Week 6: Ethics and Corporate Social Responsibility (CSR) in Leadership

Table of Contents
6.1 Introduction ...........................................................................................................................................................2
6.2. Learning Outcomes ..............................................................................................................................................2
6.3 Ethics and Corporate Social Responsibility (CSR) in Leadership ....................................................................3
References ..................................................................................................................................................................10

LJMU-7508-BEGP Leadership for Strategic Execution 1|Page

6.1 Introduction
In recent years, the concepts of ethical leadership (EL) and corporate social responsibility (CSR)
have become crucial to the competitiveness of firms in both the manufacturing and service
sectors (Khan et al., 2018; Roeck & Farooq, 2018). The globalisation of business is a force that
routinely increases the social pressures on organisations in an effort to improve the social impact
of corporate responsibility, ethical behaviour, and ethical leadership (Mishra & Schmidt, 2018).
An important setting where ethics matter is the workplace (Mey et al., 2014). Ethical behaviours
help to establish a way of doing things and serve as a guide for those who adhere to them. For an
organisation to be effective and successful, ethical leadership is crucial; the survival and success
of an organisation over the long term depend on ethical leadership (Brown et al., 2005).
Typically, every profession has a code of conduct that specifies what constitutes unethical
behaviour in that profession. Brown et al. (2006) defines ethical leadership as leading in a
manner that respects the ethical value, right, belief, and dignity of others. According to Brown et
al. (2005), ethical leadership is characterised by virtues such as honesty, compassion, openness,
reliability, altruism, fairness, and collective motivation. Corporate social responsibility has
existed in the context of organisations for many years.

6.2. Learning Outcomes

Upon the completion of this week of study, you will be able to:
LO.1 Explain and critically analyse the theories and concepts of leadership and
management and their application in organisations and on projects.
LO.2 Critically evaluate the role of leaders in ethically managing change and in working
collaboratively, ethically, and effectively to support project execution.

LJMU-7508-BEGP Leadership for Strategic Execution 2|Page

6.3 Ethics and Corporate Social Responsibility (CSR) in Leadership
Leadership is about influence and the literature on leadership is replete with various leadership
styles and traits that relate to organisational performance (Yasir & Mohamad, 2016). However,
we are aware that a leader's leadership abilities and styles may not be sufficient to create an
ethical organisation (Brown, Trevino, and Harrison, 2005). In this regard, the ethical orientation,
values, and integrity of a leader are just as important as leadership styles and abilities in
promoting ethical behaviour among employees and, consequently, within the organisation (Khan
et al., 2018). This implies that the challenge of creating an ethical organisation lies primarily
with the organisation's leadership and top management team, and particularly with the need for
the leader to possess a strong ethical orientation, such as honesty and integrity (Khan et al.,
2018). Brown and Trevino (2014) state that the leader and the senior management team must be
ethical in order to co-create an ethical culture within the organisation.

It may be difficult to define ethical leadership, but researchers agree that it entails "the
demonstration of normatively appropriate behaviour through personal actions and interpersonal
relationships, and the promotion of such behaviour to followers through two-way
communication, reinforcement, and decision-making" (Brown et al., 2005). Ethical leaders are
expected to conduct themselves in an appropriate and credible manner in accordance with the
context in which they operate, engage in ethical discourse, and attract the attention of
subordinates to ethical issues within their organisations. In addition, they establish explicit
guidelines to regulate the behaviour of their subordinates by establishing transparent ethical
standards and reinforcing them via reward and disciplinary systems. They also consider the
ethical implications of their decisions and make moral choices that their subordinates can
emulate (Brown, Trevino, & Harrison, 2005). In addition, ethical leadership may overlap with
other leadership styles (Brown et al., 2005).

While ethical leadership is distinct from other leadership styles (e.g., transformational,
transactional, authentic, spiritual, and servant leadership) (Khan et al., 2018), recent research
indicates that ethical leadership and other leadership styles partially overlap and that these
leadership styles complement one another (Brown, Trevio, & Harrison, 2005).

