Chapter 13

Ethical, Servant, Spiritual, and

Authentic Leadership

Learning Objectives
After studying this chapter, you should be able to:
■ Understand different conceptions of ethical leadership.
■ Understand the difficulties in defining and assessing ethical leadership.
■ Understand the individual and situational influences on ethical leadership.
■ Understand theories of transforming, servant, spiritual, and authentic leadership.
■ Understand the consequences of ethical leadership for followers and the organization.
■ Understand ways to promote ethical behavior and oppose unethical practices.

Powerful leaders can have a substantial impact on the lives of followers and the fate of an
organization. As Gini (1998) reminds us, the primary issue is not whether leaders will use
power, but whether they will use it wisely and well. Powerful leaders can advance their own
careers and economic gains at the expense of organization members and the public. Moreo-
ver, by making unethical practices appear to be legitimate, a leader can influence other mem-
bers of the organization to engage in “crimes of obedience” (Beu & Buckley, 2004; Hinrichs,
2007). Interest in ethical aspects of leadership has been growing as public confidence in politi-
cal and corporate leaders continues to decline. Repeated scandals about these leaders have
been publicized in the news media, in books, and in movies (Kouzes & Posner, 1993). Com-
panies with top executives involved in unethical activities during recent years include Enron,
Global Crossing, HealthSouth, Qwest, Scandia, Tyco International, and WorldCom (Carson,
2003; Flanagan, 2003). This chapter will examine different conceptions of ethical leadership,
discuss ethical dilemmas commonly faced by leaders, describe leadership theories involving
ethical leadership, and identify some things leaders can do to promote ethical behavior in
organizations.

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 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 341

Conceptions of Ethical Leadership

Despite the growing interest in ethical leadership, there is considerable disagreement
about the appropriate way to define and assess it. In a scientific discipline that values objectiv-
ity, even to discuss this subject causes some people to feel uneasy. However, as Heifetz (1994)
pointed out, there is no ethically neutral ground for theories of leadership, because they always
involve values and implicit assumptions about proper forms of influence.

Defining Ethical Leadership

Ethical leadership has been defined in many different ways. When asked to describe ethi-
cal leaders in one study, executives identified several behaviors, values, and motives (e.g., hon-
est, trustworthy, altruistic, fair). A key characteristic was leader’s efforts to influence the ethical
behavior of others (Trevino, Brown, & Hartman, 2003). Examples include leader statements
about the importance of ethics, dissemination of ethical guidelines for members of the organiza-
tion, modeling ethical behavior to set a visible example for others, including ethical behavior in the
assessment of performance, and criticizing or punishing unethical behavior. It is also useful to
make a distinction between the ethics of an individual leader and the ethics of specific types of
leadership behavior, and both types of ethics are difficult to evaluate (Bass & Steidlmeier, 1999).
Several criteria are relevant for judging individual leaders, including the person’s values,
stage of moral development, conscious intentions, freedom of choice, use of ethical and unethi-
cal behavior, and types of influence used. Famous leaders usually have a mix of strengths and
weaknesses with regard to these criteria. One difficulty in evaluating the morality of individual
leaders is the subjectivity inherent in determining which criteria to use and their relative impor-
tance. The final evaluation can be influenced as much by the qualities of the judge as by the
qualities of the leader.
Judgments about the ethics of a particular decision or action usually take into account the
purpose (ends), the extent to which behavior is consistent with moral standards (means), and the
consequences for self and others (outcomes). The three criteria are usually considered in relation
to each other, and a common issue is the extent to which the ends justify the means. For example,
is deception justified when the purpose is to help another person avoid serious personal harm?
Moral standards used to evaluate behavior include the extent to which it violates basic laws
of society, denies others their rights, endangers the health and lives of other people, or involves
attempts to deceive and exploit others for personal benefit. Examples of behavior that is usually
considered unethical in Western nations include falsifying information, stealing assets for per-
sonal use, blaming others for one’s own mistakes, provoking unnecessary hostility and distrust
among others, selling secrets to competitors, showing favoritism in return for a bribe, and reck-
less behavior that is likely to injure others. Judgments about ethical leadership vary somewhat
across cultures, but researchers find that some types of leader behavior (e.g., exploiting followers)
are considered improper regardless of national culture.

