Leadership, Ethics, and Communications: Foundations of a Sustainable Organization

Leadership, Ethics, and Communications 1
LEADERSHIP, ETHICS, AND COMMUNICATIONS
Leadership, Ethics, and Communications:
Foundations of a Sustainable
Organization
Bryan Hill
Webster University

Abstract
Purpose
This paper was written to explore the links between effective organizational leadership,
ethics, integrity, and communications. The paper looks at recent organizational crises which
have stemmed from a lack of ethical leadership, and a few possible scenarios which can lead
to unethical decision making. Also looked at is the impact of ethics on organizational
communications; strategy; culture; human resources; organizational development and
change; organizational and personal reputation; as well as the impact on other organizational
aspects. Further, the paper focuses on common recommendations for organizational ethics
policies, as proposed by academicians, organizational leaders, and international councils
which have created global ethics declarations. Scriptures from Judeo-Christian, Muslim, and
Buddhist religions are reviewed in the Appendix for foundational leadership, ethics, and
communication principles. In addition, my hypothesis is that ethical leadership, decision
making, and communications has a tremendous impact on an organization‘s long-term
sustainability and profitability.
Problem with Hypothesis
Problems of the hypothesis include that, while most national cultures and large world
religions share many of the same moral ethics and values, there are some people, including
professors and business leaders within these societies, who do not subscribe to the same
ethical views—believing that moral ethics are not conducive to intelligent and profitable
organizational leadership. Another problem stems from the question: Who gets to decide
whose set of ethics is used as the base for the organization?

Proposed Methodology
This is a qualitative data analysis focusing on the subject of ethical organizational leadership,
decision making, and communications. The data examined has been gathered from various
newspaper and internet articles—including articles on unethical decision making and actions
at Enron, Arthur Andersen, A.I.G., Standard & Poor‘s, and Moody‘s; from business and
communications textbooks, international business ethics declarations and, as found in the
Appendix, scriptures from the Judeo-Christian Holy Bible, the Jewish Tanach, the Muslim
Qur‘an, and Buddhist teachings.
Conclusions
Various studies and articles suggest that effective organizational leadership is also ethical
leadership; that an ethical organization is built upon the foundation of values set by founders
and senior executives; that these values are embedded into the culture of the organization and
written into its vision and mission; and that communications is the delivery method of these
values and the means by which they are reinforced.
These are subjects which generate much interest, study, and writing. A search of Google
presents over 14 million results for ―ethics in business [or workplace],‖ 473,000 for ―ethics in
accounting,‖ and 831,000 for ―ethics in advertising.‖ Searches on ―organizational leadership‖
yield 4.5 million results, ―organization ethics‖ yields almost 2.5 million results, ―leadership
ethics‖ yields 969,000 results, and ―ethical leadership in business‖ yields almost half a
million results. Turning to the subject of ―ethical communication‖ returns 12.3 million
results, while a search on ―organizational culture and leadership‖ returns 1.35 million results,
and a search on ―organizational culture and ethics‖ returns 498,000 results. More
specifically, there are 925,000 results for a search on ―Enron ethics,‖ with a combined

836,000 other results searching ―Enron scandal,‖ ―Enron fraud,‖ and ―Enron collapse.‖ A
Google search on ―A.I.G. bailout‖ provides nearly three million results.
I conclude that organizations which have strong ethical values, and employ ethical decision
making and communications, build a solid reputation with stakeholders, the media, and the
community at large, and have the opportunity for long-term sustainability and the potential
for greater success.

Leadership, Ethics, and Communications
Foundations of a Sustainable Organization
The Problem
Effective organizational leadership has as two cornerstones of its foundation: good ethics
(or morality), and good communication ability. Solid ethics (or morals) help an organizational
leader to make wise decisions for the organization. Good communication ability helps the leader
to transmit his or her vision and direction throughout the organization, assists in building trust,
and inspires organizational members to adopt the vision and follow the direction. Without good
ethics, a leader can make bad decisions for the organization, even though the decisions may be
legal. Without being a good communicator, the leader has difficulty in establishing or
maintaining the culture of the organization, developing and implementing strategies, bringing
about organizational development or change, and effectively handling crisis management and
crisis management communications. While it can be argued that there are many other qualities
essential to good, effective leadership, both good ethics and good communication skills appear
foundational.
Important Studies
The news is filled with reports on organizations stumbling and faltering as a result of
making unethical decisions. Virtually without exception, these unethical decisions and actions
stem from unethical leadership and an organizational culture where ethical values are not built
into every policy, every practice, and every decision made by senior executives and other
employees. It is the responsibility of senior leadership to set the values for the organization and
to transmit them to all employees by embedding them within, and communicating them through,
the organizational culture. Aronson (2001) states that, ―Leaders are obligated to set a moral

example for organizational members and to determine those organizational activities which may
be detrimental to the values of society in general‖ (Avolio, Weichun, & May, 2004, cited in
text). According to Avolio, et al., when ―[l]eaders exhibit ethical behaviors…they help to elevate
followers‘ moral awareness and moral self-actualization….[and] create the right conditions and
organizational culture…to foster the development of ethical behavior‖ in their followers.
Gilman, Hand, Navran, and Brown (2008) show what happens when leadership does not exhibit
ethical behaviors, by stating that, ―Ethical lapses at the upper echelons of management tend to be
perceived as tacit permission to choose the ‗path of least resistance‘ at lower levels.‖ This is why
Mathis and Jackson (2008) stress that, ―the primary determinant of ethical behavior is
organizational culture, which is the shared values and beliefs in an organization‖ (p. 22). Sankar
(2003) sees the leader(s) as the one(s) ultimately responsible for communicating a culture of
ethics, values, and integrity throughout the organization: by highly visible means such as
―speeches, company publications, [and] policy statements,‖ but more importantly, through his or
her ―personal actions.‖ Mathis and Jackson summarize the results of ethics in an organization by
stating that:
On the strategic level, organizations with high ethical standards are more
likely to meet long-term strategic objectives and profit goals….[and to be] viewed
more positively by individuals in the community and industry, as well as by
consumers and employees….translat[ing] into bottom-line financial results and
the ability to attract and retain human resources‖ (p. 22).
Current Leadership Crises
Since the beginning of the new millennium, it has been evident that there is a leadership
crisis in American organizations. These crises have stemmed from a lack of ethical values on the

part of senior executives—the leaders of organizations. The lack of ethical values has led to
unethical decision making and actions on the part of leaders and employees alike; when ethics
have been only nominally built into the culture, there is a lack of walking the talk and of keeping
employees accountable in living ethical values.
In 2001, the media began covering what would become one of the first and greatest
displays of organizational corruption and unethical leadership in this new millennium—the
collapse of the Houston-based energy company, Enron.
At Enron, the focus of leaders was on short-term profits, stock prices, and stockholder
dividends, instead of long-term sustainability. That led senior executives to engage in many
unethical and illegal practices to drive up the per share price of Enron stock. In the process, those
executives were amassing great personal wealth on their own shares of stock. As the company
began to falter, those same senior executives were encouraging their employees to continue
purchasing stock—stating that the company was healthy—while at the same time those leaders
were selling their own shares in the company and not disclosing to their employees and other
stakeholders that Enron was losing millions of dollars; was in debt; that its leaders were guilty of
fraudulent bookkeeping and other unethical business practices; and that the entire organization
was collapsing. After Enron collapsed, thousands of employees were ―unemployed or financially
devastated,‖ having lost their jobs and their life savings (Blohowiak, 2004). Among those who
would be brought to trial were the former Chairman of the Board, Kenneth Lay, the former Chief
Executive Officer, Jeffrey Skilling, and the former Chief Accounting Officer, Richard Causey
(Blohowiak).
Malcolm Salter, in his book Innovation Corrupted: The Origins and Legacy of Enron’s
Collapse (Hancock, 2008, cited in text), says that:

[Enron‘s] downfall can be traced to supreme arrogance bred by considerable
success, some extremely poor diversification decisions, and poorly conceived and
implemented administrative practices that led, over time, to reckless gambling and
ethical drift….and perverse financial incentives [for executives which] led to a
gladiator culture in which executives proposed—and risk managers and the board
of directors approved—a growing number of risky gambles with high expected
returns….[while engaging in] intense lobbying [of Congress] to encourage further
domestic deregulation and limit federal oversight of the energy industry….Once
Enron‘s ethical drift took hold, its collapse was only a matter of time.
In his book, Salter asks, ―Why did Lay‘s espoused faith and Christian values fail to
guarantee his moral leadership and protect the enterprise from increasing immoral behavior?‖
(Hancock, 2008, cited in text). Hancock did not provide an answer from Salter, nor give his own.
Csorba (2006) says that the culture and practices of Enron were filled with
―manipulation, infighting, backstabbing and fuzzy math;‖ ―greed, distrust and deception;‖ ―a
consistent manipulation of accounting rules, but also a pattern of careless recruitment practices;‖
and an ―utter lack of leadership.‖ He says that ―integrity‖ was often talked about at Enron, and
even promoted, but it wasn‘t truly practiced by the senior executives; nor was it practiced down
through the organization (Csorba). On that note, Csorba states that while former Enron employee
Sherron Watkins was giving her testimony during the trial of Kenneth Lay and other Enron
executives, she talked of notepads being distributed to the employees by those executives. These
notepads bore a quote by Dr. Martin Luther King, Jr. which stated, ―Our lives begin to end the
day we become silent about things that matter‖ (Csorba).

