Ethical Leadership: context and theoretical framework

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"First, that we are living a global social crisis were Capitalism and businesses are part of the problem and should play a major role in the solution. Secondly, that to play these role business corporations should recognize their social nature and responsibility, be conceived as purposeful communities of people with a broader sense than generate profits, and keep ethics present in its conversation and every daily practices.  Thirdly, and maybe the most important, that Ethical Leadership is one of the key factors that could make these things happen.”

Este ensayo es el producto del ramo Applied Ethics: Directed Research en el Master of Arts (Professional and Applied Ethics) que estoy haciendo en la University of Melbourne, Australia. El programa permite elegir la temática, y en mi caso es Liderazgo y Ética.

Para mi fortuna, aún cuando mi master está al alero del CAPPE (Centre for Applied Philosophy and Public Ethics), la tesis y esta investigación las estoy haciendo en el Centre for Ethical Leadership, de la Business School. La combinación de filosofía y negocios ha sido muy afortunada.

Tomé este ramo optativo como la revisión bibliográfica de la tésis que estoy partiendo en estos momentos. Esta última será, probablemente, sobre Ethical Leadership for a Conscious Capitalism: key elements and challenges.

Algunos alcances:

- al momento de partir escribiendo este ensayo a mediados del año pasado, encontré el libro Adaptación, la empresa chilena después de Friedman, de Tironi y Ossandón. Muy recomendable. En resumen, el libro que recoge ensayos de distintos autores, intenta dotar de un relato a la empresa de hoy y mañana en Chile, que reconozca un propósito más allá de la mera generación de valor económico para sus accionistas. Lamentable o afortunadamente, no hay un capítulo de Liderazgo directamente, por lo que en alguna medida intentaré hacer un esfuerzo por llenar ese espacio con la tesis.

- en segundo lugar, mientras escribía el ensayo, Raj Sisodia, uno de los creadores de la idea de impulsar un Capitalismo Consciente, fue a Chile invitado por el Diario Financiero. Y como si fuera poco, hace algunas semanas, se informó del nacimiento del capítulo chileno de Capitalismo Consciente.

- en tercer lugar, les puedo contar que este ensayo como parte del master ya fue evaluado. Los espacios de mejora son tres: una mayor profundización en ejmplos prácticos que sustenten la opción por una perspectiva Aristótelica y Kantiana como fundamento ético. En segundo lugar, quizás haber profundizado respecto del rol que han tomado las grandes corporaciones al día de hoy. Y tercero, faltó profundizar en el desarrollo del ensayo lo que mencionó en las conclusiones respecto de un sentido de Nosotros más profundo.

En fin, espero les sirva y contribuya a que esta conversación esté más presente. Comentarios, sugerencias, críticas, pero no insultos, son muy bienvenidos. O insultos también, pero con cariño.

1. Introduction.

 

The purpose of this document is to build a literature review for a later thesis’s on Ethical Business Leadership beyond Milton Friedman ideas of business’ purpose exclusively focused on profit maximization. It considers three main areas: rethinking capitalism, business ethics, and ethical leadership. Rethinking Capitalism deals with the increasing levels of mistrust in Capitalism as a system capable of solving social problems, it also describes traditional businesses practices, and then some emergent practices showing new shapes of Capitalism. In Business Ethics I present the ethical framework that I will take into account and define boundaries with other perspectives not considered as fundamentals for the next work. Thirdly, Ethical Leadership describes the outstanding characteristics of ethical leadership and includes considerations on ethical behaviour, and particular elements of ethical leadership and its practice. Finally I present conclusions and open points that this document leaves for other potential development.

2.   Context: Rethinking Capitalism

 

Over twenty years ago, Berlin’s wall fell and at the same time a popular book was announcing the end of history referring to the theoretical global acceptance of capitalism and democracy (Fukuyama & Bloom, 1989). However, instead of quiet times, the current era is characterized by several crises, social movements and plenty of social changes. Capitalism, business corporation, and business leaders are not away of all that. They are actually in the centre.

