Business Ethics- Need for ethical leadership in modern business 8-12-22

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Introduction Financial crisis has become a common thing in today’s time, but if talk about 10 years back at that time financial crisis have shaken the planet as various organization/companies out there shut down. The main reason which is identified behind the worst situation of financial crisis is unethical practices in the financial institutions which are huge, and which are run by the big top leaders of the companies. Unethical practices are used for faster growth within the organization or rapid growth and profit earning. Unethical practices can be done in various ways such as convincing the employees working at junior level to adopt practices such as upselling of products, cross selling of products, incentivizing junior employees and much more [ CITATION Den12 \l 1033 ]. These kinds of practices further on results in various consequences such as huge financial losses in the whole industry, occurrence of hardships in the companies. Thus, it states that ethical behavior should always be considered as essential component in the industries. Lots of research and studies has been done upon the leadership and ethics which states that ethics are highly important in leadership as based upon which the actions, abilities, decisions- making, etc. depend on. The result of ethical decision-making also flows to straight to the employees those who are working at the lower levels in the department. In this study, the importance of ethical leadership will be analyzed, and different companies those who has adopted unethical activity or behavior has impacted the world or the industry will be discussed in the study. Ethical Leadership Considering moral behaviors and requirement in a leadership which are acceptable to other people out there are known as ethical leadership. In fact, there are both acceptable as well as unacceptable behaviors based upon which leadership is judged by the others [ CITATION

Giu21 \l 1033 ]. In short, an ethical code that shows respect to the people and guide them in the form of leadership is known as ethical leadership. In addition, there are various factors which are considered in the ethical leadership such as policies, management, behavior, ethics supervisors, audit system, and ethics procedure. Based upon these factors it is identified how the ethics are being adopted within the organization, and any ethical or unethical act by the employees working at higher level such as manager will definitely be going to impact the employees those who are working at lower level of organization. Unethical Practices and Corporate Frauds Corporate frauds are considered as one of the biggest unethical practices that takes place. In real life there are many examples stating how worst corporate frauds can get. For example- In the year 2015, a popular car brand named as Volkswagen did a major fraud in their cars by installing defective devices in around 10 million diesel cars [ CITATION BBC15 \l 1033 ]. After some time, this fraud was exposed and the mastermind behind this fraud and he was removed right away from the company for the case of violating different acts regarding environment and for defrauding the people out there. After removing the CEO of the company, the case kept on going, and it was revealed that the whole company was involved in this unethical act which also includes bribes to workers at different level. On the other hand, there is another example of unethical practices which is known as Enron Scandal in which the company played sharply and hid all the trade losses in the company [ CITATION Tro21 \l 1033 ]. Enron impressively displayed fake financial performance out there which resulted in increasing the number of stocks. It is because company was aware that if poor performance of the company whether in terms of finances are displayed it might impact the company in a long-run and the stocks prices are also. In the year 2001, the Enron Scandal was exposed.

Thus, these kinds of unethical practices don’t only affect the operations but also the overall finances of the company which is why ethical leadership is essential in today’s modern business to set the right and high standards, and to inspire other people too. Financial Crisis and Ethics There is a poor history of financial crisis which shook the world in the year 2007 – 2008, and the main reason behind this crisis which was identified is selfishness, desire to high unnecessary achieve something, greed, etc [ CITATION USE18 \l 1033 ]. Thus, the economy can never be right and wrong at the same, there are two option which are being exploitive and being legal. Thus, the reasons which are identified above leads the economy to become exploitative. In consider about real life, then here is an example of Wells Fargo Cross Selling Scandal where unethical practices are noticed and exposed among the employees working in the bank. The fraud that was committed by the bank is regarding cross-selling targets. The bank used to forge the signature of the customers and open new bank accounts, issue new debit/credit cards without the knowledge or consent of the customers. The bank continues to reward the achievers in the organization itself those who set and achieve such a high daily target in everyday life. This example clearly states that the adoption of unethical practices by leaders within the organization. Organization Culture Ethics plays essential role in the Organization Culture because the culture of organization influence majorly influence the moral judgment of the stakeholders as well as the employees, and also the decision-making power of stakeholders too [ CITATION Boa21 \l 1033 ]. On the other hand, economic benefits in the organization always works best to promote different