Ethics Scoreboard.com (2004) states that Enron CEO Skilling lacked four key leadership
ethics: ―responsibility, competence, prudence, and accountability.‖ Further, whether Skilling
would be found guilty of breaking the law or not, his actions while serving as Enron CEO were
still unethical (Ethics Scoreboard.com). Ethics Scoreboard.com says that Skilling‘s lawyers tried
to use the defense that he was only following the advice of his lawyers and accountants;
however, as Ethics Scoreboard.com points out, ―CEOs [don‘t] take orders from lawyers and
accountants,‖ CEOs are the ones to give the orders. ―A CEO like Skilling says [to the lawyers
and accountants], ‗We have this idea that seems to allow us to hide our losses without violating
any laws. Will it work?‘‖ (Ethics Scoreboard.com). Instead of refusing to be a part of these
unethical practices, both the lawyers and the accountants helped Skilling and other senior
executives at Enron to ‗cook the books‘ and engage in other acts to hide Enron debt and other
dealings.
F. J. Reh (n.d.) states that ―Enron….[like any] organization [had] an obligation to all of
its stakeholders, not just its stockholders, and those obligations were not met in this case.
Executives…made decisions that were wrong….[possibly including] illegal activities.‖ Feh
continues, ―Many people [were] also…beginning to question the professional conduct of auditors
Arthur Andersen. Did their interest in preserving their income cloud their judgment?‖
Gilman, Hand, Navran, and Brown (2008) state that the accounting firm Arthur Andersen
displayed a conflict of interest by serving as a consultant to Enron while at the same time acting
as their auditor. Enron then hired away former Arthur Andersen employees to become Enron
managers, furthering the conflict of interest, according to Gilman, et al. (2008). But this also
went beyond being a conflict of interest for, as Gilman, et al. state: ―The independence and

integrity of financial auditing organizations are fundamental to the stability and growth of…free
markets throughout the world.‖
Authors of Crafting and Executing Strategy: The Quest for Competitive Advantage:
Concepts and Cases, Thompson, Strickland, and Gamble (2008), summarize the lack of ethics on
the part of both Enron and Arthur Andersen:
Enron…touted four corporate values—respect, integrity, communication, and
excellence—but some top officials engaged in dishonest and fraudulent
maneuvers that were concealed by ‗creative‘ accounting; the lack of integrity on
the part of Enron executives and their deliberate failure to accurately
communicate with shareholders and regulators in the company‘s financial filings
led directly to the company‘s dramatic bankruptcy and implosion over a six-week
period, along with criminal indictments, fines, or jail terms for over a dozen
Enron executives. Once one of the world‘s most distinguished public accounting
firms, Arthur Andersen was renowned for its commitment to the highest standards
of audit integrity, but its high-profile audit failures and ethical lapse at Enron,
WorldCom, and other companies led to Andersen‘s demise—in 2002, it was
indicted for destroying Enron-related documents to thwart investigators (p. 29).
Csorba (2006), referencing Matthew 7: 24-27 of the Holy Bible, says of Enron
leadership: ―Management constructed this house on the sands of deceptions, lies and fraud,
instead of building it on the solid foundation of trust and transparency.‖
But Enron has not been the only organization to make the news over unethical decision
making, unethical practices, and unethical leadership. The current economic collapse (of 2008) is
riddled with a lack of organizational ethics. Unfortunately, as with Enron, for many of these

organizations there exists ―a wide gap…between [their] stated values and [their] actual business
practices‖ (Thompson, Strickland, and Gamble, 2008).
The current financial crisis is the result of many factors, including: losses realized by
mortgage and investment companies, such as American Insurance Group (A.I.G.), and banks,
through borrower defaults on securities backed by high-risk subprime mortgages; the merger of
Bear Stearns with J.P Morgan Chase; the filing for bankruptcy protection by Lehman Brothers;
and the buyout of Merrill Lynch by Bank of America (Craig and Lucchetti, 2008). Many of these
factors were as the result of unethical, though legal, decisions.
Using information reported by Bloomberg, Kiel (2008) states that an additional blow to
the economy—and a further example of unethical leadership—has been the practice, since 2000,
of credit ratings organizations such as Standard & Poor‘s, and Moody‘s, which have let a focus
on profits distract these organizations from their obligation to investors to provide honest ratings
of securities based on their financial risk and reward potential. Instead, Standard & Poor‘s, and
Moody‘s, allowed a conflict of interest to develop (Kiel). These ―major credit rating
agencies…gave much of the risky securities their highest credit ratings [AAA], effectively
preserving the illusion that they were risk-proof‖ (Kiel). This was done in order to make their
customers—the banks packaging and selling the securities—happy. The higher Standard &
Poor‘s and Moody‘s rated the securities, such as the AAA gold standard, the more money these
credit rating agencies made from the banks who hired them to rate their securities, and the more
business the banks would give them versus competitors (Kiel).
One of the reasons individuals make unethical decisions is because of extreme pressure
put on them—by leaders, managers, the board, Wall Street analysts, stockholders, and others—to
perform and make money or cut costs. In his article, Kiel (2008) talks about the intense pressure

put on analysts at Standard & Poor‘s and Moody‘s to make the numbers work in order to give
securities the AAA ratings. They were instructed to do whatever it took. Using testimonies and
e-mails disclosed by the Securities and Exchange Commission (SEC), Kiel quotes a senior
analyst at Standard & Poor‘s as saying, ―My mandate was to find a way. Find the way.‖ Kiel‘s
article reveals other quotes from the SEC report, such as, ―the ratings were essentially fictional.‖
Kiel relays that ―an analyst at [one] rating agency complained that her firm‘s model didn‘t
capture ‗half‘ of the deal‘s risk, but that ‗it could be structured by cows and we would rate it.‘‖
Frank Raiter, Standard & Poor‘s managing director, was ―told ‗to just guess‘ at the value of [the]
complex securities…‖ (Kiel). Mr. Raiter also said that, ―…if we could have hired a supreme
being to tell us exactly what the loss was on a loan, [we] wouldn‘t have hired him because the
Street wasn‘t going to pay us extra money to know that‖ (Kiel). And it wasn‘t just that people
were making ‗bad‘ decisions without realizing the consequences. Many fully expected the
current crisis to come—just not necessarily knowing how quickly it would arrive. They were
making unethical decisions, because they had a choice in their actions and because they sensed
that what they were doing wasn‘t right. ―Let‘s hope we are all wealthy and retired by the time
this house of cards falters,‖ wrote one analyst in a 2006 e-mail which the SEC obtained (Kiel).
Another organization with some recent questionable ethics is American Insurance Group
(A.I.G.). Joseph Cassano, the fired former head of A.I.G.‘s financial products unit, was
responsible for pursuing ―many of the complex financial transactions that pushed the company to
the brink of collapse‖ (Sorkin, 2008) while with the company. After receiving $120 billion in
taxpayer-provided government bailout money, A.I.G. executives went on a retreat costing nearly
half a million dollars. That decision was quickly reported in the press and on talk shows.

Craig and Lucchetti (2008) state that there is a large concern by taxpayers that the
hundreds of billions of dollars being given in bailout loans to financial and other organizations
may be going to pay bonuses to their leaders—the same ones who have placed the economy in
its current condition.
Realizing this himself, New York Attorney General Andrew Cuomo began working with
A.I.G. to ensure that taxpayer money was not going towards paying bonuses to executives.
A.I.G. already had a $600 million reserve for 2008 executive bonuses (Sorkin, 2008). Although
the $600 million was not going to come from government bailout money, Cuomo pushed for
A.I.G. to suspend the bonuses, stating, ―There should not even be any contemplation of bonuses
for executive performance because I find it hard to conceive of a situation that you could justify
a performance bonus for management that virtually bankrupted a company‖ (Sorkin). The paying
of bonuses to these executives is itself an ethical dilemma: how can the bonuses be justified
when the company has to take a multi-billion dollar loan to keep from collapsing and employees
are losing their jobs?
As Sorkin states, A.I.G. agreed not to pay any bonuses this year—including the $70
million Joseph Cassano would have received as part of his severance package (2008).
Attorney General Cuomo, in a letter to A.I.G. executives, identifies the need for
executives to earn back the trust of the public—especially the financial sector‘s need to earn
back the trust of investors and taxpayers (Sorkin, 2008). He states:
I believe that rebuilding trust in our capital markets requires executive
compensation packages that are rational, fair, and based on bona fide performance
measures that are disclosed to the public. We must ensure that executive pay
package structures no longer create improper incentives for executives to

overleverage their companies and manipulate the books for their own short-term
financial benefit (Sorkin, 2008).
Cuomo identifies the market pressures that leaders face to make their organizations
profitable—pressures which cause many leaders to focus too heavily on short-term gains…and
entice many leaders into making unethical decisions in the name of competition and profitability.
Leaders who are successful in making their companies profitable also run the risk of the allure of
executive compensation tied into those profits. Such was the case in the example of Enron, and
in the example of Standard & Poor‘s and Moody‘s.
Many organizational leaders do, however, have moral values and practice ethical decision
making. Once such set of leaders during the current economic crisis is Lloyd Blankfein, CEO of
Goldman Sachs, and six other Goldman Sachs executives who have requested that the
organization refrain from paying them ―tens of millions of dollars‖ (Craig and Lucchetti, 2008)
in 2008 bonuses which they were scheduled to receive as part of their employment contracts.
Each executive will still receive their $600,000 in base pay, but felt that ―the right thing to do,‖
considering the current economic crisis, was to forgo the bonuses (Craig and Lucchetti). Craig
and Luchetti quickly point out, however, that as part of the ‗right thing to do,‘ this includes
continuing to give bonuses to the ―lower-level‖ employees who continually work hard for the
organization.
Craig and Lucchetti believe that Blankfein and the other Goldman Sachs executives may
be setting the standard for executives to follow at other financial and mortgage institutions, as
well as other organizations (2008). Doing so, Craig and Lucchetti believe, will help these
financial and other institutions to win back some of the trust that has eroded as a result of this
crisis.