 

I will start by reviewing free market`s failure to deliver social wellbeing, some traditional business practices and emergent tendencies that show the uprise of a different kind of Capitalism and Business Management.

2.1. Why re-think Capitalism?

 

According to the World Bank, round of 40% of the global population lives with less than two dollars a day. Close to the 80% do it with less than ten dollars a day (World Bank, 2013). Despite this figures are better than ever before, a big part of world population is still living in very precarious conditions.

 

Around forty years ago, Time magazine announced the emergence of The Executive as Social Activist (Time magazine, 1970), while at roughly the same time Milton Friedman stated, “that the only social responsibility of business is to maximise profits” (Friedman, 2007). Just a couple of years ago, all of this had seemed to become more radical, and Michael Porter wrote: Capitalism is under siege at the beginning of his article presenting Shared Value theory (Porter & Kramer, 2011a).

 

In the meantime, we have seen a lot of corporative scandals that support Porter’s vision and Time`s  “proposal”. One of the most notorious scandals developed in 2001 when Enron in partnership with Arthur Andersen consultancy, staged one of the biggest scams in corporative history manipulating the accounts numbers and affecting a huge number of employees and people. Another scandal in 2008, was the subprime crisis USA `s biggest brank when into bankruptcy. But the government declared them “too big to fail”. The US government articulated a plan to save the biggest one with public funds, which implies merging and making the state part of their ownership. At this point it was pretty clear for all kind of experts that the market couldn’t act self-regulated. But, a second scandal broke when salaries and bonus paid to executives were shown to the public as bonus, even in the scenario of the worst economic result in the whole industry (Sandel, 2011). This second scandal boosted discussions over ethics in business and ethical. Deep down it was clear that something was going really wrong with businessmen avarice and the real purpose of business corporations. (Sandel, 2011).

 

Along with business scandals and the disheartening figures on world poverty, there are still other challenges that appear as a consequence of unrefrained capitalism. Climate change is putting the entire world facing a common challenge, as never seen before and it is the first truly global ethical challenge, because it raises the ethical question about the life we want to have and what we will do to achieve it (Gardiner, 2004; Shue, 1999).

 

All the previous facts, business scandals, world poverty, global warming and its consequences, put capitalism under siege. Now it is clear for more people that famous Milton Friedman’s statement is an absurd reduction of economic activity that doesn’t consider intrinsic drivers of business people, is considerably unsustainable and even unmoral (Handy, 2002; Sandel, 2011; R. C. Solomon, 1992). More people started thinking that it is logical to expect businesses to play a central role in solving social problems and advocating for businesses to be a integrated piece in our society and people’s life (Bartlett & Ghoshal, 1994; Porter & Kramer, 2011b). These changes in business’s roles necessarily include a movement in assumptions and practices of capitalism, business management and business leadership.

2.2. Business’s assumptions and practices are changing

Traditional assumptions and practices about business and management

 

Since the “Wealth of Nations” (Smith, 1863) was published, several neoliberal economists and some businessmen defend a particular group of the ideas about human beings, society, and business. Among others, people pursuing their self-interest as part of its nature, that everyone working for his or her self-interest will finally create the best welfare for the whole society, instead of altruistic behaviour (Bowie, 1991). Also, that business are intrinsically economic entities called to maximize profits (Friedman, 2007), and that they demand a particular ethical standard different than the one of individual’s personal life (Carr, 1968).

