Chapter Four: Ethics of Business: Management and Leadership

4. Introduction
Leadership styles have been extensively researched, but the styles applicable to ethics of business have
not, according to Christensen et al. They reviewed research on leadership and identified possible styles
or forms applicable to the ethics of business and corporate social responsibility. These forms are: ethical,
responsible, and servant leadership. Leaders using an ethical form of leadership communicate ethical
standards and encourage ethical conduct. The concept of responsible leadership has two different
orientations, a narrow one focused on financial performance and an extended one with a
stakeholder view. A third form is servant leadership, which emphasizes concern for others, and
combines the motivation to lead with the need to serve others. Characteristics of this form include:
empowering and developing of people, acting authentically, showing of humility, and providing
direction. Managers practicing this form act as stewards who work for the good of the whole while
creating value for relevant stakeholders. Focus is on all stakeholders and a wider set of goals than only
profits.

4.1. Statement of value

A statement of values contains a description of the beliefs, principles, and basic assumptions about
what is desirable or worth striving for in an organization. Many corporations have articulated their
values in such statements, also referred to as creeds and statements of philosophy. A statement of values
also becomes the basis for a code of ethics. An example is provided in Everyday Ethics. Most business
enterprises are concerned to some extent about ethical behavior, integrity, employee health and safety,
the environment, quality, and service. Such concerns are a part of corporate life today. A study of 15
Canadian multinational corporations found the top ten corporate values to be integrity, honesty, justice,
equality, objectivity (impartiality), loyalty, devotion, respect, prudence, and tolerance.
There is no uniformity in content or format in these statements. Kooten found that a value statement may
contain any combination of components, such as:
• The key interests to be satisfied and balanced; for example, the public or community interest, owners,
employers, and suppliers;
• An emphasis on quality and/or excellence in relation to product and service, employees, and
technology;

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• Efficiency as indicated by low cost, high productivity, and value for money or investment;
•The atmosphere or climate of enterprise; for example, a good place to work, an emphasis on teamwork,
managers' support of staff, and development of employees;
•The observance of codes of conduct to enhance integrity and to ensure fairness in all dealings.
By using a statement of values, managers are recognizing that individual and corporate actions are
caused, in part, by the values that the individuals and the corporation have in common. Values need to
be shared by everyone, at least to some degree, so that the values are reinforced and widely accepted. It
is important to identify the organizational values desired, to compare them to individual values, and to
ascertain how they can be reinforced. Value statements should be developed with the involvement, over
time, of as many employees as possible. Although the production of a statement is the desired end result,
the process used to accomplish that end is an important learning process. What happens in practice is
often quite different. The statements usually express the beliefs of the chief executive or top-level
management and little, if any, effort is made to communicate or explain the values. In other cases, value
statements, creeds, or philosophies are designed to improve the public image of the corporation and are
only cited in advertisements, press releases, and newsletters. As a result, they are not taken seriously. A
related problem is that no effort is made to instill the values throughout the corporation. In effect, the
values are not shared and do not become a part of daily life-the ideals expressed are not reflected in
reality, the meaning of the values is unclear, and employees and others do not understand the process.
Despite these problems, it is argued that management should be value-driven; that is, all plans,
decisions, actions, and rewards are governed by a value focus. Thus, values have influence on
organizational objectives, corporate plans, individual accountability, standards of performance, and
reward systems.

4.2. Codes of conduct and code of ethics

A code of conduct explicitly states what appropriate behavior is by identifying what is acceptable and
unacceptable. A code of ethics is a statement of principles or values that guide behavior by describing
the general value system within which a corporation attempts to operate in a given environment. A
distinction should be made between a code of ethics and a code of conduct even though academics and
practitioners often do not do so; these differences are described in Table As there is little consistency in
the contents of the codes in practice, the following discussion refers to codes generally. Codes are

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referred to by a variety of titles, including "Standards of Practice," "Code of Behavior," and "Standards
of Professional Conduct," and can be 20 or more pages in length. Corporations often develop codes that
are a mix of conduct behavior and ethics guides.

