As part of their studies, first year students in the Leadership for Change Master’s Programme are writing short memos on various social theories. We are publishing some of the memos here, on the LFC blog. This set of memos deals with ethical theories, a topic on which Professor Johanna Kujala gave a lecture to the students.
Ethical Theories and Moral Practice in Organisations
The main issues address during Professor Kujala’s lecture were the basic concepts of ethics and morality, ethical theories and organizational ethics, and moral dilemmas in organisations. Among these are ethics and ethical, morality and moral, rights and justice, freedom and responsibility, and values. The key ethical theories and organisational ethics addressed are relativism, consequential ethics, deontology, theory of justice, virtue ethics, and postmodern view.
The theory of ethical relativism implies that morality has to be examined in the context of the norms of one’s culture. Therefore, the same action may be morally right in one society but be morally wrong in another. There are no unconditional truths in ethics, and that what is morally right or wrong varies from person to person or from society to society. Ethical relativism is the most customary variety of relativism, and it embodies the position that there are no moral absolutes (Messerly, 1994)
Deontology is an ethical theory that uses rules to differentiate right from wrong. The real significance is in determining the moral intent of an action itself. Deontology, also known as Deontological Ethics, is an approach to ethics that focuses on the rightness or wrongness of actions themselves. Morality is outlined by our duties toward other human beings. An action is regarded as morally good because of some characteristic of the action itself, not because the product of the action is good. It is duty-based – ethics are concerned with what people do, not with the consequences of their actions. The word deontology comes from the Greek word deon, meaning “obligation” or “duty.”
Consequentialism is an approach to ethics that concentrations on the rightness or wrongness of the consequences of actions, aiming at the utmost amount of good for the greatest number of people. It is an ethical theory that justices whether or not something is right by what its consequences are. Morality is about generating the right kinds of overall consequences. A morally right action is one that produces a good outcome. Two examples of consequentialism are utilitarianism and hedonism. Utilitarianism implies that an action is right if it leads to the most happiness, and hedonism implies that pleasure is the most important pursuit of mankind.
Virtue ethics is an approach to ethics that concentrates on the character and habits of the actor. Morality is regulated based on how well we are achieving our human potential. Virtue Ethics highlight the role of character and virtue in moral philosophy rather than either doing one’s duty or acting in order to bring about good consequences – virtue ethics is person rather than action based. They are normative ethical theories which underline virtues of mind and character, individual’s character as the major element of ethical thinking.
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The Complexity of Ethics, Moral and Justice Related Theories
Ethics, morals, and values are deeply rooted into human social structures, in certain cases we share common principles, such as being courteous by holding the door for a young mother as she is holding her child. On the other hand, individual views on specific situations are subjective, for instance; a young man stealing food to feed his family who doesn’t have the means to support them. Despite this being illegal, some may believe it is unethical, where others would understand his motivations. These contrasting views may be related to the likes of cultural background, upbringing, and social environment.
Professor Kujala discussed several concepts within ethical theories and provided details from both an individual’s perspective and an organisational perspective. The article by Lawton and Páez (2015) discussed ethical leadership theory, whereby they proposed a framework to analyse the relationship between three key elements; virtues, purposes and practices.
Several other scholars also indicated that leadership is perceived as a practice and can be influenced by external factors. Brown, Trevino & Harrison (2005) defined leadership as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making” (cited in Lawton and Páez, 2015, p. 641). Within the study, three forms of leadership where identified; the first was ‘leadership in’, that consisted of activities were leaders are highly driven by their desire for knowledge, looking to seek new challenges and facing them head on (Lawton and Páez, 2015, p. 640). Lawton and Páez specified that this form of leading is not concerned about the outcome as it is unpredictable, in a sense, this form of leadership has its ups and downs. The second stream was ‘leadership of’, which is a target driven form of leadership, where leaders may have to encourage others to achieve targets. Finally, ‘leadership for’ is concerned with external target setting, “creating a vision for ethical purposes” (Lawton and Páez, 2015, p. 640). An example of seen at Interface Inc, where the firm’s CEO Ray Anderson’s (2009) vision was to implement a philosophy of “take nothing: do not harm”, hence, his leadership approach is not about his self-interest, but focused on the greater good.