 

According with this tradition the proper way to manage a business includes the following kind of assumptions and practices about businesses:

 

  • Businesses are economic entities with an economic purpose, that don’t have any other social responsibility beyond of respecting institutional framework and maximize their profits (Friedman, 2007).
  • Business has a sort of parallel ethic standard, away from personal life (Carr, 1968).
  • Businesses are self-centred and autonomous (Handy, 2002).
  • Its purpose is to serve their owners (shareholder), who expect to maximize their profits in the shortest time as possible (Stout, 2012).
  • They need to act with the highest level of liberty to reach their maximum level of efficiency (Friedman, 2007).
  • They act following the logic of strategy, planning, and operation (Bartlett & Ghoshal, 1994; Mintzberg, 2004).
  • In order to accomplish their goals, they use different kinds of means as economical, physicals, technological, and human resources. Management challenge is to combine them for the profit maximization without particular differentiation between them (Mintzberg, 2004).

 

These traditional assumptions and practices represent tensions that are solved in a trade off dynamic of “one or another”: business or society, egoism or altruism, corporate life or personal life, economic value or broader values, short term or long term, shareholders or stakeholders, etc. As I will show next, part of the emergent assumptions and practices reflect an approach toward the integrations of each of these poles, rather than the selection of one of them.

New assumptions and practices about business and management

 

Changes in the way Capitalism is conceived and the new ways businesses are managed are conceptual and practical. They reflect new conceptions regarding several issues: business’s nature in terms of what kind of entity they are (Handy, 2002); purpose in terms of what are they for and what kind of values we should expect from them (Bowie & Bowie, 1999); and even ownership, in terms of considering corporations as thing one can own, given the fact that behind them a community of people are “investing” time, capabilities, and life’s purpose (Stout, 2012).

 

Reflecting these changes, we find the following new assumptions and practices in businesses:

 

  • Businesses are purposeful communities of people, where profit is fundamental for existence, but not enough (Bartlett & Ghoshal, 1994; Handy, 2002).
  • Focused on purpose more than specific objectives and recognizing their social nature (Bartlett & Ghoshal, 1994).
  • They purpose is to serve and create value for their different stakeholders, in the short and long time (Stout, 2012).
  • Ethics is in the inner activity of free enterprise as part of the business meaning, strategy, and process (Bowie & Bowie, 1999; Robert C Solomon, 1997).
  • They are interdependent with its different kind of stakeholders, including the natural environment. They are part of the society (Freeman, 2010)
  • They do have a social responsibility, regarding the way they pursue their purposes, the social needs of the communities they live on, and regarding the most important social challenges as poverty, climate change, and social integration, among others (Freeman, 2010; Handy, 2002; Porter & Kramer, 2011b).
  • They need to act with the highest level of liberty, but within a framework of regulation to assure corporative ethical behaviour and real free and fair competence(Sandel, 2011).

 

Having described the new assumptions on business and management, I will show how companies are adopting them trough different kind of practices. Some focus on business purpose, other in different conceptions of strategy and new markets opportunities, and others in business’s nature as economic and social entity. I will focus and describe the four of this emergent practices because of their worldwide relevance and theoretical symbolism: Corporate Social Responsibility, Shared Value, Conscious Capitalism, and B-Corporations, because they clearly embody these new visions.

 

Corporate Social Responsibility

 

Corporate Social Responsibility (CSR) is a term introduced in management since the 60’s, but consolidated in the 80’s. A keystone in CSR history was the book “Strategic management: a stakeholder approach” by R. Edward Freeman written on 1984. Freeman stood for the idea of respectful businesses corporations with the different groups affected by them, including the environment (Freeman, 2010). Later, John Elkington in 1997 coined the term “Triple Bottom Line” which developed the idea that businesses should be evaluated for its economic, social, and environmental performance (Elkington, 1997). Since then, there has been a lot of promotion of CSR, defending it from a not despicable number of voices against it. As Friedman, there were others standing out for the idea of Business Corporation focused exclusively in the maximization of profits. One of the important works against CSR was written by McWilliams and Siegel, which questioned the real impact of CSR in business (McWilliams & Siegel, 2000). Another one came from David Henderson, which tried to put in concrete terms what to expect and what not of CSR (Henderson, 2005).