Codes have been developed at different levels in the business system, and they all contribute to the
managing of ethics:
• Corporate or business enterprise-
 Individual Professional organizations
• Industry and sector-Industry associations
• Single issue-Non-governmental organizations (NGOs) or business associations develop codes.
• Codes of national and international bodies
Codes are the most common approach to institutionalizing ethical behavior, and aid in understanding
relationships with stakeholders. They can improve customer confidence in the quality of a product or the
level of service, and also help ensure ethical and fair treatment of customers. The reputation of the
business enterprise or organization that develops codes is improved and attracts high-caliber employees
and customers. Codes simplify the detection of unethical behavior in competitors and employees by

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standardizing norms of behavior. Lastly, codes provide for self-regulation, which is preferable to
external control.
Overall, codes increase awareness, discourage ethical apathy, facilitate ethical decision making, and

make it easier to refuse an unethical request. The content of codes varies, but the following table
identifies commonly found items.

4.3. Ethics training, audits and Committee

Ethics Training: Ethics training involves teaching employees about the values and policies on ethics
they should follow in their decision making. The teaching sessions involve an orientation on values or
ethics and related policies and deal with reputation and legal risks. A code of ethics or statement of
values may be used in this teaching process, in addition to handbooks or policy statements. Such
teaching can be done by managers or outside consultants and addressed to all levels of employees, but
more emphasis has been placed on management levels. Such training programs are established not only
to develop employee awareness of ethics in business but also to draw attention to the ethical issues to
which an employee may be exposed. Training involves giving participants practical checklists and tests
to evaluate their actions. Training usually also includes a description of conflict of interest, something
that inevitably arises in a discussion of ethics.

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An ethics audit is a systematic effort to discover actual or potential unethical behavior in an
organization. It is designed not only to uncover unethical behavior, but also to identify existing
opportunities for unethical behavior. There is a preventive as well as a remedial purpose. Audits are
particularly useful when used in conjunction with a code of ethics, as the code can be the basis for
comparison to establish how well or poorly the organization is doing. Regular audits foster ethical
practice. In recent years, several ethics audits or ethics accountability measures have been developed.
Consultants knowledgeable in the area of ethics advise management on how to put "integrity" into
enterprise culture.
An ethics committee is a group comprising directors, managers, or staff formed to monitor ethical
standards and behavior. The formation of such a committee, sometimes referred to as a business conduct
committee, injects ethics at the highest level in the organization, and is a signal to all stakeholders of the
company's commitment to ethical practice. This type of committee is involved in developing an ethics
program and may monitor management and employee behavior for ethical issues.
4.4 Ethics-Who Is Responsible?

A simple answer to the question "Who is responsible for ethics?" is "Everyone." But in a corporation it
is argued that the responsibility for recognizing the importance of ethical behavior in business and doing
something about it has to start at the top-that is, with the board of directors.
Board of Directors Responsibility
Gillies states that directors have two tasks in relation to ethics: to collectively identify values that
determine acceptable behavior in the firm, and to put in place a process that ensures values are reflected
in action. Merely acting on the basis of one's own values is not sufficient, and it is necessary to
deliberately consider the implications of unethical behavior. Not all directors agree with this position,
and the arguments for and against it reflect the general discussion of whether or not business has any
social responsibility. The reasons given for the board's responsibility for ethical or moral behavior
include the point that it is simply good management to develop an appropriate culture that is sensitive to
ethics issues. In addition, the board itself is involved in ethical questions such as conflicts of interest,
compensation schemes, management buyouts, the rights of minority shareholders, and changes in
management. Finally, it is easier to make decisions if the fundamental principles or values of the
corporation are known and can serve as a reference point.
Management Responsibility

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The success of any ethics program depends on the commitment of top management. Managers must
announce the program, champion its development and implementation, and always aspire to lead in an
ethical manner. They must provide moral leadership as opposed to immoral or amoral leadership. The
following table distinguishes the three models of moral management and leadership.
Ethics-Who Is Responsible?
A simple answer to the question "Who is responsible for ethics?" is "Everyone." But in a corporation it
is argued that the responsibility for recognizing the importance of ethical behavior in business and doing
something about it has to start at the top-that is, with the board of directors
Board of Directors Responsibility
Management Responsibility