In order to gain an understanding of ethical theory of leadership, three characteristics were identified in the study: virtues, integrity and authenticity. Virtue is considered a character trait of an ethical leader; two key features of this trait stand out, namely integrity and authenticity. In terms of integrity, Lawton and Páez (2015, p. 462) specified that “integrity seems to consist of both a character trait and behaviour; it is both a possession and an action”. They also added that this specific trait is conscientiously rooted into the nature of leadership. In addition, several researchers stated that authenticity referred to the beliefs and values of an individual and if they act in the best interests of all the actors involved (Lawton and Páez, 2015).
What constitutes as ethical? What is moral? How can we define ethical theories when there are so many different factors at play? Lawton and Páez (2015, p. 639) questioned, “whether leaders need to demonstrate ethical standards that go above the norm”.
Leaders should consider every decision they make from an ethical perspective. We live in a society were organisations need to think about the repercussions of decisions, not only in monetary terms, but also from an ethical standpoint. Take the British bank Northern Rock (NR) as an example, in 2008 the bank collapsed, costing the UK government over £37 billion to help bail out the firm (Arnold, 2017). The unethical aspects of this scandal were a result of the poor decisions made by the upper management of NR. Brummer (2017) added that these decisions were made by “bankers, who didn’t understand banking”. Their poor decision making was eventually nationalized in 2008 and thousands of clients at the bank lost their mortgages, savings, pensions, and just under 5,000 employees lost their jobs (Arnold, 2017). Organizations and leaders have an ethical obligation to their stakeholders; they should not act out of self-interest, but instead should make decisions based on what is right, even if it is not deemed the most optimal outcome.
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Developing Virtues of Individual Leaders – A Critical Perspective
How do the virtues of an individual leader augment to ethical conduct by the organization as a whole? This is the question that came to my mind after reading the article by Lawton & Páez (2005).
While the authenticity and integrity may positively influence follower-perceptions, in hierarchical and layered management model these virtues may be very far from the operative level. Take, for example, recent cases of Esperi Care and Attendo elderly care scandal in Finland. In the case of Attendo, serious misconduct was revealed and after the case started to dismantle, ten of the new employees were reported to already have quit within the first month of the operation in Alavus unit. Esperi got several warnings neglected by the management (YLE News, 2019).
These cases display how a distance between the operative and management level may alienate the leaders from the ethical issues taking place in daily operational-level work. While Lawton & Páez (2015) emphasised authenticity and integrity as important virtues of ethical leaders, in business organisations leader’s main duty is to secure corporations’ financial performance, but not at any cost, which seemed to be the case with Attendo and Esperi Care.
Some theorists argue that profits do not always have to dictate decision-making, and meta-level theories have emerged to connect ethical leadership with business-logic, where businesses are harnessed serving common good and are supposed to create not only financial value for the shareholders, but also wellbeing for the employees, or societal value for the communities in which they operate in.
According to Lawton & Páez (2015), the discussion of the virtues should not be separated from the cultural context and norms within which they are practiced. According to this view, virtue ethics are subject to ethical relativism, but still placed high as a way to develop ethical leadership. From a critical leadership studies (CLS) perspective, this appears a heroic leader-centric leadership discourse, providing a rather idealistic view of the intellectual and rational ethical leaders who would remember Aristotelean virtue ethics when using their power in their organisation’s daily practices.
One of the problems with the virtue ethics and leadership is that ethical leadership, as framed by Lawton & Páez (2015), would mean that moral conduct in an organization remains as a privilege of the organization’s elite. Leader-centric virtue ethics expose the organisation to the subjectivity of the ethical perceptions, and arbitrariness of those few in power.
