing ethics and more so in leadership, one gains the respect and admiration of employees, with the satisfaction of knowing you did the right thing. If the leader does notmake clear what he wants, and expects result, then it can cause mistrust.Being unethical in the workplace can include anything from taking personal phone calls while at the desk, telling someone the "check is in the

mail", when in fact it hasn't even been written yet, or even taking office supplies home for personal use. Most organizations create an ethical code, which is usually a list of rules that mentions what behaviours are right and what are wrong in the company. As a leader, thus it becomes imperative for him to the right thing at all times as the subordinates would only mirror what the leader showcases. The leader has a great moral responsibility in upholding the ethical environment in an organization.


One typical reaction to the ethics crisis in business is a call for more ethical leadership, yet there are not many large number of demonstrations of what precisely is indicated by the term explanations of what exactly is meant by the term. A considerable number of executives and business thinkers believe that ethical leadership is simply a matter of leaders having good character. By having the right values or being a person ofstrong character, a moral leader sets the example for others and withstands any temptations that may occur along the way. The reality of ethical leadership is far more complex and the stakes are much higher, if the importance of good character and the right values are denied. For the last 25 years, all industries have been going through a world of great change like globalization, democratization, and incredible technological advances and in this situation leaders have an extra responsibility to lead due to which a number of touchstones for the idea of ethical leadership have be en identified. Majority of the executives want to be efficient in their jobs and leave an impact on their companies and the world, creating value for people whose

lives they affect. Leaders are first and foremost members of their own organizations and stakeholder groups. As a result, their purpose, vision, and values are for the benefit of the entire organization and its key stakeholders. Leaders see their elements as not just followers, but rather as stakeholders determined to achieve that same common purpose, vision, and values. In order to maintain a moral community, and the follower be and stakeholder an





understanding of ethical ideals, leaders exemplify the purpose, vision, and values of the organization and of the constituents,. They connect the goals of the organization with that of the internal employees and external stakeholders. Leaders work to create an open, two way conversation, thereby maintaining a liberal understanding of different views, values, and constituents opinions. They are open to others opinions and ideas because they are leading better. Leadership is by all means a special talent that not all people possess. A leader must also have ethics to be effective for the long term in the corporate world. These leaders generally implement ethical programs in order to influence an organizations climate (Yukl, 2010). In any organization an effective leader must have people that will follow him or her. Generally speaking people will follow someone who is ethical and moral over a leader who is dishonest and immoral. The most effective leaders are those who empower their employees to follow the same model of integrity. Velasquez (2006) states when employees believe an

organization is just, they are more willing to follow the organizations managers, do what managers say, and see managers leadership as legitimate. In short, ethics is a key component of effective management. It is not certain who decides what ethics really are. Society mainly directs the moral standards which make up the discipline of ethics (Velasquez, 2006). Its all of us that decide what is ethical and what is not. There is power in knowing this, but more importantly where leadership and ethics meet is leadership takes on a broad meaning. It means different traits one may possess or as simple in the ability to have others follow. A leader isnt always a manager, but can be a manager in an organization. When you combine the two into ethical leadership you have a strong dynamic. According to Yukl (2010) in cross-cultural research on the essential traits for effective leadership, integrity is near the top of the list in all cultures that have been studied. Most scholars consider integrity to be an important aspect of ethical leadership. In order to be a successful ethical leader there are many activities that can be promoted to encourage ethical behavior in ones organization. An ethical leader will create programs that endorse integrity in business. Programs can include setting guidelines for dealing with ethical issues, open discussion on ethical issues, and establish a protocol for people to get advice (Yukl, 2010). By establishing programs an ethical leader is really changing and encouraging moral behavior which can affect an organizations

work environment and improve morale. By empowering the employees to know how to handle ethical dilemmas a new found trust is created. Being a servant leader can by definition empower your followers. Attending to the needs of the employees and creating a nurturing environment can create trust. Yukl (2010) states, The servant leader must stand for what is good and right, even when it is not in the financial interest of the organization. Social injustice and inequality should be opposed whenever possible. A servant leader is an ethical leader as well. The qualities or traits that are attributed to this type of leadership are integrity, altruism, humility, empathy and healing, personal growth, fairness and justice, and empowerment. All these are that of a servant leader, but also an ethical leader. Any time a leader can gain trust of their subordinates it will lead to a better relationship as well as more influence that the leader has in accomplishing tasks.