Personal Integrity and Ethical Leadership

Discussions of ethical leadership invariably involve the concept of personal integrity. As
noted in the chapter on leader traits and skills (see Chapter 6), integrity is an attribute that helps to
explain leadership effectiveness. In cross‐cultural research on the essential traits for effective leader-
ship, integrity is near the top of the list in all cultures that have been studied (see Chapter 14). Most
342 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

scholars consider integrity to be an important aspect of ethical leadership, but the meaning of
integrity is still a subject of debate (Barry & Stephens, 1998; Locke & Becker, 1998; Simons, 2002;
Trevino, Weaver, & Reynolds, 2006).
The most basic definition of integrity emphasizes honesty and consistency between a per-
son’s espoused values and behavior. What the leader values and how the person acts are not part
of this definition, and critics contend that the values must be moral and the behavior must be
consistent with a set of justifiable moral principles (e.g., Becker, 1998). A thief who believes it is
morally acceptable to steal from corrupt organizations would not be classified as high in integ-
rity. A limitation of this narrower definition is the difficulty of getting agreement about justifi-
able moral principles, especially when they are not the same for all cultures.
Behaviors commonly regarded as morally justifiable include observing the same rules and
standards applied to others, being honest and candid when providing information or answering
questions, keeping promises and commitments, and acknowledging responsibility for mistakes
while also seeking to correct them. However, behaviors that appear morally justifiable can be
used for unethical purposes. An example is to use kindness to gain the trust of people who will
later be exploited. For this reason, it is necessary to consider a leader’s intentions and values as
well as behaviors when evaluating ethical leadership. To be ethical, the leader must intend no
harm and respect the rights of all affected parties (Gini, 1998).

Dilemmas in Assessing Ethical Leadership

Influencing follower commitment and optimism for a task are the central aspects of most
theories of effective leadership, but this influence is also the source of ethical concerns. The chal-
lenge is to determine when such influence is proper. It is easier to evaluate ethical leadership
when the interests of the leader, the followers, and the organization are congruent and can be
attained by actions that do not involve much risk or cost. However, in many situations the influ-
ence process may involve (1) creating enthusiasm for a risky strategy or project, (2) inducing
followers to change their underlying beliefs and values, and (3) influencing decisions that will
benefit some people at the expense of others. Each type of influence involves ethical dilemmas.

Influencing Expectations
An important leadership responsibility is to interpret confusing events and build consen-
sus around strategies for dealing with threats and opportunities. Sometimes success requires a
strategy or project that is bold and innovative. A risky venture may result in great benefits for
followers if completed successfully, but the costs can also be high, especially if the project fails or
takes much longer than expected. How the leader influences follower perception of the risks and
prospects for success is relevant for evaluating ethical leadership.
Most people would agree that it is unethical to deliberately manipulate followers to do
something contrary to their self‐interest by making false promises or deceiving them about likely
outcomes. One proposed standard for ethical leadership is for the leader to fully inform follow-
ers about the likely costs and benefits of a risky venture, and ask followers to make a conscious
decision about whether the effort is worthwhile. However, it is often difficult to find any objec-
tive basis for predicting the likely outcomes of an innovative strategy and project. If an obvious
crisis already exists for the group or organization, expressing doubts and sharing complete infor-
mation can create panic and ensure failure.
As Heifetz (1994) proposed, it is important to help people understand a problem without
demoralizing them. Effective leaders do not dwell too much upon the risks or obstacles, but
instead emphasize what can be accomplished with a concerted, shared effort. Hope and optimism
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 343

can eventually become a self‐fulfilling prophecy if combined with effective problem solving. Thus,
in situations where sharing information and interpreting events involves competing values, there
are complex ethical issues to be resolved. For example, should political leaders withhold informa-
tion about a possible terrorist attack to avoid the risk of harm caused by mass panic?

