Leadership Ethics Governance and Sustainability - Essay Example

Lеаdеrshiр, Еthiсs, Gоvеrnаnсе and Sustainability Name Course Lecture Date Introduction Authentic and ethical leadership seems to be essential aspects of organisations. All leaders in organisations need to adopt these values to makes their corporations prosper. An extra essential issue that organisations should incorporate in their operations is good corporate governance. In regard to these aspects, this paper sets out to discuss the challenges and issues that are usually encountered in assessing ethical and authentic leadership. This will be closely followed by a discussion of why good governance is important and the risks associated with poor corporate governance. The analysis will be supported by real life business cases and relevant academic theories. Responsible leadership Influencing follower optimism and commitment are essential aspects that are discussed in a great number of effective leadership theories. Leaders are expected to have an influence on the follower’s commitment to a new activity or an already existing task. On the other hand, this kind of influence is also an excellent source of ethical concerns. The issue of assessing ethical and authentic leadership sets out to determine when the influence is appropriate. It is usually easier to determine authentic and ethical leadership when the leaders, organisation and followers have congruent interests and they can be obtained by activities that do not encompass much cost and risk to either of the involved parties (Avolio, Luthans & Walumba 2004). Nevertheless, numerous situations in the influence process may include the creation of enthusiasm for risky strategy, inducing the followers to have some of their values and beliefs and influencing decision that will be of benefit to some people at the expense of others. The other issue relates to influencing expectations. An essential responsibility of the leaders is to infer confusing events and at the same time, build consensus around strategies to deal with opportunities and threats. At times, the success must entail projects that are innovative and bold. Risky ventures may lead to significant benefits for followers, but the associated cost may be high and mostly, when projects take a longer periods or fails. A great number of people would be of the opinion that, it is unethical for leaders to manipulate their followers to engage in something that goes contrary to their self-interest since they are motivated by false promises (Cooper, Scandura & Schriesheim 2005). Leaders find it difficult to arrive at an objective basis for offering accurate outcomes of projects. Based on Heifetz 1994, people need to be helped in understanding a problem in a way that does not demoralise them. He further states that, effective leaders emphasise more on what can be achieved through shared effort as opposed to dwelling much on the obstacles and risks. Thus in assessing authentic and ethical leadership, particular complex ethical issues need to be resolved first. The other controversial issue in the assessing authentic and ethical leadership is the attempt to change the follower’s values and beliefs. A great number of writers are of the opinion that, this kind of influence from the leader is unethical, even though the intended effect is to be of benefit to the organization and the followers (White & Wooten, 1986). These writers usually question the inherent assumption that, all leaders know what is best for their supporters, and there are also concerns raised on the misuse of control and power over information about unfairness follower perceptions about events and problems. A special issue of concern is the influence that charismatic leaders have on followers who are insecure and weak. Leaders are also tasked with the responsibility of implementing significant changes in the organisations that they are managing to ensure the survival and effectiveness of the organisation. A significant organizational change cannot be successful without eventual change in member perception and beliefs. Effective leaders take on other stakeholders and members to dialogue to establish what types of changes can be implemented and if they are right for the organization. The other challenge in evaluating the authentic and ethical leadership is that, it entails the multiple criteria with complex tradeoffs and stakeholders who have partially conflicting interests. The various consequences of leader’s actions and decisions usually complicate the assessment of ethical and authentic leadership. The same activities that tend to be of benefit to followers then, in a number of ways can also harm them later and in other ways. At the same time, the same activities that serve some followers interests may be opposing to the interests of other followers, and by doing what is best for one of the stakeholders may not serve the interests of the others. For example, the interest of the owners may be fulfilled but other stakeholder’s such as the customers, employee and the community may feel neglected. The efforts that aim to balance interest and values entail subjective judgements about accountability, rights, social responsibilities and due process. In instances, when stakeholder’s interest seems to be incompatible, it becomes harder to assess authentic and ethical leadership. The conventional viewpoint is that, leaders in organisations are agents, and they are supposed to represent the owner’s interest so as to achieve economic success. From this perspective, ethical and authentic leadership can be satisfied through the maximization of economic results that are of benefit to the owners and at the same time not doing anything that is illegal. For instance, a company may make the decision to move from one city to another though it would be considered ethical in instances when they can improve profits, it may have numerous effects on the local economy and employees. Governance Importance of Governance Good governance is a concept that is associated with public companies, but it would also help if small businesses can adopt and make use of the notion. Corporate governance comprises of the rules that direct the actions, as well as the roles of people in the organisation. Unlike the simple procedures and policies, corporate governance focuses on creating fewer ethical and legal problems and creating better management (Clarke 2004). One of the benefits of governance is that, it leads to fewer lawsuits, penalties and fines. Corporate governance encompasses the formulation of policies that requires companies to take all the necessary steps to adhere to state, local and federal