BA 310 Mod 7 Ch 5 Ethical Leadership and Corporate Governance Objectives 1 Define ethical leadership 2 Distinguish between transformational leadership and transactional leadership 3 Describe the transformation of a moral person to an ethical leader citing examples of leadership styles 4 Define corporate governance and the role of ethics in corporate governance matters 5 Describe the purpose of the board of directors and the core ethical values that should guide them 6 Identify some of the decisions made by the board of directors 1 ethical leadership demonstration of normatively appropriate conduct through personal actions and interpersonal relationship and the promotion of such conduct to followers through two way communication reinforcement and decision making A leadership strategy without ethical clarity produces moral and economic bankruptcy Bill Dunahue Ethical leadership is the driving force for a firm to have a positive ethical climate with its employees With a positive ethical climate employees have a supportive work environment which leads to higher commitment and job satisfaction of the employees Ethical leadership at the top of the organization does trickle down to the lower organizational levels of the firm Positively impacts the perception of top management effectiveness Positive influence on the level of subordinates optimism about their own contributions to the firm Ethical leaders are those who are attractive are credible and are legitimate role models to their subordinates 2 Leadership styles Transformational Leadership Focused on developing a long term vision for the company Based on inspirational motivation idealized influence individualized consideration and intellectual stimulation It is argued that ethical leadership is transformational Examples Nelson Mandela Franklin Roosevelt MKL Mother Teresa Walt Disney Principles of Ethical Power Purpose long term vision determines means to implement the ethical vision Perspective make decisions based on prudence and justice Patience understand there will be roadblocks to implementing the ethical vision Persistence remain strong to commitments regardless of setbacks Ethical Values Have an organic and interdependent view of external events Moral altruistic motives are supported by the deontological philosophical frameworks means or process justifies the ends Focus on social obligations Develop idealistic goals Has a very strong positive ethical effect on the firm More effective style in which to implement an ethical vision Actions of an authentic transformational leader Influence employees by presenting long term ethical vision Inspire and foster commitment of the employees instead of trying to control them Set the ethical standards by being a role model Foster intellectual stimulation of the employees Develop clarity and provide meaning to the goals and expectations of the Demonstrate confidence in the ability of the employees to achieve their employees self actualization goals Use intrinsic motivation to empower the employees Develop and maintain collective identity among the employees 1 BA 310 Mod 7 Ch 5 Ethical Leadership and Corporate Governance Transactional Leadership Based on the assumption that the interaction between the leader and the subordinate is based on the mutual benefit of a transaction between the two parties Focus on operational and routine activities within the firm Allocate resources Monitor the activities of the employees Direct employees to achieve the firm s goals and objectives It is argued that this is more of a managership in which control is used to protect the status quo of the firm Focus on control issues instead of influencing the values and ethical beliefs of the employees Use contingent rewards and management by exception to manage employees contingent rewards based on an agreement between the leader and the employee that if certain tasks are accomplished certain rewards will be given to the employee management by exception the concept that the leader will become involved in issues only if some extraordinary events have occurred that need the attention of the leader Due to the compliance nature of transactional leadership this type of leadership does not support an ethical commitment Leaders perceive employees to be programmed robots Control system forces strict compliance that could be counter to the dignified treatment of the employees Transactional leaders can use standard setting performance appraisal and rewards and punishment to support ethical behaviors Ethical Values Have an independent view of external events Mutual altruistic motives are supported by teleological frameworks end or results justifies the means Focus on the individual obligations Develop pragmatic goals Examples George HW Bush Bear Bryant Mitt Romney Nancy Pelosi Do not intend to change the world but want to be extremely competent and the best at whatever task was put before them Servant Leadership Developed by Robert Greenleaf Characterized by Altruistic calling Emotional healing Wisdom Persuasive mapping Organizational stewardship Characteristics Listening Empathy Healing Awareness Persuasion Conceptualization Foresight Stewardship Building community Commitment to the growth of people Questions related to to moral problems What is duty Recognition of Moral Problems What is right Application of Moral Reasoning What is integrity Possession of Moral Courage Leaders who are ethical stewards are motivated by virtues values and the needs of society 2 BA 310 Mod 7 Ch 5 Ethical Leadership and Corporate Governance 3 The Transformation from a Moral Person to Ethical Leader Moral Person Traits Behaviors Integrity Trustworthiness Honesty Stable and consistent over time Do the right thing Being open and approachable Be consistent with what managers say Concern for people Personal Morality Moral Manager Role Modeling through Visible Action Rewards and Discipline Decision Making Hold on to values Concern for society Objective Fair Follow ethical decision rules Communicating and ethics and Values Transfer of moral value within the moral manager to those he she interacts with is based on how the moral manager is able to communicate the ethical values to others Moral Persons and Moral Managers Unethical Leader Weak moral person and weak moral manager Drive to reward their own self interests Examples include Jeff Skilling Bernie Ebbers and Dennis Kozlowski Ethical Leader Should be the ultimate ethical goal of any manager