Ethical Leadership

Introduction

An effective, influential and ethical leader is ‘an attractive, credible and legitimate role model who engages in normatively appropriate behaviour and makes the ethics message salient’ (Brown, et al. 2005: 130). Arguments for and against the statement that ethical leadership behaviour always has ‘positive effects on both individual and organizational effectiveness’ (Rubin, et al. 2010: 216-217) will be debated in the context of the Human Resource (“HR”) consulting industry. Although ethical leader behaviour is generally rewarded in some way, sometimes it may result in the leader being penalised for pushing normative boundaries.

The article from which the statement originates explains that the term ‘normatively appropriate conduct’, positive behaviour that followers believe leaders should espouse and enact, was used intentionally, to account for variations in ethics due to differing contexts and cultures (Brown, et al 2005: 120). Measuring such behaviour non-financially may utilise qualitative research methods, such as the Ethical Leadership Survey, the Perceived Leadership Integrity Scale or the Ethical Leadership Work Questionnaire (Yukl, et al. 2013). Financial methods may include costs incurred due to unethical behaviour or activities (Yukl, et al. 2013). Positive effects of ethical behaviour tend to be more difficult to quantify than the negative effects of ethical or unethical behaviour.

Arguments For

The statement is valid as ethical leadership behaviour and activities is generally a positive influence on overall organisational and individual behaviour and activities. Through role modelling and effective communication of ethics, leaders may instil a culture of ethical behaviour that is transmitted throughout the organisation (Rubin, et al. 2010). This is mirrored in the HR consulting industry, where ethical leadership is largely defined by individual leaders and should be constantly emphasised and embedded into the organisational culture (O’Mahoney 2011; Thomas et al. 2004). In the HR consulting industry, the most common form positive effects of ethical leadership is seen in is corporate social responsibility and corporate governance, which impacts all stakeholders. For example, PA Consulting is particularly intent on preventing bribery and details procedures to do so in its Code of Conduct, which is reviewed periodically (PA Consulting 2013). This ensures that a certain standard of ethical behaviour is adhered to throughout the company. However, compliance structures and systems are not effective if leadership does not follow them. An ethical leader is required to not only communicate ‘normatively appropriate conduct’, but consistently enact it as well.

Arguments Against

The other perspective of the statement is the view that ethical leadership behaviour may have negative effects on individual and organisational performance, and that unethical behaviour may have positive effects (Yukl, et al. 2013: 41). The issue of whistleblowing backlash is one negative effect of ethical leadership, where reporting or challenging unethical practices or structures result in being penalised or terminated (Yukl, et al. 2013: 41-42). Alternatively, unethical behaviour, such as fraud or bribery, may be rewarded in the short-term, especially if the organisational culture is tacitly accepts the practices (Thomas, et al. 2004; Yukl, et al. 2013). In the HR consulting industry, examples of such an incident is the involvement of some of McKinsey & Company’s top management in the Raj Rajaratnam insider trading scandal in 2011 (Hill 2011) or Monitor Group’s bankruptcy after being found to have done business with the Gaddafi regime in Libya (McCarty and Pettersson 2012). Additionally, the HR consulting industry is defined by interdependent and interconnected relationships between clients, the company and consultants, and this may result in conflicts of interest that impede the progress of ethical leadership, increasing the possibility of unintended ethical breaches (Donnelly 2011). It is, therefore, necessary for individuals and organisations to self-regulate behaviour and activities to avoid the inevitable negative effects of unethical leadership behaviour.

Conclusion

Ultimately, individual leaders should make the choice to practice ethical behaviour, including enacting qualities such as approachability, trustworthiness and humility (Zenger 2012), while following and role modelling the company Code of Conduct. An ethical leader will enhance the positive effects of such behaviour to translate into performance and profit.

References

Brown, M., Treviño, L., & Harrison, D. (2005), ‘Ethical leadership: A social learning perspective for construct development and testing’, Organizational Behavior And Human Decision Processes, 97(2), 117-134, PsycINFO, EBSCOhost, viewed 22 March 2013.

Donnelly, R. (2011), ‘The coalescence between synergies and conflicts of interest in a top consultancy firm: an analysis of the implications for consultants’ attitudes and behaviours’, Human Resource Management Journal, 21(1), 60-73, Business Source Complete, EBSCOhost, viewed 22 March 2013.

Hill, A. (2011) ‘Inside McKinsey’. The Financial Times [online] 25 November. available from <http://www.ft.com/cms/s/2/0d506e0e-1583-11e1-b9b8-00144feabdc0.html#axzz2OHV17nHq> [22 March 2013]

McCarty, D. and Pettersson, E. (2012) ‘Monitor Company Group LP files for Bankruptcy in Delaware’. Bloomberg News [online] 8 November. available from <http://www.businessweek.com/news/2012-11-07/monitor-company-group-lp-files-for-bankruptcy-in-delaware> [22 March 2013]

O’Mahoney, J. (2011), ‘Advisory Anxieties: Ethical Individualisation in the UK Consulting Industry’, Journal Of Business Ethics, 104(1), 101-113, Business Source Complete, EBSCOhost, viewed 22 March 2013.

PA Consulting (2013) Corporate Responsibility – PA Consulting Group [online] <http://www.paconsulting.com/about-us/preventing-bribery/> [22 March 2013]

Rubin, R., Dierdorff, E., and Brown, M. (2010), ‘Do Ethical Leaders Get Ahead? Exploring Ethical Leadership and Promotability’, Business Ethics Quarterly, 20(2), 215-236, Business Source Complete, EBSCOhost, viewed 21 March 2013.

Thomas, T., Schermerhorn Jr., J., and Dienhart, J. (2004), ‘Strategic leadership of ethical behavior in business’, Academy Of Management Executive, 18(2), 56-66, Business Source Complete, EBSCOhost, viewed 22 March 2013.

Yukl, G., Mahsud, R., Hassan, S., and Prussia, G. (2013), ‘An Improved Measure of Ethical Leadership’, Journal Of Leadership & Organizational Studies (Sage Publications Inc.), 20(1), 38-48, Business Source Complete, EBSCOhost, viewed 22 March 2013.

Zenger, J. (2012) ‘Ethics in leadership: The 8 rules to prevent misuse of corporate power’, Forbes.com [online] 20 June. available from <http://www.forbes.com/sites/jackzenger/2012/06/20/ethics-in-leadership-the-8-rules-to-protect-corporate-power/> [22 March 2013]

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