LJMU-7508-BEGP Leadership for Strategic Execution 3|Page

Moreover, leadership is about character (Khan et al., 2018), and whether followers purchase into
a particular leader is in part related to that leader's character (Khan et al., 2018). The primary
purpose of leadership should be service. In this regard, servant leadership occurs when leaders
assume the servant role in their interactions with coworkers. In fact, servant leadership focuses
on developing and empowering followers and achieving organisational outcomes through this
development (Van Dierendonck, Stam, Boersma, De Windt, and Alkema, 2014). Moreover,
ethics is fundamental to servant leadership due to its emphasis on integrity and dependability
(Van Dierendonck et al., 2014). In this regard, a growing corpus of research investigates
organisational outcomes associated with servant leadership that contain ethical elements. In
addition, servant leadership promotes organisational justice (Khan et al., 2018) and trust in its
leader and organisation (Khan et al., 2018). In addition, through trust, procedural justice,
organisational commitment, assisting culture, and organisational citizenship behaviours, servant
leaders foster an ethical climate in their organisations (Burton, Preachey, & Wells, 2017).

We move from leadership and ethics, to the topic of ethical culture and social responsibility. We
know that organisational contexts play a crucial role in shaping organisational behaviour
(Burton, Preachey, & Wells, 2017). This implies that the context of ethical behaviour is
determined by the organisational culture and climate. The organisational ethical context is the
internal social psychological environment of organisational ethical adaptation (Brown and
Trevino, 2014), which consists of moral ideologies as adopted by organisational members,
institutionalised philosophies regarding principled conduct, and ethical codes that shape action
(Brown and Trevino, 2014).

In addition, ethical culture can be conceptualised as a subset of organisational culture, indicating

the interaction between formal (codes of ethics) and informal (peer behaviour) systems of
behavioural control that can promote ethical behaviour (Brown and Trevino, 2014). Corporate
social responsibility and ethical leadership extend beyond the management of routine duties. As
a comprehensive concept, corporate governance focuses on how a company ensures that all of its
policies and procedures are ethically sound. Social responsibility is essential in leadership

LJMU-7508-BEGP Leadership for Strategic Execution 4|Page

because it can aid in establishing a positive reputation, engaging
employees, mitigating risks, and fostering innovation and expansion.

According to Jamali and Mirshak (2006), corporate social responsibility (CSR) is a significant
factor in the success of a company's operations. CSR is also viewed as an excellent opportunity
for businesses to consider social concerns in addition to economic profits. According to Jamali
and Mirshak (2006), organisations are likely to experience increased sales and revenues, contrary
to what many may believe about CSR activities. The ability to attract the finest customers and
maintain their loyalty is one of the most important factors in achieving success. In the meantime,
the company will have an advantage over the competition by establishing policies to promote
corporate social responsibility and contribute to the development of a culture of good citizenship
(Baraibar-Diez & Luna, 2018). When organisations operate in a manner that promotes
sustainability and associates itself with certain causes, they generate a great deal of public
support. Consumers, on the other hand, responded emphatically that they would purchase
products from companies associated with a cause that they care about (Doda, 2015). Any
company whose name appears in the rankings enjoys an enhanced public perception, which
contributes to their image.

Ethical leaders have the potential to positively impact the performance of their followers by
fostering a stronger sense of identification with the group or organisation. In their study, Raiswa
et al. (2019) highlighted the influence of personal values on ethical leadership, which in turn has
a direct positive effect on corporate social responsibility (CSR) and both direct and indirect
effects on firm performance. These leaders embody the organization's high ethical standards and
values. As a result, the juniors will seek guidance from them regarding the path they should take
and how to conduct themselves in different situations (Doda, 2015). Corporate socially
responsible operations have the potential to enhance firm performance by generating higher
revenue. Additionally, these initiatives can also lead to cost savings for firms by reducing their
expenses. Additionally, governments and other agencies have the potential to incentivize
socially-oriented companies through rebates and cash injections (Doda, 2015). The primary
objective of any company should be to generate and increase value for both current and future

LJMU-7508-BEGP Leadership for Strategic Execution 5|Page

stakeholders. CSR activities, although not extensively documented, can
serve as the means through which the company achieves this objective. According to Doda
(2015), potential investors or financiers may be drawn to a company's corporate social
responsibility efforts, leading to a positive perception of the enterprise. This is because these
stakeholders value accountability and sustainability as key aspects of the company's operational
framework.

