ETHICAL LEADERSHIP

Introduction:
Leadership is essential in all areas of management and its importance is immense in
ethics.
There are four important variables in leadership, namely
lithe leader,
lithe follower
lithe leadership skills
lithe situation".
There is a canonical interpretation of leadership consisting of the above four
variables. There are three ways to connect values, ethics and leadership. The relationship
among the four variables can be illustrated through the following model.
Leader
Leadership
Skills
Followers Situation

Types of leadership
There are three types of leadership, namely
 amoral leadership,
 value-based leadership and
 ethical leadership.

Amoral leadership:
In the early stages, ethics and values were not attached to leadership. Effective leaders
were considered as capable of achieving the organizational objectives such as efficiency,
high profit, innovation and good customer care. For example both Hitler and Gandhi
were considered as effective leaders.
Amoral leadership is the absence of ethics and values in leadership. Is the outcome
desirable? Are the tools ethical? How can we distinguish between a good leader and bad
leader? These are all some questions to be answered.
Amoral leadership is not accepted by ethical and value-based societies.

Value-based leadership:
This type of leadership is bridging the gap between ethics, values and leadership. Values
are taken as the basis of leadership. Right type of values like honesty and trust should be
taken as tools of achieving the desired rules. The means should justify the ends. There are
a number of theories related to value-based leaders-

Bennis (1989) has suggested that there are five ingredients to leadership, namely,
integrity, dedication, magnanimity, openness and creativity.
Covey (1990) have given one P and eight 5s:- people, self, style, skills, shared vision,
structure and systems, strategy and streams.
Bennis (1985) and Nanus (1997) have recommended the five key skills ethical for value-
based leadership namely, acceptance, forgiveness, courtesy, trust and self-confidence.
In many organisations, the followers want an honest leader. The role of situation in
determining the outcome is not accepted in modern days. One should follow values
irrespective of the situation is the popular opinion.

Ethical leadership:
According to John William Gardner, an ethical leader (1990, on Leadership, New York:
Free Press), should have the following minimum objectives:
(a) Releasing the human potentials.
(b) Balancing the individual needs with the organisational needs.
(c) Defending the fundamental values of the organisation.
(d) Instilling a sense of initiative and responsibility in individuals.

The vision of the leader should be based on moral strings. Leadership should be linked to
collective purpose. The collective purpose should be positive, promotive and progressive.
Ethical leadership should engage and satisfy the motives of followers.

The following are the important tasks of the ethical leadership:

(a) The ethical leader is viewing leadership itself as a fully task. He uses sound moral
judgement.
(b) The ethical leader articulates the purpose and values of the organisation. It is not the
question of preaching but practicing.
(c) The ethical leader should be able to connect ethics with business. He should be able to
convince the stakeholders the importance of ethics in business. He should be able to
speak about ethics, values and the creation of value for stakeholders. A mere statement of
values cannot be an ethical problem. The misconception that values and ethics are soft
should be removed from the minds of the people.
(d) The ethical leader should be able to find the best people and develop them. There is a
moral imperative in developing people so that they can develop a value for themselves
and others.

According to Charles Handy, the world can be improved through business. The business
can act as a social agency. Business is an active agent of progress by creating new
products, spreading technology, increasing productivity, enhancing quality and
effectively improving service.
Philosopher Henry David Thoreau has said that man has the unquestionable ability to
elevate his life by conscious efforts.

Ethical leadership should contain some basic characteristics:

(a) People oriented in the sense caring about people and treating people with respect.
(b) Visible ethical actions by serving as a role of ethical conduct and behaviour.
(c) Ethical awareness taking the interests of multiple stakeholders.
(d) Neutral and impartial using fairness in management.
Ethical leaders act as transformational leaders. A transformational leader is
different from transactional leader in the following ways:
 Firstlv. regarding relations to others, the transactional leader is independent while
a transformational leader is interdependent.
 Secondlv. a transactional leader is trying to protect individual rights while a
transformational leader is meeting social obligations.
 Thirdly. the transactional leader has pragmatic goals where as a transformational
leader has idealistic goals.
 Fourthly. the transactional leader has a teleological orientation, namely ends
justify means. The transformational leader has a deontological orientation, namely
means justify ends.
 Fifthly, social contract is the behavioural strategy of transactional leadership.
Cultivation of personal virtues and empowerment of others is the behavioural
strategy of transformational leadership.
 Lastly. the nature of ethics of transactional leadership is to emphasis on purpose
and on particulars.

On the other hand, the nature of ethics of transformational leadership is to emphasis on

duty and universals.