Ethical and Unethical Leadership and Communication
The leader sets the ethical tone for the entire organization. The leader establishes the
ethical and moral values, shaping them into a vision for the organization and writing them into
the company‘s mission and codes of conduct—building with them the foundation of the
organization‘s culture. The leader, utilizing the human resources and communications staff,
communicates throughout all levels of the organization and to all stakeholders—especially
employees—by publishing and promoting these ethical values, vision, and mission, so that
everyone knows the ethical values which are to drive every decision and every action within the
organization, and which are to form the culture by which the development and growth of every
employee and leader is fostered and by which the reputation of all are protected.
In Character Not Charisma is the Critical Measure of Leadership Excellence, Y. Sankar
(2003) states that ―The character of the leader is grounded on such core values as integrity, trust,
truth, and human dignity, which influence the leader‘s vision, ethics and behavior.‖ Sankar says
that these ―organizational values‖ become ―strongly internalized‖ and that leaders can ―influence
cultural and ethical values by clearly articulating a vision…that employees can believe in,
communicating the vision throughout the organization, and institutionalizing the vision through
everyday behavior, rituals, ceremonies, and symbols, as well as through organizational systems
and policies.‖
It is the responsibility of the senior leader to empower and enlist the support of all leaders
and division managers to take ownership of the ethical vision and culture and establish them
throughout their functional areas, spreading them, and causing them to take root down through
mid-level managers and line supervisors, until they reach all employees, with empowerment for
each to take ownership along the way. In short, the overall value system for an organization is

created by the leader, incorporated into and sustained by the culture, and transmitted to and
owned by the followers through relationships built upon good communications, wherein the
responsibility for an ethical culture begins and ends with the leaders. ―[I]ntegrity (or the lack of
it) flows from the top down‖ (Sankar, 2003).
The leaders may be the founders—who build the organization on their own personal
values and establish the culture of the organization. Or, the leaders may be developed or brought
in to continue to shepherd and grow the organization—following the same ethical path
established by the founders, further entrenching the values into the culture, and increasing the
interconnection between that culture and all stakeholders. Or, the leaders may be hired to turn an
organization around—possibly establishing a value-based ethical culture for the first time, or
realigning and fortifying a culture and organization that has departed from its ethical, value-
based roots.
Sankar (2003) also says that in addition to a leader having a very strong moral ethic and
character, the leader may be ―charismatic.‖ This term, as Sankar relates, has been diluted over
the millennia from its original meaning as a person who has been ―gifted‖ with special qualities
from the Holy Spirit, or a ―higher power,‖ to what is today the secular connotation of one who
has ―personality attributes such as dynamism, style, [and] image…(House, 1977), impression
management, emotional intelligence (Coleman, 1998), extroverted style, self-confidence,
empathetic understanding, and [ability to] articulate[e] a vision (Shamir, 1995)‖ (cited in text). In
this connotation, the charismatic leader has the ability to inspire others to meet organizational
goals, or to believe in themselves or their common cause.
What is needed by organizations is not a focus on leaders who simply have ―charisma,‖
but a focus on leaders with character. As Sankar (2003) states, ―Charisma is not connected to

ethics, moral literacy, mentoring or the design of an ethical culture for the organization by the
leader. It is the character of the leader that is connected to these elements of a leader‘s behavior.‖
Therefore, it is character, not charisma, which sustains an organization as it faces ethical
decisions, and which stirs a leader to also be a mentor and a servant. According to Sankar,
―Character acts as a moral compass for guiding others along the ethical path.‖ It is the character
and integrity that a leader feels slipping away from them as they travel down a path of increasing
unethical decision making and actions, and which can become ingrained in the culture, decisions,
and actions of the peoples and organization he or she leads.
Whereas the ethical leader will be more or equally concerned with the good of the
organization—employees, stockholders, and other stakeholders—as well as the community,
Sankar (2003) states that:
[C]harismatic leadership may occasionally be more personalized in nature where
the leader is self serving, self-aggrandizing, and exploitative of others (Kets de
Vries, 1993; Klein and House, 1998) displaying high levels of Machiavellianism
(i.e. maximizing one‘s self interest at the expense of others through the use of
manipulation and deceit) narcissism and authoritarianism causing loss of self
initiative and self control of their followers.
The above character flaws are what Sankar (2003) refers to as: ―The dark side of
charisma…essentially a crisis in character or character flaws of the charismatic leader, which
neutralize his/her core values of integrity and his search for excellence.‖ The same holds true for
any leader—charismatic or otherwise—who has not developed a character grounded in those
same core values of integrity and excellence.

Sankar (2003) provides a summary of other character flaws which are often exhibited by
charismatic leaders without an ethical grounding, and the impact those flaws have on the
followers they lead:
As a result [of the above-mentioned character flaws], the leader‘s behaviors can
become exaggerated, lose touch with reality, or become vehicles for pure personal
gain….An overpowering sense of self-importance and strong need to be at the
center of attention can lead charismatic leaders to ignore the viewpoints of others
and the development of leadership ability in followers. We might even classify
charismatic leaders as positive or negative by their orientation toward satisfying
their own needs versus those of their followers. For example, negative charismatic
leaders presumably emphasize a devotion to themselves over their mission. They
also are likely to promote personal identification and dependence on themselves
over a more straightforward endorsement and internalization of the values and
ideological goals they are promoting. Positive charismatic leaders, on the other
hand, are more likely to emphasize the mission rather than themselves and to seek
internalization [of the values and ideological goals of the organization] over
personal identification.
Further, referencing the work of House, Spangler, and Woycke (1991), Sankar states:
Such leaders govern in a totalitarian manner, discourag[e] questioning of their
decisions, advocate goals that largely benefit themselves, disregard legitimate
institutional channels, and use punishments and rewards to motivate. Among their
followers, they prefer to foster dependence and unquestioning obedience over
independent thinking (2003, cited in text).

As Sankar states, this is not to suggest that all leaders with charisma have self-serving
motivations, but that a charismatic leader without a strong, personal moral compass, has by the
very nature of charisma, the exponential power to rally masses around a shared cause they
believe in, and to incite unethical practices, lead their followers astray, and cause much pain,
death, and destruction not only to those outside of their organization, but to those within the
organization, and themselves, as well. This has been witnessed through Hitler, Stalin, Pol Pot,
Jim Jones, David Koresh, and others. Likewise, in business, the charismatic leader without
strong personal ethics has the ability to cause much organizational destruction.
J. Reingold (2008), in her article Meet Your New Leader, says that the ―visionary leader,‖
an idea of leadership gaining prominence and popularity in the 1980s and continuing in some
measure today, is rapidly beginning to wane (pp. 145-146). The visionary leader was seen as
almost ―omnipotent;‖ a ―Lone Ranger with…Loyal Tontos;‖ given celebrity status by the media
and ―worshipped by business magazines;‖ and hesitant to admit ignorance to their board of
directors out of fear of rapid replacement (Reingold, pp. 145-146). Reingold writes that, of the
visionary leader, his or her evaluation by the board and the organization; the estimation of their
leadership ability by other business leaders and the media; their salary and bonuses, were all
determined by how well they were able to grow and expand their organizations in a series of
―ever more dramatic moves, such as mergers, acquisitions, or other gambles….[with] [t]he stock
price…widely accepted as a real-time CEO report card, [and] the numerical proof of success…‖
(pp. 145-146). They were expected to sustain the growth of their organizations, lead the stock
prices up, and to have ever-increasing large profits from one quarter to the next—an upward
trend that is almost impossible to sustain. Moderate growth was often not good enough.
Corruption becomes increasingly possible under that kind of pressure and expectation.

According to C. K. Prahalad, ―We took the complex nature of leadership and converted it into a
single metric by basing compensation on stock price‖ (Reingold, p. 145, cited in text).
As Reingold (2008) states, previous generations of leader were focused on creating long-
term success for their organizations, for their shareholders, and for other stakeholders; these
leaders were the founders of the organizations, and then the following generation(s) of leaders
who focused on maintaining what was begun by the founders (p. 146)—moderate growth, solid
reputation, customer satisfaction, and employee loyalty. Quoting noted economist Milton
Friedman, Reingold says that, for visionary leaders however, the ―social responsibility of
business [was] to increase profits‖ (p. 146). Profits—or perhaps more accurately, the bottom line,
to encompass not-for-profit organizational leaders who can also be corrupt—were first and
foremost, and sometimes solely, the focus of many organizations and their leaders.
Today, it is agreed by many that the visionary leadership style has failed, and Reingold
(2008) points to Enron and the dot-com bubble burst as some of the first signs that this style had
major faults (p. 146). Today, the ―visionary leader‖ is seen as largely responsible for the
economic crisis gripping not only the nation, but the world (Reingold, pp. 145-146). Connecting
the terms ―visionary leader‘ and ―charismatic leader,‖ she voices the work of Rakesh Khurana, of
the Harvard Business School, saying, while ―‘charismatic‘ leaders didn‘t boost performance in
the long run….[still] the visionary persevered, his gambler‘s instincts honed and rewarded in a
lightly regulated, winner-take-all environment‖ (p. 146).
The ethical crises which have resulted since 2000 alone make many believe the previous
bureaucratic control, with centralized planning, top-down communications, layer upon layer of
management, and focus upon immediate gains should be replaced. Pinchot (2008) says that
leaders ―feel coerced to manage things for the short term bottom line.‖ This is the type of