 

Since its early starts there has not been one clear and shared idea of what CSR is. Despite the existence of well established tools like the Global Reporting Initiative (Hussey, Kirsop, & Meissen, 2001) for Sustainability, or the ISO 26000 for Social Responsibility management (Pojasek, 2011), companies still do a huge variety of different things calling them CSR: philanthropy, community relationships, environmental impact, ethics management, and stakeholder engagement, among others. Due to this, it is fair to mention that CSR which Friedman spoke about in early 70’s was one related with what now is considered just philanthropy. Still given this limited idea of CSR, Friedman’s detractor’s argument that he stands for business purpose just related with the maximization of profit and that company belongs exclusively to their stock- holders.

 

Shared Value

 

Originally described by Porter and Kramer, Shared Value is defined as “policies and operating practices that enhance the competitiveness of company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress” (Porter & Kramer, 2011a). This concept draws from the idea that there are not enough resources to achieve welfare for the whole worldwide population and that that businesses are the only institutions that create profit that enables solving these social problems (Porter & Kramer, 2011a).

 

The authors also argue that capitalism was focused to serve the richest portion of society who represent close to the 10% of the worldwide population. That means that the biggest part of the market is still unattended by companies (Porter & Kramer, 2011a). Thirdly, that Shared Value is created through three different ways: new products and markets, redefining value in the value chain, and facilitating local cluster development (Porter & Kramer, 2011a).

 

Despite the good news to have a business’s guru as Porter talking about capitalism serving to solve social problems, from the ethics perspective, as I will show later, it is still insufficient if we take what the authors say: “It is not philanthropy but self-interested behaviour to create economic value by creating societal value”. (Porter & Kramer, 2011a).

 

In my perspective, there are two main problems with Shared Value. The first one is that even when it surpasses the “one or the other” dynamic (profit or social good), it still considers bottom line economic value as the sole purpose of business without taking into account, others values that a company could generate to its different stakeholders during its process. The second problem is deeper because is ethical: Shared Value still works in the belief of self-interested human beings and seems legitimating it as the fundamental driver to participate and lead businesses.

 

Conscious Capitalism

 

Conscious Capitalism is relatively new business philosophy that stands for capitalism where companies could (and should) create different kind of values for the multiple kinds of stakeholders. Conscious Capitalism focuses on shared human values, in addition to shared economic value and holds it´s foundations in the virtue of companies as a human activity that implicate emotional and even spiritual connection (Kofman, 2008; Mackey, Sisodia, & George, 2013; Sisodia, Wolfe, & Sheth, 2007).  

 

Conscious Capitalism is defined as “a way of thinking about business that is more conscious of its higher purpose, its impacts on the world, and the relationships it has with its various constituencies and stakeholders. It reflects a deeper consciousness about why business exist and how they can create more value” (Mackey et al., 2013)

 

In the same theoretical approach, the book Firms of Endearment (FoEs) written by Sisodia et al. in 2007, shows how Conscious Business behave by presenting financial performance data and comparing conscious businesses with others companies. Numbers are eloquent. FoEs that were took to illustrate the concept returned “1025% over the past 10 years, compared to only 122% for the S&P 500 and 316% for the companies profiled in the bestselling book Good to Great.” (Sisodia et al., 2007)

 

Finally, these are the most important practices that FoEs develop (Sisodia et al., 2007):

 

  • They give a high priority stakeholder status to customers, employees, suppliers and community (society) as well as shareholders.
  • Relatively modest executive’s salaries.
  • Open-door policy at executive level.
  • They are largely above the market in employee’s compensations.
  • They invest considerably more time to employee training than their competitors.
  • They empower employees to full satisfy customer under they own view.
  • They make explicit effort to hire people passionate with the company and its product or service.
  • Their marketing investment is significantly lower than the one of their pairs, with highest levels of customer satisfaction and loyalty.
  • Suppliers are taken as partners, which implies efforts to plan together and help them in their productivity improvements, quality, and profitability.
  • They tribute the spirit of law, and apply high level of standards to assure its accomplishment.
  • Considers culture as the most important asset and competitive advantage.

