Article: Ethical Leadership in the Organisations: A Way Forward

1.0 Introduction

          Since the beginning of humanity, leaders and leadership principles have existed, while most successes recorded in human endeavours can be primarily credited to their leadership quality as well (Matira & Awolusi, 2020). In general, the actions and decisions of organisational leaders considerably affect the company’s overall productivity and success stories (Padhy et al., Reddy, Raj & Pattanayak, 2022). Furthermore, it is believed that good leaders initiate the best in others and aid them in recognising their full potential. Likewise, others also acknowledge that thriving leaders empower individuals to acquire their highest prospects (Hosalikar, 2021).

          Leadership is one of the most debated subjects in the contemporary competitive era and is crucial to any business in today’s continually changing market environment (Daouk, Farmanesh & Zargar, 2021). Therefore, this article aims to discuss the concept of leadership and different leadership styles by emphasising more on ethical leadership from the global perspective, as ethically questionable actions have become a common phenomenon in corporate life that endangers the firms’ survival worldwide.

2.0 The Concept of Leadership in General and Different Leadership Styles

          The concept of leadership, has been researched throughout the years in order to comprehensively comprehend effective leadership’s benefits. As a result of extensive research in the field of leadership, various definition of its concept has been proposed by numerous scholars, which will be discussed in the following paragraph (Blazi & Awolusi, 2020; Matira & Awolusi, 2020; Mukonga & Awolusi, 2019; Olatunji & Awolusi, 2019).

          Kesting et al. (2016) stated that leadership can be defined as how an individual inspires and affects others to accomplish organisational goals. Similarly, Northouse and Lee (2019) defined leadership as a process by which an individual encourages a group to achieve shared goals. Furthermore, as cited in a study by Ariussanto, Tarigan, Sitepu, and Singh (2020), leadership is a social influence procedure in which leaders manage and seek followers’ participation to acquire organisational objectives (Golmoradi & Ardabili, 2014).

          As asserted by Budur et al. and Torlak et al. (2019), effective organisational leaders enable their teams to develop and enhance their skillset; nevertheless, several leadership styles have been developed and redefined throughout the historical evolution. Thus, the most practiced leadership styles (transformational, transactional, coaching and entrepreneurial) throughout the globe, besides ethical leadership, are described below.

          In 1978, James MacGregor Burns initially proposed and developed transformational leadership when the concept of leadership was divided into two forms known as transformational and transactional (Budur & Poturak, 2020). Hence, transformational leadership depicts leaders transforming followers in the circumstances leading to organisational success (Siangchokyoo, Klinger, & Campion, 2019). Additionally, transformational leaders inspire their followers to have a shared vision of targeted organisational goals and performance standards in order to acquire them (Anderson, Baur, Griffith & Buckley, 2017).

          Moreover, in 1947, Max Weber initially proposed the transactional leadership model, which primarily strived to aid organisations in obtaining goals in accordance with employees’ efficiency and effectiveness, as this style acknowledges that employees can be encouraged by rewards. Commonly, transactional leadership can be pinpointed as a style in which leaders decide what employees must do to accomplish corporate goals by providing resources and rewards in order to raise efficient task accomplishment (Fernando et al., 2020). Thus, in contrast to transformational leaders who raise groups’ interests beyond individual ones and form a healthy leader-follower relationship established on trust and leaders’ power (Guhr et al., 2019), transactional leaders primarily prefer to accomplish organisational and individual goals (Erdel & Takkac, 2020).

          McGrath and Mac Millan (2000) initially proposed the concept of entrepreneurial leadership, which further asserted that the power of analytical leadership is weakened in industries that encounter high uncertainty and rivalry. Furthermore, Bel and Ordu (2020) pointed out entrepreneurial leadership as a kind of leadership style that entails entrepreneurial acts at the individual level, innovative actions at the organisational level and critical measures taken to capitalise on determining market opportunities. As a result, the kind of business leader called an entrepreneurial leader is required (McGrath & MacMillan, 2000), as these types of leaders can move strategically, focus on entrepreneurial initiatives, assure better organisational performance, create opportunities, and develop a competitive advantage for better performance as well (Sarabi et al., 2020; Miao et al., 2019; Rahim et al., 2015).

