In a work environment setting, leaders facilitate the internalisation of values, organisational goals and behaviour of employees. They are often in a level to control different outcomes that may impact employees in different ways and their incentives signal employees of the degree and type of acceptable behaviour (Brown and Mitchell, 2010). Initially ethical leadership was conceived from normative and descriptive approaches that relied on how individuals should behave. Brown and Mitchell (2010) views ethical leadership from an approach that relies on social science that explores peoples’ perception of ethical leadership and the precursors, outcomes and conditions of those views. Rooted in social learning theory, individuals can easily learn appropriate standards of behaviour by observing and imitating role models and likewise leaders teach employees conducts that are ethical. The ethical norms and conducts that are expected of employees are formally communicated in the form of organisational policies and rewards. Such ethical modelling is requires leaders to exhibit credibility making them worthy of imitation which further results in higher productivity. Strang and Kuhnert (2009) investigate the theory of constructive development and shows that leadership ability is highly linked to the performance of employees. Research has also shown that poor leadership has led to higher turnover, unproductiveness and unethical behaviour even to the extent of sabotage. In addition, Zhu et al., (2004) suggests a model in their research paper that states that the empowerment of employees at a psychological level facilitates the relationship between the ethical behaviours of leaders and employees’ commitment towards the organisation. Moreover, authenticity of the leader in consistently performing actions in alignment to their moral intentions is also key in motivating employees.
In addition to the impact of ethical leadership on employees, communication between the employees and the leader is also crucial. According to Mayer et al., (2012), leaders reciprocate by listening to employees in addition to communicating their values and therefore, leaders should develop certain behavioural norms on how to deal with employees having positive effect on relations within and between groups. However, authors show that the extent to which leaders may institutionalise ethics and have positive effects on both individuals and organisational effectiveness depends on the level of employers and degree of authority. Distance is also an important factor in ethical leadership. Executive leaders who work more closely with employees are in a better position to manipulate the perceptions of employees on ethics and behavioural norms. For instance, high profile executives such as Andrew Fastow from Enron developed a positive reputation within the organisation but they were the ones to engage in unethical behaviour. Moreover, the level of persisting cynicism about the honesty of leaders among the employees also affects their behaviour. Employees may poorly rate leaders with whom they have little interaction (Brown and Treviño, 2006).
The debate shows that the level of ethical leadership is crucial in shaping the norms and behaviour of employees in an organisation. As much as it is important set up guidelines, code of conduct and behavioural standards within the organisation, it is also crucial to develop personal values of leaders and communicate those values to the employees. This is because employees’ level of compliance to ethical standards is highly reliant on the perception of consistency of employer’s behavioural values and actions. In the service sector, particularly in the banking industry it is important to have strong codes of conduct and organisations heavily invest in ethics trainings. In the banking industry, employees deal with a high level of private and sensitive information and they also deal with large sums of money for which compliance to ethical behaviour is necessary. In the consultancy and advisory industry, employees deal with different clients particularly competitors within the same industry. This indicates that they need to maintain high level of integrity and confidentiality regarding safe-keeping internal information. Inspite of regular training programs and behavioural orientation by leaders, there are cases of unethical conduct and many of these may be rooted to individual preferences. Nevertheless, strong leadership and firm values of leaders can institutionalise a sense of ethical behaviour throughout the organisation allowing for little or no opportunity to engage in misconduct.
Brown, M. E., & Mitchell, M. S. (2010). Ethical and Unethical Leadership. Business Ethics Quarterly, 20(4), 583-616.
Brown, M. E., & Treviño, L. K. (2006). Ethical leadership: A review and future directions. The Leadership Quarterly, 17(6), 595-616.
Mayer, D., Aquino, K., Greenbaum, R., Kuenzi M. ( 2012) ‘ Who does ethical leadership and why does it matter? An examination of antecedents and consequences of ethical leadership’ Academy of Management Journal 55(1), 151-171
Strang, S.E., and Kuhnert, K.W. (2009). Personality and leadership developmental levels as predictors of leader performance.Leadership Quarterly, 20(3), 421-433.
Zhu, W., May, D. R., & Avolio, B. J. (2004). The impact of ethical leadership behavior on employee outcomes: The roles of psychological empowerment and authenticity. Journal of Leadership & Organizational Studies, 11(1), 16-26.