Leadership and Corporate Culture

Executives have the power to shape corporate culture and motivate ethical conduct. Most leaders consider themselves ethical. Some, however, question whether ethics is a relevant component of leadership. Boatright (2009) contends that it is just as important to embrace ethical behavior in public life as well as in private life. Most corporate moguls are under the impression that behaving ethically alone is enough to sustain them as an effective leader.

In fact, studies suggest that leaders do not believe specialized skills or knowledge in ethics are necessary to produce effective results in the work place (Boatright, 2009). This is a false perception. Situations arise more often than not in a business environment where leaders cannot easily resolve issues without identifying the ethical implications. This research focuses on the role a leader plays in the development of an ethical corporate culture. It takes a closer look at the importance of ethical leaders and the various roles they serve in an organization.  In addition, this study will illustrate the relationship between ethical leaders and their stakeholders.

The analysis will also examine various leadership styles, the impact they have on corporate culture, how they affect ethical-decision making, and draw from examples to support this investigation. The findings of this research will conclude that leaders, who engage in business practices without ethical rules and regulations, will eventually discover that ethical misconduct behavior can easily become an inevitable component in their future.

Importance of Ethical Leadership

The most successful leaders use their power to shape corporate culture and motivate ethical conduct. Because they are in the business of making a profit, they design strategies to achieve desired outcomes. Deepak Chopra (2012) reminds us that life is riddled with challenges, obstacles, and situations that leave many individuals asking the question, “Why is this happening?” No matter what advantages an individual may possess – money, intelligence, charismatic personality, a positive disposition, or influential social connections – none of these elements offer a magic key to effective leadership (Chopra, 2012). Managing directors are continually faced with difficult challenges. How they manage these trying situations can make the difference between the prospect of success and the threat of failure (Chopra, 2012). For example, when leaders cultivate an environment of fraud and deceit, they are fertilizing the ground for failure and destruction. In order for an executive to be considered an effective leader, they must have the ability to:

(a) Guide a corporation to profits for the sake of the stakeholders,

(b) Achieve organizational goals in an ethical manner

(c) Motivate their employees to adhere to behavior that is in alignment with the organization’s code of conduct.

Consistency also plays an important role for successful executives. The most effective leaders incorporate policies that inspire high performance levels and motivate organizational behavior that goes beyond just observing regulations. When leaders establish trust with subordinates, they earn the loyalty of their staff. In return, employees trust their leaders to protect them from harm in return for their services, dedication, and loyalty.

By making choices to work in partnership with their employees, leaders can help them achieve greater levels of success than perhaps even they realized were capable of achieving. Employees who respect their supervisors, feel supported and appreciated by them, are more likely to become motivated and go beyond just achieving organizational goals.

Leaders and Stakeholders

Stakeholders provide leaders another reason to cultivate an ethical culture. As a leader, it is their responsibility to make sure the company is guided towards the path of success and profit for the benefit of the stakeholders that support them. Executives, therefore, must incorporate effective strategies and hire the appropriate talent to reach desired outcomes as part of their responsibility to the employees, consumers, suppliers, and society as a whole. Ferrell et al. (2013) posit that because stakeholders have the ability to affect corporate policies it is imperative that leaders find methods to use their power to influence positive outcomes. There are five power strategies leaders utilize to achieve their goals:

(a) Reward power

(b) Coercive power

(c) Legitimate power

(d) Expert power,

(e) Referent power

Studies suggest these five power bases can be implemented to achieve both ethical and unethical outcomes (Ferrell, Fraedrich, & Ferrell, 2013). For example, a leader that incorporates legitimate power believes they have the right to exert their influence and that others are obligated to accept it. This kind of power is typical in hierarchical environments where leaders are assigned titles and specific positions of authority. In this type of culture, stakeholders readily acquiesce to leaders who command legitimate power. In some instances, however, leaders use this power to engage in behavior that is opposite of their belief systems.

These individuals use strict protocol and the chain of command to their advantage. This is typically one way leaders can influence individuals to engage in misconduct. In this setting, it is easier to establish a climate of deceit because subordinates are hesitant to disobey orders for fear of the punishment or termination. The leaders at the well-oiled Enron machine, for example, employed all five power strategies to maintain their grand illusion.

The Decision-Making Process

The decision-making process also plays an integral role in how leaders influence corporate culture and motivate ethical conduct. Hanh (2012) posits that because leaders can get into difficult situations, they must have the ability to handle strong emotions in the workplace in order to maintain effective relationships.

To achieve this they must keep communication open and become cognizant to avoid the creation of a negative or repressive work culture. The most successful leaders incorporate practices that help manage strong emotions and become educated on how to utilize these strategies in good times before strong emotions arise.

This strategy offers leaders the ability to respond in a more skillful fashion and incorporate effective methods during a crisis (Hanh, 2012). For example, Hanh’s Plum Village organization has developed a culture that incorporates three positive influences of power to guide their code of conduct. They are love, understanding, and letting go. The leaders at Plum Village posit that these three influences of power help in the decision-making process because they are used as effective tools that focus on the release of suffering. Their strategies of operation are designed in a way that does not incorporate punishment or destruction. In addition, they conduct their business practices in a manner that protects the environment and all living things.

Conclusion: Organizations like Plum Village that focus on creating a culture of happiness have produced a community that stakeholders are motivated to invest in. Hanh (2012) posits they have created a model that does not focus solely on profit. They also cultivate a climate to create joy and happiness (Hanh, 2012). Businesses should not have to sacrifice happiness to achieve high levels of profit. Organizations that are destructive, engage in fraud, and operate without regard for stakeholders do not enjoy longevity. Leaders in this arena cultivate an atmosphere of discontent and anxiety.

Executives on the other hand, who focus on cultivating a climate that motivates ethical conduct without compromising their ability to profit, are more likely to succeed and maintain the confidence and support of their stakeholders. For a workplace to function successfully and harmoniously there must be a code of behavior that everyone is willing to accept. The most effective method of making sure this is accomplished is for leaders to make it a part of their organization’s culture.

The most successful do so by setting an example and participating in a leadership style that reflects ethical behavior. They must also include strategies to incorporate supportive speech and engage in actions that bring content and cheerfulness to themselves, their organization, and the community at large. The findings of this research conclude that leaders who engage in ethical misconduct and cultivate a culture of deceit will achieve disastrous results like Enron unless they embrace effective leadership skills that have the power to shape a corporate culture that supports and motivates ethical conduct.