Ethical Leadership in Banking in Pakistan

Strategic Planning and Performance Measurement
The ethical issues that pertain to the assessment of emotional intelligence (EI) among leadership in the Pakistani banking industry are that while EI is recognized as being important to leadership effectiveness, moral aptitude and virtue are seen as most important in being a great leader (Sivanathan, Fekken, 2002). Possessing moral aptitude and communicating virtue through transparent exchanges with followers are qualities that must be possessed alongside EI to facilitate leadership. As Segon and Booth (2015) show, virtue is the missing ethics element in EI; for instance, “an unethical manger or leader [may] demonstrate EI competence” (p. 789). For this reason, “ethical decision-making behavior” is a major ethical issue that leaders must address as they incorporate EI skills into their daily communication routines (Holian, 2006). This issue applies especially because employment law is a broad area that encompasses various aspects of the employer-employee relationship. The law is there to help regulate the relationship—but ethical leadership is there to help strengthen the relationship. Each is ultimately helpful to the other, and EI is like the oil that allows the relationship to develop and work smoothly. Ethical leadership is then like the machinery—the tubing, the rods, the engine—that keeps the parts operating in unison towards the overall goal, which is to keep the company moving forward.
Performance measurement is a significant component in the creation of any ethical organization because it enables the organization to gauge just how effectively its ethical leadership and ethical strategy is being incorporated or implemented throughout the firm. When performance is measured routinely, managers and workers alike can see whether they are on task to meet the goals that the company needs to meet in order to be productive and profitable. Without taking measurement of progress, the firm will have no awareness of where it stands with regard to its goals. It would be like an individual wanting to achieve a precise hairstyle but never bothering to look in the mirror to see what his hair actually looks like. A company that does not engage in performance management is essentially a company that is flying blind or driving in the dark without headlights. Measurement is the lamp that lets the firm’s leaders know whether the business is on track or whether it has driven off the road. It is highly imperative that progress routinely be gauged at all levels. In an ethical organization, the degree to which an corporate culture is supportive of ethics development can best be identified through measurement of the ethical guidelines’ implementation in the workplace. This can be assessed by relationship development, task-oriented achievement, morale increases, and overall positivity growth.
Laws that specifically impact ethical leadership relate to how the banking industry is operated. There are laws that focus on honest accounting practices, transparency in reporting, bookkeeping, and disclosure. There are laws that identify the precise processes by which information may be exchanged among parties, how client data is stored and/or distributed, and how the banks themselves operate in the public sphere. The laws provide the platform or framework by which leaders in the industry can base their decision-making. These laws do not necessarily hinder ethical leadership, but neither do they necessarily support ethical leadership. Laws are like the letters, while ethics is like the spirit. The letter of the law can be followed, while the spirit of the law can be violated. Banks may adhere to what can be seen as the black-and-white code or regulation, but at the same time they can engage in subterfuge and deception and actually maneuver their way around laws by finding loopholes that allow the institutions to engage in unethical advantage. As the Pakistani Banking Companies Ordinance of 1962 (updated in 2011) states, “No banking company shall engage in any form of business other than those” which are described clearly in the Ordinance. A bank that lacks ethical leadership may attempt to break this ordinance and engage in unsanctioned activity while masking it by using loopholes to get around the fact that in spirit it is violating the ordinance—which could then impact its employer-employee relationships as well as bank-customer relationships. The law, in other words, can only be impactful to an extent—and then it is up to the individual leaders to exercise ethical leadership to ensure that the spirit of the law is followed too.
The necessary steps to address these ethical issues in order to both reinforce the positive influences and mitigate or eliminate the negative influences on organizational ideology and behavior, both now and in the future, is to develop a culture that promotes ethical decision-making and ethical behavior. In other words, the organizational culture should reward ethical practices and honor ethical behavior. Incentives that make ethical activity shine in the spotlight are needed to help leaders develop their own ethical practices. Thus, the first step is to strengthen the organizational culture with respect to honor ethical decision making. The second step is to codify an ethical guideline for the firm so that expectations are clear and apparent. The third step is to enforce ethical activity and behavior by disallowing unethical activity in the workplace. The fourth step is to establish an internal reporting system so that if leaders are not honoring their ethical commitment, workers may use the system to report the issue so that it can be addressed. This allows for the positive influences of ethical leadership to be more fully made possible not only now but also for the future.

References
Banking Companies Ordinance. (2011). Retrieved from
http://www.sbp.org.pk/publications/prudential/ordinance_62.pdf
Holian, R. (2006). Management decision making, ethical issues and “emotional”
intelligence. Management Decision, 44(8), 1122-1138.
Segon, M., & Booth, C. (2015). Virtue: The missing ethics element in emotional
intelligence. Journal of Business Ethics, 128(4), 789-802.
Sivanathan, N., & Fekken, G. (2002). Emotional intelligence, moral reasoning and
transformational leadership. Leadership & Organization Development Journal, 23(4), 198-204.