6. Ethical Leadership and Business Culture

Business Ethics: Corporate Culture and Ethical Leadership

• Business ethics is a critical subject encompassing corporate culture and ethical leadership.
• It's about the ethical conduct of individuals and organizations in business.
• Learning objectives include understanding the role of ethical corporate culture, the impact of ethical leadership on this culture, defining ethical leadership, and explaining the necessary aspects of ethical leadership.

Learning Objectives

• Understand the role of an ethical corporate culture.
• Understand the impact ethical leadership has on corporate culture.
• Define what ethical leadership is.
• Explain the essential elements of ethical leadership.

Crane et al., Chapter 5 (pp. 221-224)

• This chapter focuses on the critical aspects related to business ethics.

Bad Apple – Bad Barrel

• The ethical decision-making process impacts corporate behavior.
• Implementing ethical standards helps in improving overall company behavior.
• Aligning corporate culture and image with legally/ethically sound conduct is crucial.

Individual Factors Influencing Ethical Decision-Making

• Age and gender: Mixed evidence links age and gender to ethical decisions.
• National and cultural characteristics significantly affect ethical beliefs and views of business issues.
• Education and employment: Some differences exist in ethical decision-making based on educational and professional experience.
• Psychological factors (e.g., cognitive moral development): Influence ethical decision-making to a degree.
• Locus of control: Minimal impact on decision-making, but can impact whether blame or credit is assigned.
• Personal values: Have a significant impact on ethical judgments.
• Personal integrity: Also a factor in influencing ethical behavior.
• Moral imagination: A relatively new area with promising potential in understanding ethical decision-making.

Situational Factors Influencing Ethical Decision-Making

• Issue-related factors include the intensity of the moral issue and how the issue is framed ethically.
• Context-related factors involve authority, reward systems, norms, and culture.

Ethical Culture

• Corporate culture is a complex mix of values, norms, structures, and symbols.
• Ethical corporate culture has three main elements: core ethical values, ethics program, and ethical leadership.
• Deliberate cultural management is difficult and rarely successful.
• Focusing on subcultural groups can be another approach to promoting ethical cultural learning.

Asch Conformity Experiment (1956)

• Participants conformed to the incorrect majority about 33% of the time.
• Significant conformity, especially in critical trials.
• Less than 1% of controls gave incorrect answers (consistent).
• Conformity due to normative or informational pressures.

The Milgram Experiment

• Stanley Milgram's experiment explored obedience to authority.
• Participants were willing to administer potentially lethal electrical shocks to others,
• Experiment illustrates the potential for individuals to obey authority figures even when conflicting with personal conscience.

Ethical Leadership

• Senior managers' role is pivotal in defining the ethical tone and promoting ethical conduct within the organization.
• Ethical leaders are characterized by planning, organizing, budgeting, controlling, motivating, inspiring and facilitating.
• Ethical leaders show respect for subordinates' autonomy, integrity, and refrain from any coercion/manipulation.
• Ethical leaders use their creativity to solve ethical dilemmas (moral imagination) and enforce ethical values.

Managing Business Ethics

• This chapter covers tools and techniques within management to successfully strategize in ethics.
• Core concepts include business ethics management, code of ethics, stakeholder management, social accounting, environmental management, and environmental management systems, along with ethical leadership.

Ethical Decision-Making:

• Several approaches, techniques, and considerations are discussed for organizations dealing with ethical considerations relevant to them.
• Formal ethical management is discussed.

Stakeholder Relations

• Stakeholder theory is a vital aspect in evaluating business's role in society.
• It's important for organizations to understand, engage with, and manage their stakeholders' interests.
• Identifying and prioritizing stakeholders is crucial, as not all stakeholders hold equal importance to a given business organization.

Assessing Ethical Performance

• Ethical performance needs assessment.
• Social accounting is detailed; its purpose and process, involving data gathering, verification, and report delivery.
• Key elements of effective social accounting are discussed.

Environmental Management

• The management of environmental impact is a critical part of business ethics and is addressed.
• Important tools and standards, like ISO 14001 and EMAS, for environmental performance are detailed.

Ethics in Action Examples (Deepwater Horizon, Tannery Sector in Bangladesh)

• Practical applications of ethical considerations in specific industry contexts are discussed.
• Issues of compliance, ethical concerns, and local complexities are highlighted in these examples.

Organizing for Business Ethics Management

• Formal ethics programs (compliance, values, external, and protective orientations) in business are discussed.
• Approaches used in successful organizations for ethics management are analyzed:
• Focus on integrating ethics throughout the organization.

Test your knowledge on the principles of ethical behavior and leadership within organizations. This quiz explores the importance of codes of ethics, the impact of leadership on corporate culture, and the factors influencing ethical decision-making. Dive in to understand the critical components of fostering an ethical workplace environment.