There is a considerable amount of literature on the subject of organizational leadership and management, and specifically on ethics in organizational leadership (Knights & O’Leary, 2006; Bello, 2012; Verschoor, 2007). The plethora of research work has increased as more and more ethical breaches in workplace or organizational setting have been described. Despite the concentration of research on organizational ethics (Bello, 2012), the dynamic nature of ethical issues in organizations gives room for further explorative research on the topic. Consequently, this review considers the extant literature on ethics in organizational leadership to understand how ethical orientations and behaviors of organizational leaders influence behavior of the rest of the staff and general organizational outcomes. The review is organized into five main parts: organizational ethics from the perspective of organizational leadership; the role of leadership ethics in creating ethical culture within organizations; authentic leadership versus ethical leadership; and the influence of leadership styles on ethical leadership. The next section commences with the review of extant literature from the perspective of organizational leaders.

Understanding Ethical Leadership

The study of ethical leadership in organizations is becoming increasingly relevant, as some of the historically famed organizations have fallen from grace due to unethical issues. Recently, corporate giants such as Enron, Lehman Brothers, and the Housing Market Crash have witnessed decline partly due to unethical conducts (Green & Odom, 2010). In the highlighted cases, lack of ethical leadership resulted in loss of jobs of thousands of employees, crippled consumer confidence in the financial sector, and increased government regulation of the industry (Thompson, 2010). On the positive side, the exposition of unethical behavior in corporate leadership has spurred contemporary business leadership to rethink their strategic directions, and helped them to view ethical leadership as the way to profitability. With the fierce competition for scarce resources and businesses in the global marketplace, ethical issues in organizations are still relevant issues, with the scope of the problems expanding exponentially (Thornton, 2009). Therefore, there is a need for charismatic ethical leadership in organizations.  

Among the serious problems facing business organizations is impoverished ethical conduct and lack of ethical leadership in organizational leadership (Plinio et al., 2010). As a result, Plinio et al. (2010) have explained that employees in a string of organizations have lost trust in their leaders, with the situation worsened by weakening economies. In addition, the tendency of leadership to fail to provide ethical leadership has resulted in an alarming rise in the number of employees who engage in unethical conduct. In a separate study, Darcy (2010) has opined that the climate in most organizations today is skeptical of ethics. The researcher reported that about 66 percent of the participants interviewed in the qualitative study questioned the existence of ethics in organizational leadership, and referred to the problem as ‘a crisis of trust’ (p. 200).  

Owing to Plinio et al. (2010) and Darcy (2010) findings, lack of trust in organizational and individual leadership is a problem that most organizations face today,  which raises the concern over the standards of ethical conduct in these organizations. Earlier, Frank (2002) referred to the waning trust in organizational leadership as the ‘shadow side’ of leadership. The shadow encompasses  inconsistency in organizations, deceptions,  misplaced loyalties, and irresponsibility. With continued exposure to the shadow side of leadership, employees get affected by the consequences of leadership misconducts, and eventually lose trust in leadership integrity (Frank, 2002).

The plethora of issues and research on ethical leadership prompts the question of how a leader can steer an organization in an ethical manner while realizing good returns for stakeholders. In response to this prompt, one needs to first understand what ethical leadership implies within the business context of organizational leadership. With definitions evolving over the years, it is important to recognize that there is no universal and agreed definition of ethical leadership. However, all the definitions and descriptions suggest that ethical leadership is an act of influencing followers into the right conduct and  direction. In one of the earlier but significant studies, Greenleaf (1977) has suggested that ‘service to followers is the primary responsibility of leaders and the essence of ethical leadership’ (P. 20). Heifetz (2006) has similarly proposed that the key responsibility of ethical leaders is to resolve conflicts that arise among their followers, and guide them through the right procedures.

Leadership is regarded ethical when leaders’ decision making processes are directed by inward virtues (Cumbo, 2009). Cumbo (2009) has opined that employees in an organization are only supposed to be beneficiaries of leadership that is virtuous. In brief, Cumbo (2009) has advanced that ethical leadership is only amplified when leaders in an organization exhibit compassion, imagination, discernment, and empathy.

Along with this definition, understanding of ethical leadership requires comprehension of how ethical character develops within a leader. According to Frank (2002), ethical character develops when a leader starts with a critical examination of his/her self. Tough moments such as personal trauma, failures, mistakes, and career setbacks help individuals to examine themselves and develop character (Frank, 2002). Souba (2011) has regarded leadership as a process that involves questioning and deep examination of held beliefs and convictions.

Yukl (2006) has referred to ethical leadership as an act of promoting honesty, mirroring the leader’s conduct in their beliefs and values. Freeman & Stewart (2006) have defined ethical leadership “as a matter of leaders having good character and the right values or being a person of strong character”. While discussing what ethical leadership entails, Plinio (2009) explained that observing the laws and regulations of the industry does not make ethics complicated in organizations; even influencing employees to do the right thing does  not make ethical leadership complicated. What makes ethical leadership complex for organizational leaders is contention of who assumes responsibility when problems in the organization arise (Plinio, 2009).

