Ethical Leadership

1.0 LEADERSHIP and ETHICS

This blog emphasizes the significance of ethical leadership and its impact on organisational performance; with particular focus on the retail industry. The relevance of this subject lies in the results it produces; as one study showed that companies with consistent and clear values have been more profitable compared to those without moral responsibility. (Manisha 2006) Two theories of ethics (the deontological and teleological ethics) and an ethical leadership model (4 V model) will be used to buttress this point.

According to Rubin. et al (2010) ‘Ethical Leadership is 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’.  In essence, ethical leadership equates abiding by codes of conduct which leaders exhibit via communication and decisions they endorse for followers to emulate. However, ethical leadership concept has failed to evaluate the attitudes and individual differences in defining the actual behaviour of leaders. (Rubin et al, 2010)

Deontological ethics posits that the law should be the guiding rule for affirming ethical behaviour; so it is straightforward and supports uniformity. (Griseri and Seppala 2013) For instance; in 2014, the CEO of Tesco; Dave Lewis proclaimed Tesco overstatement of £263 profit. (Felsted and Oakley 2014). Since overstatement of profit opposes business regulations, Tesco is considered unethical but the CEO is justified dutiful/ethical. Pardey (2007) argues that this concept is rigid and not dynamic enough for life’s circumstances which are ever changing.

While teleology focuses on the outcome of decisions with the philosophy that the end justifies the means. (Rowe and Guerrero 2013). Due to the outcome of 11.5% decline in Tesco share price, the CEO’s action may not be justified teleological ethical since the overstatement was aimed at increasing investor value. Though teleology grades decisions made for the greater good as ethical, it has no specific decision-making approach. This means leaders would decide via intuition which can be biased, moreover, outcomes are often unpredictable and companies without clear ethical guidelines may be considered unreliable since the business-environment is maintained by law. (Pardey 2007).

These ethical theories are conflicting; so the Institute for Ethical Leadership (2015) proposed a framework which contains universal values; such as: transparency and integrity; that businesses could evaluate their ethical performance on. Also, Ethisphere (2015) uses the criteria below to measure ethical behaviours.

Furthermore, studies show that leaders with ethical behaviours can impact their organisations positively. (Rubin et al 2010). Certain factors such as: rewards, sanctions, communication and decision making can influence employees’ behaviour but to positively influence followers; leaders should have a strategy of securing trust by exhibiting virtues as earlier stated.(Monahan 2012). Ethical behaviours are linked to job satisfaction so followers can emulate same which could reduce workplace deviance and build a culture of commitment that enhances organisational effectiveness. (Michael and Marie 2010)