Ethics in Leadership
The 21st century leaders are faced with various challenges in terms of managing and overseeing the various operations of companies. They are tasked with bigger responsibilities as they are important in sustaining the companies. As such, they need to be equipped with sound leadership skills, with most boards of corporations mentoring their leaders before the actual assumption of office. In addition, they also need to be talented in various dimensions to be able to handle diverse challenges which come by. Leadership is defined as the structuring and giving guidance to people to enable an entity achieve its goals in maximizing its economy within the most cost effective time and effort (Rost, 1993). The act of leading may take a given dimension based on the occurrences within the company, which can have ethical, financial or cultural elements.
One of the notable company that has faced leadership challenges is the Enron creditors and recovery Corporation. Initially known as Enron Corp, a company based in Texas, United States and mainly operates in the Energy industry with dealings in electricity, natural gas, communications and paper. It was known to be one of the most innovative companies, clinching the title six consecutive years. Enron faced a major accounting scandal ever reported in the US markets, before undergoing a major rebrand to Enron creditors and Recovery Corporation.
Its notable success remains in the US stock market, however its downfall still affects its operations. These effects continue to affect the leadership and management of the new company despite the change in guard and trade name. This paper analyses the various ethical challenges facing the newly formed Enron creditors and recovery Corporation. It also highlights the possible future strategies that leaders can use to overcome the challenges in the future. It will highlight these based on the code of ethics and values that steer corporations.
Code of Ethics
Organizations are always governed by a code of ethics. A code of ethics is a guideline used to prevent ethical vagueness by maintaining an ethical atmosphere in an organization (Dutelle, 2011). The codes are established and enforced by the leadership of an organization in an attempt to promote ethical decision making. Enron creditors and recovery Corporation code of ethics is based on respect, excellence, communication and integrity, which govern the day-to-day operations of the company.
Respect: The Company aims to treat all stakeholders with respect by reducing instances of callousness and malpractice behavior.
Excellence: The Company aims at achieving the best in its operations, through raising the bar in order to maintain an excellent atmosphere for its stakeholders.
Communication: The Company has an obligation to communicate to the stakeholders. The Company does this by listening to all stakeholders since it believes that information is crucial in its operations.
Integrity: The Company conducts all its activities in an open manner with all stakeholders. It also practices honesty and sincerity in its operations while also fulfilling all its promises.
The company also has stakeholders, with these being a group of people with the capability of achieving an organizational objective, and at the same time can affect the achievement of an organization (Gossy, 2008). They include the employees, government, investors and the New York stock exchange.
Ethical challenges facing Enron creditors and Recovery Corporation
Despite the code of ethics that the company is supposed to uphold to steer it towards ethical practices, the company continues to violate its code of ethics in its operations, thereby bringing forth ethical challenges, which distract the leadership of the company towards the attainment of its goals. The company managers still neglect to uphold integrity in the decision-making processes by including practices which are questionable in nature. This is especially prevalent in the financial segment where major stakeholders are treated with much respect than the others, which is against the spirit of equality and fair treatment as states the code of ethics. In instances of financial rewarding, the managers tend to reward the major investors by calculating their stocks at much higher volumes without regarding and upholding the code of ethics.
The company also has the major challenge of integrating various ethical practices into work culture, which may benefit the stakeholders. This occurs especially because the company’s objective is to uplift its financial state after the initial collapse in order to make it remain viable, and at the same time sustain its operations, quell any perceptions which may arise from the stakeholders. The leadership of the company also faces challenges in fostering the corporate culture, which promote values, geared to enhancing the performance of the company in its various business segments.
The corporate culture does not foster an atmosphere, which improves employee performance, but it is more centered on financial aspects of performance at the detriment of other small stakeholders. The smaller stakeholders tend to suffer due to inappropriate values, for instance, in the ranking of employees, which is unethical, and violate the code of ethics.
The company’s best practices tend to benefit the company as well as the major stakeholders, while disregarding the smaller few individuals. This especially occurs when the company faces an uphill task in upholding integrity, despite the individuals being handled. Enron creditors and recovery corporation has one major ethical dilemma currently facing the company, which has eroded the corporate governance at the organization. The leadership in place has cultivated an atmosphere of distrust, eroding the cultural values that are necessary for creating and fostering credibility in all its operations.