Influencing Values and Beliefs

Even more controversial is an attempt to change the underlying values and beliefs of indi-
vidual followers. Some writers contend that this type of leader influence is clearly unethical, even
when the intended outcome is to benefit followers as well as the organization (e.g., Stephens,
D’Intino, & Victor, 1995; White & Wooten, 1986). These writers question the implicit assump-
tion that the leader knows what is best for followers, and there is concern about the misuse of
power and control over information to bias follower perceptions about problems and events. A
special concern is the influence of charismatic leaders on followers who are weak and insecure.
A contrary view is that leaders have a responsibility to implement major changes in an
organization when necessary to ensure its survival and effectiveness. A large‐scale organizational
change will not be successful without changes in member beliefs and perceptions. Effective lead-
ers engage members and other stakeholders in a dialogue to determine what types of changes are
necessary and morally right for the organization. How much influence the CEO or any other
individual should try to exert on this process, and the form of the influence, are ethical questions
that are yet to be resolved.

Multiple Stakeholders and Competing Values

The difficulties in evaluating the effectiveness of leaders include multiple criteria with com-
plex trade‐offs and stakeholders with partially conflicting interests. The diverse consequences of a
leader’s decisions and actions complicate the evaluation of ethical leadership. The same actions that
benefit followers in some ways may also harm followers in other ways or at a later time. The same
actions that serve the interests of some followers may be contrary to the interests of other follow-
ers. Doing what is best for one type of stakeholder (e.g., owners) may not be what is best for others
(e.g., employees, customers, the community). Efforts to balance competing values and interests
involve subjective judgments about rights, accountability, due process, and social responsibilities. It
is more difficult to evaluate ethical leadership when stakeholders have incompatible preferences.
The traditional perspective is that managers in business organizations are agents who rep-
resent the interest of the owners in achieving economic success for the organization. From this
perspective, ethical leadership is satisfied by maximizing economic outcomes that benefit own-
ers while not doing anything strictly prohibited by laws and moral standards. For example, the
decision to move a manufacturing plant from Kansas to Mexico would be considered ethical if
it would significantly improve profits, regardless of the effects on plant employees or the local
economy. The pursuit of short‐term profits is often used as the excuse for making strategic deci-
sions that are harmful to many stakeholders such as employees, customers, and towns where the
company has facilities.
A very different perspective is that managers should serve multiple stakeholders inside and
outside the organization (Block, 1993; Gini, 1998; Greenleaf, 1977; Jones, Felps, & Bigley, 2007;
Sharp‐Paine, 1994). From this perspective, judgments about ethical leadership must take into
account the extent to which a leader balances and integrates the interests of different stakeholders
within the constraints imposed by legal and contractual obligations. An integrative orientation
appears more ethical than supporting the faction that will provide the highest personal gain for
the leader, playing stakeholders off against each other (e.g., by encouraging negative stereotyping
344 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

and mutual distrust), or trying to ignore substantive conflicts of interest. The following incident
described by Nielsen (1989) provides an example of the integrative approach.

The division manager for a paper products company was confronted with a difficult prob-
lem. Top management decided to close some paper mills unless operational costs for them
could be reduced. The manager was concerned that cutting costs would prevent the mills
from meeting government pollution control requirements. However, unless costs were
reduced, the mills would close, seriously hurting the economy of the local community. The
manager decided to look for an integrative win‐win solution. He asked the research and engi-
neering people in his division to look for ways to make the mills more efficient and also reduce
pollution. He asked the operations and financial people in his division to estimate how much
it would cost to build better mills, and when the operations would achieve a breakeven pay-
back. When a good solution was found, he negotiated an agreement with top management to
implement the plan.

Unfortunately, when different stakeholders have incompatible objectives, an integrative

solution is not always possible. Leaders of business organizations sometimes have an opportu-
nity to support a worthy cause, even though it does not provide any short‐term benefit to the
financial performance of the organization. However, making this type of decision requires cour-
age and strong convictions, because powerful stakeholders may expect a leader to protect their
interests, regardless of the harm to people who are not viewed as legitimate stakeholders (Jones
et al., 2007). A good example of this type of ethical dilemma is provided by Useem (1998).