          On the other hand, another paramount leadership style can be pointed out to the coaching leadership. The term “coaching” originally dates back to the ancient philosophers that became widely used in sports and arrived in leadership literature in the 50s (Ristikangas & Ristikangas, 2013). Paul Hershey and Kenneth Blanchard initially defined the coaching leadership style in the 1960s, and the business world adopted the notion of coaching from sports by the 1970s and early 80s (Evered & Selman, 1989). Typically, coaching leadership signifies that leaders use coaching to achieve desired outcomes (Karlsen & Berg, 2020), intending to reinforce dedication, guidance, and help as a “learner” (Kunos, 2018). As a result, a study by Maamari et al. (2021) revealed that coaching could be a learning enhancement tool that results in behavioural changes and encourages employees to be more effective and perform better.

          For simplicity purposes, the table below summarises the mentioned leadership styles along with brief justifications.

Table 1.0: The Most Practiced Leadership Styles

Source: Burn, (1978) & Bass, (1985); Weber, (1947) & Bass (1981); Hersey and Blanchard, (1969); Mcgrath and Macmillan, (2000)

          Nevertheless, the global crises and ethical scandals associated with industries may have shifted the focus of ethical studies toward the business world. Hence, the lively debate concerning business ethics due to ethical scandals has made ethical leadership one of the most debated subjects in organisational practices (Eisenbeiss, 2012). Therefore, the main focus of this article which is ethical leadership, will be discussed extensively in the following section.

3.0 Introduction to Ethical Leadership

          The contemporary business environment indicates the significance of leadership styles in encouraging individuals to cooperate toward a shared goal; however, as previously stated, this article emphasises ethical leadership as it has become an area of interest for managers and scholars in the current era. Commonly, ethical leadership is derived from two principles of leadership and ethics. Furthermore, Brown, Treviño and Harrison (2000) were the first scholars to study the conceptual basis of ethical leadership from the perspective of organisational members. Brown et al. (2005), as one of the early contributors to this leadership style, stated that this style is primarily defined by respect and ethical standards, typically associated with ethical consideration, truthfulness, justice, and charisma.

          It may be complex to define ethics as the interpretation of this concept varies due to different mindsets. Nonetheless, the existing literature revealed one of the widely used definitions, which indicates that ethical leadership is the expression of contextually acceptable behaviour through personal actions and interpersonal relationships, along with advancing such actions to followers through two-way communication, reinforcement and decision-making (Brown, Treviño, & Harrison, 2005; Trevino et al., 2003; Treviño, Hartman, & Brown, 2000).

          Ethics, in general, is a prominent pillar that makes a balance between the risk of organisations and businesses aiding in achieving positive financial developments, job balance and welfare (Popescu, 2022; Sebestova & Lejková, 2020; Sison et al., 2019; Fichter, 2018; Šebestová & Palová, 2017). Furthermore, ethics in business practice has been researched and demonstrated to positively affect employee productivity and psychological well-being (Lizano, 2021; Qing et al., 2020; Yousaf et al., 2019).

          Likewise, this particular leadership style leads to self-efficacy, leader-member exchange, organisational support, work engagement (Naeem, Weng, Hameed & Rasheed, 2022), innovative and voice behaviour (Jin, Qing & Jin, 2022), as well as organisational citizenship behaviour (Abu Bakar & Connaughton, 2022; Kalshoven et al., 2016).

          Contrarily, unethical behaviour, which occurs due to unethical leadership, violates the acknowledged social and ethical norms (McCrum, 2019; Zaleski., 2017; Hakim & Ewing, 2015). Numerous incidents of unethical corporate practices have resulted in global prosecution or vilification of company leaders (Valentini, Kruckeberg, 2018; Witman, 2018; Cavico & Mujtaba, 2017). Therefore, the following section will comprehensively discuss some major global cases caused due to the lack of ethics and unethical leadership.

4.0 Ethical Corporate Issues from the Global Perspective

          From the global perspective, reputable specialists have highlighted numerous unethical incidents throughout the years (Straker et al., 2021; Sood & Bhushan, 2020; Elson & Ingram, 2018), which have been caused due to unethical practices. Some of these actions are uncovered and turned into major corporate scandals, while some remain hidden.

