Chapter 3: MANAGERIAL ETHICS AND LEADERSHIP IN ORGANIZATION

Conttentts
3.0. Aims and Objectives
3.1. Introduction
3.2. The Concept of Leadership
3.3. Ethical Leadership
3.4. Moral Leadership
3.5. Value Based Leadership
3.6. Managing Ethics in Organization
3.7. Summary
3.8. Self-Test Questions
3.0. Aims and Objectives
At the end of this chapter students will be able to:
 Explain the Concept of Leadership
 Describe Ethical and moral Leadership
 Explain Value Based Leadership
 List out how to Manage organizational Ethics
3.1. Introduction
During the first fifty years of the twentieth century, as scholarly attention to leadership
intensified, ethics and values played no role in understanding effective leaders. Indeed, effective
leaders were viewed as capable of achieving effective outcomes. In turn, effective outcomes
were defined as attainment of organizational objectives, such as efficiency, low turnover, high
profitability, innovation, and client service. The absence of values and ethics in leadership
theories does not foster the exploration of certain interesting questions; questions like is the
desired outcome desirable? Are the tools used ethically sound? On what basis can we distinguish
a good leader from bad leader? Though most leadership theories have significant limitation, of
the many theories on leadership there are three types of leadership theories that are related to
values and ethics; Ethical leadership, moral leadership and value based leadership.
3.2. The Concept of Leadership
As a property, leadership is the set of characteristics attributed to those who are perceived to use
such influence successfully. As a process, leadership is the use of non coercive influence to
direct and coordinate the activities of group members to meet a goal. A Leader is one who goes
first and leads by example, so that others are motivated to follow him. This is a basic
requirement. To be a leader, a person must have a deep-rooted commitment to the goal that he
will strive to achieve it even if nobody follows him.
Leadership is also stated as the process of social influence in which one person can enlist the aid
and support of others in accomplishment of a common task.
Ethics and Leadership: Ethics and leadership go hand in hand. An ethical environment is
conducive to effective leadership and effective leadership is conducive to ethics. Ethics and
Leadership function as both cause and effect.
3.3. Ethical Leadership
One of the major responsibilities of leaders within an organization is to act ethically, make
ethical decisions and to promote ethics within the organization. However, in order to accomplish
this, one must first start by understanding the definition of ethics. At the most basic level, ethics
can be defined as deciding what is right in a particular situation and determines what ought to be.
Ethical leadership is described as people oriented, modeled through visible ethical actions and
traits, focused on setting ethical standards and accountability, based on broad ethical awareness,
and indicative of a strong decision making approach. Leadership is a particular type of human
relationship. Some hallmarks of this relationship are power and/or influence, vision, obligation,
and responsibility.
By understanding the ethics of this relationship, we gain a better understanding of leadership,
because some of the central issues in ethics are also the central issues of leadership. They include
the personal challenges of authenticity, self-interest, and self-discipline, and moral obligations
related to justice, duty, competence, and the greatest good.
Ethical leaders embody the purpose, vision, and values of the organization and of the
constituents within an understanding of ethical ideals. They connect the goals of the organization
with that of the internal employees and external stakeholders.
Leaders must provide a good role model by:
 being ethical and honest at all times;
 telling the truth; don’t hide or manipulate information
 admitting failure and not trying to cover it up
 communicating shared ethical values to employees through symbols, stories, and slogans
 rewarding employees who behave ethically and punish those who do not
 Protecting employees (whistleblowers) who bring to light unethical behaviors or raise
ethical issues.

Ten Principles of ethical leaders:

 treat all employees as unique, valuable individuals;
 support each employees freedom, growth and development;
 communicate to employees by name with respect;
 model and encourage a balanced life of good work and rest;
 honor and respect employee families;
 protect employees' life, safety and health;
 create a working environment free of sexual harassment;
 be fair and just in financial matters;
 communicate honestly and truthfully; and
 Cultivate a positive attitude towards others and their accomplishments.