Organizational Ethics from the Perspective of Organizational Leadership

In most organizational contexts, cultural values that guide employees emanate from management levels (Ciulla, 2014). In any organization, employees are likely to copy the behavior of their leaders (Bimmer, 2010). In addition, employees take  cues from the messages communicated by the senior management team. This occurs due to the fact that most employees do not know their organization executives personally. They only can make sense from the information they receive. As a result, senior executives must develop ethics for their leadership by being visible in ethical matters and communicating strong ethical messages (Ciulla, 2014), prompting the question of how the organizational leaders perceive the issue of ethics in the organization.  Furthermore, the aftermath of recent organizational scandals has provoked managers and researchers to turn their attention to questions regarding ethics in organizational leadership and management (Brown & Trevino, 2008). Despite the fact that scientific study of ethics in organizational leadership is relatively new, there exist research and theory that can aid executives who try to manage their organizations and their ethical conduct in a better way.

Ethical leaders at different organizational levels employ certain intrinsic traits and behavioral patterns to transmit values and expectations. These intrinsic features come from the argument that being an ethical leader involves being, first of all, a moral person and only then a moral manager. According to Grojean et al. (2008), ethical leaders must exhibit a high standard of individual moral conduct in line with established standards (relating to the moral aspect) and encourage moral conduct in others (relating to a moral manager). Ethical leadership may slightly differ from country to country and the context within which leaders work may vary too, but what remains unchanged is that ethical leadership involves being both a moral manger and a moral person, irrespective of the context.

According to Grojean et al. (2008) a moral person who is  a leader at the same time must  act with integrity and be perceived as trustworthy. Additionally, the ethical leader has to exhibit traits like honesty, integrity, and candor. Howell and Avolio (2010), building on Grojean et al. (2008)’s study, suggest that the leader as a moral person should be able to:

• Ensure that his/her private moral behavior is consistent with the moral standards he/she openly exposes,
• Do what is right in every situation and act morally under any circumstances,
• Take every responsibility for his/her actions and decisions,
• Show concern for other employees and treat them fairly,
• Use values to direct his/her own decisions and behavior,
• Implement objective and fair decisions, and
• Use sound ethical principles to make decisions.

As a moral manager, the leader has to be involved in proactive promotion of ethical behavior in other employees within the organization. This can be realized through the use of communication, a formal reward system, and role modelling (Grojean et al., 2008). Ethics in organizational leadership requires that the leader is able to recognize that his/her subordinates look for ethical guidance and that he/she as a leader can influence ethical behavior of their subordinates in a positive way. According to Cooper (2007), the ethical leader as a moral manager depicts the following characteristics:

• Portrays a role model for ethical decision-making and ethical behavior for his/her subordinates,
• Explains his/her decisions not only  in rationale but  also in ethical terms,
• Discusses ethical issues in most of their communication and encourages ethic-centered discussions among subordinates,
• Explains ethical principles and rules and incites subordinates to be open and speak up about ethic-related concerns and questions,
• Gives juniors a say in the organization’s decision making and listens to their concerns and ideas, and
• Describes clearly the organization’s ethics and ensures that subordinates abide by the set standards.

Taken together, research on this theme suggests that ethics in organizational leadership is vital for improving ethical behavior and other critical results in organizations. Reinforcement of ethical behavior is not just an issue of weeding out the few “bad apples”, but it involves assisting others in achieving high ethical standards (Cooper, 2007). These high ethical standards can be accomplished through demonstration of ethics in organizational leadership.

Ethics in Leadership’s Role in Creating Ethical Organizational Culture

A study conducted by Carlson and Perrewe (2009) has hypothesized that employees who report directly to an ethical leader within the organization engage in fewer acts of workplace deviance. The study fosters the theme that ethics in leadership creates ethical organizational culture. In this study, Carlson and Perrewe (2009) have argued that harmful acts aimed at the organization will be less dramatic because the supervisor is viewed as a linking pin between the organization and its employees. When an ethical leader represents positive ethical values, the subordinates’ attitude toward the organization becomes more positive and they have little motivation to harm it. Additionally, there will be less harmful acts directed at the organization and work group members. It can be explained by the fact that ethical leaders inspire subordinates to transcend their own self-interest for the greater good of the organization (Carlson & Perrewe, 2009). With this type of transcendence, harmful behavior will be inconsistent with the organization’s climate.

According to the social learning theory put forward by Russell (2010), ethics in organizational leadership makes ethical leaders serve as a visible role model within the company. When leaders are ethical role models, then subordinates observe and imitate their ethical behavior. The imitation translates into lower levels of deviance. In Russell (2010)’s study, unethical or personalized leadership has been associated with increased subordinate destructiveness. In this study, Russell (2010) has found out that ethical leadership within the organization was positively associated with the perceptions employees have of the organization’s attractiveness and with their intentions to pursue employment in companies that are led by ethical leaders.