Eroded corporate governance
Corporate governance, as a system which directs and controls companies (Hilb, 2012), is a fundamental requirement in proper management of organization lacks in the organization due to lack of internal controls to measure, control and oversee the operations of the organization. The top level managers continue to neglect and avoid issues of integrity when dealing with financial matters in the company, through offering an unbalanced approached in solving issues in the company. The organizational leadership continues to lag behind in instituting proper ethical measures to foster proper governance in the company. This has led to an ethical dilemma due to the lack of ability in instituting institutional integrity in the organization. Due to lack of institutional integrity, the leadership continues to face various ethical dilemmas which have damaged the reputation of the organization.
There are questionable accounts of malpractices that continue to smear the company’s leadership as well as the image due to instances in which stakeholders are handled in different manner. The company also continues to face moral issues within the internal atmosphere involving employees, leadership and the middle management. This is because the company continues to act in contrary with the code of ethics, which establishes some moral norms aimed at instilling ethical practices in the company.
On the other hand, conflict of interest continues to arise in the company between the leadership and other stakeholders, which also tends to be a deadlock in implementing the best practices of ethical governance. This is because the company is forfeiting its professional practices in its daily operations by making unethical decisions aimed at benefiting the small shareholders. The senior managers lack honesty and integrity when carrying out their duties as leaders of the company. The professional duties are executed as expected, as there is a conflict of interest between managers when conducting their duties. The values and code of ethics of the company due not fully guide the operations of the company, as well as the management style of the leadership.
The company’s quest to uphold its dignity and ethical standards in all organizational operations continue to face a myriad of challenges. Despite most stakeholders depending in the leadership of the company, the leaders have eroded the ethical principles that originally guided the company. The leaders fail to uphold the ethical principles amongst themselves and at the work environment. The company faces challenges in enforcing ethical principles, since some of the leaders managing various units do not comply with the code of ethics.
The erosion of the ethical principles is largely practiced by the leadership due to the perceived conflict of interest among the shareholders and the management.
The leadership of the company continues to fail in their moral obligation in upholding the code of ethics and moral values, so as to maintain a work environment guided by ethical principles. They continue to disregard the ethics of work that govern the company. However, there are various strategies that the company can use to overcome the ethical challenges facing the leadership. They can be implemented as a control measure to enable the management enforce all ethical principles, as well as code of ethics, which govern the company.
Strategy to overcome the ethical challenges
Given the ethical problems facing the leadership of the company, the management can enforce the principles surrounding sound ethical practices by ensuring there is an effective communication concerning its ethical principles. This will ensure that employees conduct their activities based on the ethical principles, because the principles have been communicated to all people, who will then practice them within the company premises. Communicating the code of ethics and the ethical principles can be used to streamline unethical practices in the company. This can be done through the following methods.
Setting the bar by involving the top leadership:
Ethical principles that govern a company can be well communicated from the top leadership. The leadership remains an important element in sustaining and maintaining all ethical practices within an organization. This is because they are vested with governing and leading employees, maintaining and establishing moral standards with all stakeholders. The company can attain this through fostering positive ethical attitudes that can be driven at large by the management.
The leadership of the company can be used in this case to embrace positive deviants of ethics, by creating an environment that is socially acceptable and motivating for all stakeholders. Ethics being the guiding principle in the company’s endeavors, it can be used to drive standard morals to guide the company against unethical practices.
In a scenario where the leadership adheres to its moral principles, there is a likelihood of commitment from all quarters within the company, hence a leadership that drives and complies with ethics is likely to impact a company positively.
On the other hand, a strategic approach can be used to instill ethical practices in the company. This can be done by communicating the strategic message to all stakeholders, permitting and encouraging them to undertake their activities and operations within the ethical fronts. A strategic approach towards the practice of ethics can be used in the organization to motivate the stakeholders towards acting in an ethical manner to reduce ethical challenges in the company. This would be used by the management to foster ethical practices and integrity as a backbone in sustaining the company’s code of conduct.
By the use of the strategic approach in minimizing the ethical challenges, the management would clearly derive its operational objectives in the context of sound ethical principles, by which the leadership, employees and all stakeholders would abide with. The company would also enforce integrity into its activities and operations so as to ensure that all stakeholders are motivated towards acting in an ethical manner. The use of integrity would complement the strategic approach in a way that all stakeholders would employ moral standards and behavior while conducting their operations in the honest manner possible.
Integrity therefore would be used to enforce the code of ethics which would guide the company in terms of conducting its operations in a professional manner.
