Discuss the Importance of Ethical Leadership and Corporate Governance.
Ethical leadership is a kind of leadership ran by the ethical leaders of the organization that is directed towards maintaining ethical standard in the organization. The behavior of ethical leaders is directed ethical standards for maintaining ethical beliefs and values of employee’s dignity and rights. Ethical leadership creates code of conduct for the organization towards shaping the action of the organization performed by the organization (Mayer et al. 2012). Apart from that, ethical leadership also shapes the behavior of the employees in their workplace as well as in dealing with the customers. The goal of ethical leadership is to convey consistent and clear principled message to the employees for ensuring their ethical approach when making their decision in performing their job role (Moore et al. 2014).
Corporate Governance is the way; the organization should run their business and the principle by which the organization should be governed. Corporate Governance is actually conducted by the board of director and other related committee towards ensuring the benefits of the stakeholders. This is important to balance individual and societal goals along with social and economical goals. Corporate governance important in regards to maintain the transparency that ensures balanced ad strong economic development (McCahery, Sautner and Starks 2015). Good corporate governance safeguards the interest of all stakeholders in regards to the return of financial investment properly in time. Corporate governance of the organization also ensures fair allocation of job among the employees that creates healthy working relationship within the workplace. Good corporate governance also ensures maximization of capital within the organization by increasing the confidence of the investors in investing in the organization.
Impact on ensuring ethical conduction
Ethical leadership has a significant effect on ensuring ethical conduction with the organizations. Ethical leaders are responsible for formulating ethical standards of the organizations are the employees follow those when they contribute towards the organizational success. It has been found that the ethical leaders of Franklins Supermarket act as role model for the organization and thus, the employees can hold their honesty and dignity within their workplace (Moore et al. 2014). Ethical leadership also links the values of employees with the organizational strategy that ensure the harmony within the organization. It has been found that the ethical leaders of Dick Smith Electronics maintain transparency within the organization by clearly transferring the important information of the organization to the employees equally that ensures the dignity of the employees (McCahery, Sautner and Starks 2015).
Corporate Governance ensures ethical conduction of the organization in a significant way. Clear and consistent strategies are formulated within the organization through corporate governance set by the board of director if the organization. It has been found that IGA Supermarket maintains corporate governance in a significant way for protecting the interest of shareholders. Fair communication of organizational polices can be found between the organization and the stakeholders of the organization (Aoki 2013). Corporate Governance also prevents the misappropriation and misuse of shareholder’s money by ensuring standard policy of the investment policy. In case of take over and mergers of organizations, corporate governance protect the interest of all parties. In this way, ethical standards of the organization are maintained properly.
Aoki, M., 2013. Controlling insider control: issues of corporate governance in transition economies. Chapters.
Mayer, D.M., Aquino, K., Greenbaum, R.L. and Kuenzi, M., 2012. Who displays ethical leadership, and why does it matter? An examination of antecedents and consequences of ethical leadership. Academy of Management Journal, 55(1), pp.151-171.
McCahery, J.A., Sautner, Z. and Starks, L.T., 2015. Behind the scenes: The corporate governance preferences of institutional investors. Journal of Finance, forthcoming.
Moore, C., Mayer, D.M., Chiang, F.F., Crossley, C.D., Karlesky, M.J. and Birtch, T.A., 2014. Leaders Matter Morally: The Role of Ethical Leadership in Shaping Employee Moral Cognition and Misconduct. Available at SSRN 2574219.