Strategies of ethical leaders to make ethics and profits work together:

(1) In a modern society, there is sufficient room for ethical living. Crimes and cheating
are the reflection of an unethical society. Power and chance dominate in an unethical
society. In an ethical society both power and chance cannot be misused.
(2) The general object of morality is to contribute to betterment and not deterioration.
According to philosopher Thomas Hobbes, the general human condition creates anxiety,
violence and constant danger. By enforcement of social order, the human beings can be
happy and peaceful.
Aristotle and John Stuart Mill strongly believed that individuals should be given the
opportunity to lead a well-structured and happy life.
(3) Business influences the economic activities of a nation. When illegal practices prevail
like black market, unfair practices and high level of price rise, these are bound to create
inequalities.
Inequalities lead to further inequalities in terms of assets and opportunities. Ethical
practices can avoid this type of situation.
(4) When a society is demanding unethical practices the business should not encourage
these practices. Ethical business practices can enable the society to develop ethical
standards. If fraudulent practices are not followed in business, it is possible for the
society to develop and follow only ethical behaviour. Ethical society model and ethical
business model can go hand in hand in achieving an ultimate ethical society.
(5) Building trust between companies and stakeholders is an ethical conduct. Fair
treatment and mutual respect promote trust. Trust and reciprocal of trust are essentially
ethical acts.
As pointed out by Hosmer the expectation of loss, if trust is broken, will be much greater
than the gain if trust is maintained.
Trust should improve the willing cooperation of different parties. If trust is more the
business cost will be lesser. If adequate trust is not prevailing co-operation can be sought
under a system of formal rules and regulations subjected to negotiation, litigation and
enforcement.

The development of trust indicates the development of ethics in any society. Ethical
values can promote trust. Trust can be promoted by some good ethical acts like fair
treatment, justice in dealings, honesty in negotiations and transparency of management.
Promise-keeping and an excellent customer care promote trust building. Above all,
competence, good business practices and professionalism build trust. All these are ethical
values converted in terms of actions. Ethics should be used to remove bad management
practices.
Fear and arrogance affect the trust. An employee or customer with fear cannot develop
trust.
Fear being a negative emotion can reduce the efficiency and effectiveness. Similarly
arrogance reveals a lack of respect for others. For example, an increase in market share
may lead to feel a person that he is superior to others. This negative attitude also leads to
the destruction of trust.
(6) A people-oriented approach is a practical approach removing all the barriers related to
powerbased approach. According to Bartlett and Ghoshal, "corporate leaders found that
when people in the organization clearly understand corporate objectives, they measure
their own performance against those objectives".
Empowered employees will become ethical employees.

Jack Welch the former CEOof General Electric says:

"Good leaders are open. They go up, down and around the organisation to reach people.
They are informal. They are straight with people. They never get bored telling their story.
Real communication takes countless hours of eyeball-to-eyeball, back and forth. It means
more listening than talking ... It must be absolutely relentless".
Open and personal communications require trust.
(7) Justice is reflected in terms of fairness. Fair deal to customers and employees is an
ethical act.
This fair act breeds loyalty both from the customers and employees. In a person-oriented
and knowledge-based business fair practices are essential to prove the ethical base of
business. This fair practice will enlarge the size of market and enhance the profitability of
business.
The core values of many well-known companies reflect a deep concern for the customers.
For example, Johnson and Johnson says:
"We believe our first responsibility is to the doctors, nurses and patients, to mothers and
fathers and all others who use our products and services. In meeting their needs
everything we do must be of high quality. We must constantly strive to reduce our costs
in order to maintain reasonable prices. Customers' orders must be serviced promptly and
accurately. Our suppliers and distributors must have an opportunity to make a fair profit".
When the companies follow ethical principles, people in a society are happier because
they are not exploited as consumers, investors or employees.
Ethical practices for the benefit of customers:
(a) Customers should have right information which is complete in nature. For example,
information about food nutrition is beneficial to people.
(b) Fair prices for goods and services.
(c) Good quality of goods and services.

Ethical practices for emplovees:

(a) Fair wages.
(b) Good working conditions.
(c) Recognition for good work.
(d) Required counseling.
(e) Sufficient training related to the job.

Conclusion:
An ethical leader in business can lead the business to achieve success both in business
and ethics.There is a mistaken notion that ethics cannot be practiced in business. In
reality, a good ethical approach can enhance the profitability of business.

Questions
Section 'A'
(1) What is ethical leadership?
(2) Define amoral leadership.
(3) What is value-based leadership?
Section 'B'
(1) Discussthe strategies of ethical leaders
(2) Discussthe importance of ethical leadership in modern times.
Section 'c'
(1) Examine the issues connected with good ethical leadership in modern global business.