Despite their power to influence, leaders may still have limited capacity to act and even detect ethical issues within their organisation. Lawton & Páez (2015) also recognised some problems embedded into a leader-centric ethical leadership, such as conflicted virtues of an individual qua individual and an individual qua position holder. The authors themselves also pondered some difficult questions related to the construct: Does being a “good” person mean that the person will be a good leader? And what happens when civilian roles overlap with the leadership position, or when technical excellence and ethical conduct contradict? By contrast, a postmodern inclusive approach to organizational ethics would call for shared organizational ethical leadership, where organisational ethics would be determined in interaction and through multi-voiced stakeholder inclusion, where the code of conduct is created in collaboration, and current conduct contested through organizational democratic discussions.
This brings us back to the case of Attendol as lack of employee and shareholder dialogue was blamed as one of the root causes allowing the scandal to escalate. In Attendo’s case, after the scandal hit the news, FIM and S-bank Ltd. (S-pankki) started a boycott, and shares dived nearly 15 percent in Stockholm Stock Exchange (YLE News, 2019).
Employees and shareholders vote with their feet, if not given any opportunities to participate. When us students were asked to bring ethical issues that we have faced in working life to our in-class dialogue, one thing was very clear: Many ethical issues were complex, socially and culturally embedded, and as a class we were not able to unanimously agree what was the right course of action in each situation.
I would argue that dialogue is crucial in order to address the complexity of ethical issues. Perhaps avoiding the scandals within the Finnish elderly care sector would have been possible if the stakeholders were given more equal opportunities to state their opinions, and most importantly, platforms within the organisations where these opinions could have been heard.
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Ethical Theories and the Responsibility of Commercial Organizations
Ethics means the principles which define right and wrong. Morality is a relative issue as it is context dependent and based on individual, social or cultural views, as Professor Kujala argued at the lecture. In organizations, ethics is strongly dependent on the organizational culture i.e. the policies, guidelines, principles, procedures and ways of doing things. These facets of organizational culture shape the actions of individuals within the organization even though they are primarily acting in accordance to their personal values.
The discourses which underpin the meaning of an organization strongly shape the perceptions of right and wrong. Organizations are formulating their positions on moral questions in accordance to these discourses. Owners, managers and employees of an organization align their actions with the prevalent discourse.
Ethical theories of organization can help us see that the only responsibility of commercial organizations cannot be the value maximization and the generation of profits. The morality of organizations must be based also on the preservation of nature and considerations of social opportunities of people. The principles of opportunity and fairness must be emphasized in order to curb the significant negative effects of capitalist competition.
However, the widely prevalent neoliberal discourse is largely based on the assumption that competition, effectiveness and constant growth are inherently desirable characteristics of an organizations and thus its employees should behave accordingly.
Efficiency and competitiveness is believed to be the only responsibilities of a business organizations. This was argued in 1970 by the American economist Milton Friedman in his article “The Social Responsibility of Business is to Increase its Profits”. In the article, Friedman states that corporations do not have any social responsibilities. The following excerpt from his article illustrates the neoliberal rationale for competitive organizations “The difficulty of exercising social responsibility illustrates, of course, the great virtue of private competitive enterprise -it forces people to be responsible for their own actions and makes it difficult for them to exploit other people for either selfish or unselfish purposes. They can do good -but only at their own expense” (Friedman 1970, 4). The underlying assumption is that organizations’ sole responsibility is to maximize shareholder value by being profitable as long as the organizations is abiding law and rules of the society.
The neoliberal discourse and organizational theory do not take into account, for example, the fact that laws are not established impartially but rather they strongly reflect the perceptions and desires of those who are influential enough to shape them. As it is giving primacy to effectiveness and competition, it simultaneously overlooks and disregards the downsides of competition on social spheres of society (Buch-Hansen & Wigger 2011, 144).
The continual and inexorable process of capital accumulation is causing irreversible negative consequences on nature and it is excluding a significant proportion of humanity from capitalist production as there is no room for considerations of environmental sustainability or social inequalities in the pressure of competition and on fierce battle of profits.