Leadership has many roles, but ethical behavior versus unethical behavior has its rewards and repercussions. The consequences of unethical leadership can reflect in a business or industry in many negative ways. At times in the short term unethical behavior can actually be perceived as valuable and for a short time, boost revenue. In the end, unethical leadership will catch up to you. This report uses the example of the mortgage Industry. For a number of years rules and regulations were very tight when it came to lending. As time went on and the American dream became a driving force to allow for mortgages to be extended

to everyone, tactics were taken on, that were unethical. The lenders were loosening their strings and not regulating the housing market as they once were. Homes were getting appraised for well over their fair market value which was being given a blind eye. As the bubble burst, the economy took a turn for the worse, the unethical leadership in the mortgage industry snow-balled catching up with all those on homeowners who had taken loans that were adjustable rate mortgages or pick a pay program that was not disclosed properly. Unethical behavior completely took down an entire industry causing a domino effect in the economy. Even though unethical people made many very rich, it has now plagued all facets of the markets. The rewards of ethical leadership can take longer to see. There is not the instant gratification. It can take years or decades to feel the wrath of ethical leadership in a business. For example, Merck and company had a dilemma. They had found a drug that could profoundly improve the quality of lives of those with river blindness. This disease was prevalent in Africa and South America, a place where there was not enough money to pay for such a drug. Merck and Company had to weigh the effects of the cost of making a drug no one could pay for or allow human suffrage when there was a solution. The leadership in the company chose to go ahead and lose money by not only making the drug to help eradicate river blindness, but also gave it away. Merck and Company lost billions of dollars by this decision even though it was the ethical and morally right decision.

The effects on this decision were great. The ethical leadership cost Merck and Company billions of dollars in this project but to gain more in return over time. This company gained the trust of other countries and its consumers. It is no wonder the reason Merck is the largest American pharmaceutical company in Japan and other countries. Velasquez (2006) stated that, ethical behavior creates the kind of goodwill and reputation that expand a companys opportunities for profit. In addition over time this principle has proven accurate as in Merck and Companys humanitarian efforts with eradication of river blindness in tropical third world regions, treatment of elephantiasis, and tuberculosis post World War II in Japan.


There is no question that the current climate has prompted many more companies to tackle ethics issues. Many are making a set of moral values a part of their corporate cultures. And some forward-looking companies are providing ethics training to managers and workers. While company-wide ethics awareness is a wonderful thing, the recent information about the online persona assumed by Whole Foods CEO John Mackey reminds us that the moral centre of every company lies within its leaders. Those leaders are and should be held to higher standards of ethics and morality-because they are leaders. If, as in the case of Mackey, they are running companies designed around a social responsibility premise, the standards are, and should be, that much higher. The Mackey incident is more about the Achilles' heel of a standard bearer than it is about illegality or immorality.

The Mackey incident Whole Foods Market Chairman and CEO Mackey spent years earning a positive reputation as a corporate leader not afraid to take a stand on ethics issues. Before other companies figured out that it pays to be environmentally friendly, Whole Foods led by setting standards for humane animal treatment. In 2006 Mackey took the bold step of reducing his own annual salary to one dollar, pledging money instead for an emergency fund for his staff. Not shy about expressing his views, Mackey challenged leading thinkers, like Nobel prize winner Milton Friedman, on business ethics issues. Like many leaders, Mackey seemed to relish the public spotlight. But on July 20, Mackey got more publicity than he bargained for.The Wall Street Journal reported that Mackey had long used the pseudonym "Rahodeb" to make postings in Yahoo Finance forums that flattered his own company and levelled criticisms against the competition. Serious financial and possibly legal repercussions continue to unfold from this incident, and the final consequences may not be known for some time. Amid the commotion following this disclosure of Mackey's secret online alias, it is vital that we not lose sight of the critical issues it raises about ethics and leadership in a rapidly evolving business world. Implications for leadership and ethics

