CHAPTER 11
Ethical Leadership
SUMMARY
This chapter demonstrates the importance of leadership in creating an ethical culture. We first provide a
definition of ethical leadership and explore its relationship to ethical decision making. Next,
requirements of ethical leadership are provided, followed by how ethical leadership benefits the
company. The relationship between ethical leadership and organizational culture is examined, as well as
ways ethical leaders can manage conflict. Managing conflict appropriately identifies potential issues
and reinforces a firm’s ethical climate. An important part of leadership is the implementation of
INSTRUCTOR NOTES FOR “AN ETHICAL DILEMMA”
This Ethical Dilemma focuses on communication conflict management, and training and developing
staff to be able to complete the goals of the firm. Stacy was hired because of her strong skill set and
quality of education. Once Stacy was hired she received little guidance and training and was set up for
failure. By being given a heavy workload and scrutinized by one of the partners, Doug, Stacy became
dissatisfied with the treatment and unreasonable expectations toward the employees at Dewey,
Cheatum, and Howe. Stacy was unsure how to present the firm in a positive and favorable manner.
LECTURE OUTLINE
I. Defining Ethical Leadership
A. Leadership is the ability or authority to guide and direct others toward a goal.
B. Ethical leadership creates an ethical culture.
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C. Leadership has a significant impact on ethical decision making because leaders have
the power to motivate others and enforce the organization’s norms, policies, and
viewpoints.
1. Ethical leadership has a positive relationship with the organizational citizenship
of employees and a negative relationship with deviance, or misconduct.
II. Requirements for Ethical Leadership
A. Ethical leadership skills develop through years of training, experience, and learning other
best-practices of leadership.
1. Leadership qualities differ for each situation. Ethical leaders
a. Must model organizational values
B. Ethical leaders never operate in a silo of decision making.
1. The strength of ethical leaders involves recognizing their own weaknesses and relying
on others to help them.
2. Ethical leaders encourage employees to reach their full potential and emphasize their
role as important co-creators of value.
C. Strong ethical leaders are those passionate about the organization and act in the
organization’s best interests.
III. Benefits of Ethical Leadership
A. Ethical leadership has a direct impact on the corporate culture of the firm.
1. Ethical leaders communicate and monitor an organization’s values, ensuring that
employees are familiar with the company’s purpose and beliefs.
1. Positive association between the ethical commitment of employees and a firm’s
valuation on the stock market.
IV. Ethical Leadership and Organizational Culture
A. Ethical leaders generally adopt one of two approaches to leadership:
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1. Compliance-based approach emphasizes obedience to rules and regulations and sets
processes in place to ensure compliance.
B. Another way to classify leader types includes the following categories: the unethical leader,
the apathetic leader, and the ethical leader.
1. The unethical leader is usually egocentric and often does whatever it takes to achieve
the organization’s objectives and his/her own.
occur daily.
V. Managing Ethical Conflicts
A. Ethical conflicts occur when there are two or more positions on an ethical decision.
B. Ethical conflict issues will not be brought to management’s attention without effective
mechanisms for transparent communication.
VI. Conflict Management Styles
A. Conflict management is categorized into five styles: competing, avoiding, accommodating,
collaborating, and compromising.
1. These styles are based on two dimensions:
a. Assertiveness is acting in one’s own best interests.
C. Avoiding style of conflict management: Leaders with this approach are not effective
because they avoid conflict at any costs—even if it leads to misconduct.
1. They are uncooperative and non-assertive.
D. Accommodating style of conflict management: Leaders who adopt this style are highly
cooperative but non-assertive.
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F. Collaborating style of conflict management: Leaders who adopt a collaborating style are
cooperative and assertive.
G. Effective leaders can use different styles depending upon the situation.
H. Ethical leaders should also have the ability to identify the conflict management styles of
others.
VII. Ethical Leaders Empower Employees
A. Ethical leaders within an organization cannot make every ethical decision by themselves.
B. Employee empowerment is an essential component of a values-based organizational
culture.
1. Encourages employees to express concerns, bring up ethical issues, and take a
proactive approach toward resolving conflicts.
VIII. Ethical Leadership Communication
A. The way an ethical leader communicates to employees has just as much impact on the
firm’s ethical culture.