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Ethics in Business and Everyday Life – an Easy Choice?
Interest in the role of ethics in business has grown enormously in recent years, because ethical questions lay the foundations for corporate social responsibility, as well as sustainability issues in the organizations. Therefore, understanding what ethics is about, rationalizing ethical concepts, determining ethical choices became important in organizational and leadership studies.
In their paper, Lawton and Páez (2015), develop a framework for ethical dimensions of leadership that can be applied in different sectors or contexts. Thus, they present and examine the ethical leadership as three interlocking circles: Virtues (Who are the leaders and what are their characteristics), Purposes (Why do they do what they do?) and Practices (How do they do what they do?) (Figure 1).
The authors suggest that the three circles interlock and form an integrated unit within which ethical leadership is exercised. For example, managers in anorganization will need to have a set of good traits of characters such as honesty, sincerity, fairness, compassion (the virtues dimension). These will be exercised in their relations with partners, employees or consumers through non-maleficence and beneficence (the practices dimension) in order to promote justice and the common good (the purposes dimension). (ibid.).
The authors acknowledge that attributes of each dimension are not fixed and vary depending on the context/environment/culture/sector. They suggest that this framework is compatible with different approaches to ethics. (ibid.).
In practice, the line separating ethical behavior from the non-ethical one is gray, rather than black and white. Let’s take, for example, the Red-branded products. Product RED is officially a “brand created to raise awareness and money for the Global Fund to fight AIDS, Tuberculosis and Malaria by teaming up with iconic brands to produce RED-branded products”. The question is: are these apparently ethical and altruistic forms of corporate behavior address the key concerns of the campaigns: meet the needs of the people they are meant to serve or more unfairly “sell” suffering to the public to decrease consumer guilt and serve the big corporations’ own interests? (Richey&Pont, 2011).
During the lecture of Prof. Kujala, we students made role plays about moral dilemmas in organizations and everyday life, which showed once again ambiguous perceptions of ethics and morality. It was interesting to see that what was perceived as moral for some students, was not for the others and vice versa. Prof. Kujala introduced some strategies to help resolve ethically and morally ambiguous situations. One strategy was to reverse roles during the role plays: playing the role which is not the most natural to someone would allow the role player to look at things from another perspective and would eventually change his/her perception.
Another useful tip from Prof. Kujala when facing ethical and moral dilemmas in organizations and everyday life, would be to ask ourselves a set of questions. Those include, for example:
- Does this really make sense?
- Is this the best I can do?
- What do people close to me think about this?
- Would I like to read this from the newspaper?
Answering those questions would help to move into the right direction. However, in order to find more sustainable solutions for the issues of ambiguity, it is important to create cultures where ambiguity can be recognized and discussed (Johnson, 2017).
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Virtue Ethics in Business and Leadership
Living ethically, one should match their personal and professional goals, and that ethics should support efficiency and effectivity in the long term. Stated differently, ethics should provide us with sustainability and power to manage our life and, in some situations, others’ lives. Among plethora of theories of ethics, I would like to review virtue ethics as a possible guideline for business and leadership practices.
Virtue ethics derives from ancient Greek philosophy. In particular, Aristotle played an important role in establishing this theory. He introduced numerous virtues such as justice, fortitude, self-control, courage, prudence and vice versa which are necessary for achieving eudemonia as a life purpose. Eudemonia means “happiness” or “well-being”. Virtues are considered as the tools to achieve happy life and become a human in every sense of the word. However, there are some drawbacks and “open questions” in the theory. First, how to evaluate “happiness”? Second, what should we do with cultural differences? Third, how exactly can it be implemented in researches? Despite these problems, virtue ethics approach could be used as a framework to study social and business issues.
