This paper examines the ethical leadership theory and its application in organizational settings. Beginning with a conceptual overview drawn from Brown, Treviño, and Harrison's widely cited definition, the paper traces how ethical scandals at firms such as Enron, WorldCom, and National Irish Bank have intensified academic and corporate interest in moral leadership. It discusses the characteristics of ethical leaders — including honesty, fairness, and moral courage — and the consequences of their absence. The paper also reviews corporate initiatives designed to promote ethical cultures and concludes that sound application of ethical leadership ultimately depends on the personal values and character of individual leaders.
The paper exemplifies synthesis across multiple sources. Rather than summarizing one author at a time, the student weaves together findings from Brown and Treviño, Toor and Ofori, Naubert et al., and others to build a composite argument about what ethical leadership is, why it matters, and what happens when it fails. This multi-source integration is a hallmark of graduate-level academic writing.
The paper opens with a brief framing introduction before moving into a two-part body. The first part (overview and discussion sections) builds the theoretical foundation. The second part applies that foundation to corporate examples and explores the causes and consequences of ethical failures. A short concluding section ties the argument back to the paper's central claim: that ethical leadership is ultimately rooted in personal character. The structure is tightly linear and well-suited to an analytical essay format.
The dominant view of leadership has historically held that leaders should concern themselves primarily with enhancing production and profit growth. This view is, however, slowly diminishing. In its place, a new perspective that encourages leaders to embrace ethical and moral conduct is taking shape. This paper examines how the ethical leadership theory has been applied in organizational settings.
Ethical leadership does not have a single, universally assigned definition. In the past, various definitions have been offered by different authors and leadership experts. Before defining ethical leadership, it is useful to first offer a concise definition of ethics. Ethics, according to April (as cited in McCann and Holt, 2013), is a system of morals. Essentially, it helps us distinguish between what is right and what is wrong in an attempt to achieve distributive justice. McCann and Holt further point out that ethics attempts to define not only the rules but also the practices that bring about responsible behavior and conduct among people for the common good.
For purposes of this discussion, the definition provided by Brown, Treviño, and Harrison will be adopted. In their words, ethical leadership is "the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making" (Brown, Treviño, and Harrison, 2005, p. 120). In this regard, ethics with respect to leadership has largely to do with not only the character of leaders but also their behaviors and actions.
As Brown and Treviño (2006) argue, ethical leadership should be distinguished from other forms of leadership, including spiritual, authentic, and transformational leadership — even though ethical elements are also present in those theories. It is important to note, however, that a study conducted by Toor and Ofori found a definite positive relationship between transformational leadership and ethical leadership (Toor and Ofori, 2009). The authors further note that their findings are consistent with past research, particularly on the claim that a positive relationship also exists between ethical leadership and followers' level of satisfaction with a leader, willingness to go the extra mile, and idealized influence (Brown et al., as cited in Toor and Ofori, 2009).
According to Tanner, Brugger, Schie, and Lebherz (2010), a number of factors have contributed to widespread attention on moral and ethical behavior in organizations. These include the misuse of power by high-ranking corporate officers, the recent economic downturn, and several high-profile ethical scandals. Some of the most prominent scandals involved Parmalat, WorldCom, and Enron (Knights and O'Leary, 2005).
In addition to raising the bar on ethical behavior, these scandals have also, according to Knights and O'Leary (2005), prompted business schools to identify the need to incorporate ethical studies into their curricula. The scandals have also stirred both research and discussion on a wide array of issues relating to ethical leadership (Toor and Ofori, 2009). As Padilla et al. and Schaubroeck et al. (as cited in Sabir, 2012) observe, there is a category of leaders referred to as "lethal leaders" — individuals who are constantly on the lookout for loopholes they can exploit for personal gain.
According to MacIntyre (as cited in Naubert, Carlson, Kacmar, Roberts, and Chonko, 2009), managers have the option of pursuing either external goods or internal goods. External goods include reputation and money, while internal goods may comprise job satisfaction and overall work enjoyment. Managers who are more inclined to pursue external goods, according to MacIntyre and Moore (as cited in Naubert et al., 2009), are likely to develop an organizational character that is largely immoral. Such managers ultimately shift their attention from internal goods to material concerns.
A notable example of a leader who pursued external goods at great personal cost is Martha Stewart, who served a five-month prison sentence after being found guilty of securities fraud. The Enron scandal is another classic example of leaders who chose to serve their own self-interest rather than the common good of all stakeholders. Despite being hugely successful at the turn of the century, the unethical conduct of Enron's top executives ultimately brought the corporation down, largely through the misrepresentation of earnings.