B. Transparency and reporting are two major dimensions of ethical communication.
IX. Ethical Leadership Communication Skills
A. Ethical communication skills do not come easily.
1. Organizational communication is separated into four categories:
a. Interpersonal communication
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B. Interpersonal communication is the most well-known form of communication and
occurs when two or more people interact with one another.
1. Often difficult to communicate to a superior.
C. Small group communication is growing in organizations.
1. Small groups can increase collaboration and generate a variety of different
perspectives and opinions on a particular issue.
more extreme position than the group members might have done individually.
D. Nonverbal communication is communication expressed through actions, body
language, expressions, or other forms of communication not written or oral.
1. A person’s nonverbal cues are deemed more reliable than what he or she states
verbally.
E. Listening involves paying attention to both verbal and nonverbal behavior
1. Listening is just as important as speaking.
X. Leader-Follower Relationships in Communication
A. Leader-follower congruence occurs when leaders and followers share the same
vision, ethical expectations, and objectives for the company.
XI. Ethics Programs and Communication
A. One of the most observable ways of communicating ethical values to employees is through
codes of ethics and training in how to make ethical decisions.
1. Codes of ethics provide important guidelines for employees on how to act in different
situations.
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A. Ethical leaders can mitigate power differences through frequent communication with
workers.
1. Organizational politics is often perceived as trying to achieve one’s own ends even if it
means harming others in the organization.
B. There is a difference between having a high degree of office politics and having good
political skills.
XIII. Feedback
A. Most companies recognize the need for organizational leaders to provide feedback to
employees.
1. Informal methods like a simple conversation or through more formal systems such as
employee performance evaluations.
XIV. Leadership Styles Influence Ethical Decisions
A. Leadership styles influence many aspects of organizational behavior, including employees’
acceptance of and adherence to organizational norms and values.
B. The most effective ethical leaders possess the ability to manage themselves and their
relationships with others effectively, a skill known as emotional intelligence.
C. Six leadership styles that are based on emotional intelligence have been identified by
Daniel Goleman:
1. The coercive leader demands instantaneous obedience and focuses on achievement,
initiative, and self-control. Although this style can be very effective during times of
crisis or during a turnaround, it otherwise creates a negative climate for organizational
performance.
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5. The pacesetting leader can create a negative climate because of the high standards that
he or she sets. This style works best for attaining quick results from highly motivated
individuals who value achievement and take the initiative.
6. The coaching leader builds a positive climate by developing skills to foster long-term
success, delegating responsibility, and skillfully issuing challenging assignments.
D. Transactional leaders attempt to create employee satisfaction through negotiating, or
“bartering,” for desired behaviors or levels of performance.
1. Transactional leaders focus on ensuring required conduct and procedures are
implemented.
XV. The RADAR Model
A. When ethical misconduct or issues arise, the leader should have plans in place to answer
stakeholder concerns and recover from misconduct. We adopt the acronym RADAR to
describe an ethical leader’s duty to recognize ethical issues, avoid misconduct whenever
possible, detect ethical risk areas, answer stakeholder concerns when an ethical issue comes
to light, and recover from a misconduct disaster by improving upon weaknesses in the
ethics program.
E. Discovery involves proactively uncovering ethical risk areas that could lead to misconduct.
Many managers are reluctant to engage in this process because they fear doing so will
uncover questionable conduct that could put the firm in an unfavorable light.
F. Answering involves responding to the discovery of an ethical dilemma through
communication both internally and externally.
G. Recovery occurs when a firm begins to rebuild its reputation.
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DEBATE ISSUE: TAKE A STAND
Have your students split into two teams. One team will argue for the first point, and the other will argue
for the opposing view. The purpose is to get students to realize that there are no easy answers to many
of these issues. This debate asks students to choose whether the CFO should be the key leader to deal
with ethical risks. Those arguing that the CFO should be the key leader could argue that many ethical
“RESOLVING ETHICAL BUSINESS CHALLENGES” NOTES
The instructor may want to discuss where the line is between loyalty to the company and loyalty to the
staff you manage. How is David to reconcile the difference between Stan saying the decision has been
made to move toward automation, Jane’s accounting analysis that demonstrates no improvement in
efficiency by moving to automation, and the community’s need to keep their people employed?
Ask the students what they would do in Jane’s position. Jane has already run accounting analysis on
automating the plant and determined that automation will not increase overall efficiency of the plant.