It is said that practice makes habit, habit makes tendency, tendency makes attitude, and attitude makes lifestyle. I think that it can be implied not only to individuals, but also to organizations. Indeed, practices are configured by both people and businesses in their own contexts. Virtues in this sense are implicated as characteristics of the best behavior, for example “Corporate Ethical Virtues” model (Kaptein, 2008) offers seven ethical virtues (clarity, congruence, feasibility, supportability, transparency, discussability and sunctionability) for organization to follow ethical lifestyle. Lawton and Paez (2014) argue that such virtues as integrity and authenticity reside in ethical leaders. In addition to virtues approach, they researched ethical leadership from perspectives of purposes and practices. If one implements virtue ethics to these dimensions, I would say that ethical leaders have the purposes to improve well-being of their followers through appropriate decisions which lead to happiness, or eudemonia. Moreover, eudemonia can be achieved only in society because “it is only this particular form of association that facilitates the development of his human self” (Lawton&Paez, 2014, p.644).
One good example of implementation of virtue ethics and ethical leadership would be a character of Russell Crowe, Maximus, in the Gladiator movie. Maximus was a Romanian general who had respect and love of his family, army and even Emperor Marcus Aurelius. He had everything but lost it. He lost his family, titles, house, army, and freedom and became a slave, a gladiator. He was full of virtues including abovementioned integrity and authenticity, that made him an excellent commander. Especially I highlight such virtues as magnanimity, courage and humility. This is a story illustrating how human virtues allowed a person to survive. Moreover, he was not broken because he believed in good. This belief encouraged him to live and not only to become free, but also to return his power.
The example of Maximus motives and leads us to do something more. In the business perspective, a mission of a business it to contribute to the success of society. From one side, virtues empower us to discover the greatness of one’e mission and the greatness of serving others with excellence. From the other side, to achieve that we should develop our human potential, our virtues.
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Ethics As a Part of Leadership?
The connection between ethics and leadership are often understood differently throughout various ethical theories. Philosophers, like Karl Marx, see moral behaviour as a reduction of an action, which is fulfilling economically determined functional imperatives. This basically means that moral behaviour is subordinate to capital and the practice of leading. A leader who holds the power inside an organisation is acting in a capitalistic manner and his or her ethical assumptions are constructed under the profit aspect. This theory belongs more to a historical economic construct (Honneth 2011: 584).
Nevertheless, various subsections of different ethical theories suggest that leadership and organisational practice can be seen as something different than the maximalisation of profit. Nowadays, the question of ethical behaviour is being placed closer to the centre of leadership studies.
The postmodern view describes, for example, morality as a part of our interaction with others in moral dialogues. With this we are taking the needs of others into account, while listening and respecting their views and opinions. This means that organisations are archiving their ethical standards in a moral discussion with their employees, stakeholder or other parts inside the organisation. This practice is repetitive, and can be seen as a moral dialogue between two parties.
Leadership in this sense is defined under the needs of everyone inside the organisation and those needs can be openly verbalised. Knights & O’Leary (2006) are giving an example of a situational approach of leadership. The leadership style will change depending on the situation. In this context, the moral assumptions could be taught inside a situation and a dialog with others. This leads to the point, that morality and leadership practice can be learned and someone can grow into the leading position in a certain time (Ibid., 129). An interesting question, concerning this concept, would be if all dialogs are equally useful in establishing a moral framework or are there priorities?
Another approach would be the moral philosophy of deontology. The focus in this theory is on an ethical act. The own behaviour in this sense has rules, which are offering us standards for what is right and wrong. Emanuel Kant would be one of the most famous philosophers in this theory tradition. This tradition is consistent with the Christian believe that you should not act in a certain way, if you would treat yourself differently. The individual and the individual lawgiving are one of the main concepts. In this theory, leadership is not determinate by a maximization process. The moral behaviour is relying on moral rules and believes in the right behaviour (ibid.130-131). Questionable in this point would be, how someone can reflect their own leadership behaviour and how are rules constructed?
It seems rather obvious that leaderships and ethics have a connection, and different theories are offering different approaches to the topic. The ability to decide which one si the most plausible one regarding the moral dilemma one is facing is an important task especially for future change makers or leaders.