By now "business ethics" is an established part of doing business, not just in the United States, but also increasingly around the world. Jokes like "business ethics is an oxymoron" have long since worn thin, as society has come not merely to expect, but to demand, that business conducts itself according to basic rules of ethics and integrity. Business ethics, as an academic topic as well as a growing body of real-world practices, is not a new fad, but is something that has developed since publicized price-fixing and other corporate scandals in the late 1960s and 1970s. The most recent major business scandals, such as Enron, actually served to reinforce widespread perception that "business as usual" can no longer attend only to the financial bottom line. The subject of leadership links closely to ethics, as it involves linking values to human behavior for the achievement of a mission and objectives. Business leaders have long recognized that they play a key role in promoting ethical conduct in their businesses. They set the ethical tone that pervades the entire organization. Even the very best ethics and compliance programs can be negated by a leader who communicates cynicism or lack of support for ethical conduct. They lead by example. Ethics is communicated through words, but words are compelling only when they are supported by action. The actions that matter most are those from the people at the top.

They motivate others. The focus on ethics after Sarbanes-Oxley increasingly tends to be on compliance, which is primarily concerned with preventing employees from engaging in misconduct. However, leadership is concerned not simply with avoiding harm, but also with promoting excellence. More than anyone else, the CEO has the ability to promote an ethic of aspiration, not just an ethic of compliance. Companies that are able to promote a positive link between ethics and excellence enjoy a competitive advantage as well as an enviable reputation. Setting the right tone, leading by example, motivating others in a positive way: For some time, Mackey seemed to be meeting all three tests of ethical leadership. But his online fiasco can easily undermine his claim to ethical leadership. The current problem is unusual because it takes place in the novel forum of an online discussion board, where perhaps the norms for discourse are not exactly like those that guide face-to-face, conventional communication. The challenge is to evaluate Mackey's online behavior in terms of the basic requirements of ethical leadership while also being attuned to new aspects of communication online.


A manager must focus on the on the day-to-day aspects of keeping the department, team or organization running smoothly. This includes making sure the department is staffed appropriately, that the company is on target for sales, that production is on target, etc. A leader, on the other hand, must be able to set goals and aspirations for the team, set the tone of the organization, motivate and inspire the group, etc. Realistically, managers must be able to do both. They must inspire and motivate and they must ensure that the company operates effectively. Setting the ethical tone of the organization is a leadership function. The challenge for most managers is to spend enough time focusing on leadership functions without becoming totally consumed by the day-to-day operations of the team. Because "business ethics are about the morally functional nature of our

business relationships...giving themthe attention and care they deserve is crucial to an organization's success". James Gehrke suggested six ways for a leader to be ethical in an organization. 1. Reflect on Values. To focus the appropriate attention on the ethical tone of the organization, a leader must "draw on their own fundamental values and capabilities" in order to optimize their leadership potential (Quinn, 2005). To do this, leaders must find time to reflect and identify their own personal moral compass as well as to ask themselves what are the key ethical questions and dilemmas facing their organizations. Just as a manager must take time to understand their market, budgets, production timelines, etc., an ethical leader must take time to understand his/her own personal values, the values of the team, what the value statements of the organization should be and identify the gaps that exist in aspired goals and current behavior within the organization (Hamm, 2003). 2. Establish Trust. Build an environment of trust with employees in order to create an environment where employees feel free to discuss ethical dilemmas and issue with management. 3. Establish a Shared Ethical Vision. To ensure buy-in and commitment from the organization, include members from various levels of the team to help create a "Code of Conduct" that is aligned with the Ethical Vision of the organization.

4. Communicate the Ethical Vision and Code of Conduct . A leader must ensure that the vision and code is communicated to everyone within the organization. This can be done through policy manuals, training events, one-on-one and team coaching, newsletters, team meetings, etc... "Communicating the program frequently is another important success factor, as is establishing a way for employees to communicate their concerns back to management in a safe and confidential manner. 5. Act. To be effective, the leader must show that all the organization is serious about ethical behavior. All reports of unethical behavior must be investigated thoroughly. Furthermore, all violators of ethical standards must be punished equally and justly throughout the organization, irregardless if the perpetrator is a senior executive or first line hire. In addition to punishing negative behavior, effort should be made to reward and recognize positive ethical behavior (Trevino and Nelson, 2005). Just as a good manager knows that rewarding employees for reaching goals is important, the ethical leader will recognize that equal importance must be given to recognize those who exemplify ethical behavior within the organization. Acting also means leading by example by letting ethical behavior guide the actions of the leaders at all times. Doing so will help establish and sustain a culture of ethical behavior.

