Chapter four
Ethics of Business: management and leadership
• 4.1 statement of value
• 4.2 codes of conduct and ethic
• 4.3 Ethics training , audits and consultants
Leadership is the ability or authority to
guide and direct others toward a goal
Most people agree that effective leadership
is essential for a company
Ethical decisions are one dimension of
leadership
Successful companies develop based upon the
leadership and creative abilities of their
founders
Ethical leadership creates an ethical culture
Top managers provide a blueprint for a
firm’s corporate culture
If these leaders fail to express desired
ethical behaviors and goals, a corporate
culture evolves on its own to reflect the
values and norms of the company
• Consider the fate of one highly profitable and
successful accounting company.
• The founder of the company was known for
his integrity—so much so that he refused to
make an improper accounting entry for a
major client despite the consequences
• 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.
• Ethical leaders ensure these goals are met in
an ethical manner
• Leaders are central to influencing an
organization’s corporate culture and ethical
posture
Ethical leadership is not simply allowing
employees to follow their own moral codes;
it is about helping to implement and
reinforce shared ethical values to promote
an ethical culture, as well as assume
responsibility to model ethical conduct for
employees
Ethical leadership has a positive
relationship with the organizational
citizenship of employees and a negative
relationship with deviance, or misconduct
In other words, ethical business leaders are
more likely to have employees that follow
their example and less likely to have
deviants that create trouble in the company
While ethical leaders need good character,
they also require skills to lead and guide
others
Ethical leadership skills develop through
years of training, experience, and learning
other best practices of leadership
Seven Habits of Strong Ethical Leaders
1. Ethical leaders have strong personal character
2. Ethical leaders have a passion to do right
3. Ethical leaders are proactive
4. Ethical leaders consider all stakeholders’ interests
5. Ethical leaders are role models for the organization’s
values
6. Ethical leaders are transparent and actively involved in
decision making
7. Ethical leaders take a holistic view of the firm’s ethical
culture
• Errors, bad behavior, and poor judgment in
leadership can negatively impact a company’s
brand and reputation.
• Ethical leadership involves leaders and
managers making decisions based on the
right thing to do for the common good, not
just based on what is best for themselves or
for the bottom line.
• While profits are important, ethical leaders
take into consideration the needs of
customers, communities, and employees in
addition to company growth and revenue
when making business decisions.
4.1 statement of value
The values statement highlights an
organization's core principles and
philosophical ideals
It is used to both inform and guide the
decisions and behaviors of the people inside
the organization and signal to external
stakeholders what's important to the
company
The 6 Main Principles of Ethical Leadership
Having ethical leaders isn’t as simple as
hiring “good” people
Companies should strive to fill their
leadership ranks with people who embody
the principles of ethical leadership.
• The six main principles include
1. Respect
• Respect includes valuing others’ skills and
contributions. While historically respect in
the workplace may have been one-way
(leaders demanding respect from
employees), in an ethical work environment,
respect is mutual.
• Mutual respect leads to healthier workplace
relationships where both sides appreciate and
support what the other is doing and feel secure in
talking through issues and challenges
• Healthy relationships create positive work
environments, which drives increased productivity.
• Current and upcoming business leaders should
take mutual respect into account as workforce
expectations continue to shift.
2. Accountability
Ethical leaders hold themselves accountable
for their actions
They make decisions based on integrity and
stand behind their work
They also lead by example, communicate
openly about challenges, and don’t look to
place blame on others for any shortfalls
3. Service
Leaders make ethical decisions based on doing
what is right for employees, customers, and the
community
Because these constituents are always top of
mind for ethical leaders, they often have a strong
sense of service
They engage in activities such as charitable giving
and volunteer work to give back to their
communities — and encourage their teams to do
the same
4. Honesty
Leaders who are transparent build trust amongst their
organizations and amongst customers
To build and maintain trust, leaders must be good
communicators who speak openly and honestly about
issues
Regardless of the issue’s severity or unpopularity,
leaders’ responsibility to be clear and candid empowers
others to make the right decisions with the information
they have
Honesty and transparency also help to build a brand’s
reputation, leading to long-term customer loyalty.
5. Justice
• Justice is not just about following the law, but
about ensuring that everyone is getting what
they deserve
• Ethical leaders approach situations with a focus
on treating everyone fairly, and they expect
their teams to treat each other and customers
the same way
• Through their actions, they build equitable work
environments where everyone feels respected.
6. Community
Ethical leaders view their companies as
communities and consider everyone involved
when evaluating situations and making
decisions
By viewing their organizations this way, they
build equity and inclusion into their decision-
making process and create work
environments that encourage collaboration
across teams
4.2 codes of conduct and ethic
• One way to encourage the desired CSR behavior
throughout the firm is to record expectations
and the boundaries of acceptable behavior in an
Ethics Code and reinforce those rules and norms
via regular ethics training
• Both establishing the rules and then reinforcing
them via training are essential to establishing a
consistent culture throughout the organization
• A code of conduct is a set of values, rules,
and principles that outline what employers
expect from their staff.
• A code of ethics provides broader guidelines
to influence employee mindset and decision-
making
• Most organizations combine both into a single document,
rather than having separate ones.
• A code of conduct can range from overarching ideals to
specific rules. It may cover how employees should align
their behavior with the company’s mission or detail
specific policies, such as dress code or break times.
• It may also address ethical attitudes and communication
practices, aiming to prevent conflicts or harassment while
clearly outlining the consequences of violating the code
4.3 Ethics training , audits and consultants
• An ethics audit is a systematic evaluation of
an organization’s ethics program and
performance to determine whether it is
effective