3.4. Moral Leadership

Generally speaking, leadership is an achievement word that indicates the success in moving
forward a group towards a goal; a goal that can be evil or good. But in moral leadership the
leader questions the morality and acceptability of goals.
Moral leadership is to use morally acceptable methods to motivate groups to move towards
morally desirable ends. Thus, moral leaders are people who successfully move a group towards
morally valuable goals. Moral leaders are defined as those who have a positive, lasting effect or
influence on others and/or the world (Roepke, 1995).
Benefits of moral leadership:
 employee satisfaction, higher morale;
 better customer satisfaction;
 employee retention;
 enhanced workplace trust;
 cooperation;
 innovation; and
 Money is saved from costs associated with misconduct and surveillance to prevent it.
3.5. Value Based Leadership
The value based view of leadership takes value as a central part of leadership. This view
emphasizes the description of values and the causal role they play in determining desired
outcomes. The argument is that if one wishes to understand how the outcome emerged, one must
understand also the values of the leaders and followers. Effective and value based leadership has
two features. First their desire to serve to be a servant leader and second, leading by example;
everything the leader says or does sends a message, sets a tone, or teaches people what to do or
not to do.
The four principles of value -based leadership:
i. Self-reflection: it is a trait required for a person to identify and evaluate his or her fundamental
values. A person must be aware of how his or her experiences, education, priorities, beliefs, and
values affect how he or she makes decisions, leads others, and handles conflict.
ii. Balance: refers to a person’s ability to view a situation from different perspectives. A person
should remain open minded and consider all opinions before making decisions or evaluating a
situation. This trait also means to achieve a healthy work/life balance example for others to
follow.
iii. Self-confidence: is essential for leaders to truly believe in themselves. Leaders should be able
to identify areas of strength and weakness while continuing to improve their abilities. Leaders
with self-confidence are able to ask for help when needed and use their strengths to help others.
iv. Humility: is a trait that keeps a person grounded and keeps life in perspective. Humility
supports a person’s ability to respect others and value others’ opinions. A person should never
assume that he or she knows more or knows what is best; rather, a person should remain humble
in his or her assessment of the situation.
Leaders Must “Walk the Talk”
 define and communicate the values that guide the organization’s decisions and actions
  build a shared understanding of what the organization is about and how it should
operate;
 build and maintain the organization’s culture;
 model the behavior you expect from the organization “Catch someone doing something
right;” and remember that with rights, you also have responsibility.
 Characteristics of Ethical or value based Leaders:
 articulate and embody the purpose and values of the organization;
 focus on organizational success rather than on personal ego;
 find the best people and develop them;
 create a living conversation about ethics, values and the creation of value for
stakeholders;
 take a charitable understanding of others’ values;
 know the limits of the values and ethical principles they live;
 frame actions in ethical terms; and
 connect the basic value proposition to stakeholder support and societal legitimacy.

The character and practice of value based leadership

Characteristics Practices
 People oriented
 Cares about people
 Treat people with respect
 Modeled through visible ethical actions and traits
 Serves as role model of ethical conduct
 Consistent and predictable
 Focused on setting ethical standards and accountability
 Does not tolerate ethical lapses
 Practices value based management
 Have broad ethical awareness  Serves the greater good
 Acknowledges interests of multiple stakeholders
 Uses power to serve others  Relies on internal moral standards to satisfy organization
and societal interest.
“A leadership strategy without ethical clarity produces moral and economic
bankruptcy!”(Donahue, 2006).
3.6. Managing Ethics In Organization
Managing ethics is a coherent approach to build an ethical culture in an organization. It is
directed in shaping a values-based organization and actively managing risk of ethical
misconduct, such as theft, fraud, corruption, dishonesty, disrespect, or lack of transparency.