environment in which leaders, feeling pressure, or enticed by the prospect of great personal
wealth, can find themselves making unethical decisions.
Greed, internal or external pressures to perform, and a lack of a culture where value-
based ethical decisions are encouraged and praised, can lead to an environment where there are
many opportunities for leaders and employees to make unethical, or even illegal, decisions. This
results in a loss of integrity—both personal and organizational—and allows unethical decisions
to compound, and integrity to be further eroded. Returning again to Enron, as an example of the
preciousness of integrity, Csorba (2006) says that ―the day [Kenneth Lay] and his board voted
twice to lift the conflict of interest rules for his CFO to play his games with off-balance sheet
partnerships, both for the benefit of his, and his employer‘s, crooked gain,‖ was the day they
gave away the remainder of their integrity. This resulted in further unethical decisions and
actions which led to an eventual loss of personal and organizational reputation, the complete
collapse of the organization, and the indictment and conviction of several senior Enron leaders
Before this collapse, Enron had hired a ―turnaround guru‖ to help steer the organization
through bankruptcy (Csorba, 2006). According to Csorba, however, Stephen Cooper, the ―guru‖
given the task, determined that ―99 percent of Enron‘s problems weren‘t market driven, but
leadership related—a massive breakdown in accountability and governance.‖ Malcolm Salter, in
his book Innovation Corrupted: The Origins and Legacy of Enron’s Collapse, states that: ―At
Enron there were many opportunities for enormous personal gain that distracted top executives
from the essential tasks of maintaining institutional integrity and building stable relationships
with shareholders and employees‖ (Hancock, 2008, cited in text). Salter, in discussing the
current economic crisis, created in part because of subprime mortgages, says that there were
―perverse incentives for both mortgage brokers and investment bankers‖ to heavily push these

mortgages (Hancock, cited in text)—often to borrowers who could not afford the homes they
were buying. And Reingold (2008), using the example of Stanley O‘Neal, the former CEO for
Merrill Lynch, says that when he took the position in 2002, he had ―the express mission of
catching up with the more aggressive trading firms,‖ betting the existence of the 100-year-old
company on those same investments backed by subprime mortgages, and by ―outsized leverage‖
(p. 146). When ―the bet went bad‖ and the housing market burst from unqualified borrowers
defaulting on their loans, O‘Neal walked away with a ―$160 million severance package‖
(Reingold, p. 146).
In these examples, unethical decision making and actions have stemmed from leaders
who have lacked a commitment to ethical, moral values. They have known what values are; they
have given them lip service; but they have not lived them, nor communicated them, nor
embedded them into the culture of their organizations. In some instances, they have allowed
greed—or lust—for personal gain to set their minds towards how they can achieve more: make
larger salaries and bonuses, develop grander reputations, and receive more praise—even if these
gains come as a result of unethical or illegal actions and cause a loss of personal integrity and
reputation. In other instances, the greed has been for organizational gain: a short-term increase in
market share, profit, and reputation. Further, some examples stem not so much from greed, but
rather as actual or perceived market pressures to perform—to grow the organization and to
achieve greater profits for the company and greater returns for the shareholders. But, again, in
each instance the driving force behind the leaders and, thus, the organizations has not—repeat,
has not—been long-term organizational growth through a committed focus on ethical, value-
based, decisions, actions, communications, culture, and leadership.

Sankar (2003), contrasting ethical, positive charismatic leadership, against unethical,
negative charismatic leadership, asks, ―How can we judge the two charismatic leadership forms
to be ethical or unethical?‖ without first defining what it means to be ethical? Sankar says that
which is ethical is ―that which is morally good, or that which is considered morally right—as
opposed to that which is legally or procedurally right.‖ Paraphrasing Saint Thomas Aquinas,
Sankar says, ―The moral goodness of behaviors should be judged on the basis of the objective act
itself, the subjective motive of the actor, and the context in which the act is performed.‖
Therefore, Sankar suggests:
Charismatic leaders exhibit ethical leadership when they (1) strive to operate with
an altruistic intent, (2) utilize empowering rather than controlling strategies to
influence followers, and (3) endeavor to cultivate virtues and abstain from vices
to build their own character. A virtuous character is the building block of
leadership excellence.
Gilman, Hand, Navran, and Brown (2008) state that there are three questions leaders can
ask to help determine if their organization is riding the ethical fence and susceptible to a breach
of ethics: ―Are employees rewarded for succeeding at any cost or are they urged to be shepherds
of the corporation‘s reputation as well as its assets?‖ ―What pressures do they face to commit
misconduct?‖ And, ―What systemic problems exist that could encourage good people to make
bad decisions?‖
With ―charismatic‖ and ―visionary‖ leadership both seen as ineffective and damaging,
and incapable of creating any long-term sustainability without also having positive traits such as
character, integrity, and moral ethics and values, Americans are looking for leaders who can
provide these positive traits and who can strengthen our organizations and our country. As

Reingold (2008) states, the ―Lifeguard‖ style of leadership is arising out of this ―financial chaos‖
to lead with values that suit this ―environment of increased regulation, diffuse power, and
stagnant stock prices‖ (p. 146). The Lifeguard is focused on long-term success, has situational
awareness, and the ability to study the environment to identify ―weak signals‖ which the
Lifeguard recognizes as calling for a shift in strategy and even ―the courage to….tear up the
strategic plan‖ (Reingold, p. 146). Reingold states that this Lifeguard style of leadership is more
appropriate for our ―interconnected, ever more turbulent world,‖ and Good to Great author Jim
Collins believes that it is a leader‘s ―legislative‖ skills which now make him or her attractive as
compared to the ―executive‖ skills previously sought after (p. 146, cited in text). Collins adds
that, the ―top CEOs will be those who are able to create the conditions for things to get done
rather than hand down orders‖ (Reingold, p. 146, cited in text).
Teamwork is an increasingly popular term in organizations, and the true self-managed
team is slowly increasing in use, but the self-managed team requires leaders who, themselves,
work well in teams and, more importantly, trust their employees to make wise decisions as they
are empowered with ever-greater responsibilities for helping to manage and lead the
organization. The Lifeguard, as Reingold (2008) states, works well in and with teams, does not
have to be the one setting the rules and is happy to follow the rules set by others, and is not a
leader just for the money but for intrinsic reasons; whereas, ―[w]hile the visionary leaders talked
about teamwork, they believed that they could control their firm‘s destiny by themselves, citing
any attempts to regulate their businesses as hostile and anticompetitive‖ (p. 146).
To help further the growth of an organization, and to help prevent leaders from making
unethical and illegal decisions, leaders should surround themselves with others who are
committed to ethically leading an organization and who are not afraid to speak up, calling the

decisions and actions of the organization and its leaders into question when those decisions and
actions appear unethical. Ethical leadership calls for the leader to listen to the counsel of others,
to accept criticism, to empower others to have a share in the decision-making process, and to
build these character qualities and freedoms into the culture of the organization. In addition to
listening, the leader should also be unafraid of asking a lot of questions when they don‘t know
the answers—which, according to author Collins, was something respected leader President John
F. Kennedy was very comfortable with (Reingold, 2008, p. 146, cited in text).
As F. Reh (n. d.) states, ―Challenging the status quo has to be a top priority in any
organization. Accepting the status quo leads to stagnation. Stagnation will kill any organization.‖
Reh says to the leader: ―Avoid the temptation to surround yourself with individuals who are so
similar to you that they can‘t offer a different perspective [or]….who are so afraid that they
won‘t dissent.‖ This is known as groupthink. Instead, Reh suggests the leader ―Reward creativity
and original thought in [the] decision-making process. Hang on to those people who have
mastered the art of disagreeing without being disagreeable.‖
Likewise, Reh (n. d.) says that employees—or followers—owe it to their leaders to
provide them ―honest‖ feedback; ―to tell them what [they] really think….Especially if [they]
disagree….[and] to give [them] as much information and as many options as possible.‖ Reh says
that one should ―fight hard for what you believe to be right;‖ being ―professional‖ but also being
―candid.‖ However, in supporting the leader and in not creating a hostile environment or
dissension, Reh says that ―[O]nce the boss has made a decision, the discussion and arguing and
dissent must stop. [At that point,] you have an obligation to support your boss in that decision.
You expect it of your people; you should do no less.‖ To do otherwise would be hypocrisy, and

that, too, is an unethical element—to treat a person one way, but to expect to not be treated in the
same manner.
Another important character quality of an ethical leader is the ability to freely admit
mistakes. In an ethical organization, the freedom to freely admit mistakes must be built into the
culture and extended to leaders and followers, alike.
An article by E. Tahmincioglu (2008) discusses the pros and cons of admitting mistakes
in an organization. Ms. Tahmincioglu points to the recent collapse of the economy and points to
author Carol Tavris‘ observation that it has been a rarity on Wall Street to find anyone willing to
admit to their mistakes (2008, cited in text). Citing the testimony of Lehman Brothers CEO
Richard Fuld to Congress, Tahmincioglu states that Fuld defended his decision making and
actions as ―prudent and appropriate,‖ and diverted any responsibility for the collapse to a
combination of short selling, government actions, and similar decisions by others (2008).
Author of the book, Everything I Know About Business I Learned at McDonald’s,‖ and
Inside Management consulting firm CEO, Paul Facella says that, ―In most situations, if people
are honest and explain what they did, and it had no true malicious intent, then most organizations
will acquiesce and like that‖ (Tahmincioglu, 2008). Facella says that organizations like
McDonald‘s have built into their culture the ability for employees to feel ―comfortable‖
admitting to their mistakes, but also states that one should always weigh the consequences first—
to determine when and where to admit to the mistake, and how to admit the mistake to one‘s
managers (Tahmincioglu). The Integrity Dividend author Tony Simmons agrees, stating in his
book that admitting mistakes can have legal implications, including ―loss of bonuses or even jail
time,‖ but adds that the ability to admit mistakes shows responsibility and that one can be trusted
(Tahmincioglu).

