Business Ethics

Week 12 Lec 1

Recall…

Ethical Decision Making in Business

Ethical Issue Intensity

Individual factors Business Ethics Ethical

Organizational factors Evaluations and or

intentions Un-Ethical

Opportunity

Leadership and Ethics

“Radical changes require adequate authority. A man must have inner strength as well as influential

position. What he does must correspond with a higher truth”

A Situation!!! Bill church in his new job found working late into night to complete assignments. He realized the company did not want to bill clients for excessive hours worked and he wanted to become efficient. He looked for an advice from his colleague who advised that everyone “eats time’ so the group shows top results.

What Bill should do? Describe how he can resolve the dilemma? How could working long hours could be an ethical problem?

What do the leaders do?

Who are the leaders?

Business relationship requires:

Transactions and decisions Ethical choices and moral courage

What could be few situations that involve leadership business and ethical decisions?

What are essentials for becoming leaders?

Moral values Courage Credibility

Effective leadership guides the ethical and strategic integration and alignment of the internal organization with the external

environment

Leadership styles and

Ethical Decision Making

Six Styles (David Goleman) The coercive leader- demand instant obedience, focuses on achievement , initiative and self control. Effective style in crisis and turn around time , otherwise creates negative climate for organizational performance.

The authoritative leader- inspires employees to follow vision, facilitates change and creates positive performance climate

Six Styles (David Goleman) The Affilitative Leader – values people, their emotions, needs and relies on friendship and trust to promote flexibility, innovation and risk taking.

The democratic leader – relies on participation and team work to reach collaborative decisions. This style focuses on communication and creates positive climate for achieving results

Six Styles (David Goleman) The pacesetting leader – creates negative climate because of high standards he sets. This style works best for attaining quick results from highly motivated individuals who value achievement and take initiative

The coaching leader – builds positive climate by developing skills to foster long term success, delegates responsibility, and skillful in issuing challenging assignments

Which style do successful leaders use?

Transactional vs Transformational leadership

Transformational Leadership Communicate sense of mission , stimulate new ways of thinking as well as generate new learning experiences

They consider employee needs in conjunction with organizational needs

Stronger influence on co workers for ethical decisions and building ethical culture

Best suited for organizations having higher level of ethical commitment and strong stakeholder support for ethical culture

Transactional Leadership Focus on conduct and procedures being implemented

Their negotiations to achieve desired outcomes result in a dynamic relationship with subordinates in which reactions , conflict and crisis influence the relationship more than ethical concerns

Focus on achieving a negotiated level of performance including compliance with legal and ethical standards

As long as both employees and leaders find this exchange mutually beneficial , the relationship is like successful

Ethical Leadership

Ethical leadership is based on holistic thinking that embraces the complex and challenging issues that companies face on a daily basis

Ethical leaders need both knowledge and experience to make the right decision

Ethical leaders stick to their principles and if necessary ready to leave the organization if its corporate governance system is flawed that it is impossible to make right choice

Ethical Leaders have strong personal character

How this evolves?

Ethical reasoning or moral person???

Ethical Leaders Have a Passion to do Right

Passion – “glue that holds ethical concepts together’

Not only recognizing the importance of ethical behavior but also willingness to face challenges and make tough choice

Ethical Leaders are Proactive

Do not hang around waiting for ethical problems to arise

They anticipate, plan and act proactively to avoid potential ethical crisis

Ethical Leaders consider Stakeholder Interests

All – not just the one having economic impact on firm

What happens in real world?

Ethical Leaders are role models for the organization's vales

Leaders are primary influence in individual ethical behavior

Define and lead social, ethical, and competitive mission of organization

Actions should be aligned with words and values

Does this work for you?

Ethical Leaders are transparent and actively involved in organizational decision making

Transparency fosters openness, freedom to express ideas

How can this transparency be achieved?

Capable of Taking Holistic View

View ethical decision making a strategic tool

How and why?

Some Research Findings

Consequences of Moral Reasoning on Leadership (Turner et. al)

Findings: leaders with higher moral reasoning exhibited more transformational leadership behaviours

There was no significant difference between leaders with differing moral reasoning on their transactional leadership behaviours

Therefore, moral reasoning affects transformational but not transactional leadership behaviours

Schminke at al (2005) explore the relationship between a leader’s moral development and ethical climate.

The relationship between a leader and the ethical climate will be stronger when a leader demonstrates consistency between their level of moral development and their actions and conversely the relationship will be weaker when the leader demonstrates inconsistency between their moral development and their actions.

The relationship between a leader and the ethical climate in the organization will be stronger when the organization is younger compared to organizations in the later stages of the life cycle.

The Final Word

Inclusive Governance Define key relationships

Define Measure

Success and

reward

Change when required

Leadership

Effective Leadership is about laying foundations for the efficient and the

ethical conduct of business. An integrated view of ethics and economics

is logical and inevitable. What is deeply illogical is the separation of

values, reason and feeling. The inclusive approach offers leaders a

practical way of pursuing economic goals in a way that is calculated to inspire, loyalty, and ethical probity. Its is a

necessity not a luxury for the successful organization of tomorrow.

Class Exercise !!

Suggest specific ways that a leader could improve his or her

leadership competency and ethical style