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staff members within the organization such as shareholders, employees, managers, etc. It promotes good environment within the organization, and also promotes incentive culture too. These practices are to be considered carefully within the company, and when these practices go unnoticed then at the same moment chances of unethical practices started to increase within the organization. Conflict of Interest Conflict of Interest is the one in which Ethics plays essential role, as the rating agencies are the one those who make sure to assign ratings. In the year 2008, when the financial crisis occurs, the rating agencies played important role especially and their result is basically dependent upon the satisfaction of the clients. These kinds of scenarios are not always goes smooth but full of conflicts. These conflicts sometimes lead the leader to choose wrong path full of unethical behavior in order to get higher rating of the organization. Thus, a proper strategy made up of reflection, procedure, and principles are required within the organization or the industry. Lack of Oversight To improve the leadership, and to ensure ethics within the leadership it is essential to ensure continuous oversight among the activities performed by them. Thus, regular controlling or the different bodies regarding supervisor or regulator are the reason behind huge scandals or unethical practices that took place within the organization because of the unethical leadership regarding corporate or any financial crisis which are capable enough to ruin or at least impact the lives of these people. This is all because of lack of oversight or can be said that lack of control which results in the promotion of unethical or unmoral behavior [ CITATION Sha225 \l 1033 ]. Thus, adequate control is necessary within the organization.

Personal Ethics Professional conduct of a person is completely based on the personal ethics which includes behavior and is highly helpful in controlling or preventing such unethical scenarios to occur within the organization. If these personal values are not kept under control or self- observation, then a person might go towards taking unethical as well as unfair decisions. For examples- Managers in many companies takes tough decisions regarding management or put immense pressure upon the other employees in fear of losing track of target and ultimately losing of power within the organization. On the other hand, there are many people those who believes that they are superior to the others out there all because of the personal values such as arrogance and pride. This kind of behavior mostly leads a person to take wrong decision or adopting unethical behavior. Businesses should be familiar with ethical issues Businesses feels and analyze multiple aspects of life such as industrial waste, financial reporting, social media, climate change, global warming, discrimination, sexual harassment, etc. Thus, likewise businesses should also focus on what sort of ethical issue is impacting their business, what role ethical issues plays, why it is essential to resolve those issues, what are the different ways in which those issues will be resolved and much more. It is true that ethics and the actions by the company are two different things, but they are equally responsible for any sort of unethical behavior within the organization such as scandal or fraud. There are different ways in which these kinds of issues can be avoided easily such as firstly by the help of different system which are implemented within the organization such as legal, risk management, audit, governance model, human resources, and much more. These systems or the groups can easily avoid ethical issues if works together in a fair manner

[ CITATION SHR19 \l 1033 ]. Thus, a responsible behavior should be promoted within the organization in which every employee follows the code of ethics which will be inspiring, and it should begin with the leader itself as he or she should start behaving or acting ethically or morally. Conclusion Leadership is not a term which should be taken for granted but instead it is a job or responsibility upon which the progress or growth of the organization including the employees within it. Thus, the ethical and moral code are the one which makes the leadership ethical in nature. In addition, it has been analyzed as per the above study that the leader should ensure regular monitoring of the policies and procedure which are being undertaken within the organization as it results in ensuring ethical processes within the organization. Thus, the actions taken by the organization doesn’t only affect the organization but the complete society as a whole which is why it shouldn’t be taken for granted nor to be ignored. Effective leadership should be considered and ensured within the organization as it results in better decision-making regarding economy, because ethics are involved in this as they cannot be kept separate or apart from it. In the economy those who tries to keep the economy and ethics separate often end up becoming a reason for the crisis such as financial crisis. Which is why ethical leadership plays important role in today’s modern business to keep the industry and economy on the right track. Bibliography BBC. (2015, December 10). Volkswagen: The scandal explained . Retrieved from BBC: https://www.bbc.com/news/business-34324772

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Board effect. (2021, July 15). 5 Steps to Creating an Ethical Organizational Culture . Retrieved from Board effect: https://www.boardeffect.com/blog/5-steps-creating- ethical-organizational-culture/ Denish Shah, V. K. (2012, December 10). The Dark Side of Cross-Selling . Retrieved from HBR: https://hbr.org/2012/12/the-dark-side-of-cross-selling Hassan, S. (2022). Unethical Leadership: Review, Synthesis and Directions for Future Research. Journal of business ethics . SHRM. (2019, November 10). Introduction to the Human Resources Discipline of Ethics and Corporate Social Responsibility and Sustainability . Retrieved from SHRM: https://www.shrm.org/resourcesandtools/tools-and- samples/toolkits/pages/introfethicsandsustainability.aspx Segal, T. (2021, November 26). Enron Scandal: The Fall of a Wall Street Darling . Retrieved from Investopedia: https://www.investopedia.com/updates/enron-scandal-summary/ US Economy. (2018, September 5). Financial crisis explained: How greedy US banks crippled world economy . Retrieved from Business standard: https://www.business- standard.com/article/markets/financial-crisis-explained-how-greedy-us-banks- crippled-world-economy-118090500388_1.html

Villirilli, G. (2021, April 9). The importance of being an ethical leader and how to become one . Retrieved from Betterup: https://www.betterup.com/blog/the-importance-of- an-ethical-leader

Business Ethics- Need for ethical leadership in modern business 8-12-22

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