Every organisation aims to present itself as a socially responsible entity, but there are several
challenges that it may encounter in doing so. One of the main challenges is deciding on the most
suitable initiative or project to invest their money in (Amaeshi et al., 2015). Companies that do
not practise corporate social responsibility may encounter various issues, one of which is the risk
of developing a negative public perception. It is not uncommon for many enterprises to dedicate
a day for their staff to engage with communities and assist in solving various problems. The
literature demonstrates that ethical leadership plays a crucial role in promoting effective
corporate social responsibility. Furthermore, Mihelic et al. (2010) argued that in order to actively
engage in corporate social responsibility (CSR) initiatives, organisational leaders must adopt
ethical standards that align with social, environmental, and corporate values.

The achievement of diversity, equity, and inclusion relies on the presence of ethical leaders and
decision-makers. The interest in ethical leadership and workplace diversity is growing as
organisations face a persistent lack of effective leadership. Searching for the moral foundation
of leadership and identifying leadership behaviours that can enhance the potential of followers
are crucial endeavours. The significance of leadership in establishing and fostering ethical
conduct within organisations has been extensively recognised in the field of ethics. In their study,
Bedit, Alpaslan, and Green (2016) discovered a positive relationship between ethical leadership
and various outcomes for followers. These outcomes include perceptions of leader fairness and
ethical behaviour among followers. Leaders play a crucial role in establishing organisational
goals and defining the expected behaviour in the workplace. They also create and implement
systems that are designed to improve employee outcomes. Leaders must effectively
communicate the behaviours they value and inspire their employees to achieve those behaviours.

LJMU-7508-BEGP Leadership for Strategic Execution 6|Page

Additionally, leaders should provide rewards to employees when they
successfully meet these goals. Employees should be able to rely on their leaders for guidance
when they face ethical dilemmas or challenges. According to Treviño and Brown (2004),
research generally supports the idea that employees are more likely to follow the ethical values
demonstrated by their leaders.

There is a vast body of literature available on the subject of leadership ethics. In their study, Zhu,
Treviño, and Zheng (2016) discovered that numerous empirical studies have concentrated on the
favourable effects of ethical leadership on employee attitudes. These effects include increased
job satisfaction, stronger affective commitment among followers, and job behaviours that
resemble individual and group organisational citizenship behaviour. According to Brenkert
(2010), the significance of ethics in leadership and business is highly valued by business
executives. The literature also emphasises the importance of ethics in fostering and encouraging
ethical behaviour within organisations. There is a growing belief that good ethics is synonymous
with good business, and that strong leadership is rooted in an ethical culture (Benrjea, 2010).

According to Moorman, Darnold, Priesemuth, and Dunn (2012), the current business literature
generally adopts two basic approaches when defining and measuring leadership integrity. The
first approach is integrity, which is defined as consistency in applying values. Kouzes and Posner
(2002) made a significant contribution to the concept of integrity by highlighting that individuals
with integrity typically align their actions with their words and follow through on their
commitments. The second approach involves using moral values as the foundation for integrity.
Leaders who are perceived to have integrity are evaluated based on the values they believe in,
rather than solely on their behaviour in accordance with those values.

In 1995, Mayer, Davis, and Schoorman presented a comprehensive perspective on leader

integrity, encompassing both integrity approaches. In their study, Mayer et al. (1995) put forth
the idea that integrity is rooted in moral values, as perceived by followers. They defined integrity
as the followers' perception that leaders adhere to a set of principles that align with the beliefs of
the followers. The past behaviours of a leader, as well as the way others communicate about the

LJMU-7508-BEGP Leadership for Strategic Execution 7|Page

leader's followers, can influence the perception of the leader's integrity.
This includes factors such as the belief that the leader possesses a strong sense of justice and the
level of alignment between the leader's actions and the values of the group. All of these elements
contribute to how the leader is judged in terms of their integrity.