Ms. Lin Grensing-Pophal, an HR management expert, offers a three-point approach to
admitting mistakes that she learned through the actions of one of her employees: to admit to the
mistake immediately, to take ―full responsibility,‖ and to offer solutions (Tahmincioglu, 2008).
Quoting Angie Morgan, a former U.S. Marine Corps officer, and co-author of Leading From the
Front: No-Excuse Leadership Tactics for Women, ―When you acknowledge mistakes, you can
start looking for the solutions,‖ but when a CEO doesn‘t accept responsibility and admit to their
mistakes, then these leaders have lost their integrity (Tahmincioglu). According to Ms. Grensing-
Pophal, ―Mistakes, in my opinion, are not opportunities to chastise or place blame, they‘re
opportunities to learn and improve‖ (Tahmincioglu). However, as social psychologist and author
Carol Tavris identifies, while children are supposed to learn how and why to admit to mistakes
as they grow up, they often witness parents and other adults treating the making of a mistake like
doing so means a person is ―stupid or incompetent,‖ rather than the healthier belief that ―those
mistakes [are not] a reflection on their own character and ability‖ (Tahmincioglu).
Showing an ability to admit to mistakes, former Federal Reserve Chairman Alan
Greenspan, who left his post in February of 2006 after serving for 18 ½ years, recently testified
before the House Oversight Committee and admitted to ―flaws in his thinking and in the
workings of the free-market system‖ which helped to precipitate the current financial crisis in
America and around the world (Associated Press, 2008). Mr. Greenspan said he had believed
that those who served as leaders in the banking and mortgage industry would, through
deregulation, act in the best interest of their stockholders and organizations—protecting their
investments and equity—by not choosing to fill the market with subprime mortgage loans and
securities backed by them (Associated Press). The financial leaders did not self-regulate and

protect the economy as they should have. They looked out for their own interests over the
interests of investors. The ethics of their decision making and actions can be questioned.
While admitting to his own mistake of not believing it was possible for there to be a
nationwide ―collapse‖ in home prices, because there had never been one before, Mr. Greenspan
also put some of the blame on investors who were eager to purchase those subprime mortgage-
backed securities and ―did not worry that the boom in home prices might come to a crashing
halt‖ (Associated Press. 2008). Regarding the housing and economic crisis which has resulted,
Greenspan says that it ―turned out to be much broader than anything that I could have imagined‖
(Associated Press).
Americans are increasingly tired of the lack of ethical responsibility found in many
segments of American organizations and are disillusioned with many of today‘s leaders—
business, political, governmental, religious, and the media. Reingold (2008) reports that a recent
study conducted by the Harvard Center for Public Leadership, shows that, of all segments of
leadership in America, confidence in business leaders has dropped significantly further than any
of the others (pp. 145-146). And, as witnessed during the current U.S. Presidential election, there
is a renewed call for government leaders to step in and ‗fix‘ our economy and our nation. For
David Gergen, director of Harvard‘s Center for Public Leadership, ―The CEO of the future is
going to have to be someone who deals well with government‖ (Reingold, p. 146). Reingold says
that the CEO now has to more heavily weigh the ―world of competing entities, ranging from
regulatory agencies to angry shareholders, from consumers to foreign powers‖ (p. 146).
A separate poll, conducted by the Ethics Research Center, shows that Americans
understand the top-down approach of leadership and are seeking an increase in ethical leadership
beginning at the top-most level in the United States—in Washington, D. C. A late-September

2008 bi-partisan, cross-demographic, poll conducted by the ERC showed that 88 percent of
Americans agreed that one of the most important goals of the new administration should be to
create a strong ethics plan (Ethics Research Council, 2008, ―ERC Calls on McCain‖).
In a 2008 letter written to Senators McCain and Obama, Patricia Harned, President of
ERC, cited ―conflicts of interest, abusive or intimidating behavior, …lying to employees…and
fraud…in government‖ agencies and called to their minds the recent ―reported actions of Interior
Department workers engaging in sex, drugs, meals, ski trips, and sports tickets from members of
the oil industry they were supposed to be monitoring‖ (Ethics Research Council, 2008, ―ERC
Calls on McCain‖). She then called for the new administration to initiate ―a rigorous ethics and
compliance program [in Washington] that communicates and upholds a broad set of ethical
principles….followed by a continuing dedication to building and maintaining an ethical culture
(Ethics Research Council, ―ERC Calls on McCain‖).
Echoing the same current sentiment Americans have towards business leaders, Ms.
Harned says, ―It seems the American people at the moment don‘t think ‗Washington‘ and
‗ethics‘ belong together in the same sentence….It is critical that the next President, whoever it is,
seize the opportunity to start re-building the public‘s faith in their government institutions‖
(Ethics Research Council, 2008, ―ERC Calls on McCain‖).
To help protect investors and the general public against the types of unethical and illegal
financial misreporting undertaken by Enron, and to promote transparency across all financial
reports and various other management functions of organizations, Congress shortly thereafter
passed the Sarbanes-Oxley Act. This act calls for senior management to review financial reports
and to affix their signature to the reports, indicating that they have read them and that they
believe all information to be accurate and all financial and accounting processes to be solid.

According to Mathis and Jackson (2008), the Sarbanes-Oxley Act was passed ―to make
certain that publicly traded companies followed accounting controls that would reduce the
likelihood of illegal and unethical behaviors‖ (p. 25). Human resource (HR) specialists and
authors, Mathis and Jackson state that the act has large sections regulating ―executive
compensation and benefits,‖ the establishment of codes of ethics, the setting up of ethics
hotlines, the implementation of ―anti-retaliation policies for employees who act as whistle
blowers,‖ and a more in-depth and more frequently occurring ―verification process‖ to guard
against the fraudulent misrepresentation, by employees, of their hours worked (p. 25).
Business leaders, and professional business associations, recognize the impact these
previously-mentioned, and other, ethics scandals have had on public trust. Speaking for the
National Association of Corporate Directors (NACD) (2008), Kenneth Daly, President and CEO
states:
The current economic crisis has eroded public and investor confidence in
corporate governance. American corporations must take action to restore the
public trust. For the past year, we have worked with business leaders and
shareholder groups to create…[a] set of Principles to serve as a framework for
strengthening governance for U.S. publicly traded companies….[and to] empower
board leadership, particularly in the areas of oversight of risk, corporate strategy,
compensation, and transparency.
Those Principles for the board of the directors alluded to by Daly address concerns and
regulations under the Sarbanes-Oxley Act, and include ―setting the tone‖ for organizational
ethics, integrity, and transparency—principally in the area of ―financial disclosures and
controls,‖ and making sure all government laws and regulations are followed (National

Association of Corporate Directors, 2008). As set forth by the Principles, qualities the director of
the board should have include ―integrity, objectivity, judgment, diplomacy, and courage‖
(NACD). The Principles call for each board to have separate ―Independent Board Leadership‖
which provides ethical safeguards to help prevent conflicts of interest between the Board of
Directors, the CEO, and President (NACD). The Principles also state that the board should
establish strong and open communications and relationships with investors, creating
―dialogue…about corporate governance…and long-term strategy issues‖ (NACD).
The NACD also recognizes the ―pressures‖ put upon the CEO and other leaders by
―competing‖ interests—the board, shareholders, and other stakeholders. As well, the NACD
recognizes that the board, too, is subject to the interests of the shareholders, employees, and
other stakeholders, and that both the CEO and the board have to try and balance these
―competing [interests] and pressures‖ (NACD, 2008) while trying to position the organization
for long-term success and simultaneously trying to meet short-term objectives which are often
the key focus of shareholders and financial analysts.
The NACD (2008) has delineated the principle of ―Integrity, Ethics, and Social
Responsibility,‖ stressing it as key to the creation and maintenance of organizational culture and
the cornerstone of building sustainable relationships with stakeholders. This principle makes the
board responsible for ensuring the development of an ethical ―corporate culture‖ through
communications with ―senior management‖ in which the board outlines ―the parameters of the
desired culture, reviewing efforts of management to inculcate the agreed culture (including…[a]
review of compliance and ethics programs) and continually assessing the integrity and ethics of
senior management.‖
The NACD (2008) also stresses that integrity, ethics, and social responsibility are:

…at the heart of effective governance, and should factor into all board
decision…particular[ly]…when considering management proposals; assessing
internal controls and procedures; reviewing financial reporting and accounting
decisions; and…when discussing management development and succession
planning. [Also, the] board should pay special attention to how members of senior
management approach their own conflicts of interest.
However, in a review of the NACD Principles, for Business Network (BNET), P.
Galuszka (2008) states that, while the principles raise the standards for corporate governance,
there is still a long way to go in many areas, including ―backing many aspects of corporate
democracy, such as direct shareholder nominations of director candidates‖
Additionally, the Ethics Resource Center (2008, ―Performance Reviews‖) states that the
Federal Sentencing Guidelines for Organizations (FSGO) outlines six fundamentals of ―a
comprehensive ethics and compliance program,‖ which include: ―written standards of ethical
workplace conduct;‖ ―means for an employee to anonymously report violations of ethics
standards;‖ ―orientation or training on ethical workplace conduct;‖ ―a specific office, telephone
line, e-mail address or Web site where employees can get advice about ethics-related issues;‖
―evaluation of ethical conduct as part of regular performance appraisals;‖ and ―discipline for
employees who commit ethics violations.‖
But the ethics crisis, and its remedies, extends beyond business organizations and the
studies provided by the Business Roundtable, the Ethics Research Council, and the National
Association of Corporate Directors. The ethics crisis extends beyond the United States, affecting
multinational and global organizations caught between the different cultural, legal, political, and
ethical views of the various nations in which they conduct business (Mathis and Jackson, 2008,

p. 22). Mathis and Jackson state that maneuvering through the ethics of various nations can
become tricky; especially considering that, in some nations bribery of officials is an accepted and
common practice in conducting business, and is often the surest and quickest way to make sure
things get done (p. 22)—such as obtaining a license or having utilities connected. Mathis and
Jackson state that, while these may be legal practices in the country in which a multinational
company is operating, the organization must still follow the laws of its home country (p. 22).
This is particularly difficult for U.S. businesses trying to be competitive against multinational
organizations from other countries which are operating in the same nation. Those other
multinationals may be allowed to give bribes or gifts to the same officials without any
repercussions by their home governments—something which the U.S. organizations cannot do,
therefore giving a competitive advantage to those other multinationals (p. 22).
Mathis and Jackson (2008) advise that an organization‘s legal department should be able
to help the organization follow the strict U.S. laws and ―limitations‖ set forth by the Foreign
Corrupt Practices ACT (FPCA), and provide guidance to leaders and others faced with making
ethical and legal decisions (p. 22). The FPCA basically says that any practice which would be
illegal in the United States, must be treated as illegal in the country in which the organization is
conducting business (Mathis & Jackson, p. 22).
The ethics crisis is being witnessed around the world, affecting organizations operating in
their homelands—Japanese organizations in Tokyo, Indian organizations in Mumbai, Ukrainian
organizations in Kiev, United Arab Emirate organizations in Dubai, and other organizations
elsewhere—and there are individuals and global organizations trying to help solve this problem.
Pinchot (2008) says:

