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Introduction
Leadership is a journey defined by both the means and the end. It is a means
of direction, to achieve defined goals and should be done in a manner that exhibits
fairness in dealing with issues as well as increased awareness and interest in
corporate responsibility. This implies that when leadership exists without ethics and
corporate governance, it is absolutely without direction and of little value.
This term paper seeks to highlight the basic concepts and contemporary
issues of ethical leadership and good governance. Ethical issues in management
and the development of systems of corporate governance are pressing concerns in
todays business. Therefore, an understanding of this is essential to those in
leadership roles.
Ethics is a branch of philosophy that studies the difference between right and
wrong. It is about what morals and values are found appropriate by members of
society and individuals themselves. Ethics helps us decide what is right and good or
wrong and bad in any given situation. With respect to leadership, ethics is about
who leaders aretheir character and what they do, their actions and behaviors.
Different people will approach an ethical decision with different points of
view, and different cultures approach ethics in different ways. This is personal
ethics. The context is also important as one has to look at the specific rules that
govern the situation. For example, if one is an auditor, they will be bound by the
relevant auditing standards in the jurisdiction where they are carrying out an
assignment. Then, as a professional, one must consider the principles of their
professional body which form the basis of their professional ethics.
A leaders own values, interests and experiences are the filter through which
they view any situation. It is important that they are aware of those filters because
they could influence professional judgement and they should strive to maintain
objectivity by being mindful of the fact that their personal values are just that personal and unique to them. Ethical leadership is understanding ones core values
and having the courage to live them in all parts of ones life in service of the
common good (Aliyu, 2013).
When separation exists between the ownership of a company and its
management, self-interested executives have the opportunity to take actions that
benefit themselves, with shareholders and stakeholders bearing the cost of these
actions. This scenario is typically referred to as the agency problem, with the costs
resulting from this problem described as agency costs. Executives make investment,
financing, and operating decisions that better themselves at the expense of other
parties related to the firm. To lessen agency costs, some type of control or
monitoring system is put in place in the organization. This system of checks and
balances is called corporate governance (David Larcker, 2011).
Corporate governance, therefore, is the system by which companies are
directed and controlled in the interests of shareholders and other stakeholders. Its
purpose is to facilitate effective, entrepreneurial and prudent management that can
deliver the long-term success of the company. At a minimum, this (monitoring)
system consists of a board of directors to oversee management and an external
auditor to express an opinion on the reliability of financial statements. In most
cases, however, governance systems are influenced by a much broader group of
constituents, including owners of the firm, creditors, labor unions, customers,
suppliers, investment analysts, the media, and regulators
Respect for Others - Ethical leaders treat others with dignity and respect.
They treat people as ends in themselves rather than as means to their own
ends. This form of respect recognizes that followers have goals and ambitions
and confirms followers as human beings who have worth and value to the
organization. In addition, it leads to empathy, active listening, and tolerance
for conflicting viewpoints.
ii.
iii.
Justice for Others - Ethical leaders ensure that justice and fairness are central
parts of their decision making. This implies treating all subordinates in very
similar ways, except when there is a very clear need for differential treatment
and there is transparency about why this need exists. In addition to being
transparent, the logic for differential treatment should be morally sound and
reasonable.
iv.
v.
goals need to excite as many people as possible, and ethical leaders achieve
this by taking into account the goals of everyone in the team or organization.
Being an ethical leader will be easier if the following (Northouse, 2012) are
entrenched into leaders thinking:
i.
ii.
iii.
Am I respectful to others?
iv.
v.
vi.
concerned with their employees, their customers, their suppliers, their communities,
their shareholders, and themselves. Leadership is influencing people to achieve
communal goals; ethical leadership is achieving those goals in a way that is fair and
just to employees, customers, suppliers, communities, shareholders, and leaders
themselves.
Corporate governance is this holistic approach by which there is an overriding moral dimension to running a business, which permeates the entire
organization from top to bottom and embraces all stakeholders. This approach
recognizes that the interests of different stakeholders carry different weight, but it
does not, by any means, suggest that those with a major interest matter and the
rest dont. On the contrary, best corporate governance practice dictates that all
stakeholders should be treated with equal concern and respect. The principles
underlying such an all-inclusive approach include:
i.
Ethics
organizational
standards
with
high
moral
character
and
iii.
iv.
Judgement - reflecting the first three principles and giving due weight to all
stakeholders; Making decisions that will maximize organizations prosperity
v.
vi.
vii.
Reputation - this is the view that other people have of the organization. A solid
reputation will contribute to new clients, repeat business, and goodwill with
normative, derivative and mixed stakeholders (employees, debtors, creditors,
regulators).
Summary & Conclusion
There is significant positive relationship between ethical leadership and good
governance. Ethics has variables that guide the performance of leaders, thereby
creating a direction for the leaders to focus, thus, enhancing good governance.
Corporate governance is comprehensive and balances the interests of
shareholders with all stakeholders. Many academic studies conclude that effective
Attract investors and assure them that their investments will be secure and
efficiently managed, and in a transparent and accountable process.
ii.
iii.
iv.
References
Aliyu, A. N. (2013). Ethical Leadership and Good Governance. European Journal of
Humanities and Social Sciences Vol. 27, No.1.
David Larcker, B. T. (2011). Corporate Governance Matters. New Jersey: Pearson
Education Inc.
DuBrin, A. J. (2010). Principles of Leadership. South-Western.