 

B-Corporations

 

In 2009 a new business conception took shape in the USA. They were called B-Corporations, and they went further than CSR, Shared Value, or Conscious Capitalism, putting in practice a vision of companies competing not just to be the best in the world, but also to be the best for the world. Subsequent organization and work led to a new legislation in USA and the development of an accreditation mechanism, a B-corporation certificate.

 

The starting point was the experience of the owners of Ben & Jerry’s ice-cream company, who had to sale their company to Unilever compelled by a legal obligation. The fact was that they couldn’t demonstrate that they have better process to generate more profits for their shareholders, which is mandatory by law (Page & Katz, 2012).

 

After Ben & Jerry’s case, the creation of a new legislation allows founders or current board members can now consider the community, employees, and social impact as well as shareholder profit when making a business decision. Up to date, there are 855 B-Corporations in 28 countries, among 60 industries.

 

The fundamentals of Capitalism and business corporations have been changing in the last decades. Global needs, challenges and corporate’s scandals, push to businesses to develop new assumptions and practices. They are leaving behind Friedman’s idea of self-centered companies looking exclusively for profits maximization and they started turning toward more inclusive, social engaged, conscious, and purpose-diversified shapes. These new tendencies constitute the latest demands for the new executive’s leadership that society expects.

3. Business Ethics

 

This section reviews business’s ethical theories that I am taking into account for the following ethical leadership review. It does not intend to make an extended examination of the whole ethical theoretic frameworks available, which would be too broad and deep for this document. My main interest is on individuals leading with the new kind of tensions present in businesses, putting (or not) ethical considerations in practice.

 

As many authors before me (Bazerman & Tenbrunsel, 2011; Gentile, 2010) I will make a use of “ethics” and “moral” as interchangeable concepts, aware that underneath is an extended discussion. In terms of content and scope, I am considering ethics in a broad sense constituted of three elements: the standard of behaviour for individuals living in a community, the character we shape through our behaviour and decisions we take, and the pursue of common good (Sandel, 2011).

 

This ethics perspective is broader because it goes further than the commonly accepted idea of ethics as the standard of our behaviour. As we could see following Rawls definition: “ethics is how we decide to behave when we decide we belong together” (Rawls, 1985). I’m settting away from traditional ethical theories as utilitarianism and liberalism, and will consider Aristotelian ethics complemented with a Kantian’s perspective.

 

As Bowie noted, it is possible to take both theories whenever it should not be difficult to find that different ethical theories lead us to similar answers (Bowie & Bowie, 1999). I’m taking Aristotelian ethics according to the relevance of develop character and virtues, and the sense of a community with common goals with the consequent individual responsibility with it (R. Solomon, 1993). Kantian, particularly in regards his vision of individual as ends on themselves, and moral behaviour because is the right thing to do further than any other consideration (Bowie & Bowie, 1999).

 

I will now consider some of the Aristotelian elements that can be used to approach business ethics. Solomon (1993) describes them in the following way:

 

  • Cultivation of the virtue as worthy in itself regardless the consequences.
  • Life as a coherent whole, eliminating every chance of set away ethically business dimension of the rest of our life.
  • Community sense, traduced in terms of the vision of business corporations and individuals as part of a longer community with its own common goals.
  • Balance between rights and responsibilities.
  • Excellence, as considering virtue as doing one’s best, go further than do no wrong, and put ethics at the same level as profit maximization.
  • Integrity, as the integration of roles and responsibilities and the virtues defined by them.
  • Judgement, as the capacity to decide the ethical course in our roles conflict, knowing that there is not one principle to guide us.