Freedom extended to people embedded in a deep sense of community is the basic
lesson the Japanese are teaching the world….[and] we must learn to be ethical not
only to the level of company and beyond to the level or our national communities,
but to extend our ethical boundaries to include the world.
Islamic business analyst Rafi-uddin Shikoh, in reviewing the book Islamic Business
Ethics, written by Dr. Rafik Issa Beekun, states the author‘s suggestion that Islamic business
leaders also institute within their organizations ―a Code of Ethics to guide the organization‘s
ethical principles in all its interaction[s],‖ with ―compliance‖ monitored and guaranteed by
―ethics advocate[s]‖ who form an ―ethics review panel‖ to analyze the decisions of management
on a regular basis; who ensure employees are hired, in part, based on their ethics and then further
trained on their ―ethical responsibilities;‖ who ensure the culture provides employees with a ―set
[of] common [ethical] expectations and understanding within the organization; and, adjusting the
award system to reward ethical behavior and encourage repetition‖ (Shikoh, 2005).
Shikoh (2005) states that the book, ―addresses key principles of management from an
Islamic point of view with a stated goal to help Muslims engaged in business to act in
accordance with the Islamic system of ethics‖ supported by verses of scripture, or Surah, from
their holy book, the Qur‘an. As Shikoh also states, the book was designed to address
organizational ethics and leader‘s responsibilities within global business, the global economy,
and the technology used in its operation, not only from an Islamic, or Muslim, ethical
perspective, but also in comparison to ethical principles from five other ―dominant ethical
systems‖ around the world (2005). In defining ethics, Shikoh describes them as ―a set of moral
principles that distinguish what is right from wrong‖ (2005)—a definition which most people
around the world, from various nations, cultures, and religions, can all agree with.

Shikoh (2005) makes the point that Islamic business ethics are derived specifically from
the beliefs and teachings of their faith and writes, ―By behaving ethically in the midst of the tests
of this worldly life, Muslims prove their worth to God.‖ Shikoh states that there are certain
fundamental aspects of Islamic ethics: discovering intentions when judging another‘s ethical or
unethical actions; freedom of belief; and the individual experience of purification during one‘s
life. Shikoh also lists the author‘s use of five foundational aspects which are central to Islamic
ethics: ―unity,‖ ―equilibrium,‖ ―free will,‖ ―responsibility,‖ and ―benevolence‖ (2005, cited in
text). He lists the practical responsibilities, based upon Islamic teachings, which Dr. Rafik Issa
Beekun says Islamic individuals have towards their organization: ―These…include honesty and
truthfulness; keeping your word; loving God more than trade; supporting intra-Muslim trade;
being humble; using mutual consultation in business affairs; not dealing in fraud or bribery; and
dealing justly‖ (Shikoh, 2005, cited in text). However, Shikoh also contrasts these Islamic ethics
and teachings with the reputation that Muslim businesspersons have for bribery, lack of
transparency in business, discrimination across stakeholders, breaking contracts, cheating, and
lying (2005).
Shikoh says that the author‘s framing of ethics as part of an organization‘s ―social
responsibility‖ is very similar to the trend of Corporate Social Responsibility (CSR)—towards
one‘s stakeholders, society, and nature—currently practiced by leaders in organizations
throughout the world (2005). Regarding the social responsibility towards nature for the Islamist,
this includes the ethical treatment of animals, proper disposal of manufacturing waste, and other
environmental abuses which can pose serious threats to the health of citizens, livestock, and
crops (Shikoh). Dr. Rafik Issa Beekun stresses that this social responsibility is not a one-way
street, but that stakeholders also have a responsibility back to the organization (Shikoh, cited in

text). The Islamic organization and its leaders have a social responsibility to the employee to
make ethical hiring and firing decisions, pay fair wages, maintain a safe environment in which to
work, and ensure employee privacy; the employee, on the other hand, has the organization as its
stakeholder and, therefore, should always be honest, should continue to improve their skills
through training, and should remain free of conflicts of interest (Shikoh).
According to Dr. Rafik Issa Beekun, maximizing profits should not be ―the ultimate goal
or only ethical outcome of trade in Islam,‖ however neither does Islam ―reject profits or trade
and does not aim to remove all differences in income and wealth that may result in various social
and economic classes‖ (Shikoh, 2005, cited in text). The Qur‘anic scripture to support this is
found in Surah 18:46, which states, ―Wealth and sons are allurements of the life of this world;
But the things that endure, good deeds, are the best in the sight of your Lord, as rewards, and
best as the foundation for hopes" (Shikoh, 2005).
This coincides with Judeo-Christian verses from the Bible, such as Matthew 6:19-21,
which talk about storing your treasures in Heaven as opposed to on earth, because the things of
earth fade, rot, are stolen, and are otherwise eventually destroyed. The treasures stored in
Heaven, however, are good works, which are recorded and follow a person into judgment,
according to the teachings of the Judeo-Christian faith. It is also true that throughout the history
of the Jewish nation, as well as Christian nations, the profits of hard work are honorable and
many classes have always existed and have been honored by God. So, for the Muslim, the Jew,
and the Christian alike, while riches and fame and other kinds of prosperity should be considered
as good, and as blessings, it is treating others well—by being respectful and being honest—
which should be the main pursuits of a person; the rest are to come as rewards, not goals.

Matthew 6:21 seals this thought and also serves as a warning against covetousness and greed,
―For where your treasure is, there your heart will be also‖ (New King James Version).
Dr. Rafik Issa Beekun uses 2:282 from the Qur‘an to impart Islamic teaching on the
honoring of contracts and the importance of honesty and fairness: ―…when you deal with each
other in transactions involving future obligations in a fixed period of time, reduce them to
writing. Let him who incurs the liability dictate, but let him fear his Lord God, and not diminish
aught of what he owes‖ (Shikoh, 2005, cited in text). So, for Muslim and non-Muslim
businesspersons, alike, honoring contractual obligations preserve one‘s integrity and are a part of
ethical business practices.
Shikoh (2005) also sums up two other Qur‘anic principles as discussed in Dr. Rafik Issa
Beekun‘s book:
…in discouraging the temptations to exaggerate and lie about one's products or
services during sales or marketing, the importance of honesty and truth is
referenced as laid out by this saying of the Prophet Mohammad (saaw): ‗The
merchants will be raised on the day of resurrection as evil-doers, except those
who fear God, are honest, and speak the truth.‘ [This corresponds to the Jewish
and Christian beliefs in a resurrection and judgment.] Similarly, the following
Ayah (4:29) is used in support of Muslims not resorting to extravagance (the
extravagant behavior of the dot-com companies during the internet boom comes
to mind here): ‗O you who believe! Eat not up your property among yourselves in
vanities: but let there be amongst you traffic and trade by mutual good-will: nor
kill (or destroy) yourselves: for verily God has been to you Most Merciful.‘ [This
corresponds to the writings in Ecclesiastes by King Solomon that pursuing

worldly riches and goals is vanity and chasing after the wind; and other Bible
(Tanach) texts which warn against covetousness, greed, and pride].
Shockley-Zalabak (2006) also discusses organizational misleading in public
communications, stating:
We have all questioned the truth of particular organizational messages.
Advertising claims are often exaggerated, with consumer complaints frequently
hidden from public scrutiny….Strategic organizational communication is an
intentional effort to shape our perceptions. Themes selected for marketing,
advertising, and crisis management may focus or frame an issue away from the
product or service to a more generally accepted societal good‖ (p. 374)
All communications must be framed with the intent that the receiver ‗buys‘ the message the
sender is ‗selling.‘ But, the message must be truthful and not misleading.
Muslim, Jewish, and Christian business leaders have much in common regarding
business ethics and share many tangents of faith. Many of these same ethical concepts can also
be found in the writings of Buddha, and in other various religions. Moreover, there exist some
who profess to have no religious beliefs, but whom still adhere to these scriptural ethics on the
basis that these are universal principles and are the ‗right thing to do.‘
Of the international organizations trying to solve the ethics crisis, one put forth A
Universal Declaration of a Global Ethic, in 1993, in Amman, Jordan, after the conclusion of a
series of international, intercultural, and interreligious meetings, held over several years, between
theologians, educators, and business and government leaders (―An Interfaith Declaration,‖ 1993).
As reported by the Center for Global Ethics, the leaders represented the three ―monotheistic‖
world faiths of Judaism, Islam, and Christianity—each faith having its origins in Abraham, their

biological or spiritual father, whose life and legacy are found in the Scriptures of the Tanach
(Judaism), Holy Bible (Christianity), and Qur‘an (Islam) (―An Interfaith Declaration‖). It was
their purpose to move beyond stereotypes and religious and cultural differences in order to
identify common ethics which underlie and drive personal and business decision making and
actions in organizations across all main religious and ethnic populations and cultures, and to
show the relevancy, wisdom, and strength of these traditional ethics which are being supplanted
by a new breed of ethics which has fewer moral boundaries and requires less responsibility (―An
Interfaith Declaration,‖ 1993; Shafer, 1998).
According to Shafer (1998), of the Center for Global Ethics, the Center‘s mission is to:
…coordinate the work of thinkers, scholars, and activists from around the world,
who are working to define, implement, and promote policies of responsible global
citizenship. As profoundly interconnected members of a global community, we
recognize the need to develop and advance the acceptance of a viable and
sustainable Global Ethic.
A Universal Declaration of a Global Ethic was created primarily through the Center for
Global Ethics, and is associated with the Global Dialogue Institute, the Institute for
Interreligious, Intercultural Dialogue, and the Journal for Ecumenical Studies, all located at
Temple University in Pennsylvania, and under the direction of Leonard Swindler, Professor of
Catholic Thought and Interreligious Dialogue at the university (Shafer, 1998).
Interspersed throughout the paper so far have been just a very few of the ethical teachings
contained in the scriptures of these three major world religions—Judaism, Islam, and
Christianity. A more substantial, but by no means conclusive, selection of Judeo-Christian
scriptures, along with some of the teachings of Buddha, can be found in Appendix A and