In the 1970s river blindness was one of the world’s most dreaded diseases, and it had long
frustrated scientists trying to stop the spread of river blindness in developing countries. Then
a potential cure for the disease was discovered by researchers at Merck. The new drug (called
Mectizan) would cost more than $200 million to develop, and it was needed only by people
who could not afford to pay for it. When Roy Vagelos, the CEO of Merck, was unsuccessful
in his effort to get governments of developing nations to agree to pay for the drug, it became
obvious that Mectizan would never make any profit for Merck. Nevertheless, Vagelos decided
to distribute Mectizan for free to the people whose lives depended on it. Many people in the
company said the decision was a costly mistake that violated the responsibility of the CEO
to stockholders. However, Vagelos believed that the decision was consistent with Merck’s
guiding mission to preserve and improve human life. The development of Mectizan was a
medical triumph and it helped to nearly eradicate river blindness. The humanitarian decision
enhanced the company’s reputation and helped to attract some of the best scientific research-
ers in the world to work for Merck.

Determinants and Consequences of Ethical Leadership

Two interesting research questions are the reason for differences in ethical behavior among
leaders, and the consequences of ethical leadership for followers and the organization. Both
questions are briefly discussed in this section of the chapter, because they are relevant for under-
standing the theories of ethical leadership described later in the chapter.

Individual Determinants of Ethical Leadership

Ethical leadership is related to a leader’s personality traits and needs (Brown & Trevino,
2006b; De Hoogh & Den Hartog, 2008; Kish‐Gephart, Harrison, & Trevino, 2010; Mumford et al.,
1993; O’Connor et al., 1995). Most of the traits related to effective leadership (see Chapter 6) are
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 345

also related to ethical leadership. Unethical, abusive leadership is more likely for a person who
has low conscientiousness, high neuroticism, high narcissism, and a personalized power orienta-
tion. Emotionally mature leaders with a socialized power orientation, a high level of cognitive
moral development, and a strong moral identity are more likely to resist the temptation to use their
power to exploit others.
Kohlberg (1984) proposed a model describing how people progress through six sequen-
tial stages of moral development as they grow from a child to an adult. With each successive
stage, the person develops a broader understanding of the principles of justice, social respon-
sibility, and human rights. At the lowest level of moral development, the primary motivation
is self‐interest and the satisfaction of personal needs. At a middle level of moral development,
the primary motivation is to satisfy role expectations and social norms determined by groups,
organizations, and society. At the highest level of moral development, the primary motivation
is to fulfill internalized values and moral principles. A person at this level may deviate from
norms and risk social rejection, economic loss, and physical punishment in order to achieve
an important ethical objective. The Kohlberg theory of moral development is similar in many
ways to Kegan’s (1982) theory of psycho‐social development.
Unlike physical maturation, moral development is not inevitable, and some people become
fixated at a particular developmental stage. A leader who is at a higher level of development is
usually regarded as more ethical than one at a lower level of development. Some research indi-
cates that cognitive moral development is related to ethical decisions in business organizations
(e.g., Trevino, 1986; Trevino & Youngblood, 1990). However, a review of research on the theory
found a lack of clear evidence that leadership behavior or effectiveness is related to stage of
development (McCauley, Drath, Palus, O’Connor, & Baker, 2006).
Another explanation for moral behavior involves self‐identity theory. A person with a
strong moral self‐identity is motivated to act in ways that are consistent with ethical values and
beliefs (Reynolds, 2006a). A moral self‐identity is less important as a determinant of behavior in
the situation where there is a strong consensus about ethical behavior. Most people will conform
to the social norms, even if they do not have a strong moral self‐identity. However, if there is not
a consensus about a moral issue, then judgments about ethical consequences of actions are more
important as determinants of behavior.
Decisions about moral behavior are also affected by values involving the consequences of
behavior and the observance of formal rules, policies, laws, and traditional practices (Reynolds,
2006a). A person’s moral identity usually emphasizes one value over the other. If consequences
are more important, the person will favor actions likely to result in the greatest benefit to all
affected parties. If formalism is more important, the person will be inclined to obey rules and
policies. The impact of these values on behavior is most evident when there are rules or tradi-
tions about proper behavior but no strong moral consensus about it. In this situation, people
with a strong moral identity and a primary concern for consequences will be the most likely to
select a behavior that will result in benefits for others, even if it violates formal rules or laws. In
contrast, people with a strong moral identity and primary concern for formality will be the most
likely to conform with existing rules or laws, even when the behavior is likely to have adverse
consequences for some people.