 

Regarding Kantian perspective I will focus on two of Kantian categorical imperatives: the respect for humanity in persons, and the moral community formulation. For Kant human beings are ends in themselves. They should be respected because they have dignity, and have dignity because they are autonomous and thus capable of self-governance. Given that, they are responsible beings. For Kant, human dignity is based on the rational capacity. One person is a moral agent only if she is free and autonomous. One person is free and autonomous if is rational (Bowie & Bowie, 1999). Consequently, it is logical that if a person who recognize himself as autonomous and responsible, she should consider others like him to be autonomous and responsible as well. This rationalisation connects justice with morality, and freedom (Sandel, 2011). That is why Kant’s second formulation of categorical imperative says: “Act so that you treat humanity whether, in your own person or in that of another, always as an end and never as a means only” (Kant, 1969).

 

It seems to me that the work of Norman Bowie is important to consider given the fact that the author announces explicitly that his “friend Ed Freeman had not completed that project himself”. Bowie was alluding to the essay of Freeman and Evan in which they develop a theory of Kantian Capitalism based on stakeholder strategy (Evan & Freeman, 1988). This is relevant because Freeman’s stakeholder approach constitutes part of the roots of the latest tendencies in business’s philosophy and practices as CSR and Conscious Capitalism.   

 

Following Bowie’s work the next are some elements and practices approaching business ethics from a Kantian perspective (Bowie & Bowie, 1999):

 

  • Corporations are moral solely if they treat employees as ends and not merely as means.
  • Organisational democracy in the form of employee’s participation in making employment policies that affect them.
  • If managers has the obligation to manage in the best interest of the company, and if building trust among stakeholders is the only way to do it, then managers has an obligation to build this trust among stakeholders.
  • Building meaningful works according to positive freedom means the ability to be autonomous governed by own law.
  • Companies as moral communities of people based on humanistic values.

 

In my perspective it is possible and desirable to take ethics in a broader sense to base, explain, and latest emergent business’s practices and leadership behaviour. As I have presented, ethics as the standard of behaviour, character’s development, and the pursue of the common good, is a proper way to approach to the phenomenon. Based on Aristotelian and Kantian ethics is possible to find pillars strong enough to shape the ethical business corporation we need for the future, and the ethical leadership we need to conduct them,

4. Ethical Leadership

 

In this section I will review different elements on ethical leadership models identifying challenges and tensions involved. I’m giving special attention to traditional leadership models, altruism versus egoism and recent evidence on moral behaviour.

 

Both leadership and ethical considerations are necessities imposed by the fact that we have a communal existence. In a broad sense, leadership is the act of influencing other toward the achievement of a common purpose (Bass & Bass, 2009). Ethical Leadership is the act of influencing others to achieve purposes or goals, in regards to standards of behaviour based on a set of values that consider others rights and dignity, the way that we live in community, and the character developed through his decisions and actions (Wood, 2009).  Ethical Leaders pursue the common good and elevate people in the process of leading (Freeman & Stewart, 2006; Wood, 2009).

 

Ethical Business Leader has been described as having certain particular characteristics, in this way this kind of leaders:

 

  • Define and embody the purpose and values of the organization outlining what to pursuit and how to do it.
  • Focus on organizational purpose more than in personal purpose.
  • Consider ethical standards together with organizational goals and keep alive the conversation about ethics and different stakeholder’s value proposition. This includes societal engagement to assure organizational sustainability.
  • Recognizes value conflict within goals and means and different people approaches to each situation, favouring different ways to confront dissent.
  • Envision action in ethical terms, generates a strategy congruent with his/her values, and are conscious about the limits of them.
  • Convert their values into an ideal image in practice of himself (his best), and of a team, organization, community, government, and society. At the same time they know how to act in ways that are consistent with these values and images.
  • Promote people development treating them as ends on themselves. (Freeman & Stewart, 2006)

 