In order to successfully address the challenges associated with diversity and reap its benefits, top
managers have acknowledged the importance of implementing effective diversity management
practises (Rawat & Basergekar, 2016). The way an organisation views diversity can greatly
impact its employees' ability to communicate effectively and fully benefit from the advantages
that diversity brings (Lambert, 2016). In their study, Ely and Thomas (2001) identified three
perspectives on cultural diversity that can either enhance or hinder the functioning of work
groups. One perspective to consider is the fairness-and-discrimination viewpoint, which focuses
on organisations adhering to legal requirements without necessarily reaping the advantages of
workplace diversity. The access-and-legitimacy perspective refers to the way in which racial
minorities gain benefits through workforce access. However, it is possible that the organisation
itself may not benefit from these activities. The integration-and-learning perspective highlights
the mutual benefits that organisations and employees can derive from having a diverse
workforce. According to a study by Rawat and Basergekar (2016), it was found that these
perspectives have an impact on the organisational culture of an organisation. However, the
relationship between these perspectives in terms of diversity and innovation has not been
established.

In a study conducted by Richard (2000), it was discovered that organisations with cultural
diversity possess unique and valuable resources that are difficult to replicate. These resources
have a significant impact on market performance, return on equity, and productivity. Top
management team diversity has a positive impact on firm performance. This is because having
female representation brings about informational and social diversity benefits, as shown by
Dezso and Ross (2012). In his study, Badal (2011) proposed that improved performance can be
attributed to various factors such as enhanced problem-solving techniques, diverse perspectives

LJMU-7508-BEGP Leadership for Strategic Execution 8|Page

and ideas, market insights, thoughtful actions, skills, and knowledge.
These elements have the potential to ignite innovation.

Procedural justice plays a crucial role in promoting diversity and inclusivity within an
organisation. According to Badal (2014), diversity and engagement have a positive impact on
financial performance, leading to improved bottom line results. Integrity and diversity are
essential qualities that constitute a good leader. Leadership, integrity, and diversity play crucial
roles in shaping the relationship between leaders and employees within the workplace. In order
for employees to willingly follow their leaders, they seek individuals whom they can trust. They
will not follow individuals whom they do not trust or who are unable or unwilling to articulate a
clear set of values, ethics, and standards. When organisations possess a comprehensive
understanding of ethical and diversity leadership tools, it enables them to enhance their
performance and effectively adapt to the evolving landscape of resources, technologies,
marketing methods, and distribution systems resulting from the ongoing globalisation of
business. Parry and Thomson (2002) argue that it is not only preferable but also essential for
organisations to fully integrate ethical standards, including diversity leadership, in order to
ensure their long-term survival. According to Moorman, Darnold, Priesemuth and Dunn (2012),
the definition and measurement of leadership integrity in today’s business literature generally
follows two basic approaches. The first approach is integrity as consistency with integrity
defined by the belief that values are applied consistently. Kouzes and Posner (2002) contributed
to the idea and indicated those with integrity generally practice what they preach and will do
what they say they will. The second approach is where moral values form the basis of integrity.
Leaders with perceived integrity are then evaluated on the values they believe it and not just on
their behavior using these values.

LJMU-7508-BEGP Leadership for Strategic Execution 9|Page

References
Alshammari, A., N. Almutairi, N., & Fahad Thuwaini, S. (2015), Ethical Leadership: The Effect
on Employees. IJBM, 10(3).
Badal, S. B. (2014, January). The business benefits of gender diversity. Gallup Business Journal.
Banerjea, P. K. (2010). Wholesome ethical leadership. IUP Journal of Corporate Governance,
9(1/2), 7-14
Baraibar-Diez, E., & Luna L. (2018), The mediating effect of transparency in the relationship
between corporate social responsibility and corporate reputation. Revista Brasileira De Gestão
De Negócios, 20(1), 5-21.
Bedit, A., Alpaslan, C., & Green, S. (2016). A meta-analytic review of ethical leadership
outcomes and moderators. Journal of Business Ethics, 139(3), 517-536.
Brenkert, G. C. (2010). The limits and prospects of business ethics. Business Ethics Quarterly,
20(4), 703-704
Brown, M. E., & Treviño, L. K. (2006), Ethical leadership: A review and future directions. The
Leadership Quarterly, 17, 595-616.
Brown, M. E., & Treviño, L. K. (2014). Do role models matter? An investigation of role
modeling as an antecedent of perceived ethical leadership. Journal of Business
Ethics, 122(4), 587–598.
Brown, M. E., Treviño, L. K., & Harrison, D. A. (2005), Ethical leadership: A social learning
perspective for construct development and testing. Organizational Behavior and Human Decision
Processes, 97, 117-134.
Burton, L. J., Peachey, J. W., & Wells, J. E. (2017). The role of servant leadership in developing
an ethical climate in sport organizations. Journal of Sport Management, 31(3), 229–240.
Dezso, C. L., & Ross, D. G. (2012). Does female representation in top management improve
firm performance? A panel data investigation. Strategic Management Journal, 33(9), 1072-1089.
Doda, S. (2015), The Importance of Corporate Social Responsibility. Journal of Sociological
Research, 6(1), 86-91.