Appendix B, respectively, and are profitable for learning the wisdom of personal and business
ethics.
However, a very incomplete summary of ethical principles, which these above four faiths
share, and which can be found in other faiths, cultures, and societies, include: the need of a
person for self-control—their thoughts, their words, and their actions; humility as opposed to
arrogant pride and self-importance; honesty, truth, transparency, and keeping one‘s word versus
deception, lies, and breaking promises (such as contracts); respecting and upholding the law;
being respectful to others instead of disrespectful; being grateful instead of ungrateful; having
confidence, hope, and a lasting positive reputation as a result of maintaining integrity at all
times; charity as opposed to greed; servanthood and social responsibility; culture;
communications which lift a person up, or instruct, or offer advice and constructive criticism and
correction, but which are not said in a mean spirit with the intent of hurting or destroying a
person; listening to wise council versus trying to decide everything oneself; being contemplative
as opposed to making hasty decisions; listening to what one has to say before making a decision
or opening one‘s mouth; admitting mistakes, seeking forgiveness, and providing restitution
versus covering mistakes up; learning from mistakes; having compassion; empowering others to
grow, to learn, and to make wise decisions; the wisdom of long-term planning versus acting for
the short-term; being satisfied with what one has and working honestly and diligently to gain
more versus being covetous and cheating and stealing to get what one wants now; diversity and
non-discrimination; stewardship of one‘s time, talents, money, and that of the organization under
one‘s leadership; honor as the result of actions versus honor sought after as its own reward;
balance and equilibrium; justice tempered by mercy; fair measures in valuing the worth of
products, services, contracts, and people; not pursuing unjust profits; and long-term

organizational sustainability and prosperity versus sudden ruin and destruction—both of which
comes as a result of one‘s decisions and actions; for thoughts lead to actions.
Yet some people question whether ethics or morality makes for good business practices.
Dr. E. Rozycki (1993), in his paper Leadership vs. Morality: An Unavoidable Conflict?,
questions whether or not leadership and morality are mutually exclusive, and if the ―standards of
judgment‖ required to be a ―heroic leader‖ is ―in conflict with common notions of morality,‖ or
being a ―moral leader.‖ ―[M]oral heroic leadership‖ is desired, according to Rozycki, because
people want organizations—their leaders and employees—to do ―more good than evil‖.
Citing ―elite private‖ universities and the military as examples, Rozycki (1993) says that
both seek to turn out these heroic leaders, but that heroic leadership is promoted as: ―acting
through organizations to get the job done [through]….[l]eadership…stimulated by providing
incentives to rule-breaking…done cleverly enough to avoid getting caught in the act….[and] to
achieve a superordinate good, if only from the perspective of the immediate group to which one
belongs.‖ Rozycki says that, in the elite private universities, a student may pull off an elaborate
hoax and get expelled, yet that student can be welcomed with open arms by another private
university for exactly the reason he or she was expelled from the other university. Rozycki states
that the student was welcomed because the student proved him- or herself clever and capable of
organizing and pulling off the stunt. Rozycki also states, ―Rule-breaking done with wit and style
can become a mark of distinction‖. Regarding the military, Rozycki says that recruits are told to
achieve a certain objective, such as to mop the floors, but are not given the resources by which to
accomplish the mission. Rozycki says that they are expected to use their intelligence and
resourcefulness to acquire what they need and get the job done, but should they get caught
stealing, they will be punished. ―In both cases,‖ states Rozycki, ―there is some sense that a

‗higher‘ good is served by the competition that often subverts rules that govern ‗ordinary‘
situations.‖ He further states that:
The basic risk of leadership is encountering interference with one‘s effectiveness.
The leader is expected to ‗break the rules‘ from time to time to achieve greater
goods. But only success justifies this ‗outlawry.‘ Even then, whether a ‗greater
good‘ has been achieved may be a matter of substantial controversy. It is difficult
to be a leader even in a pluralistic society‖ (Rozycki, 1993).
This statement can help explain the pressures that leaders face—such as being expected
to achieve continually rising stock prices—and the temptation to break the rules and do the
unethical to achieve the objective. Yet, when they do commit unethical actions and are caught,
they are castigated by many of the same individuals who placed them under what may have been
unrealistic expectations and pressures in the first place.
This is why Rozycki (1993) asks whether or not one can be a ‗heroic leader‘ and also be a
‗moral leader.‘ Rozycki says that there is something ―particularly disturbing about [a] discussion
of ‗moral, heroic leadership‖ and that the thought is too ―simple.‖ The two paragraphs which
follow are Rozycki‘s thoughts on how leaders and organizations can be morally defective:
The mythos of heroic leadership seems to require that a ‗real leader‘ be the cause
or author of the organizational act. This leads to an interesting dilemma. One kind
of morally defective organization is one which prevents moral veto power by
individuals over organizational acts. Individuals other than the leader become
mere functionaries, instruments of the leader‘s will. An administrator can only be
a cause or an author of a organizational act, that is, a ‗heroic leader,‘ if his action

cannot be vetoed by his subordinates, i.e., if the organization is morally defective.
Thus, leadership presumes a morally defective environment of action.
Any action performed by one constrained from the exercise of moral
choice is ceteris paribus morally defective. So, even if the administrator‘s
command is morally correct, the organizational action will necessarily be morally
defective. But if the organization is not morally defective, i.e., each actor within it
may veto the administrator‘s cause or command on moral grounds, then the
administrator is not the author of the organizational act. The organizational act in
a morally non-defective organization is substantially the act of those moral agents
who execute it. Thus, the administrator‘s act, even if moral in such circumstances,
is not heroic leadership.
Dr. Rozycki (1993) further states that, for the sake of managing society, because it is not
practical to punish everybody, leaders who are guilty of crimes are punished as an example to the
followers who are left free to be condemned by their own guilty consciences. He states that such
was the case with the execution of Nazi leaders after World War II while thousands of followers
were not punished. Unethical and corrupt business, political, and religious leaders are also held
up as examples when they are punished—with the hope that this will dissuade others from
pursuing the same unethical or illegal courses of action.
Dr. Rozycki (1993) also argues that, in a ―pluralistic…modern society, too much
‗morality‘ is probably counterproductive in terms of social control. Too strict an enforcement of
rules—moral or legal—might cause the kind of resistance which eventually might bring the
legitimacy of those rules into question.‖

Dr. Rozycki (1993), in his conclusion, may be considering moral, heroic leadership to be
a mixed blessing, calling that leader ―conflicted, and…ultimately, tragic,‖ yet that leader is ―a
teacher who provides us with common understandings of the moral basis of social action.‖
Tony Simmons, author of The Integrity Dividend, mentioned previously in this paper,
generally agrees that being ethical and admitting mistakes is the best practice—that it pays
―dividends‖—but also seems to imply that the ethical decision to admit a mistake may be
contextual, stating that, because admitting the mistake may bring severe consequences, one
should ―be able to read if those around [them], and the company [they] work for, are worthy of
the truth‖ (Tahmincioglu, 2008).
Pamela Shockley-Zalabak (2008) takes this question of whether or not to admit a mistake
a step further, saying that even within an organization, different people may have different
personal moral codes, and the question of whether or not to admit a mistake is a matter of their
interpretation of what is ethical. She states:
Employees have individual value systems and make individual judgments about
the rightness or wrongness of communication behavior. Even in organizations in
which openness is encouraged, an individual employee may choose not to notify a
supervisor of a serious mistake. The individual judges this behavior as ethical
because of his or her intent to correct the problem. The employee‘s supervisor, on
the other hand, may consider it unethical to withhold information that could affect
the productivity of the group. An absolute judgment about the rightness or
wrongness of the employee‘s behavior is difficult. It is possible to understand,
however, that individual and organization values can differ, contributing to
different interpretations of ethical behavior‖ (Shockley-Zalabak, 2008, p. 120).