As can be seen, leadership subsists in the permanent tension between pragmatism and idealism, and between effectiveness and moral considerations (Ciulla, 2004). Not all classic leadership models take into account these tensions. Some of them, like the charismatic model are focused on the individual while the transactional model focuses in the action of influence toward a specific objective (Bass & Bass, 2009). The ones that do take these tensions and could be part of Ethical Leadership are: Transforming Leadership, Servant Leadership, and Strategic Leadership. These leadership models integrate the following elements that make them ethical:

 

  • Promoting people in terms of character, values, and skills, us such, they raise consciousness about believes and value conflicts within their followers.
  • Letting their followers became leaders and transforms themselves as moral agents (Ciulla, 2004).
  • Acting behind the team to lead them to their purposes (Greenleaf & Center, 1973).
  • Making people find their purposes and face their adaptive challenges, which involve their deepest values, beliefs and principles (Heifetz, 1994).

 

As I mentioned regarding new business and management tendencies, there are some tensions that Ethical Leadership have to manage. All of these tensions seem to be around two more fundamental ones: altruistic versus self-interested behaviour, and ideals versus pragmatism. The last part of this work goes toward these tensions as they represent a keystone of Ethical Leadership’s challenge.

 

Altruism versus self-interested behaviour

 

For several authors (Avolio & Locke, 2004; Bowie, 1991; Freeman & Stewart, 2006; Greenleaf & Center, 1973; Kanungo & Mendonca, 1996) it is clear that altruism is a sine qua-non condition for Ethical Leadership insofar it includes the pursue of common good, elevates their followers and puts other’s goals before personal ones. But while we found an important group standing by altruism in the centre of Ethical Leadership, for others that is not a necessary condition.

 

One valuable source to clarify each position is a letter’s exchange between Bruce Avolio defending altruism and Edward Locke, arguing for self-interest. The main arguments are synthesized as follows (Avolio & Locke, 2004):

 

Avolio (altruistic and self-sacrificed):

  • Finite resources world makes impossible to fulfil selfish interest.
  • Highest leadership challenge is built virtue among others.
  • Leader’s self sacrifice could be part of the strategy to build moral authority over their followers.
  • There is cultural differences must be considered, of what does it mean altruism and how is perceived.
  • Long-term common good implies self-sacrifice.
  • The more the interest is centred on others, the higher moral level.
  • We could refer to “altruistic egoism” as the self-interest in others satisfaction.
  • At last, it is a matter of perception rather than definition. Leaders perceived as more selfish are playing against their loyalty credits from the side of followers.

 

Locke (self-interest)

  • More real and practical.
  • Reason as the best virtue.
  • One individual can do whatever he wants, if it doesn’t hurt physically anybody else.
  • Maturity moral level is about rational in the long run, and long-range context.
  • Highest moral purpose is the achievement of his or her happiness (Avolio & Locke, 2004).

 

Regarding this discussion, there are two points that seems important to highlight. First, the argumentation is based in the idea of human beings’ nature as selfish or altruistic. Second, although Avolio consider altruism as a higher moral behaviour, his argument is practical at last. For him it is impossible for leaders to make people follow them if they are perceived as acting in self-interest. For Locke, to pursue own happiness is the highest moral value as rational and free individuals. I’m with Avolio. In my perspective altruism means the inclusion of others in my actions and ends. And, as I defined before, I don´t think libertarianism as the maximum human value.

 

Ideals versus pragmatism

 

The second tension is about ideals and pragmatism, that is the vision of how things should be and how to achieve them and the practical idea of what is possible to achieve and how to do it, attending human limitations, resources, capabilities, etc. In that sense Ethical Behaviour is what is in the heart of ideals versus pragmatism, as the challenge to put values in practice when the given conditions hinder moral actions.

 

One important finding on ethical behaviour is that even when most of people have “good intentions”, the majority fail at identifying ethical dilemmas and overestimate their ethical behaviour. The good news is that rising levels of awareness and figuring out potentially sensitive ethical situations increase the possibility to act ethically (Bazerman & Tenbrunsel, 2011; Gentile, 2010).

