Business Ethics Khalidah Khalid Ali Ethical Leadership
• Ethical leadership is the ability to cultivate
ethical behaviour in the workplace by role modelling and motivating followers to observe ethical conduct in their daily activities. • Employees learn through observation. So, leaders ought to send the right message by first behaving ethically themselves and then motivating their followers to observe ethical conduct. Module Code and Module Title Title of Slides • The boundaries of ethical and unethical practices are reflected in the organizational values and ethical standards established by the organization. • Leaders can influence the behaviour of their followers through role-modelling and establishing systems and processes that promote ethical behaviour.
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• Leaders can encourage ethical behaviour through two-way communication, reinforcement and ethical decision-making. • Ethical leadership embraces the values of trustworthiness, respect, responsibility, fairness and caring. • In fact, an organization is ethical only if its leaders are ethical.
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Two Pillars of Ethical Leadership
• Trevino (2003), suggest two pillars of ethical
leadership: – The moral person pillar represents the leader’s personal traits, characters and altruistic motivation. – The moral manager pillar represents the proactive efforts of the manager to influence the way his employees behave, ethically and unethically.
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• Leaders must behave ethically in both their personal and professional lives. They should avoid being hypocrites. • Role modelling alone is not enough to develop ethical leadership. It has to be supplemented by rewards and penalty system and constant two-way communication about the importance of ethics.
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Characteristics of a ‘moral person’ and a ‘moral manager’ MORAL PERSON MORAL MANAGER Traits Role modelling through visible Integrity, honesty, trustworthiness, action competence, respect Behaviour Rewards and discipline Do the right thing, concern for people, being open, personal morality Decision-making Communicating about ethics Hold on to values, objective/fair, and values concern for society, follow ethical decision rules
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Setting the Right Tone from the Top
• The initiative by corporate leaders and the
board of directors to create an ethical atmosphere in the workplace where everyone takes ownership and responsibility to do the right thing because it is the right thing to do. • Toor and Ofori (2009), said that ‘ leadership which lacks ethical conduct can be dangerous, destructive and even toxic’.
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• If the top management shirks, misuses company assets, misrepresents the capabilities and performance of the organizations, given bribes, breaks the law, and engages in other unethical practices, then the employees receive the message that these types of behaviour are not only acceptable, but perhaps expected. • Employees watch the behaviour of their managers, listen to what they say and follow their lead. Module Code and Module Title Title of Slides Examples of actions that can be taken to set the right tone from the top 1. Always act as role models by being ethical towards employees, customers, suppliers, shareholders, and regulators. 2. Actively embed values so that employees know that ethics and honesty are important in the organization. 3. Regularly talk about the organization’s ethical values and standards in all company events to show that ethics is a priority. 4. Consistently ‘do as they say’ as opposed to double talk , where in the organization the leaders talk about the importance of ethics and integrity, but ignore them in their personal lives and social engagements. Module Code and Module Title Title of Slides 5. Implement policies, processes and systems to support the tone from the top. 6. Make it clear that compliance and ethical risks are not tolerated, and infuse this stance in the organization’s reward and disciplinary system. 7. Take immediate action to fix any ethical problem and remedy the harm, which includes taking appropriate action against the offending employee in a swift and firm manner. 8. Provide, sponsor and endorse adequate and regular ethical training on a code of ethical business conduct of the organization. Module Code and Module Title Title of Slides Critical Elements of a Formal Ethics Programme • Formal ethics program provides ethical safeguards in the workplace. This program consists of a set of formal activities, policies, practices, processes and procedures to deal with ethical issues in an organization. • This program aims to affect employees’ perception and view of ethical issues, and most crucially, to guide them to address those issues that arise on the job. Module Code and Module Title Title of Slides • It is also intended to support employees to comprehend the ethical standards set by the organization and ensure compliance with the standards. • Employees need to have ethical standards, training and channels to seek advice when they encounter an ethical dilemma in their daily work. Then, they will be able to make an informed and ethical decision to address such dilemma. • The top management should take the lead to initiate and sponsor this ethics program. This way, the top management team and the employees’ immediate supervisors can show strong commitment to create an ethical atmosphere throughout the organization. Module Code and Module Title Title of Slides Critical Elements of a Formal Ethics Program