Organizations to guide decisions and behavior in their workplaces can manage ethics by
establishing ethics management program includes extensive training and evaluating, depending
on the organization. A corporate ethics program is made up of values, policies and activities
which affect the propriety of organization behaviors. Balancing competing values and
reconciling them is a basic purpose of an ethics management program. Employees need more
practical tools and information to understand their values and how to manage them.
Managing ethics in organization means creating value based organization, managing risk of
ethical misconduct and guiding decisions and behaviors at work place.
Benefits of Managing Ethics in Organizations
There are numerous benefits in formally managing ethics in organization. Some of them are:
 develop awareness and sensitivity to ethical issues;
 establish required operating values and behaviors;
 align organizational behaviors with operating values;
 integrate ethical guidelines to decision making;
 structure mechanisms to resolving ethical issues;
 establish organizational roles to manage ethics; and
 facilitate the ongoing evaluation.
Key Elements of Organizational Ethics Management
i. Recognize that managing ethics is a process: Ethics is a matter of values and associated
behaviors. Values are distinguished through the process of ongoing reflection. Therefore, ethics
programs may seem more process-oriented. However, the most important aspect from an ethics
management program is the process of reflection and dialogue that produces these deliverables.
ii. Ethics management is accomplishing preferred behaviors in the workplace: As with any
management practice, the most important outcome is behaviors preferred by the organization.
The best of ethical values and intentions are relatively meaningless unless they generate fair and
just behaviors in the workplace. That's why practices that generate lists of ethical values, or
codes of ethics, must also generate policies, procedures and training that translate those values to
appropriate behaviors.
iii.Make ethics decisions in groups, and make decisions public, as appropriate: This usually
produces better quality decisions by including diverse interests and perspectives, and increases
the credibility of the decision process and outcome by reducing suspicion of unfair bias.
iv.Integrate Ethics management with other management practices: When developing the
values statement during strategic planning, include ethical values preferred in the workplace.
When developing human resource policies, reflect on what ethical values you'd like to be most
prominent in the organization's culture and then design policies to produce these behaviors.
v. Use crs-functional teams when developing and implementing the ethics management
inorganization: It’s vital that the organization’s employees feel a sense of participation and
ownership in the program if they are to adhere to its ethical values. Therefore, include employees
in developing and operating the program.
Ethical Decision Making
Ethical decision-making refers to the process of evaluating and choosing among alternatives in a
manner consistent with ethical principles. In making ethical decisions, it is necessary to perceive
and eliminate unethical options and select the best ethical alternative.
Ethical decisions are decisions that are consistent with one’s personal or organizational value
system. As a leader, it is important to be aware of the messages you are sending when you make
decisions. Making ethical decisions requires the ability to make distinctions between competing
choices. Principled decision making is based on six values that cut across time, culture, politics,
religion, ethnicity and other human division. These values, called the six pillars of character, are
trustworthiness, respect, responsibility, fairness, caring and good citizenship responsible
participation in society. The six pillars are the basis of ethically defensible decisions and the
foundation of well lived lives.
The six pillars of character
1. Trustworthiness
Trustworthiness is the quality of professionals which manifest in the form of one’s honesty,
reliability, dependability, fidelity, constancy, responsibility and credibility to the public. When
others trust us, they give us greater leeway because they feel we don’t need monitoring to assure
that we’ll meet our obligations. They believe in us and hold us in higher esteem. That’s
satisfying. At the same time, we must constantly live up to the expectations of others and refrain
from even small lies or self-serving behavior that can quickly destroy our relationships. Simply
refraining from deception is not enough. Trustworthiness is the most complicated of the six core
ethical values and concerns a variety of qualities like honesty, integrity, reliability and loyalty.
a. Honesty
It refers to the uprightness, morality, trustworthiness, goodness, scrupulousness, decency,
rectitude, righteousness, fairness, reliability and honor of a good professional. There is no more
fundamental ethical value than honesty. We associate honesty with people of honor, and we
admire and rely on those who are honest. But honesty is a broader concept than many may
realize. It involves both communications and conduct. Honesty in communications is expressing
the truth as best we know it and not conveying it in a way likely to mislead or deceive.
