CHAPTER 6
Leadership Ethics and Social Responsibility
The purpose of this chapter is to examine important issues about leadership ethics and social
responsibility. The focus is on leaders rather than on a general treatment of business ethics, and includes a
summary of the principles of ethical and moral leadership. Skill building is also incorporated into this
chapter.
CHAPTER OUTLINE AND LECTURE NOTES
Being ethical and socially responsible is part of being an effective leader even if many financially
successful executives are unethical and socially irresponsible.
I. PRINCIPLES OF ETHICAL AND MORAL LEADERSHIP
Ethics is the study of moral obligations, or separating right from wrong. Also, ethics are the
accepted guidelines of behavior for groups or institutions. Morals are an individual’s determination
of what is right or wrong and is influenced by his or her values. A moral leader will practice good
ethics. Edwin H. Locke argues that ethics is at the center of leadership because the goal of a rational
leader is to merge the interests of all parties so that everyone benefits and the organization prospers.
A. Four Ethical Leadership Behaviors
1. Be Honest and Trustworthy and Have Integrity in Dealing with Others. Trustworthiness
2. Pay Attention to All Stakeholders. Maximizing shareholder wealth is not a sufficient role
B. Factors Contributing to Ethical Differences
Several reasons for differences in ethics and morality among leaders are listed next.
1. Leader moral identity. A moral identity involves a self-perception organized around a
set of moral traits such as honesty, caring, and compassion.
Chapter 6: Leadership Ethics and Social Responsibility
2. Greed, gluttony, and avarice. Many people seek to maximize personal returns, even at
the expense of others. Exceptionally high executive compensation could be interpreted as
signs of greed and avarice.
4. Moral development level. A key factor behind ethical differences is the leader’s level of
moral development: preconventional (intent of receiving rewards and avoiding
punishment); conventional (conform to societal norms); and postconventional
(internalized set of principles that may go beyond laws of a society).
5. Sense of entitlement. Many business leaders have developed a sense of entitlement.
Some CEOs lose their sense of reality and feel entitled to whatever they can get away
with or steal.
C. The Ethical Mind for Leaders
Howard Gardner believes that for a leader to stay ethical, he or she must develop an ethical
II. GUIDELINES FOR EVALUATING THE ETHICS OF A DECISION
The Center for Business Ethics at Bentley College has developed six questions to evaluate the ethics
of a specific decision:
1. Is it right?
2. Is it fair?
3. Who gets hurt?
Chapter 6: Leadership Ethics and Social Responsibility
III. A SAMPLING OF UNETHICAL LEADERSHIP BEHAVIORS
Table 6–1 presents a sample of the type of unethical, immoral, and often illegal behavior engaged in
IV. LEADERSHIP, SOCIAL RESPONSIBILITY, AND CREATING AN ETHICAL
ORGANIZATIONAL CULTURE
Good deeds are important for leaders. Corporate social responsibility is the process by which
managers within an organization think about and discuss relationships with stakeholders, and how
they will work toward attaining the common good. Social responsibility involves a firm’s impact on
society. Here we look at a few socially responsible actions. Being socially responsible fits into the
“Thou Shalt” approach, versus “Thou Shalt Not.”.
A. Providing for Strategic Leadership of Ethics and Social Responsibility
Senior managers can become ethics leaders. If high ethics receive top priority, workers are
B. Creating a Pleasant Workplace
A social responsibility initiative that directly affects the well-being of people is the creation of
C. Helping Build a Sustainable Environment
Socially responsible leaders influence others to preserve the external environment through a
variety of actions that go beyond mandatory environmental controls. Helping build a
D. Engaging in Social Entrepreneurship
A social responsibility initiative gaining momentum is social entrepreneurship, the use of
E. Engaging In Philanthropy
A standard organizational leadership approach to social responsibility is to donate money to
Chapter 6: Leadership Ethics and Social Responsibility
F. Working with Suppliers to Improve Working Conditions
An excellent opportunity for practicing social responsibility is for company leaders to work
G. Establishing Written Codes of Ethical Conduct
conflicts of interest, and vendor relationships.
H. Developing Formal Mechanisms for Dealing with Ethical Problems
Many large employers have ethics programs of various types. An ethics committee to establish
I. Accepting Whistleblowers
A whistleblower is an employee who discloses organizational wrongdoing to parties who can
take action. Whistleblowers are often ostracized and humiliated by the companies they hope to
J. Providing Training in Ethics and Social Responsibility
Ethics training programs reinforce the idea that ethically and socially responsible behavior is
K. Minimizing Abusive Supervision throughout the Organization
Abusive supervision is “a dysfunctional leadership behavior that adversely affects its targets
V. ETHICAL AND SOCIALLY RESPONSIBLE BEHAVIOR AND ORGANIZATIONAL
PERFORMANCE
Chapter 6: Leadership Ethics and Social Responsibility
A meta-analysis of 101 samples published over a 15-year period involving 29,620 study participants
found that ethical leadership was positive related to job attitudes, job performance, and overall
evaluation of the leadership. It was also found that ethical leadership was slightly related to task
performance and good organizational citizenship behavior, and a reduction in counterproductive
work behavior.