rules, laws and regulations (Denis & McConnell 2003). For instance, company's executive management team may conduct reviews of some aspects of the organization such as the hiring process. Additionally, some companies may call for external audit from external accounting firms. An additional benefit of good governance is that, it leads to a good reputation and better recognition for the company. When companies practise good governance, they can gain trust from their customers, investors and the community. This eventually has a positive effect on the reputation of the company, and the company gains more recognition as a transparent and fair company (Dignam & Lowry 2006). This image acts for the benefit of the company and it helps the company prosper and achieve its set organisational goals faster. If a company publicizes their corporate governance policies and details and the manner in which they work, a considerable number of stakeholders will be willing to work for such a company. An added benefit that is closely associated with good governance is decreased cases of fraud and conflict. Good governance limits the chances of bad behaviour among the employees by putting forward rules that reduce potential conflict of interest and fraud. For instance, some companies draft statements that executives are supposed to sign, that requires them to avoid or disclose any form of conflicts that are detected in their organisations (Sun 2009). For instance, the company might prohibit loans to family members or officers or hiring of relatives. Other companies may require checks that exceed a certain amount to be approved by a group of people to reduce fraud and errors. Risks of poor corporate governance One of the risks associated with poor corporate governance is that, it can have some economic effects. A company with poor governance can have an impact on the business market as well as to the economy. A lack of efficient corporate governance in an organisation can lead to the making of bad business decisions, which lowers the value of the company, and this makes it difficult for the corporation to meet its financial goals (Clarke 2004). A good example of this risk was during the 2009 crisis when poor decision led to the failure of companies in the automobile and real estate markets. This also caused large-scale loss of job and economic slowdown. The other risk is the loss of shareholders confidence in a company. Organisations that do not adhere to their corporate governance strategy are in danger of weakening the trust of shareholders. This may be unpleasant mostly when shareholders feel that they were given misleading facts in regard to the business strategy and organisational structure (Dignam & Lowry 2006). When a good number of the shareholders believe that poor business decisions are being made, they are likely to start selling their stock so as to avoid the potential loss. Large sell off of stocks leads to falling share prices thus diminishing the overall value of the corporation. This means that the shareholders remaining in the company will sell their stock at lesser value as compared to those who sold earlier. A good example of this is the Olympus scandal. It was ascertained that, the company had been hiding their losses for about 20 years (Hawkes & Goodley 2012). The other risk is that, they may experience increased oversight from the government. A corporation with a reputation for poor governance incurs increased government control of certain departments that aims at verifying that the company is working within the stipulated bounds of the law (Denis & McConnell 2003). Oversight may include alterations in employees pay, review of the business practices and checking on the legality of the corporation’s investments. In instances, that they are found to be violating the set rules and regulations, they may be heavily fined, and they may also face numerous lawsuits which are not good for the company. A good example of these is Olympus and Enron, some of the executives who worked in the companies during the time that the fraud took place have been sued (Neate 2012 and Teather 2002). Conclusion Based on the above discussion, it is clearly evident that there are some issues and challenges that exist when it comes to assessing ethical and authentic leadership. One major challenge entails the multiple criteria with complex tradeoffs and stakeholders who have partially conflicting interests. A further issue relates to the leaders influence and the attempt to change the follower's values and beliefs. The essay also discusses the benefits of good governance while at the same time advocating for corporations to shun away from poor corporate governance practices. The reason as to why governance is important is that, it leads to fewer lawsuits. At the same time, the company attains recognition and good reputation and thus they can attract a significant number of investors. Good governance also reduces fraudulent cases and conflicts in an organisation. The various risks of poor governance include numerous fines and lawsuits, increased oversight from the government and they may also have an effect on the economy as a whole and loss in shareholders confidence. References Avolio, B. Luthans, F & Walumba, F 2004, Authentic leadership: Theory building for veritable sustained performance. Working paper, Gallup Leadership Institute, University of Nebraska-Lincoln. Clarke, T 2004, Theories of Corporate Governance: The Philosophical Foundations of Corporate Governance, Routledge, New York. Cooper, C, Scandura, T & Schriesheim, C 2005, ‘Looking forward but learning from our past: Potential challenges to developing authentic leadership theory and authentic leaders’, The Leadership Quarterly. Denis, D & McConnell, J 2003, ‘International Corporate Governance’, Journal of Financial and Quantitative Analysis, vol. 38, no. 1, pp. 1–36. Dignam, A & Lowry, J 2006, Company Law, Oxford University Press, Oxford. Hawkes, A & Goodley, S 2012, ‘Olympus admits hiding losses for 20 years’, The Guardian, 8 November, viewed 24 March 2015, . Heifetz, R 1994, Leadership without Easy Answers, The Belknap press of Harvard University, Harvard. Neate, R 2012, ‘Michael Woodford: the man who blew whistle on £1bn fraud’, The Guardian, 23 November, viewed 24 March 2015, . Sun, W 2009, How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence, Edwin Mellen, New York. Teather, D 2002, ‘Barclays denies Enron fraud the guardian’, The Guardian, 9 April, viewed 24 March 2015, . White, L & Wooten, K 1986, Professional ethics and practice in organizational development: A systematic analysis of issues, alternatives, and approaches, Praeger, New York. Read More