Organizational Change, Leadership and Ethics

Leading Organizations towards Sustainability

Rune Todnem By, Bernard Burnes

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136256134
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Given recent financial crises and scandals, the rise of corporate social responsibility and the challenge of environmental sustainability, few would disagree that the role of ethics has taken centre stage in the management of organizations. In reality, however, organizations have found it extremely difficult to promote successful, ethical behaviour as this rarely results in short-term gains which can be appraised and rewarded.

By and Burnes bring together leading international scholars in the fields of organizational change and leadership to explore and understand the context, theory and successful promotion of ethical behaviour in organizations. By focusing on real world examples, contributors analyze the issues and challenges that hinder ethical change leadership which can lead to sustainable organizations.

This unique volume brings together the worlds of organizational change, leadership, business ethics and corporate social responsibility, resulting in a book that will be valuable reading in all four fields. With contributions from leading scholars, including David Boje, Dexter Dunphy, Suzanne Bennand Carl Rhodes, Organizational Change, Leadership and Ethics is a must-read.

Part I Context and theory

1 Leadership ethics and organizational change Sketching the field

Moritz Patzer and Christian Voegtlin

DOI: 10.4324/9780203106013-1

Introduction

Some ten years ago UN Secretary-General Kofi Annan called upon global business leaders to join the fight against human rights violations, inhumane working conditions, the rising threat of pollution and the spreading problem of corruption. He proposed the Global Compact Initiative as a means to foster sustainable and socially responsible business practices. Since then the world has witnessed scandals like Enron, WorldCom, Siemens and many other high-profile cases of leadership failure and managerial misconduct. These developments reached a climax in the financial sub-prime crises starting in 2007 and the ‘Euro-crisis’ of 2010, events which have by now permeated public discourse and put regulators, as well as private actors, on the spot to find answers to the new challenges of global business.

Yet, as politicians and practitioners look towards theory for answers to the rising call for socially responsible leadership, hopes for quick fixes or even adequate support are being disappointed. Leadership ethics – being the overarching label for questions on ethics, fairness, legitimacy and sustainability in the context of leadership – still remains an underdeveloped field (Ciulla, 1995; Ciulla, 2005b; Doh and Stumpf, 2005b; Rost, 1995). Within it we find a variety of competing and partly contradictory efforts that focus on different research foci of leadership’s new challenges, ranging from aspects of globalization (Bartlett and Ghoshal, 2003; Danon-Leva, 2005; Mendenhall et al., 2008), to moral responsibility (Brown et al., 2005; Brown and Trevino, 2006; Doh and Stumpf, 2005a; Johnson, 2009; Maak and Pless, 2006a; Maak and Pless, 2006b; Sharma and Bhal, 2004) and to political theory (Cradden, 2005; Patzer, 2009).

While these hallmarks indicate a dramatic change in the perception of what ‘good leadership’ at the onset of the twenty-first century is, research is still struggling to address the multitude of new challenges of globally responsible leadership (Bennis, 2007; Waldman and Siegel, 2008). It is the aim of this chapter to address this situation.

We do this with regard to the underlying causes for and characteristics of the new leadership challenges, as well as the conceptual state of leadership ethics as a research field. First, we argue that the former must be analysed in the context of globalization. Understood as the processes of socioeconomic transformation (Beck, 1992; Beck, 2000), globalization has led to regulatory deficits on the level of the nation state (Habermas, 2001b) that redefine the societal role of private actors in a globalizing society (Matten and Crane, 2005; Moon et al., 2005; Scherer et al., 2006). This sets the stage for new concepts of responsible global leadership that acknowledge the economic needs for effective leadership and the need to retain moral integrity in the light of ethical pluralism.

Second, globalization, new societal roles and ethical pluralism pose substantial challenges for a new understanding of leadership, especially in change processes. Furthermore, researchers and practitioners are faced with a research field that is characterized by a pluralism of different labels, research foci and research methodologies. The divide between positivist and post-positivist approaches inhibits efforts for a comprehensive perception of what good leadership means for present and future business.

By sketching these challenges of leadership ethics we hope to foster some understanding of the characteristics of responsible global leadership and to improve the dialogue between existing research strands within this new field. The chapter is structured as follows. First, we highlight the new challenges leaders are facing in a globalizing world. We start with the globalization process and its implications for organizations and subsequently, for leadership. Leadership is then connected to the ethical challenges of change. In the second part, we sketch the field of leadership ethics along its conceptual challenges and potentials and portray the thoughts on transformational leadership, ethical leadership, servant leadership, and responsible leadership as an introduction into different concepts of good leadership. We will conclude with a summary of our findings.

Global challenges for global leaders

An ongoing globalization process puts organizations in the need for continuous change and the adaption to new challenges in unstable environments. As Graetz (2000:550) acknowledges, ‘against a backdrop of increasing globalization, deregulation, the rapid pace of technological innovation, a growing knowledge workforce, and shifting social and demographic trends, few would dispute that the primary task for management today is the leadership of organizational change.’

However, globalization not only increases the pressure for organizational change but also the ethical challenges leaders face. In the following we will illustrate these challenges which are due to the globalization process and due to what Habermas (2001b) calls an emerging ‘postnational constellation’, before we turn to the ethical challenges of change.