LJMU-7508-BEGP Leadership for Strategic Execution 10 | P a g e

Ely, R. J., & Thomas, D. A. (2001). Cultural diversity at work: The effects
of diversity perspectives on work group processes and outcomes. Administrative Science
Quarterly, 46, 229-273.
Jamali, D. & Mirshak, R. (2006), Corporate Social Responsibility (CSR): Theory and Practice in
a Developing Country Context. Journal of Business Ethics, 72(3), 243-262.
Khan, H. U. R., Ali, M., Olya, H. G. T., Zulqarnain, M., & Khan, Z. R. (2018), Transformational
leadership, corporate social responsibility, organizational innovation, and organizational
performance: Symmetrical and asymmetrical analytical approaches. Corporate Social
Responsibility and Environmental Management, 25(6), 1270–1283.
Kouzes, J. M., & Posner, B. Z. (2007). The leadership challenge (4th ed.). Jossey-Bass, San
Francisco, CA.
Lambert, J. (2016). Cultural diversity as a mechanism for innovation: Workplace diversity and
the absorptive capacity framework. Journal of Organizational Culture, Communications &
Conflict, 20(1), 68-77.
Mey, M., Lloyd, H., & Ramalingum, K. (2014), Ethical Leadership Essential for an Ethical
Environment. MJSS.
Mayer, R. C., Davis, J. H., & Schoorman, F. D. (1995). An interactive model of organizational
trust. Academy of Management Review, 20, 709-734.
Mihelic, K., Lipicnik, B., & Tekavcic, M. (2010), Ethical Leadership. International Journal of
Management & Information Systems (IJMIS),14(5).
Moorman, R. H., Darnold, T. C., Priesemuth, M., & Dunn, C. P. (2012). Toward the
measurement of perceived leader integrity: Introducing a multidimensional approach. Journal of
Change Management, 12(4), 383-398.
Parry, K. W., & Proctor-Thomson, S. B. (2002). Perceived integrity of transformational leaders
in organizational settings. Journal of Business Ethics, 35, 75-96.
Raiswa, S., Shashi, Roberto C., Rajwinder S., Richa D.,(2019), Effect of ethical leadership and
corporate social responsibility on firm performance: A systematic review. Wiley Online Library.
409–429.
Rawat, P. S., & Basergekar, P. (2016). Managing workplace diversity: Performance of minority
employees. Indian Journal of Industrial Relations, 51(3), 488-501.

LJMU-7508-BEGP Leadership for Strategic Execution 11 | P a g e

Richard, O. C. (2000). Racial diversity, business strategy, and firm performance: A resource-
based view. Academy of Management Journal, 43, 164-177
Roeck, K. D., & Farooq, O. (2018), Corporate social responsibility and ethical leadership:
Investigating their interactive effect on employees’ socially responsible behaviors. Journal of
Business Ethics, 151, 923–939.
Treviño, L. K., & Brown, M. E. (2004). Managing to be ethical: Debunking five business ethics
myths. Academy of Management Executive, 18(2), 69-81.
Van Dierendonck, D., Stam, D., Boersma, P., De Windt, N., & Alkema, J. (2014). Same
difference? Exploring the differential mechanisms linking servant leadership and
transformational leadership to follower outcomes. The Leadership Quarterly, 25(3), 544–562.
Yasir, M., & Mohamad, N. A. (2016). Ethics and morality: Comparing ethical leadership with
servant, authentic and transformational leadership styles. International Review of Management
and Marketing, 6(4), 310–316.
Zhu, W., Treviño, L. K., & Zheng, X. (2016). Ethical leaders and their followers: The
transmission of moral identity and moral attentiveness. Business Ethics Quarterly, 26(1), 95-115.

LJMU-7508-BEGP Leadership for Strategic Execution 12 | P a g e