VI. GUIDELINES FOR ACTION AND SKILL DEVELOPMENT
A solid foundation for developing a leadership career is to establish a personal ethical code. A code
of professional ethics helps a leader deal with such issues as accepting bribes, backstabbing
COMMENTS ON EXPERIENTIAL EXERCISES
Leadership Self–Assessment Quiz 6–1: The Leadership Ethics Quiz
A positive aspect about this scale is that it provides clues as to what actually constitutes unethical
Leadership Self–Assessment Quiz 6–2: The Air Force Character
Attriubtes Checklist
Chapter 6: Leadership Ethics and Social Responsibility
Leadership Skill–Building Exercise 6–1: Should “Dinosaur Power” Be
Placed on the Market?”
The ethical dilemma presented here surfaces frequently with respect to beverage products. The fact
Leadership Skill–Building Exercise 6–2: Conducting an Environmental
Audit
This exercise provides a concrete task for students related to a topic of widespread interest. Although
Leadership Skill–Building Exercise 6–3: Collecting Examples of
Socially Responsible Behavior
This skill–building focuses on social responsibility, but probably also includes ethical behavior. The
Leadership Skill–Building Exercise 6–4: My Leadership Portfolio
Ethical temptations abound on the job and in personal life, thereby making this exercise relatively
Leadership Skill–Building Exercise 6–5: Company Policy for
Employee Recycling of Electronic Products
Here is an opportunity to practice policy formulation about an ethical issue. The policy should serve
COMMENTS ON DISCUSSION QUESTIONS AND ACTIVITIES
1. If several reputable companies have been charged with using bribes to obtain sales, why should you
worry about being ethical?
A major issue here is to think about why being ethical is important, particularly if some workers are
Chapter 6: Leadership Ethics and Social Responsibility
2. The majority of business executives accused of unethical behavior have studied ethics either as a
subject in a business course or as an entire course. So what do you think went wrong?
3. Suppose you had inside information that your employer was thinking about declaring bankruptcy,
and you found out that a family member was about to purchase $20,000 in the stock of your
employer. To what extent would it be unethical for you to dissuade then family member from
making the investment?
The ethical purist can respond immediately that any use of inside information such as that described
is a form of insider trading, and therefore unethical and illegal. At the same time the person is
4. How can consumers use the Internet to help control the ethical behavior of business leaders?
In recent years consumers who believe they have been treated unfairly have taken to websites or
5. What responsibility should the major online retailers take to combat “porch pirates”? The latter are
people who steal packages left a people’s homes.
6. Should leaders of companies that produce fattening food that can lead to cardiac problems and
obesity be targeted for being socially irresponsible?
Most students will probably say that the individual has a choice about eating fatty foods, so servers
of high-cholesterol food are not being socially irresponsible. However, an emerging trend is to
7. How fair do you think it is to deny an executive a CEO position he or she had been promised
because of a romantic relationship with a subordinate?
The answer to this question reflects directly on the student’s values and attitudes. Some people think
that a CEO should be a model of virtuous behavior, and therefore should be denied the CEO
Chapter 6: Leadership Ethics and Social Responsibility
8. As a present or future organizational leader, what can you do to be an ethical role model for others?
A starting point here would be for the personal too behave ethically in as many ways as possible,
business trip.
9. Provide an example of a company you consider to be highly ethical and socially responsible. What
is the basis for your answer?
One criterion a student might use in judging the ethics and social responsibility of a firm is whether
adults?
10. In this chapter we have discussed ethical problems mostly in business. For sake of fairness and
balance identify a few ethical problems you have observed among lawyers, physicians, politicians,
or sports figures.
Answering this question helps the reader recognize that low ethics seem to be part of human nature
and cut across occupations. Many lawyers are disbarred because of factors such activities as
PLAUSIBLE RESPONSES TO CASE QUESTIONS
Leadership Case Problem A: Salary Advance Ponders Its Future
This case illustrates that a business model that appears unethical to an outsider may still be providing
a highly needed service to society.
1. What is your evaluation of the ethics of Salary Advance United making payday loans?
The evaluation of the ethics of Salary Advance might be divided into three issues. The first is
whether payday loans are ethical. Because these loans provide a valuable service to society,
2. What do you think of the ethics of the two alternatives mentioned to avoid state regulations:
locating offshore or on a Native American reservation?
3. What do you recommend to Max to make the model of Salary Advance ethical enough to avoid
being attacked by politicians?
Chapter 6: Leadership Ethics and Social Responsibility
Several initiatives can be taken to enhance the ethics of payday loans. One would be to offer
Associated Role Play
This role play focuses on what so many students do so well and enjoy doing: finding alternative
solutions to a problem of merit. The activity called for here is so natural it may not seem like role
Leadership Case Problem B: Are Drivers or Smartphones to Blame?
A key social responsibility and ethical issue this case touches on is how rsponsibility a company should
have for the potential dysfuunctional consequences of the use of its product or services.
1. What role do you think this industry leader should play in encouraging safer use of their
smartphones?
Millions of people are so enamored with smartphones that they regard any criticism of these
2. With the negative perspective Derek has about the use of smartphones while driving, should he
be released from his position as the marketing manager?
3. How ethical and socially responsible are the opinions of Olivia and Raphael about the
advantages of smartphones in society?
Olivia and Raphael appear to be blinded by their enthusiasm for the role of smartphones in
Associated Role Play
Chapter 6: Leadership Ethics and Social Responsibility
A potential value of this role play is that it gives students the opportunity to discuss issues that