Leadership is always been interesting topic to be discussed. Given the theories that continue to grow and evolve. There is none of the theories that really can define what is the real meaning of leadership but we agree that the leader must have knowledge, skills on how to analyse the information in order to make appropriate decision. An effective leader is one who is able to read the situation, correct the problem, responsible, willingness to develop the followers, have integrity and good ethics. Effective leadership expected to act within the ethical framework. The ethical framework itself is about what right or wrong and good and bad. The reason why ethical decision becomes so important in the leadership is because business involves in a lot of transactions with people both within and outside the organisation. The purpose of this report is to provide better understanding about effective leadership, decision making and ethical management and how they linked each other both in theories and practices and how the leaders ensure that every decisions are made within the ethical framework.
. According to Ciulla (1998) Ethics is study about human relationships it is about the role that we play in life on what we should do and what we should be like as human being. Ethics is about right or wrong and good or devil. Ethics is the foundation of leadership. There are four theories in ethics: 1. Virtue ethics. Focused on in individual processes whether their act is expressing good character (moral virtues) or not. 2. Deontological ethics. In deontological perspective, intentions are the morally relevant aspects of an act. As long as the leader acts according to his or her duty on moral principles then the leader acts ethically, regardless of the consequences. In simple words, deontological focus on what is right based on the facts. 3. Ethical growth and learning ethics. Ethical growth and learning ethics also called as the character ethics. According to Covey (1992) the character ethics based on living effectively including things like integrity, courage, fidelity and so on. He believes that human have to go through the necessary stages in their life for their personal growth. Senge (1990), see learning process in each individual are important for the organisation learning development. 4. Teleological. This theory locates the ethics of the action in its results.
Leadership is the one of the specific type of human relations. There are a lot of thoughts behind the theory of leadership, even those theories still growing from time to time and it stills remain without satisfactory conclusion on that. According to Bolden, The theories of leadership are ranging as follow (Bolden et all.,2003):
1. Great Man theories.
These theories based on the idea that leaders are those who are incredible, born with leadership qualities and destined to become a leader.
2. Trait theories.
The theories based on the qualities and traits that leaders have. Trait theories often
3. Behavioural theories.
These theories are opposite from great man theories. The theories believe that good leaders are made, not born.
4. Situational theories.
These theories view leadership as something that is specific into the situations. For example: there are some situations that require the type of autocratic leadership, in other situation participative approach might needed.
5. Contigency theories.
These theories focus on particular variables related to the environment to suit the style of the leadership. According to this, successful leadership depends on numbers of variables including leadership style, follower’s quality and the conditions.
6. Participative theories.
The theories suggest that ideal leadership style is one that taking input from others. These leaders are more engaging the group members in decision making process. According to Lewin (1939) there are three leadership style in participatory, autocratic, democratic and laissez faire.
7. Management theories or transactional theories
These theories focus on the role of organisation and group performance. These theories use rewards and punishment system and most used by the business organisations.
8. Relationship Theories or transformational theories.
These theories focus on the connection between the leaders and followers. In this theory, beside focus on the overall performance of the groups, the leader also focusing on each member’s potential. This theory also often has high ethical and moral standards. Decision Making
According to business dictionary, Decision making is process of selecting a choice from the available options. In order to make good decision, someone must be able to predict the result of each option and based on that options, take the best for the particular situation. There are two dominant decision making process models:
1. Rational model
Rational model is mechanistic. The foundation of this model is quantitative discipline. It involves a cognitive process where each step follows in a logical order in order to get the best result. Disadvantage of this method is slow process in decision making
2. Bounded rationality
Bounded rationality foundation is qualitative approaches. Bounded rationality model recognize that the data that available may or may not be completely valid but decision maker stills allow to make decision based on available data.
Toyota started in 1993 as one of Toyoda automatic divisions. Toyoda Automatic was encouraged to develop Japanese automobile production by Japanese government for supply their domestic vehicles. In 1993, Toyota motor co. became independent and separated from Toyoda automatic. Toyota started to expand in 1960 to other countries began by establishing new research and development facility in Thailand and in 1963, the first Toyota built outside Japan located in Melbourne, Australia. During that decade, Toyota had exported one million units which had their presence established worldwide. In 2010 Toyota facing the most critical crisis on their history as one of the biggest car manufacturers in the world. At least 8 million cars were recalled from the market regarding to floor mats and gas peddles that causing uncontrollable acceleration that reported become the cause of accidents and death. This incident costing the company of millions dollars in repair expenses lost in sales and destroyed the company image for its reputation and of course undermining its credibility.
The company also faced some of expensive lawsuits because it accused that Toyota leaders knew about the problems but they held back the information to held recall and in this case the Toyota leaders using ethical growth and learning approach. A lot of organisation experienced crisis incidents that need them to make audience public messages in explanation, apologies, and other efforts to fix their image. The unethical things that resulting in public accusation often can result in harm to shareholders and stakeholders of the organisation and will have negative impact in organisation’s sustainability. Toyota confront by some very clear situational limitation in trying to respond effectively in responding to the allegations and fixing its bad image. The allegations including the causes of the problem is not all clear yet ranging from engineering issue to human’s error.
In reality, some reports suggest that the company do to repair the product are not solving the problems. The toyota also accused on having slow decision making process because they didnt respond to that that problem quickly and decisively. Ideally, the organisation expected to have quickly responsive actions to make positive image in the society because it is indicate that the organisation primary interest is to solving the problems rather that avoid legal problems. Such organisations are likely to be seen as ethical, responsible and decisive. However, the most difficult part that the company confront regarding their CEO.