There are three dimensions of honesty:
Truthfulness: Truthfulness is presenting the facts to the best of our knowledge. Intent is the
crucial distinction between truthfulness and truth itself. Being wrong is not the same thing as
lying, although honest mistakes can still damage trust insofar as they may show sloppy
judgment.
Sincerity: Sincerity is genuineness, being without trickery or duplicity. It precludes all acts,
including half truths, out of context statements, and even silence, that are intended to create
beliefs or leave impressions that are untrue or misleading.
Candor: In relationships involving legitimate expectations of trust, honesty may also require
candor, forthrightness and frankness, imposing the obligation to volunteer information that
another person needs to know.
Honesty in conduct is playing by the rules, without stealing, cheating, fraud, subterfuge and other
trickery.
b. Integrity
The word integrity comes from the same Latin root as integer, or whole number. Like a whole
number, a person of integrity is undivided and complete. This means that the ethical person acts
according to his beliefs, not according to expediency. He is also consistent. There is no
difference in the way he makes decisions from situation to situation; his principles don’t vary at
work or at home, in public or alone.
Because, he must know who he is and what he values, the person of integrity takes time for self
reflection, so that the events, crises and seeming necessities of the day do not determine the
course of his moral life. He stays in control. He may be courteous, even charming, but he is
never duplicitous. He never demeans himself with obsequious behavior toward those he thinks
might do his some good. He is trusted because you know who he is: what you see is what you
get. People without integrity are called "hypocrites" or "two faced."
c. Reliability (Promise-Keeping)
When we make promises or other commitments that create a legitimate basis for another person
to rely upon us, we undertake special moral duties. We accept the responsibility of making all
reasonable efforts to fulfill our commitments. Because promise keeping is such an important
aspect of trustworthiness, it is important to:
i. Avoid bad-faith excuses. Interpret your promises fairly and honestly. Don’t try to rationalize
non compliance.
ii. Avoid unwise commitments. Before making a promise consider carefully whether you are
willing and likely to keep it. Think about unknown or future events that could make it difficult,
undesirable or impossible. Sometimes, all we can promise is to do our best.
iii. Avoid unclear commitments. Be sure that, when you make a promise, the other person
understands what you are committing to do.
d. Loyalty
Some relationships; husband-wife, employer-employee, citizen-country; create an expectation of
allegiance, fidelity and devotion. Loyalty is a responsibility to promote the interests of certain
people, organizations or affiliations. This duty goes beyond the normal obligation we all share to
care for others.
i. Limitations to loyalty: Loyalty is a tricky thing. Friends, employers, co-workers and others
may demand that we rank their interests above ethical considerations. But no one has the right to
ask another to sacrifice ethical principles in the name of a special relationship. Indeed, one
forfeits a claim of loyalty when he or she asks so high a price for maintaining the relationship.
ii. Prioritizing loyalties: So many individuals and groups make loyalty claims on us that we
must rank our loyalty obligations in some rational fashion. For example, it’s perfectly
reasonable, and ethical, to look out for the interests of our children, parents and spouses even if
we have to subordinate our obligations to other children, neighbors or co-workers in doing so.
iii. Safeguarding confidential information: Loyalty requires us to keep some information
confidential. When keeping a secret breaks the law or threatens others, however, we may have a
responsibility to blow the whistle.
iv.Avoiding conflicting interests: Employees and public servants have a duty to make all
professional decisions on merit, unimpeded by conflicting personal interests. They owe ultimate
loyalty to the public.
2. Respect
People have to be respected and everyone has a right to be treated with dignity. We certainly
have no ethical duty to hold all people in high esteem, but we should treat everyone with respect,
regardless of who they are and what they have done. We have a responsibility to be the best we
can be in all situations, even when dealing with unpleasant people.
