Introduction

Many companies collapse due to ethical problems. In prior years, worlds

major companies such as Enron and Lehman Brothers, fallen from the grace. Both
companies had their own ethics code of conduct of conduct, however it declared
their bankruptcy and right after company executives were charged with criminal acts.
There are moral failures at the top. It has shown having an ethics code of conduct of
conduct does not enough to create ethical organization. This article will argue that
ethical leadership more important to creating an ethical organization than having an
ethical code to conduct for several reasons.
What is ethical leadership and ethics code of conduct?
Ethical leadership can be defined as the demonstration of normatively
appropriate conduct through personal actions and interpersonal relationships, and
the promotion of such conduct to followers through two-way communication,
reinforcement, and decision-making (Brown, Trevio, & Harrison, 2005, p. 120). The
concept of ethical leadership hard to constructed by words. We have to see it
through social interactions between leaders and followers. The core of being ethical
leader is being a moral person, and at the same time being a moral manager. Moral
person determined by personal trait, characteristics of a leader, such as intergrity,
honesty, trustworthiness, and leaders conducts. Insistence of doing the right thing
and fight against inappropriate and wrong acts at any time and under any kind of
situation will be seen by followers as ethical leader. There are several acts that
ethical leaders usually implement, such as change job characteristics to increase the
autonomy and job significance of employees, supporting them by placing them in the
right position and divsion, providing the opportunities to improve and develop their

job skills and realize their goals as well as empowering them to perform their job. A
research conducted to observed a large numbers of managers across industries. It
found eight common ethical values, which are hon esty, loyalty, dedication to
purpose, benevolence, social justice, strength of character, humility, and patience.
Meanwhile, ethics code of conduct, also called codes of conduct, business
principles, codes of ethics and corporate ethics statements, typically have open
guidelines describing desirable behavior and restrictive language prohibiting other
behaviors such as bribery and conflict of interest (Nijhof, Cludts, Fisscher, & Laan,
2003).
Why ethical leadership more important than ethical codes of conduct?
Some people may think ethics code of conduct of conduct is enough to create
ethical organization. Code of conduct does not enough to create ethical organzation
because of the nature of the relationship between leaders and followers. First
premise, leaders influence followers. They can affect followers lives either negatively
or positively. Second, leaders have authority to shape and change corporate culture
is another reason that ethical leadership is needed to create ethical organization.
Corporate culture shows the way they should perceive, feel and act in the
organization. There is a relation between corporate culture and ethical behaviour.
Although the culture may not be the sole determinant of the behaviors in
organizations, it certainly influences them. In every individual decision making,
culture also has influenced to shape the decision. Decision makers shape their
decision based on their preferences, not only individual preferences. Sometimes
decision makers ignored their preference and following other advice or tradition. In
short, people look up and around before make a decision. Some research had
demonstrated this. According to (Sinclair, 1993) the culture may even encourage

members to act in ways which are not necessarily consistent with individual or preexisting norms, but apparently induced by organizational membership. Third, in an
organization, ethics code of conduct might send wrong message ane lead to its
failture due to several causes, such as they are wrong and poorly communicated,
there is inconsistency between code ethics values and organizational culture. Wrong
and poorly communicated ethics of conduct can create a different interpretation on
every employee and may lead to a double standard of ethics.
Enrons case is tangible proof that ethics code of conduct would not work
properly without ethical leadership lead and guide its implementation. Enron was
lack of ethical leadership and it caused deprivation to thousands of employees,
trigger greater government regulation, and crippled consumer confidence of the
financial industry. Bethany McLean and Peter Elkind observed that there are
responsibility problems occured in Enron. The problems ran wide and deep. It seems
that leadership in Enron does not match with the companys ethics code of conduct
and values. Enron might have the great code of conducts, but there is inconsistency
between corporate culture, corporate system and code of conduct. Enrons policies
create a culture that you have to achieve high targets or you will be fired, it motivated
the employees rather do whatever it takes to achieve the target.
Therefore, only leaders with inner ethical maturity can build their followers
trust and influenced them to pursue an ethical living. In order to create ethical
organization, the company executives should have the inner ethical maturity to be
great role models for their employees. Leaders visible behavior has great value for
communicating assumptions and values to other members. When employees see
the leaders violating companys ethics code of conduct, it gives them a legitimation
that violating the ethics code of conduct is an okay thing to do. In short, leaders can

be cultured setter, what kind of actions are allowed or not allowed in the company.
Moral failure at the top, such as abuse power, exces privilege, deceit, inconsistent
treatment of internal and external constituencies, missplaced and broke loyalties,
and irresponsible behavior. It gives the employees a legitimation that violating the
ethics code of conduct is an okay thing to do by seeing their leaders doing so.
According to Artistotles ethics advice, the spirit of morality is awakened in the
individual only through the witness and conduct of a moral reason.
Conclusion
In conclusion, codes of conduct without ethical leadership supervise and
guide its implementation like a horse without no one riding it. Wrong and poorly
communicated codes, and inconsistency between the code, corporate culture and
how the leader behaves may lead to a double standard on how followers to perceive
the codes. Culture may not be the sole determinant of the behaviors in
organizations, it certainly influences them. Moreover, ethical way of living only can be
taught by leaders visible behavior. According to Artistotles ethics advice the spirit of
morality is awakened in the individual only through the witness and conduct of a
moral reason. The leaders also can be cultured setter, what kind of actions are
allowed or not allowed in the company, because people always looking up and
around before the act and decide.

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