The Impact of Ethical Leadership to Employee Performance

The Impact of Ethical Leadership to Employee Performance

Milton Friedman as an American renowned economist emphasized that ethic is not a mandatory for business and the only important thing is profit maximization. However, it has been proven wrong, because nowadays an ethic is considered as a critical issue in business and management field. Many giant firms such as Enron, Lehman Brothers, and WorldCom are falling from the grace due to ethical problems, which affected employee performance. Yet, ethics cannot be shaped without ethical leadership. As the result, many scholars have been doing extensive research about the impact of ethical leadership to employee performance, which become a crucial aspect of maintaining business continuity of a company.

Ethics & Leadership Overview

Ethics is a tool that used by society to define whether an act is acceptable or not (Malloy et al, 2003). The ethical standard from one to another society is different. For example, child labor considered unethical in the developed country, while in the developing country with a high percentage of poverty, child labor is acceptable, because it might be the only way to live their life and support their family needs (Siddiqi, 2000).

On the other hand, leadership is considered as a way that enact by an individual to achieve goals by influencing groups of people (Northouse, 2007). However, there is a different kind of ways that can be used to achieve goals, not all of the way is ethical. Some leader preferred high-risk and high-return way, although the way is unethical and may be illegal, such as corruption, bribery, deceiving, and many more. As the result, Yukl defined ethical leadership as a leader that possess several characteristics such as honesty and reflect his/her values and beliefs through an act (2006).

Another scholar, Dickson and Mitchelson (2006), relate ethical leadership with six attributes, including character and integrity; ethical awareness; have an orientation...