6. Monitor and Sustain Ethical Behavior. The leader must consider ethical leadership a key aspect of their role as a manager. It cannot be seen as a passing organizational fad. Effort must be made to gather feedback through surveys, focus groups, one-on-one interviews, etc., to identify employee concerns regarding the ethical environment where they work. This should be a continuous improvement process to identify concerns and to improve the overall ethical environment. There are many benefits for a manager to focus on being an ethical leader, including; improved public image of the organization, restoration or enhancement of investor confidence, prevention and reduction of criminal penalties, preventing civil lawsuits of employees who could not have their grievances met satisfactorily inside the company, improved employee retention, market leadership through by improved customer satisfaction and setting the example for others in the market (Hamm, 2003).


Hay's study examined over 75 key components of employee satisfaction. They found that: trust and confidence in top leadership was the single most reliable predictor of employee satisfaction in an organization. Effective communication by leadership in three critical areas was the key to win organizational trust and confidence: helping the employees understand the company's overall business strategy. Helping employees understand how they contribute to achieving key business objectives. Bring information with employees on both how the company is doing and how an own employee's division is doing - relative to strategic business objectives.

So basically, you must be trustworthy and you have to be able to communicate a vision of where you are going. Notice how the "PRINCIPLES OF LEADERSHIP" in the next section closely ties in with this.

TO HELP YOU BE, KNOW, AND DO, (2) FOLLOW THESE ELEVEN principles of leadership (later sections will expand on gaining an insight into these principles and providing tools to perform them): Know yourself and seek self-improvement means continually strengthening your attributes. This can be accomplished through reading, self-study, classes,etc.be technically proficient. As a leader,you must know your job and have a solid familarity with your employees' jobs. Seek responsibility and take responsibility of your actions. Search for ways to guide your organisation to new heights. And when things go wrong, they will sooner or later, do not blame others. Analyze the situation, take corrective action, and move on to the next challenge. Make sound and timely decisions. Use good problem solving, decision making and planning tools. Set the example. Be a good role model for your employees. They must not only hear what they are expected to do but also see. Know your people and look out for their well-being. Know human nature and importance of sincerely caring for your workers. Keep your people informed. Know how to communicate with your people within the organization.

Develop a sense of responsibility in your people. Develop good character traits within your people that will help them carry out their professional responsibilities. Ensure that tasks are understood, supervised, and accomplished. Communication is the key to this responsibility. Train your people as a team. Although many so called leaders call their organization, department, section, etc. A team; they are not really teams... they are just a group of people doing their jobs. Use the full capabilities of your organization. By developing a team spirit, you will be able to employ your organization,department, section, etc. to its fullest capabilities.

THE FOLLOWER: Different people require different styles of leadership. For example, a new hire requires more supervision than an experienced employee. A person with a different attitude requires a different approach than one with a high degree of motivation. You must know your people! The fundamental starting point is having a good understanding of human nature: needs, emotions, and motivation. You must know your employees' be, know and do attributes.

LEADER: You must have an honest understanding of who you are, what you know, and what you can do. Also, note that it is the followers, not the leader who determines if a leader is successfull. If a follower does noit trust or lacks confidence in his or her leader, then she will be uninspired. To be successful you have to convince your followers, not yourself or your supervisors, that you are worthy of being followed.

COMMUNICATION: You lead through two way communication. Much of it is non-verbal. For instance, when you "set the example," that communicates to your people that you would not ask them to perform anything

that you would not be willing to do. What and how you communicate either builds or harms the relationship between you and your employees.

SITUATION: All situations are different. What you do in one leadership situation will not always work in another situation. You must use your judgement to decide the best course of action and the leadership style needed for each situation. For example, you may need to confront an employee for inappropriate behavior, but the confrontation is too late or too early, too harsh or too weak, then the results may prove ineffective .

if you are a leader that can be trusted,then the people around you will learn to respect you. to be a good leader,there are things tht u must be, know, and do. these fall under the leadership framework:

BE a professional. BE a professional who possess good character traits. KNOW the four factors of leadership- follower, leader, communication, situation. KNOW yourself . KNOW human nature KNOW your job KNOW your organization. DO provide direction. DO implement. DO motivate.