The Golden Rule “do unto others as you would have them do unto you” nicely illustrates the
pillar of respect. Respect prohibits violence, humiliation, manipulation and exploitation. It
reflects notions such as civility, courtesy, decency, dignity, autonomy, tolerance and acceptance.
a. Civility, Courtesy and Decency
A respectful person is an attentive listener; although his patience with the boorish need not be
endless respect works both ways. Nevertheless, the respectful person treats others with
consideration, and doesn’t resort to intimidation, coercion or violence except in extraordinary
and limited situations to defend others, teach discipline, maintain order or achieve social justice.
Punishment is used in moderation and only to advance important social goals and purposes.
b. Dignity and Autonomy
People need to make informed decisions about their own lives. Don’t withhold the information
they need to do so. Allow all individuals, including maturing children, to have a say in the
decisions that affect them.
c. Tolerance and Acceptance
Accept individual differences and beliefs without prejudice. Judge others only on their character,
abilities and conduct.
3. Responsibility
Life is full of choices, being responsible means being in charge of our choices and thus our lives.
It means being accountable for what we do and who we are. It also means recognizing that our
actions matter and we are morally on the hook for the consequences. Our capacity to reason and
our freedom to choose make us morally autonomous and, therefore, answerable for whether we
honor or degrade the ethical principles that give life meaning and purpose. Ethical people show
responsibility by being accountable, pursuing excellence and exercising self-restraint. They
exhibit the ability to respond to expectations.
a. Accountability
An accountable, person is not a victim and doesn’t shift blame or claim credit for the work of
others. He considers the likely consequences of his behavior and associations. He recognizes the
common complicity in the triumph of evil when nothing is done to stop it. He leads by example.
b. Pursuit of excellence
The pursuit of excellence has an ethical dimension when others rely upon our knowledge, ability
or willingness to perform tasks safely and effectively.
c. Diligence
It is hardly unethical to make mistakes or to be less than excellent, but there is a moral obligation
to do one’s best, to be diligent, reliable, careful, prepared and informed.
d. Perseverance
Responsible people finish what they start, overcoming rather than surrendering to obstacles.
They avoid excuses such as, "That’s just the way I am," or "It’s not my job," or "It was legal."
e. Continuous Improvement
Responsible people always look for ways to do their work better.
f. Self-Restraint
Responsible people exercise self-control, restraining passions and appetites such as lust, hatred,
gluttony, greed and fear for the sake of longer-term vision and better judgment. They delay
gratification if necessary and never feel it’s necessary to win at any cost. They realize they are as
they choose to be, every day.
4. Fairness
What is fairness? Most would agree it involves issues of equality, impartiality, proportionality,
openness and due process. Most would agree that it is unfair to handle similar matters
inconsistently. Most would agree that it is unfair to impose punishment that is not commensurate
with the offense. The basic concept seems simple, even intuitive, yet applying it in daily life can
be surprisingly difficult. Fairness is another tricky concept, probably more subject to legitimate
debate and interpretation than any other ethical value. Disagreeing parties tend to maintain that
there is only one fair position (their own, naturally). But essentially fairness implies adherence to
a balanced standard of justice without relevance to one’s own feelings or inclinations.
a. Process
Process is crucial in settling disputes, both to reach the fairest results and to minimize
complaints. A fair person scrupulously employs open and impartial processes for gathering and
evaluating information necessary to make decisions. Fair people do not wait for the truth to come
to them; they seek out relevant information and conflicting perspectives before making important
judgments.
b. Impartiality
Decisions should be made without favoritism or prejudice.
c. Equity
An individual, company or society should correct mistakes, promptly and voluntarily. It is
improper to take advantage of the weakness or ignorance of others.