1. Core value statement – a written statement issued
by the top management team to convey the values of the organization to employees and other stakeholders. 2. Code of ethical conduct – a written set of rules, policies and ethical principles to guide managers and employees to behave ethically and to resolve ethical problems at the workplace. 3. Compliance manual – a set of guidelines to guide employees to understand and implement the relevant rules, regulations and laws in their daily activities. Module Code and Module Title Title of Slides 4. Ethics training program – a program to train all employees to engage in ethical practices and behaviour in the workplace environment and to help them make the right decisions based on the established ethical standards. 5. Ethics offices and compliance officers – administrators who have a direct and full responsibility to oversee all matters related to a formal ethics program and to advice the top management, board of directors and employees on ethical problem identification and resolution. 6. Whistleblowing policy – a policy that outlines the procedure to disclose information about unethical or illegal practices within an organization and specifies the protection accorded to the whistleblower. Module Code and Module Title Title of Slides 7. Ethics helpline – a confidential channel of communication established for all members of the organizations to report on ethical violations and illegal activities to seek guidance on resolving ethical problem or dilemmas. 8. Ethics audit – an on-going process to verify and assess the adequacy and effectiveness of ethical safeguards and to check that the managers and employees closely follow the desired ethical standards specified in the code of ethical conduct. 9. Ethics awards – recognition to employees who have gone all out to demonstrate and embrace the core and ethical values in their daily routine. Module Code and Module Title Title of Slides Common Provisions in a Code of Ethical Conduct • Accepting or refusing gifts from business partners policy • Conflict of interest • Security of proprietary and confidential information • Discriminatory human resources practices • Commitment to environment and employee health and safety • Employees’ political involvement • Relationship with and treatment of customers and business partners Module Code and Module Title Title of Slides • Use of organizational assets and resources • Accuracy and safekeeping of financial records • Disclosure, transparency and access to information • Employee relations • Communications with shareholders, employees and business partners • Standards of personal conduct • Compliance with laws and regulations • Advertising and promotional activities • Rights and dignity of all individuals • Workplace harassment • Use of illegal drugs and alcohol Module Code and Module Title Title of Slides Corporate Culture & Ethical Culture • Corporate culture is the shared beliefs, values, norms, customs, expectations and meanings of the members of an organization that shape or influence their thinking and behaviour. It is the way everyone does things in an organization. • Ethical culture is an unspoken understanding amongst members of an organization of the legitimate and unacceptable practices. It is the part of corporate culture that promotes the ethical values of an organization and guides employees to understand the importance of doing the right thing. Module Code and Module Title Title of Slides Ethical Leadership & Ethical Corporate Culture • Ethical leaders play a dominant role to cultivate ethical corporate culture in an organization. They embrace ethical values in their personal and professional lives. They make decisions based on ethical principles and ethical values. • Ethical leaders have a great influence on the way the followers behave and perceive things in the organization. Hence, they can influence and motivate them to pay attention to ethics in their daily activities through role-modelling and establishing policies and reward systems that promote ethical practices. Module Code and Module Title Title of Slides • Ethical leaders can reinforce ethical behaviour by talking about ethics and emphasize on the importance of ethics to the organization. • When leaders practice ethical leadership, the followers learn the appropriate behaviour through observing them and copying such behaviour. • Ethical leadership lets employees know the boundaries of acceptable and unacceptable behaviour in the workplace. Module Code and Module Title Title of Slides Conclusion
Ethical leadership is a critical component of an
ethical culture, which is an ultimate source of ethical behaviour. They embrace a set of universal ethical values and personal traits such as trustworthiness, respect, responsibility, fairness, caring and integrity. In other words, ethical leadership is a precondition to an ethical culture.