          For instance, the world’s largest accounting firm, KPMG Australia, was fined $613,000 as a review uncovered widespread cheating by personnel on training tests over a four-year timeframe (Danckert, 2021). Furthermore, Elizabeth Holmes, the founder of an American privately held corporation, Theranos, faced accusations of misleading investors and patients, asserting that their technology could detect hundreds of diseases with a single drop of blood (McCluskey, 2021). Volkswagen also admitted to cheating on US diesel engine tests, which cost more than 32 billion euros in repairs, charges, and legal costs (Reuters, 2021).

          Additionally, in the last decade, scandals such as the failure of Enron, and the collapse of Lehman Brothers, in part, are due to the unethical behaviour of the leaders, which have eroded the confidence of organisational executives (Kim & Vandenberghe, 2020). In general, unethical behaviour reflects an unfavourable reputation of the corporation and would contribute to raising public awareness and government restrictions that may adversely affect the organisation (Kim & Vandenberghe, 2020). Nonetheless, unethical behaviour reports have continued appearing in well-known organisations, as summarised in the table below.

Table 2.0: Global Ethical Corruptions

Source: Criddle (2020); Toebe (2020); Willow, (2019); Vaswani, (2018); Yucheng Lu (2017); Allard, (2017) & Nadkarni (2017)

          The above examples were some cases caused due to unethical practices and unethical leadership style; thus, this leadership style has been in the spotlight due to the recent corporate scandals in the business world that adversely affect all aspects of corporate society.

5.0 A Way Forward

          Leadership has been one of the most complex and multi-dimensional phenomena studied extensively throughout the years, which has taken on greater importance than ever in today’s fast-paced and highly globalised industry. Indeed, all leadership styles are highly crucial; nonetheless, ethical leadership has gained more prominence in the 21st century due to numerous corporate ethical scandals, and the presence of unethical leaders referred to as destructive, toxic and abusive individuals (Dai et al., 2019; Belschak et al., 2018; Singh et al., 2018; Hou, 2017; Boddy & Croft, 2016; Naseer et al., 2016).

          As ethical breaches are everywhere in today’s dynamic business environment, organisations primarily prefer human-centred leaders to enhance the organisation’s overall performance, improve employee performance, prevent ethical issues and enhance efficiency and organisational productivity. Thus, the increasing attention to business ethics enabled enterprises to pay more attention to ethical standards and precisely include ethical principles in their policy manuals (Zhu, Li, Liu & Zhou, 2022).

          Ethical behaviour of leaders implies acquiring positive outcomes in line with organizational measures of success within the parameters of the firm’s moral principles. In addition, HR and IR practitioners must behave according to ethical norms to ensure effective and smooth business operations, aiding organisations to embed and maintain their values in order to build, sustain, and strengthen employee trust and interactions (Gordon, 2021).

          Indeed, having a profitable business is at the top of the corporation’s goals; nonetheless, profit-making needs to be aligned with ethical standards to benefit the organisations by attracting more clients/customers, leading to sales and profit enrichment (Gulati, 2021). Accordingly, an ethical-based culture enhances employee retention, reduces labour turnover, and increases organisational productivity (Gulati, 2021).

          Therefore, as a think tank, the National Human Resource Centre (NHRC) can provide strategic and operational advisory support for businesses to put more emphasis on business ethics, ethical-based leadership, and a culture that demands moral behaviour in order to prevent ethical scandals and business failure due to the lack of compliance with ethical norms. In addition, NHRC, as a national centre, can serve as a crucial centre in delivering topics related to ethical leadership and good governance in order to understand the importance of ethics and leadership elements, which are highly vital in today’s dynamic world of work. As a result, NHRC can be a platform for research fellows to deliver their research and practical experiences.

**The author would like to acknowledge and say thanks to Ms. Nazanin Dara, a Ph.D. Student from the University of Cyberjaya who assisted me in this research project. **

 Professor Dr. Balakrishnan Parasuraman is a Professor of Management/HR/Industrial Relations at the Faculty of Entrepreneurship and Business, Universiti Malaysia Kelantan (UMK) based in Kota Bahru, Kelantan. He is a member of the International Honor Societies of the International Employment and Labor Relations Associations (IIRA) based in Geneva, Switzerland, Malaysian Institute of HRM, and International Employment Relations Association, Sydney, Australia.