The strategic approach would therefore be used in the company to reduce the challenges that the leadership would face as a result of ethical issues in the company. The leadership would therefore use the approach as a way of preventing integrity lapses, which would be caused by lack of moral standards. This is because the strategic intent would involve the top leadership of the company, which would also enforce the same within their circles and the company as a whole.
Gauge for ethics during recruitment
Instilling ethics in an organization would also require a strategic move, from the recruitment processes where every individual being employed would be subjected to ethics and moral based examination. Such a hiring process would be beneficial in reducing ethical challenges that the leadership of the company would face. This is because the recruitment process would sieve prospective applicants based on a measure of ethics, in order to select candidates of high morals and ethical standing who would readily fit and abide with the company’s code of ethics.
This method would reduce the ethical challenges that employees would present to the stakeholders of the company. It can be used as a compliance program to help the company to comply with various ethical requirements, which is a necessity in maintaining ethics in the company. This is because ethical principles can be molded in an individual, hence individuals subscribing positively to the same may reduce ethical problems in the company.
Use of compliance programs
Apart from this, this compliance program would be used within the company to reduce instances of unethical practices and misconduct among newly recruited individuals. This strategy would be used by the management to prevent future ethical challenges in the company. Ethical misconducts are common in most American companies, with many involving the middle and senior management.
This would therefore be useful in the company, as it would help prevent ethical issues, promote integrity as well as regulatory violations, hence would reduce instances of abuse of office, malpractice and conflict of interest among the company stakeholders.
Theories of leadership give insight on how leaders can effectively use their skills when faced with various circumstances that need them to put their leadership skills into action, to solve an ethical issue in an organization. These theories however do not address them from a strategic point of view. However, leaders can implement strategies to prevent an occurrence in the company that is against the ethical principles. These strategic initiatives can be learnt from literature to build an effective leader.
Leadership commitment
One of the strategies that the company can use is to demonstrate its commitment towards ethics in the organization. This is more than just communicating the values to all stakeholders, but rather motivating all stakeholders to uphold the ethical principles. This can be done by inspiring all towards committing their acts based on the company’s ethical obligations. The leadership of the company can use the strategy to commit the fraternity towards being morally upright, as well as conducting their activities based on an ethical foundation, hence preventing such unethical practices and vices.
Another strategy that the company can use is to implement an ethic based management program, which aims to sustain, support, recognize and reward ethical practices practiced by stakeholders of the company. This strategy can be used to mitigate any threat that is against the moral principles and ethical behaviors hindering the existence of a conducive atmosphere, which supports ethical practices.
The ethic based management program can also be used to assess and monitor strange behavior elements within a workforce, hence can be used to conduct a comprehensive ethical conduct reviews to gauge the measure of ethical practices which are being practiced in the company.
The ethics based assessment can therefore be used as a strategic tool to carry out surveillance in establishing whether all stakeholders are abiding to the ethical guiding principles, as well as the code of ethics. This strategy can therefore be used to implement ethical principles in the company, as well in other companies.
Leadership is the fundamental element needed to enforce a code of ethics to guide on the acceptable ethical practices in an organization. This is because stakeholders would always depend on the higher authority to practice and implement a given decree or rule that has been passed.
The highlights in the paper present an opportunity, which the company can use to reduce or mitigate ethical problems. These have been illustrated in depth, and when put into action will reduce instances of ethical problems. It should therefore be recommended that the leadership in place put effort towards initiating and practicing a given code of ethics that all individuals and stakeholders of the company can imitate, follow and practice in their daily lives in the company, while avoiding conflict of interest by allowing the due process despite their state in the company. On the other hand, the leadership and the stakeholders should uphold the rules, and abide to the code of ethics in order to avoid conflict of interest, which is against the spirit of ethics. It should therefore be the moral obligation of the leadership to uphold the ethical principles, which can be imitated by all other stakeholders, to reduce ethical challenges that might arise.
References
Dutelle, A. W. (2011). Ethics for the public service professional. Boca Raton, FL: CRC Press.
Gossy, G. (2008). A Stakeholder Rationale for Risk Management: Implications for Corporate Finance Decisions. Wiesbaden: Betriebswirtschaftlicher Verlag Dr. Th. Gabler / GWV Fachverlage.
Hilb, M. (2012). New corporate governance: Successful board management tools. Berlin: Springer.
Rost, J. C. (1993). Leadership for the twenty-first century. New York: Praeger.