Ethical leadership is the act of promoting social and corporate responsibility. Ethical leadership is vital to the success and long-term wellbeing of a business. Without an ethical management team, executives may feel pressured or even obliged to falsify data in order to meet expectations. This article will describe the importance of ethical leadership by highlighting two scandals in the business world caused by unethical leaders.
Refco: Lending Itself Money
Refco was a financial services company that specialized as a broker in commodities and future contracts. Following many years of what was supposedly steady growth, the company went public in early August 2005 and attracted many investors. Two months later, the company reported that its CEO, Phillip Bennett, was systematically hiding over $400 million in Refco bad debt through an elaborate scheme that included loaning money to another company, which eventually loaned it back to Refco through a company secretly held by Bennett. It turns out that Refco had a mixed history marked by more than 100 cases opened by various trading commissions, making Refco a prime example of how the lack of ethical leadership can shape a company.
Enron: Counting Loans as Profits
Enron was once one of the world’s largest energy companies that took the world by storm with their innovative approach to the buying and selling of natural gas and electricity, creating a virtual marketplace for consumers of energy. To maintain their growth, the company decided to expand into other markets, such as news, insurance and telecommunication. Enron was excellent at finding new businesses, but were not so great at running them. As their projects started failing, company executives decided to hide their losses through shrewd accounting practices such as counting loans received from partnering institutions as profit. Eventually, everyone caught on to what was happening and the company failed.
Learning Ethical Leadership
Today, students in Master of Business Administration (MBA) programs learn about the importance of ethical leadership and how to safeguard themselves and their companies against unethical practices. An online MBA program is a great option for professionals who want to keep working as they earn an advanced degree. Schools like Texas A&M-Corpus Christi teach ethical leadership, exploring the cause of unethical behavior and learning practical techniques to promote ethical behavior. As the world becomes more connected, it is important to learn about the ethical challenges and responsibilities associated with a diverse, global society.
Ethical leadership is essential for the long-term success of a business. Although it may seem easy to hide or misreport data in order to portray better performance, fictitious results eventually come to light. Earn your success by being an ethical leader who instills values and responsibility in others.
Learn more about the TAMUCC online MBA program.
Sources:
http://www.businessnewsdaily.com/5537-how-to-be-ethical-leader.html
http://www.bloomberg.com/news/articles/2014-06-05/ex-refco-finance-chief-trosten-avoids-prison-term
http://www.nytimes.com/2002/01/26/opinion/enron-for-dummies.html
