The Role of Ethical Leadership in Organizational Performance

In: Business and Management

Submitted By hoichannguyen
Words 6120
Pages 25
ABSTRACT Evidence is presented to support that organizational performance can be enhanced through ethical leadership. An ethical corporate culture has been associated with trust, commitment to quality, customer satisfaction, employee commitment, and financial performance. There is an opportunity for managers to take a proactive approach to incorporating ethical concerns into strategic planning. In addition, there has been public policy support for top management to be responsible for organizational ethics. Academic researchers can assist by investigating the relationship between ethical leadership and organizational performance variables. The Role of Ethical Leadership in Organizational Performance
There is increasing support that it is good business for an organization to be ethical and that ethical cultures emerge from strong leadership. The rewards to organizations supporting ethical cultures include increased efficiency in daily operations and decision making, employee commitment, product quality improvements, customer loyalty, and improved financial performance (Ferrell, Maignan, and Loe 1999). Three different approaches are used by companies to implement ethics initiatives. Through compliance an organization can use internal controls to gain ethical conformity. Organizations may use ethics in public relations to enhance their reputation and gain extra media attention. A third, more committed approach involves using a value-based philosophy that incorporates the first two philosophies and focuses on creating an ethical culture through committed leadership. Ethical leaders can establish shared values that influence the ethical conduct of employees and improves relationships with customers, suppliers, investors, and society at large.

Ethical decision making models (Ferrell and Gresham 1985, Trevino 1986, and Hunt and…...

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