5. Caring
If you existed alone in the universe, there would be no need for ethics and your heart could be a
cold, hard stone. Caring is the heart of ethics, and ethical decision-making. It is scarcely possible
to be truly ethical and yet unconcerned with the welfare of others. That is because ethics is
ultimately about good relations with other people. It is easier to love humanity than to love
people. People who consider themselves ethical and yet lack a caring attitude toward individuals
tend to treat others as instruments of their will. They rarely feel an obligation to be honest, loyal,
fair or respectful except insofar as it is prudent for them to do so, a disposition which itself hints
at duplicity and a lack of integrity. A person who really cares feels an emotional response to both
the pain and pleasure of others. Of course, sometimes we must hurt those we truly care for, and
some decisions, while quite ethical, do cause pain. But one should consciously cause no more
harm than is reasonably necessary to perform one’s duties.
The highest form of caring is the honest expression of benevolence, or altruism. This is not to be
confused with strategic charity. Gifts to charities to advance personal interests are a fraud. That
is, they aren’t gifts at all. They’re investments or tax write-offs.
6. Good Citizenship
Citizenship includes civic virtues and duties that prescribe how we ought to behave as part of a
community. The good citizen knows the laws and obeys them, yes, but that’s not all. Volunteers
and stays informed on the issues of the day, the better to execute duties and privileges as a
member of a self-governing democratic society. Such a commitment to the public sphere can
have many expressions, such as conserving resources, recycling, using public transportation and
cleaning up litter. The good citizen gives more than he takes.
Steps in the Ethical Decision-Making Process
Here are a few key points regarding ethical decisions. Responsible practice requires that you:
 base your actions on informed, sound, and responsible judgment
 consult with colleagues or seek supervision
 keep your knowledge and skills current
 engage in a continual process of self-examination
 remain open
 In making ethical decisions, as much as possible and when appropriate, include your
customer in this ethical decision-making process.
 Customer needs enough information about the therapeutic process to be able to make
informed choices.
 The informed consent process begins with the intake interview and continues for the
 duration of the therapeutic relationship.
 The aim is to involve customers in a collaborative partnership.
 The key is to make ethical decisions with customers, not simply for them. Get clients
actively involved in the process to the extent possible and appropriate. Respecting the
autonomy of your clients implies that you do not decide for clients, nor do you foster
dependent attitudes and behaviors.
Steps in making ethical decisions:
Ethical decision making should be a collaborative process between customer and civil servant,
rather than a civil servant making decisions for the customer. The steps taken may not always
follow the same order shown and steps may be repeated several times in the process. Given the
fact that ethical dilemmas may not always be readily resolved through the use of codes of ethics,
it might be useful to have a framework in which to analyze and make ethical decisions. The
following ethical decision-making model comes from the work of Corey et al. (1998).
Step 1: Identify the problem.
Step 2: Identify the potential issues involved.
Step 3: Review relevant ethical guidelines.
Step 4: Know relevant laws and regulations.
Step 5: Obtain Consultation.
Step 6: Consider possible and probable courses of action.
Step 7: List the consequences of the probable courses of action.
Step 8: Decide on what appears to be the best course of action.
It is extremely important that you keep your immediate supervisor and all involved parties
informed during this process. After you have made your decision, take some time to reflect on
the process and to review what you have learned with a trusted, customer or colleague.
3.7. Session Summary
Ethics programs help to sensitize employees to potential legal and ethical issues within their
work environments. To promote ethical and legal conduct, organizations should develop
ethics programs by establishing, communicating, and monitoring ethical values and legal
requirements that characterize the firms’ history, culture, industry, and operating
environment. Without such programs and such uniform standards and policies of conduct, it
is difficult for employees to determine what behaviors a company deems acceptable.
“Ethics must begin at the top of an organization. It is a leadership issue and the
chief executive must set the example!” (Hennessey, 1933)

3.7. Self-Test Questions

1. Describe the the link of ethics and leadership?
2. What are the elements of organization ethics? Describe them?
3. What are the steps in making ethical decisions:
4. Explain six pillars of characters