Gini (2010) disagrees with the idea that ethics in organizational leadership works to create ethical organizational culture. This author argues that not all leaders within an organization promote their values and maintain an ethical perspective. Many of them do not want to be reminded of ethical leadership. Thus, they offer challenges to subordinates who want to help them generate legally accepted and ethical outcomes. According to the findings of Gini (2010), a clear ethical leadership language may be problematic for the subordinates who work with a leader of questionable character. Such a leader can be either an unethical or an ethically neutral leader. As an unethical leader, he/she will portray bad leadership features like: insularity, corrupt practices, and callousness. As an ethically neutral leader, he/she will not consider the ethical perspective. Unethical and ineffective leaders exist in most organizations and people working with them know that discussions on ethics can provoke scorn and mockery. In these organizations, subordinates do not imitate their leaders but avoid raising ethical issues with them (Gini, 2010).

Authentic Leadership versus Ethical Leadership

The question of whether an ethical leader is necessarily an authentic leader has elicited a debate, with one side arguing that ethics does not contribute to one being viewed as authentic, and the other side taking the opposite view. Jensen and Luthans (2008) in their study regard authentic leadership as a recently developed perspective of transformational leadership, which does not provide clear consensus on definitions or frameworks. From these authors’ perspective, authentic leadership defines the characteristics of organizational leaders who are genuinely self-accepting, self-aware, and whose behavior is in harmony with their own thoughts and beliefs. Authentic organizational leaders are expected to have understanding and knowledge of who they are, what they believe in, and their value. They also have the capacity to promote their values and beliefs openly (Begley, 2011). In this respect, subordinates would consider them to be ethical.

Authentic leadership produces one primary quality, which is trust. Authentic leaders share information with their subordinates, encourage open communication, and, in most instances, stick to their ideas. This conduct encourages their subordinates to have faith in them (Begley, 2011). In Begley’s (2011) opinion, the concept of authentic leadership is relatively recent and much research has not been carried out on this topic. However, it is a promising way to view ethics in organizational leadership, given that it focuses on the oral aspects of being a leader.

Price (2013) argues that the concept of authentic and ethical leadership should be viewed from perspectives of authentic transformational leadership and pseudo-transformational leadership. Distinctions between authentic and pseudo-authentic transformational leaderships often fail to produce a satisfactory response to ethical concerns about organization leadership. It often occurs that altruism suffices for the organization’s ethical success (Price, 2013). In a similar study, Surie and Ashley (2008) attest to this by inferring that when the success of the organization’s ethic leadership is grounded on altruism, the fact that leaders sometimes conduct themselves immorally, because they are blinded by their own values, may not be seen. Actually, this type of blindness considerably influences moral and ethical psychology of leadership and encourages leaders to believe that they are vindicated when they make exceptions for themselves. This vindication comes from an assumption that their behavior as leaders is authentic and they are authentic leaders (Surie & Ashley, 2008).

Influence of Leadership Styles on Ethical Leadership

Springer (2010) claims that leadership styles affect many aspects of organizational behavior, including subordinates’ acceptance of and adherence to the organization’s values and norms. Leadership styles that focus on building strong values among employees contribute to common standards of conduct. These styles also influence the way the organization transmits and monitors norms, values, and codes of ethics. In a nutshell, the leadership style of the organization affects actions of its employees . In his study of Mike Armstrong’s AT&T leadership and management policy, Springer (2010) argues that fast-paced and intensively competitive industries require rather “nontraditional” leadership styles. These leadership styles definitely have an impact on ethics applied within the organization. In this respect, studying the organization’s leadership styles and attitudes can help to pinpoint where ethical concerns may arise in the future.

Stefkovich and Begley (2009) have outlined six leadership styles that are based on the leaders’ ability to effectively manage themselves and their relationships within an ethical context. They call this ability emotional intelligence. Emotional intelligence gives: a coercive leader, an authoritative leader, an affilliative leader, a democratic leader, a pacesetting leader, and a coaching leader (Stefkovich & Begley, 2009). The coercive leadership style demands instantaneous obedience and a focus on initiative, self-control, and achievement. Even though this leadership style can be very effective in crisis situations or turnarounds, it negatively affects the organizational performance climate and can result in a compromise of ethics (Stefkovich & Begley, 2009). The authoritative leadership style, on the other hand, has been viewed as one of the most effective leadership styles. This approach may be successful due to the fact that it inspires employees to follow a vision, facilitates a change, and creates a strong ethical and positive climate in the company (Stefkovich & Begley, 2009).

In another related study, Sankar (2013) views the afflictive and democratic leadership styles as those aimed at fostering ethical leadership within the organization. This assumption is explained by the fact that they are based on trust and friendship that promote risk taking, flexibility, innovation, reliance on participation and teamwork, and realize collaborative decisions respectively. Ciulla (2008) views the pacesetting leadership style as creating a negative ethic leadership within the organization because this approach fosters a negative climate of high standards that employees need to meet. In order to achieve these standards, employees may be forced to compromise their ethical rules of integrity.

Much has been researched and written on organizational leadership and management, especially on the subject of ethics in organization leadership. The amount of research work has considerably increased because more and more scholars describe ethical breaches in workplace or organizational setting. This publication has been organized in such a way that all attention has been focused on the issue of ethical behavior and leadership in organizations. In a number of companies, cultural values that guide employees often emanate from the top levels.