Ethical Leadership Given the Recent Crash on Research Paper

  • Length: 15 pages
  • Sources: 7
  • Subject: Business - Ethics
  • Type: Research Paper
  • Paper: #52324008

Excerpt from Research Paper :

Ethical Leadership

Given the recent crash on Wall Street and the housing market symbolized by corrupt financiers like Bernard Madoff, ethical and moral leadership of corporations has become a major issue for those who study the American capitalist system. In reality, such concerns about the lack of morality in business, government and society as a while has increased significantly in the last thirty years, which undoubtedly has been an era that glorified money, power, greed and self-interest in ways not seen in the United States since the 1920s -- or the Gilded Age of the late-19th Century. Public opinion surveys in recent decades show a total lack of public confidence in the ethics and morality of leading institutions in both the public and private sectors. This has also been an era of globalization in which many older Fordist mass production industries have been downsized, outsourced and moves to China and other low-wage export countries, which has increased the distrust of corporate management at all levels. Executives have done far better financially than their employees in this new economy, as wealth and incomes have become more concentrated at the top than ever before while the middle class has declined. In the latest recession, when unethical and incompetent firms received trillions of dollars in government aid in order to prevent a general collapse of the economy, the public outrage boiled over. In short, there seems to be a great abyss between the elite and popular levels in American society and a severe need for more ethical leadership that inspires trust and confidence in ordinary people. As the American economy has increasingly become based on services, finance and high technology, there have also been growing concerns about the ethics of these new industries, and the potential that computers and the Internet might have for the privacy and freedom of the individual, and how they are used to mold and manipulate mass opinion. Many analysts argue that there is a need for transformational leadership in corporate organizations as well as the larger society -- the type of leaders who will be motivated not by money, power and selfishness, but by a higher morality and universal values that will lift the country out of the morass into which it has fallen.

For classical and free market economists from Adam Smith and Bernard Mandeville in the 18th Century to Milton Friedman in the 20th, business had no other goals or social responsibility than maximizing profit. Smith and Mandeville stated that the invisible had of the free market automatically led to progress and the betterment of society even though the individuals participating in it had no higher moral purpose except self-interest. In a competitive market of buyers and sellers, each sought their own maximum advantage, whether to sell for as high a price as possible or buy at the lowest price, while investors always sought the highest returns (Martin et al., 2009, p. 6). As the fictional Gordon Gekko put it in the 1987 movie Wall Street "greed is good" and "captures the essence of the evolutionary spirit." Of course, Gekko's greed was not directed toward building or preserving any business over the long-term, but merely plundering them for short-term gains. While Milton Friedman did not endorse Gekko's version of Robber Baron capitalism, particularly with its cynical contempt for all forms of law and ethics, he did write in 1962 that corporations had no other responsibility but "to make as much money for their stockholders as possible" (Martin et al., p. 7). In spite of all the public and academic discussion about transformational and ethical leaders over the past thirty years, in reality most corporate and Wall Street executives still seem to be following Friedman's advice. Their ethics are dubious at best, as is their concern for followers and the larger society, although they have certainly been very effective at enriching themselves -- often using highly unethical and even illegal means.

In contrast, advocates of ethical and socially responsible management have maintained for decades that corporations also have obligations to their employers, customers, suppliers, the community, government and the environment. As Edward Freeman put it in 1984, all of these were "stakeholders" in the company to which it had certain obligations, while Friedman would have done no more for these other interests than "what is required by regulation and law" (Martin et al., p. 8). Peter Drucker asserted that corporations always had three dimensions: economic, human and social (Martin et al., p. 5). He claimed that the primary obligation of a business was to its customers, without which no business could make a profit or continue to exist at all. Without profit, then a corporation could never be socially responsible or "be a good employer, a good citizen, a good neighbor" (Martin et al., p. 9). Michael Jensen called for "enlightened value maximization" in which a corporation avoided mistreating or ignoring any important constituency and would therefore "do well by doing good" (Martin et al., p. 11).

This raises the question of to whom the management of a corporation is ultimately responsible, and which set of interests should be its main priority. Fir example, "is it socially responsible for the stronger corporation to drive the weaker one into bankruptcy or a forced merger," or to declare bankruptcy "to avoid mounting financial obligations to suppliers, labor unions, or competitors" (Daft and Maucic, 2008, p. 130). In order to offer the lowest possible prices to its customers, Wal-Mart is very aggressive about importing the cheapest possible goods from a low-wage country like China, although this also damages American workers, manufacturers and suppliers. Businesses today frequently come under criticism for globalization practice like these, as well as from consumer and environmental groups in ways that were not nearly so common 30-40 years ago (Daft and Maucic, p. 132).

Ethical judgments always involve questions of right and wrong, and vice and virtue, and responsibilities individuals owe each other, their organizations and the larger society. All actions that affect others raise ethical and moral issues, such as "honesty, promise-keeping, truthfulness, fairness, and humaneness," as well as a discussion of the morally proper ends and means (Johannesen et al., 2007, p. 1). Some philosophers define ethics as general norms of right and wrong that are universally applicable, while they regard morals as more practical and specific, with great variation from one culture to another. Others do not make any real distinction between ethics and morality at all, but in any case, communications that have the potential to influence people or societies always raises questions about ethics and morality. They are often a form of persuasion or attempt to influence decision-making, no matter whether they are interpersonal or from governments, large organizations and the mass media. While a few observers might argue that morality is irrelevant as long as the message is successful, or that morality is simply a matter of personal opinion and that no one can really be judged for their ethics, most would hold that morality must always be a factor in whether and how any communications techniques should be used, and not simply how to employ them more effectively. Although Thomas Nielsen observed that "we must always expect a gap between ideals and their attainment, between principles and their application," ethics should nevertheless regulate behavior at least in a general way, even if they cannot always be attained (Johannesen et al., p. 3).

Those who are being communicated with will always judge what they receive by their own ethical standards, although this does not mean that communication should always be tailored simply to pander to the audience. Of course for no other reason than the pragmatic and utilitarian need of "enhancing chances of success, the communicator would do well to consider the ethical criteria of his or her audience" (Johannesen et al., p. 3). Some communicators will always be extremely flexible in their ethics depending on the audience, and change their message to suit its views. They will tell them whatever they wish to hear no matter what their own moral convictions might be -- if indeed they have any at all. Bill Clinton and most other politicians have a reputation for doing this constantly, and have frequently been criticized for indulging in a cynical, opportunistic and manipulative form of communication. On the other hand, if communicators completely ignore the values, prejudices, attitudes and aspirations of their target audience, they risk being perceived as irrelevant or completely ignored. Probably the best communication strategy therefore is to find a middle ground between politician-like pandering and opportunism and, on the other hand ignoring the values of the target audience. According to the Golden Mean (or Aristotle's Doctrine of the Mean), morality is "the intermediate point between two vices -- the vice of excess and the vice of deficiency" (Johannesen et al., p. 4). To be sure, there are moral absolutes in which truth is not always found somewhere in the center, like between slavery and freedom, but most ethical communications strategies for…

Cite This Research Paper:

"Ethical Leadership Given The Recent Crash On" (2011, March 13) Retrieved January 13, 2017, from

"Ethical Leadership Given The Recent Crash On" 13 March 2011. Web.13 January. 2017. <>

"Ethical Leadership Given The Recent Crash On", 13 March 2011, Accessed.13 January. 2017,