However, as Pinchot (2008) states, ―[E]thics is [not] a luxury—it‘s a staple in the success
of any enterprise.‖
Ms. Pinchot (2008) draws the correlation between the organization of businesses and the
organization of societies, stating that:
Effective societies and effective companies alike have their grounding in ethical
basics that rest on freedom and democracy: the value of [individual personal]
diversity; distributed power [empowerment to make ethical decisions]; continuous
reality testing [where Max De Pree says organizational culture makes truth and
the distribution of information paramount]; distributed leadership; global ethics;
acting for the long run [versus short-term gain]; and the Golden Rule.
Ms. Pinchot (2008) follows by taking the ‗Golden Rule,‘ an ethical core value of many
organizations, and applies it to organizational practices, giving a glimpse at the payoffs for living
by the ‗Golden Rule‘ and the consequences for not doing so. The consequences would include
those witnessed in the last decade and briefly written about in this paper. Ms. Pinchot states:
‘Do unto others as you would have others do unto you‘ is the basic rule for
community survival. Those groups which survive well will treat each other and
even their customers as equals, with consideration and respect. Internally, the
‗Golden Rule‘ is needed to prevent our worst – destructive-in-fighting, stifling
authoritarianism, [and] diverting status-seeking. This principle is the basis of
pulling together and getting done anything of value…..We function best when we
can count on others, and others on us, and when we are willing to collaborate with
our colleagues and customers on mutual goals. Every workplace that has long-
term success rests on community values: mutual support, caring for each other,

our customers, and the worlds we share, and being responsible to learn and
change so as to produce unquestionable positive value--or jeopardize everyone's
survival (2008).
Thompson, Strickland, and Gamble (2008) list the core values, and resultant ethical
actions, for several well-recognized organizations. At Kodak, these include: ―respect for the
dignity of the individual, uncompromising integrity, unquestioned trust, [and] constant
credibility‖ At Home Depot, these include: ―giving back to the community [social
responsibility], respect for all people, doing the right thing, taking care of people, building strong
relationships, and creating shareholder value‖—ethically At Toyota, this includes ―respect‖ and
―quality‖—for there is an ethical obligation to do your best; DuPont includes ―ethics, respect for
people, and environmental stewardship;‖ Heinz includes ―respect‖ and ―integrity,‖ as well as,
―Empowerment…to empower our talented people to take the initiative and to do what‘s right,‖
(Thompson, et al., p.28).
Thompson, Strickland, and Gamble (2008) say that an organization‘s core values must be
incorporated into an ethical strategy, and give a two-pointed argument for doing so: ―because a
strategy that is unethical in whole or in part is morally wrong and reflects badly on the character
of the company personnel involved and…because an ethical strategy is good business and in the
self-interest of shareholders‖ (p. 338). Thompson, et al., further states that there are three levels
of ―business costs‖ which can result from unethical business decisions and actions:
Level 1 costs [include] government fines and penalties; civil penalties arising
from class-action lawsuits and other litigation aimed at punishing the company for
its offense and the harm done to others; [and] costs to shareholders in the form of
a lower stock price. Level 2 costs [include] legal and investigative costs incurred

by the company; costs of providing remedial education and ethics training to
company personnel; costs of taking corrective actions; [and] administrative costs
associated with ensuring future compliance. Level 3 costs [include] customer
defections; loss of reputation; lost employee morale and higher degrees of
employee cynicism; higher employee turnover; higher recruiting costs and
difficulty of attracting talented employees; adverse effects on employee
productivity; [and] costs of complying with often harsher government regulations
(2008, p. 339).
Crisis management communications expert and author Steve Wilson (2002) talks about
what is perhaps the most important result of integrity, and ethical versus unethical decisions and
actions—the reputation of an individual or an organization. Wilson (2002) says that, ―It can take
decades for an organization [or a person] to build a good reputation, yet it can be destroyed in
just a few hours‖ (p. 139). Integrity is built upon trust. Trust comes from ethical decisions and
actions. A good reputation comes from the integrity built by repeated ethical decisions and
actions. Once the trust is gone, it can be an extremely hard and long process of rebuilding that
trust—and that trust is what leads consumers to buy products and services; what leads lenders to
grant financing at favorable terms; what leads suppliers to give favorable terms on the sale and
shipping of its products; what leads the government to not see a need for additional regulations;
and what leads investors to purchase more shares of an organization‘s stock. ―Emphasizing
responsible business conduct is the surest means of preserving a company‘s intangible assets‖
(International Business Ethics Institute, n.d.)
So, if the basic benefits of ethical leadership, decision making, and actions for an
organization are that all stakeholders remain satisfied and even happy, no laws are broken, the

organization enjoys a favorable reputation and, as a result, the organization also enjoys
sustainable growth and profits, then what are some of the policies and procedures that a leader
should do to ingrain ethical values into the organization‘s culture and operations?
The leader should first have a strong set of personal, ethical values which he or she uses
while creating a strategic vision for the organization and laying out its mission. Thompson,
Strickland, and Gamble (2008) state that: ―A strategic vision portrays a company‘s future
business scope (‗where we are going‘), whereas a company‘s mission typically describes its
present business and purpose (‗who we are, what we do,‘ and why we are here‘)‖ (p. 24). They
state that, ―An effectively communicated vision is a valuable management tool for enlisting the
commitment of company personnel to actions that get the company moving in the [common]
intended direction‖ (Thompson, et al., p. 25). Additionally, ―Strategic visions become real only
when the vision statement is imprinted in the minds of organization members and then translated
into hard objectives and strategies‖ (Thompson, et al., p. 26); which is also true of an
organization‘s ethics and culture—which must all be lived by the employees and made tangible
so that all employees can get on the same sheet of music. The vision statement of Charles
Schwab, one of a half-dozen examples of vision statements by highly recognizable companies
given by Thompson, et al., states: ―To provide customers with the most useful and ethical
financial services in the world‖ (2008, p. 26). This illustrates their emphasis on ethics within
their strategic vision.
Thompson, Strickland, and Gamble (2008) stress that leaders should only pursue
organizational strategies that ―can pass the test of moral scrutiny‖ and that any strategy chosen
―allows management to fulfill its ethical duties to all stakeholders‖ (pp. 10-11). However, they
also point out that sometimes strategies seem to fall in a ―gray zone‖ between what logically

seems ethical and what logically seems unethical; and that it is during these times that decisions
will need to be made based on ―how clearly the boundaries [have been] defined‖ (Thompson, et
al., pp. 10-11).
Thompson, et al. (2008), also have a firm belief in what constitutes ―the payoffs of a clear
vision statement.‖ The payoff being that ―it crystallizes senior executives‘ own views about the
firm‘s long-term direction;‖ ―it reduces the risk of rudderless decision making;‖ ―it is a tool for
winning the support of organizational members for internal changes that will help make the
vision a reality;‖ ―it provides a beacon for lower-level managers in forming departmental
missions, setting departmental objectives, and crafting functional and departmental strategies that
are in sync with the company‘s overall strategy;‖ and ―it helps an organization prepare for the
future‖ (Thompson, et al., p. 26).
Thompson, Strickland, and Gamble (2008) make the connection between the
organization‘s vision and mission and the organization‘s values, describing core values as ―the
beliefs, traits, and ways of doing things that…guide the pursuit of [an organization‘s] vision and
strategy, the conduct of company‘s operations, and the behavior of company personnel‖ (p. 27).
Thompson, et al., further connect the vision, mission, and values (ethics) to the organization‘s
culture, saying that, ―[T]he stated core values and ethical principles are the cornerstones of the
corporate culture‖ (p. 435).
Once the leader crafts the strategic vision and mission for the organization, he or she
should then enlist the help of the human resources and communications staff to help begin
forming the organizational culture around these ethical values, and communicating them through
print, such as newsletters and annual reports, and through the media, such as podcasts and
electronic media releases. All employees need to make this culture more than a set of ideals, but

something that is lived. Living the culture through his or her ―personal actions‖, Sankar (2003)
notes, is the most important way a leader can communicate ethics, values, and integrity within
the culture of the organization.
The Human Resources (HR) department can help the leader build this culture through its
hiring, training, promotion and retention, discipline, and firing practices. As part of its hiring
process, the HR department can employ the use of honesty and integrity tests, provided that they
―relate the test content to specific job content‖ so as to avoid the possibility of a discrimination
suit (Mathis & Jackson, 2008, pp. 239-240). These tests are currently being used in about 28
percent of organizations (Mathis & Jackson, p. 240). The HR department can also rely on asking
good interview questions and checking references. Once hired, the employees should be given a
comprehensive ethics training package, including ―A written code of ethics and standards of
conduct,‖ as well as going through a program whereby the new hire is trained on expected
ethical behavior, how to go about obtaining advice when facing ethical dilemmas, and how to
confidentially report ―ethical misconduct or questionable behavior‖ (p. 23). The promotion
process can take into consideration the ethics of a candidate, partly documented by performance
reviews which include a section on employee ethics. The organization can focus on promoting
those employees it feels best exemplify the ethical character and culture it wishes to ensure.
Those employees who breach the ethics policies can first be counseled if the infractions are
minor and there is reason to believe the employee will turn their conduct around, and be
dismissed at any time the breach of ethics becomes too damaging.
Interestingly, according to the Ethics Resource Center (ERC), ―only 43 percent of human
resource professionals said their organizations include ethical conduct as part of employee‘s
performance appraisals;‖ 7 percent report working for an organization that does not have any

kind of ethics program whatsoever, and only 23 percent have a ―comprehensive ethics and
compliance program in place‖ (ERC, 2008, ―Performance Reviews Often Skip Ethics‖).
However, ―82 percent of HR professionals said they reported ethical misconduct when it was
observed, compared with 61 percent of employees‖ (ERC, ―Performance Reviews‖). When HR
employees did not report ethics violations, the reasons given were that they either felt they could
not do so anonymously or that those who committed the ethics violations would go unpunished.
The same findings by the ERC also show that while ―human resource professionals…are
their organization‘s primary resource for ethics-related issues, and…help create ethics
policies….most don‘t feel…truly part of the ethics infrastructure….[but rather feel that] they are
just asked to ‗clean up‘ the situations caused by ethics violations‖ (Ethics Resource Center, 2008,
―Performance Reviews‖). Yet, the results of surveys conducted on organizations and their
leadership by the organization Business Roundtable shows that ―the single most important factor
in ethical decision-making [is] the role of top management in providing commitment, leadership,
and example for ethical values‖ Sankar (2003).
Additionally, the Ethics Resource Center (ERC), says that a study entitled The Ethics
Landscape in American Business reveals that: ―A small proportion of [human resource] HR
professionals (19 percent) and employees (U.S. average: 11 percent) reported feeling pressure by
others (within their organization or externally) to compromise their organization‘s ethics
standards, company policy, or the law (2008, ―Performance Reviews‖). The same survey
revealed that ―HR professionals think that top management (77 percent) would be less likely to
be held accountable if caught violating their organization‘s ethics standards than supervisors (86
percent) and non-management employees (91 percent)‖ (ERC, 2008, ―Performance Reviews‖).
And, confirming that unethical decision making and unethical practices are not reserved for

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