Brown and Treviño (2006) observe that, unlike other forms of leadership, the ethical leadership theory views leaders as moral managers. In this role, ethical leaders are more likely to communicate ethical standards to subordinates and reinforce their conduct through performance appraisals, rewards, and punishments (Brown, Treviño, and Harrison, 2005). Subordinates who fail to embrace the set standards of ethical conduct are disciplined, while those who adhere to them are rewarded.
As moral managers, ethical leaders value accountability. This perspective has been adopted by many company boards in an attempt to rein in errant executives. Brian Dunn is one such executive who was brought down by conduct inconsistent with organizational values. Dunn resigned as CEO of Best Buy after it was revealed that he had made inappropriate sexual advances toward a female employee, violating the company's code of conduct. Similarly, Mark Hurd — then CEO of Hewlett-Packard — resigned following accusations of sexual harassment by a subordinate. Compelling both executives to resign was the appropriate course of action to protect not only their companies' reputations but also the interests of their stakeholders.
Ethical leaders, as Brown and Treviño (2006) point out, are fundamentally moral persons. In addition to behaving ethically in both their professional and private lives, they value honesty and integrity and demonstrate genuine concern for the interests of other individuals and broader society. Ethical leaders also seek to promote ethical standards through two-way communication with followers, signaling that they value subordinates' input.
Other virtues commonly associated with ethical leaders include responsibility, courage, humility, and fairness. By embodying these virtues, ethical leaders act as legitimate and credible role models for their subordinates. The more that subordinates align their actions with those of their leader, the less likely they are to engage in deviant behavior. Naubert et al. (2009) found that the display of ethical leadership by managers plays a crucial role in shaping an ethical organizational climate. As Thomas et al. (as cited in Toor and Ofori, 2009) emphasize, business executives should use their positions to send consistent and clear messages about the need for all employees to adopt ethical behaviors.
As Naubert et al. (2009) observe, the close attention corporate leaders receive is largely warranted given the role they play in influencing the values, behaviors, and conduct of subordinates. The critical question this raises is whether today's business executives are sending clear signals to their subordinates about acceptable standards of behavior. Recent events paint a somewhat sobering picture.
At National Irish Bank (NIB), the unethical behavior of employees was never suppressed, as leaders were primarily concerned with profit maximization (Knights and O'Leary, 2005). A report issued by the inspector general later confirmed that leadership played a momentous role in the institution's scandal. The Best Buy CEO's inappropriate relationship with an employee also set a damaging example for the broader workforce, particularly given the visible disparities in age, power, and position between the two parties.
May, Chan, Hodges, and Avolio (as cited in Tanner et al., 2010) argue that leaders may embrace unethical behavior in an attempt to preserve their careers or avoid unpopularity. According to Hannah, Avolio, and May (as cited in Schaubroeck et al., 2012), "bad apples" — unethical leaders or senior individuals who disregard ethical norms — have also been blamed for triggering unethical organizational behaviors. A study by Schaubroeck et al. (2012) concluded that the ethical influence subordinate leaders exert on those they lead can be either reinforced or undermined depending on the ethical leadership level of those above them. The reverse is equally true.
Given these explanations, it is useful to consider proposed solutions. As Tanner et al. (2010) observe, it is a leader's moral courage — defined as the conviction to stand firm in the face of unpleasant consequences — that most determines his or her resolve to act ethically. Moral leaders must be ready to embrace ethical behavior even when doing so appears personally costly. According to Sabir et al. (2012), leaders also have a responsibility to ensure that their ethical conduct is reflected not only in their formal judgments but in their daily conversations and dealings as well, so that they can more readily become role models for their followers.
The impact of unethical behavior can be severe. According to Knights and O'Leary (2005), past scandals perpetrated by unethical leaders have not only threatened the positions of the perpetrators but have also had a negative impact on the financial health of the companies involved. Firms that have paid the ultimate price of bankruptcy include Dynegy, Lehman Brothers, and Enron. Bre-X, a Canadian mining company, collapsed after it was discovered that it had released falsified information about a gold discovery. HP was compelled to hire a public relations firm to rehabilitate its image following a spying scandal involving journalists and board members. Although HP justified the surveillance as an investigation into alleged information leaks, the decision ultimately cost then-CEO Patricia Dunn her position.
Tanner, C., Brugger, A., Schie, S. V., & Lebherz, C. (2010). Actions speak louder than words: The benefits of ethical behaviors of leaders. Journal of Psychology, 208(4), 225–233.
Toor, S. R., & Ofori, G. (2009). Ethical leadership: Examining the relationship with full range leadership model, employee outcomes, and organizational culture. Journal of Business Ethics, 90, 533–547.
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