The road to great leadership:

Inspire a shared vision - next, share your vision in words that can be understood by your followers.

Enable others to act - give them tools and methods to solve the problem.

Model the way - when the process gets tough, get your hands dirty. Boss tells others what to do... a leader shows it can be done.

Encourage the heart - share the glory with your followers' heart, keep the pains in your heart.

Have better perceptions of realtiy and are comfortable with it. Accept themselves and their own natures. Their lack artificiality. They focus on problems outside themselves and are concerned with basic issues and eternal questions. They like privacy and tend to get detached. Rely on their own development and continued growth. Appreciate the basic pleasures of life(do not take blessings for garnted). Have a deep feeling of kinship with others. They are deeply democratic and are not really aware of differences. Have strong ethical and moral standards. Are original and inventive, less constricted and fresher than others.

HYGEINE OR DISSATISFIERS: Working conditions. Policies and administrative practices. Salary and benefits. Supervision. Status. Job security. Fellow workers. Personal life.

MOTIVATORS OR SATISFIERS: Recognition. Achievement. Advancement Growth. Responsibility. Job challenge.

There are several factors that separate teams from groups. Roles and Responsibilities Within a group, individuals establish a set of behaviors called roles. These roles set expectations governing relationships. Roles often serve as source of confusion and conflict. While on the other hand, teams have a shared understanding on how to perform their role. These roles include: leader, facilitator, timekeeper, and recorder. Identity While teams have an identity, groups do not. It is almost impossible to establish the sense of cohesion that characterizes a team without this fundamental step. A team has a clear understanding about what constitutes the team's 'work' and why it is important. They can describe a picture of what the team needs to achieve, and the norms and values that will guide them.

Cohesion Teams have an esprit that shows a sense of bonding and camaraderie. Esprit is the spirit, soul, and state of mind of the team. It is the overall consciousness of the team that a person identifies with and feels a part of. Individuals begin using "we" more than "me." Facilitate Groups have a tendency to get bogged down with trivial issues. Ask yourself, "How much time gets wasted in meetings you attend?" Teams use facilitators to keep the team on the right path. Communication While members of a group are centered upon themselves, the team is committed to open communication. Team members feel they can state their opinions, thoughts, and feelings without fear. Listening is considered as important as speaking. Differences of opinion is valued and methods of managing conflict are understood. Through honest and caring feedback, members are aware of their strengths and weakness as team members. There is an atmosphere of trust and acceptance and a sense of community.

Flexibility Most groups are extremely rigid. Teams, however maintain a high level of flexibility, and they perform different task and maintenance functions as needed. The responsibility for team development and leadership is shared. The strengths of each member are identified and used. Morale Team members are enthusiastic about the work of the team and each person feels pride in being a member of the team. Team spirit is high. To be a successful team, the group must have a strong ability to produce results and a high degree of satisfaction in working with one another.

Character: Be a piece of the rock Charisma: The first impression can seal the deal. Commitment: It seperates doers from dreamers Communication: without it you travel alone Competence: if you build it they will come Courage: one person with courage is a majority Discernment: put an end to unsolved mysteries Focus: the sharper it is, the sharper you are Generosity: your candle loses nothing when it lights another Initiative: you wont leave home without it Listening: to connect with their hearts use your ears Passion: take this life and love it Positive attitude: if you believe you can, you can Problem solving: you cant let your problems be a problem Relationships: if you get along they will go along Resposibility: if you wont carry the ball you wont lead the team

Security: competence never compensates for insecurity Self-discipline: the first person you lead is you Servanthood: to get ahead, put others first Teachability: to keep leading, keep learning Vision: you can seize only what you can see.

1. Introduction 2. Ethical Leadership 3. Why Ethical Leadership? 4. Roles Of Ethical Leadership 5. Case In Point 6. Critique 7. Two Most Important Keys Of Leadership 8. Principal Of Leadership 9. Factors 10.Attribute 11.Characteristics 12.Quality Of Leadership