Akio Toyoda, the grandson of the founder. He facing the culture conflict associated with his multinational company’s nature. In general, Japanese corporate cultures encouraging harmony and try to avoid addressing the problems in public and prefer to manage behind the scenes and the process of their decision making is using consensus model. Consensus model is time consuming process and it will slow organisation in their respond to the crisis. For some countries this can be seen that company is not decisive. Also in the Japanese organisation culture, they more focus on their leader’s opinion than public’s opinion.
Trafigura is a private company established in 1993 by six partners, Claude Dauphin, Eric de Turckheim, Graham Sharp, Antonio Cometti, Daniel Posen and Mark Crandall. They are focusing on three regional markets, South America for oil and mineral industry, Eastern Europe for metals industry and Africa for oil industry. Currently, the group has 81 offices in 56 countries.
The story of ethical issues that faced by Trafigura begun in early 2006 when Trafigura’s oil trader decided to buy Coker naphtha, a refinery by product from Mexico. They did this to make a quick profit. In between March and June 2006, three loads of 28.000 tonned was received in Texas and transferred to chartered cargo ship, Probo Koala. Dangerous chemicals were used to clean the Coker naphtha and then Trafigura realised that they facing the problem on how to dispose the toxic material safely. In July 2006, Probo Koala arrived in Amsterdam where one of the branch corporate offices is located. The Amsterdam Port Service, a Dutch waste management company agreed to treat and dispose the waste but in the higher price than it was agreed because APS discovered that the slop was much more polluted and requiring special treatment.
As the consequences of that problem, the Probo Koala back to the sea and in August 2006, it arrived in Ivory Coast to deliver the waste to local company called Compagnie Tommy. Tommy then was illegally dumped the waste without treating it across Abidjan. The weeks after, thousands were sick and at least 10 death reported. Trafigura reached out of court agreement with Ivorian government by paying $ 198 million for cleaning up and helping the victims. Here we can see that the company using teleological approach in handling the problem. However, they denied that what they did is wrong and refused to accept any legal liabilities for that incident. The way Trafigura handled the crisis criticized by corporate responsibility observer. They said it was clearly messed up because when facing the problem, company ideally needs to find the facts quickly, disclose them quickly and involve those who can reduce the problem and work with affected community in order to clean up the damage.
In contrast, Trafigura, held everything privately and in the company like this they don’t have the same transparency and ethical requirements that a publicly company has. By looking for those examples, we realised that the need for ethics in leadership become obvious. Ethics influenced the leader in their leadership and decision making. Understandings of ethics begin with the analysis of values, both individual and organisational. Effective leaders must aware of their values, and system of ethics and ethical decision making. Good character and integrity are what we want to see from the leader. Somehow there is always the connection between a value system and the ability of the leader to use these values in their decision making.
According to the Josephone Institute’s (1999), there are six pillars of character that might easily be applied to business setting. They are: Trustworthiness – honesty, integrity, reliability, loyalty, keeping promises and not deceiving others. Respect – using the golden rule or treating others as you wish be treated, in addition to being courteous, listening to others, and accepting individual differences Responsibility – accountability, self-control, the pursuit of excellence and considering consequences of our actions prior to making them Fairness – playing the rule, not taking advantage of others, making informed judgments without favoritism or prejudice, and not blaming others Caring – Kindness, compassion, and altruism, acting to minimize hardship and to help others whenever possible Citizenship – working to make one’s community better, protecting the environment, making our democratic institution work, and operating within the law
How the leaders ensure that all decisions are made ethically? The foundation of ethical decision making involves choice and balance. As we discuss before ethics is the study of human relationship about right and wrong. To ensure that all decisions made ethically, leaders have to do ethic checks. There are varies on ethic checks but to make it simple, we can define ethic checks into three parts. The most common questions when we questioning about ethics are whether it is legal?, whether it is fair?, and if we do this, how it will affect ourselves as human being s a member’s of society. The first part of ethic check is bout legality.
Legal here means not only within legal system but also whether it is legal within the organisation policies. After we get the answer for the first part the next question will it be fair? One of the traits that effective leadership must have is putting the organisation’s interest above their personal interest. Hence to ensure the decision has made ethically here the leader should check whether the decision will be fair for all stakeholders. Lastly, after those two questions answered, the leaders must ask themselves how they want to be view by the society because whatever it is, regardless the power that the leaders have, they are still a member’s of society.
Ethics is the heart of leadership. In understanding the leadership it is important for us to understand about the ethics. Ethics is the study of human relationship. It is about what we should do and what we should be like in the society. The ethics can be different from one and another because ethics influenced by other factors such as family influence, religious belief, culture, experience and personal reflection. Leadership on the other hand is the particular type of human relationship that involving power. The effective leader has to have good ethics as one of their traits because in effective leadership, leader should put the group interest above his or her personal interest. Nowadays, many organisations in the world have been damage by their unethical decision making and most cases because they put self- interest above group or society interest which destroys the society trust to the organisations.
Regarding to that we can see that ethics and leadership should go hand in hand and the effective leadership should have good ethics that stick to the moral values on the society and oppose all the unethical conduct. Like other things in the world nothing is perfect, but it is very good for the leader to ensure that the decisions are made ethically through questioning their decision whether it is legal or fair for them and for the community and the leader also consider their decision as their personal reflection.
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