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Ethical Leadership:
Creating An Ethical Culture
Linda K. Trevino, Ph.D.
Copyright 2005
Smeal College of Business, The Pennsylvania State University
Ethical leadership research conducted
with Laura Hartman and Michael Brown
supported by the Ethics Resource Center Fellows Program
Executive leadership and
ethical culture
ETHICAL
CULTURE
FORMAL SYSTEMS
INFORMAL SYSTEMS
Exec Leadership
Daily Leader Behavior
/Heroes
Rules/Policies
Reward System
Ethical and
Unethical
Behavior
Informal Norms
Fair Treatment
Selection System
Rituals
Orientation/Training
Myths/Stories
Decision Processes
Language
2
Executive Ethical Leadership
The Good News!

Everyone we interviewed (40
interviewees) was able to quickly think
of someone they would identify as an
executive ethical leader and answer
questions about that person for about
an hour. That suggested to us that
executive ethical leadership is not as
rare as it may seem in the headlines.
3
What We Learned about
Executive Ethical Leadership


It’s about reputation - perceptions from
a distance of two dimensions (moral
person and moral manager) that result
in four types of reputation possible
Executives must stand out from a
(generally) ethically neutral background
in order to be perceived by employees
as “ethical leaders”
4
Dimensions of
Executive Ethical Leadership
Moral Person:
-
(leader’s behavior)
Traits
honesty, integrity, trust
-
Behaviors
Moral Manager:
(directs followers’ behavior)
- Role Modeling
visible ethical action
- Rewards/Discipline
openness, concern for people,
holds people accountable
personal morality
for ethical conduct
Decision-making
values-based, fair
- Communicating
conveys an “ethics/values” message
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Executive Ethical Leadership
Reputation Matrix
Moral Person
Moral
Manager
Weak
Strong Hypocritical Leader
Weak
Unethical Leader
Strong
Ethical Leader
?
Ethically neutral (silent) leader
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Ethical Leadership Example
Moral Person
Moral
Manager
High
High
Ethical Leader
James Burke,
Johnson &
Johnson
Known to be a person of the highest integrity.
Reinvigorated and revised corporate credo,
launched annual credo survey after Tylenol
crisis, required action plans to address
problems, handled ethical violations swiftly
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Unethical Leadership Example
Moral Person
Moral
Manager
Low
Lied to employees & financial analysts, was
condescending, belligerent and disrespectful of
employees, made decisions and rewarded
employees based upon bottom line only, left
company crippled, accused of filing false financial
reports - settled with SEC for half million dollars.
Unethical Leader
Low
Al Dunlap,
Sunbeam
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Hypocritical Leadership
Example
Moral Person
Moral
Manager
Strong
Weak
Hypocritical
Leader
Jim Bakker of
PTL Ministries
Talked about ethics, religion (doing “God’s work”).
Yet, employees became aware of deceptive financial
practices, conflicts of interest, lying to donors, theft
of donor contributions, sexual liaisons, etc!
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Ethically Neutral Leadership
Example
Moral Person
Moral
Manager
Weak
Strong?
Intense focus on bottom line. Decentralized
management style means that ethics management is
left to business unit managers. Centralized ethics
support structure that existed under predecessor
dismantled. Described by Fortune magazine as
“tone deaf” on ethics issues. Citigroup has dealt with
a variety of conflicts of interest scandals.
Ethically Neutral Leader
Sandy Weill, Citigroup
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Conclusions About
Executive Ethical Leadership

To be perceived as an ethical leader, must
be a visibly ethical PERSON and an ethical
MANAGER with a consistent message

Being a moral person alone is insufficient


Executives are distant from most employees and,
without “moral management,” bottom line messages can
overwhelm all others.
Being a moral manager is insufficient

Moral management (proactive words and actions) gain
legitimacy only if employees believe the exec is a
principled, caring person who means what s/he says
(counters cynicism)
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Dilbert understands
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Conclusions

Executive ethical leadership is


Much more than traits (e.g., integrity)
Requires great care to create and sustain an
ethical culture that sends a consistent
message that is at least as powerful as the
“bottom line” drumbeat (via real attention to
ethics in multiple cultural systems).
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What’s Next?
What Can You Do?

How do you know what messages you
and your organization’s culture are
sending?

Given that the higher one goes in the
organization, the more “rosy” the
perception of ethical climate!
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How Can You Change
Ethical Culture?
ETHICAL
CULTURE
FORMAL SYSTEMS
INFORMAL SYSTEMS
Exec Leadership
Daily Leader Behavior
/Heroes
Rules/Policies
Reward System
Ethical and
Unethical
Behavior
Informal Norms
Fair Treatment
Selection System
Rituals
Orientation/Training
Myths/Stories
Decision Processes
Language
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