 

Bazerman and Tenbrunsel show how our ethical judgements are based on factors outside of our awareness. These factors are (Bazerman & Tenbrunsel, 2011):

 

  • Moral hypocrisy: Evaluating differently our own moral transgression than the ones of others.
  • Preferences, biases and conflict of agency.
  • Bounded awareness: the tendency to exclude important information that provokes a dysfunctional problem definition.
  • Segmentation of decision processes: organization design that divides tasks and responsibilities into roles and department, does not alllow to “watch the forest” of the ethical dilemma.
  • Role’s boundaries: similar than the previous point, blind spots created for the specific role.
  • Groupthinking: individuals thinking and acting in a way that favour unanimity beyond realistic and even goal achievement.

 

Following Bazerman and Tenbrusel, Gentile (2010) put attention in what really happens with our ethical behaviour, but with a special emphasis in how we can put our values into action. Gentile states that our ethical performance can be importantly improved if we think previously, what would I do I am involved in some situation that supposes an ethical dilemma (Gentile, 2010).

 

Also, Gentile found that defining an ethical framework people also increase their possibilities to act ethically. Furthermore, the action of defining an ethical framework usually leads people to define a purpose for their personal and professional lives, that enhance their capacity to act ethically in the future as well. This purpose is the answer to the question: why am I doing what I’m doing and how I would like to do it? (Gentile, 2010) An ethical framework includes personal value recognition, learning from experiences, potential scenarios and decisions to take if we face ethically sensitive situations, and a vision of how could I respond to resolve ethically (Gentile, 2010).

 

This section helps us to understand what is ethical leadership, the elements involved, and the main challenges when it is brought to practice. It helps us to connect social needs and Capitalism crisis, with deep changes happening on business arena and both with Ethical Leadership intrinsical meaning and difficulties in practice.

5. Conclusions

 

This work reviewed the changes regarding capitalism, its principles, and its relationship with society, different ethics historical approaches, traditional leadership models and conceptualizations on Ethical Leadership.

 

In my perspective, three important conclusions arise. First, that we are living a global social crisis were Capitalism and businesses are part of the problem and should play a major role in the solution. Secondly, that to play these role business corporations should recognize their social nature and responsibility, be conceived as purposeful communities of people with a broader sense than generate profits, and keep ethics present in its conversation and every daily practices.  Thirdly, and maybe the most important, that Ethical Leadership is one of the key factors that could make these things happen. This supposes specific challenges for the individuals trying to do it, as: defining a personal and professional’s purpose and build a strong ethical framework, recognizing human limitations on ethical behaviour, and developing higher moral levels together with a strong character that allowed them to manage traditional tensions where social, organisational and individuals key challenges takes place.

 

This work opens the door for other potential reflection. Some of them are about the traditional approach of I versus Others, instead of a deeper development from a sense of We. Although Bowie (1991) challenges the egoistic paradigm and others defend altruism (Avolio & Locke, 2004; Kanungo & Mendonca, 1996), the common approach is about one or another, and not about a We as the integrated unit.

 

Another aspect that I did not consider is about psychological moral development, its process, influences, and implications for the kind of Ethical Leadership that seems is socially demanded and fits with the new shapes that business are taking.

 

One last issue that this work did not include and I would like to point out is Mindful Leadership. Although its development is relatively new, it could represent an opportunity to put together the previous two points: a deeper and clearer sense of We given a Buddhist perspective about interdependence and compassion in its fundamentals; and a higher morale development through deep self-reflection on purpose, self-experience, and openness to others (Sethi, 2009; Sinclair & Searle, 2010).

 

Finally, referring to the next ethical leadership proposal, I would like to explore which are the elements involved on ethical leadership development for individuals who would like to contribute to a better society leading business. For this objective, find out what kind of internal dialogue are currently present, and what are the key pillar to build a strong ethical leadership framework.

 

 

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