The globalization process

Globalization can be understood as the process of intensifying social and economic transactions (Scherer et al., 2009a:327). It is accompanied by a dissolving relevance of territorially-bound social, economic and political activities, and a stronger worldwide interconnection of important social actors (Beck, 2000; Crane and Matten, 2007:17; Scherer, 2003:59ff).

It is still an ongoing process that is triggered by several factors. First, technological developments in the field of communication, media and logistics enable a worldwide interconnection and make global trade economically profitable. Second, political decisions and events, like the breakup of territorial power blocks (e.g. the Soviet Union), the reduction of trade and tariff barriers, or the establishment of free trade areas (the EU) accelerate the process. A third factor is socio-cultural processes that comprise e.g. an increasingly mobile workforce and the export of cultural goods¹. It also includes the emergence of pluralistic societies: these are a result of the dissolution of traditional social structures, such as the family, the local community (Habermas, 1991; Horkheimer and Adorno, 1988) and civic solidarity (Habermas, 2001b), as well as an ongoing individualization of personal lifestyles (Scherer et al., 2009a:327; Sennet, 1998). Finally, the awareness of global risks such as environmental hazards, global warming, worldwide diseases and epidemics, nuclear threats, and also economic risks like the Global Financial Crisis (GFC), fosters cross-border coordination of nation-state activities and the incorporation of non-state actors like NGOs and multinational corporations into the decision-making processes (in relation to the factors of globalization, see Beck, 2000; Scherer et al., 2009a; Scherer and Palazzo, 2008).

These processes, which, due to their interdependent nature, cannot always be clearly separated, have direct effects on the regulatory power of the nation state to control global business (Habermas, 2001b). Habermas holds that these effects on the nation state lead to the emergence of a postnational constellation. Global problems, such as global warming or environmental pollution, can no longer be solved within national boundaries. These problems have spillover effects across territorial demarcations (e.g. CO₂ emissions), which leads to a discrepancy between those parties that cause an effect and those that are affected by the outcomes. The growing mobility of corporations allowing them to move to countries with cheap labour or favourable tax opportunities puts states in competition with regard to fiscal revenues and employment. This leads in part to a race-to-the-bottom, in which states underbid each other with tax-saving opportunities to attract multinational corporations (Scherer and Smid, 2000).

Western societies especially are becoming pluralistic and multicultural societies consisting of individualists, a phenomenon which also relates to the workforce of organizations. It becomes more difficult for organizations to build and sustain a common culture and to bring together the very different beliefs and attitudes of its members. Additionally, the room for nation states to control the activities of multinational organizations across open (trade) borders through means of law is becoming narrower (Habermas, 2001a; Habermas, 2001b).

Thus, the nation state is losing its regulatory power over corporations (Beck, 2000; Habermas, 2001b), while at the same time, governance gaps emerge on the global level. There is no equivalent to the nation state as regulatory authority on the global level that could regulate markets to either prohibit externalities of business conduct or to internalize unwanted outcomes (Kobrin, 2001; Kobrin, 2008). This in turn increases the responsibility of multinational firms to control their business conduct (Young, 2004) and increases the awareness on the part of external stakeholder groups who put pressure on the corporations to act socially responsibly.

Implications for organizations

These developments have implications for the corporation and, subsequently, for their main actors, the leaders. In the neo-classical theory of the firm, the state provides the regulatory framework, within which the sole responsibility of economic actors is to maximize profits (Friedman, 1970). All externalities should be controlled by legal rules and organizations are free to act as long as they comply with those rules.

If the nation state can no longer guarantee those rules, the responsibility falls (partially) back to the organization (Matten and Crane, 2005; Moon et al., 2005; Scherer and Palazzo, 2007). This has implications for their operations. Firms conduct business within the emerging global governance gaps, where they either exploit the regulatory free space consequently to their own advantage, or where they act as quasi-political actors in providing standards and helping to close those gaps (Scherer et al., 2009a). The political activity is reflected in the participation in global initiatives or self-regulating standards such as the UN Global Compact, the Global Reporting Initiative, the Forest Stewardship Council or the Social Accounting 8000 standard (Scherer et al., 2006; Scherer et al., 2009a).

Coinciding with the new responsibilities for organizations, is the process of an increasingly interconnected global society that is becoming more sensitive to social and environmental violations as well as the growth of non-governmental organizations that gather and reinforce particular interests (Den Hond and De Bakker, 2007; Mitchell et al., 1997).

As a consequence, organizations are monitored more closely by a diverse group of stakeholders, who increase the pressure to legitimize organizational conduct (Palazzo and Scherer, 2006). Stakeholder management becomes a vital aspect of the strategic agenda (Freeman, 1984; Post et al., 2002b).

These developments challenge the corporation and its organizational change process in two ways. While organizations are faced, on the one hand, with an ongoing adaption process to the changing environment of global competition, they are, on the other hand, increasingly confronted by diverse stakeholder groups that demand an enhanced awareness for corporate social responsibility (CSR). If organizations disregard ...

Table of contents

• Cover Page
• Half Title Page
• Series
• Title Page
• Copyright Page
• Contents
• List of tables and figures
• The authors
• Series editor’s preface
• Acknowledgements
• Introduction: Ethical Change Leadership
• Part I Context and theory
• Part II Ethical change leadership: issues and challenges
• Part III Change leadership and ethics: success and failure
• Part IV Ethical change leadership and organizational sustainability
• Part V Conclusions
• Index