Situational Influences on Ethical Leadership

Ethical behavior occurs in a social context, and it can be strongly influenced by aspects of the
situation (Brown & Trevino, 2006b; Mishina, Dykes, Block, & Pollock, 2010; Kish‐Gephart et al.,
2010; Trevino, 1986; Trevino, Butterfield, & McCabe, 1998). A dynamic, uncertain environment
346 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

and a lack of strong regulation by government may encourage more risky decisions and illegal activ-
ities intended to improve financial performance. The formal reward system can encourage and
support ethical or unethical behavior by leaders and members. Unethical behavior is more likely
when performance goals are unrealistically difficult, there is high pressure for increased productiv-
ity, there is intense competition for rewards and advancement, and the organization does not have
strong cultural values and norms about ethical conduct and individual responsibility. The strong
success‐oriented culture at Enron and the compensation and performance appraisal systems that
supported it encouraged employees to exaggerate results and help hide the company’s growing debt
(Probst & Raisch, 2005; Reynolds, 2006b). Bill George, the former CEO of Medtronics suggested a
way to deal with the temptation to use questionable actions to achieve difficult objectives (George,
2003, pp. 16–17):

All of us who sit in the leader’s chair feel the pressure to perform. Little by little, step by step,
the pressures to succeed can pull us away from our core values. The irony is that the more
successful we are, the more tempted we are to take shortcuts to keep it going. All leaders
have to resist these pressures while continuing to perform, especially when things aren’t going
well. The test I used with our team at Medtronic is whether we would feel comfortable having
the entire story appear on the front page of the New York Times. If we didn’t, we went back to
the drawing boards and re‐examined our decision.

Follower traits and beliefs are another aspect of the situation that can influence unethi-
cal leadership. Followers are more likely to passively accept a domineering and abusive leader
if they lack self‐esteem and self‐efficacy and do not have much confidence in their own ability
to deal with threats and hardship. Unethical leadership is more likely when people believe that
formal leaders should have strong position power and obedience to formal authority is neces-
sary. These beliefs are common in societies with strong cultural values for uncertainty avoid-
ance and power distance (see Chapter 14). Unethical behavior is also more likely in societies
where violence is prevalent, fraud and bribery are accepted, and corruption of officials is wide-
spread (Mumford et al., 2007).
Studies of “abusive supervision” and “toxic leaders” provide insights about the conditions
that make it easier for a chief executive to act in ways that are destructive for an organization and
its members (Lipman‐Blumen, 2005; Padilla, Hogan, & Kaiser, 2007). In organizations that lack
mechanisms to limit the power of the chief executive, abusive leaders are more difficult to restrain
or remove once they have been appointed or elected. Examples of ways to limit executive power
include term limits, an independent board of directors, procedures for follower evaluation of
leaders, procedures for appealing decisions by leaders (including decisions about punishment or
dismissal), and formal procedures for removing a leader who misuses power or is incompetent.

Consequences of Ethical and Unethical Leadership

Most theories of ethical leadership emphasize the importance of leader influence on fol-
lowers and the ethical climate of an organization. Many different measures have been used
to assess the effects of ethical leadership on followers, and they include some criteria seldom
used in the earlier leadership research (e.g., follower values and ethical behavior, follower
self‐awareness, follower feelings of spiritual fulfillment). The theories differ somewhat with
regard to the criteria used to assess the effects of ethical leadership. Examples of research on
the effects of ethical leadership are provided by a number of studies (Reave, 2005), and there is
clear evidence of beneficial effects for followers and for leader‐member relations. For example,
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 347

a study of critical incidents found that a lack of leader integrity was the most frequent reason
for erosion of trust by subordinates (Lapidot et al., 2007).
Abusive supervision includes using power and authority to humiliate, ridicule, bully, and
otherwise mistreat subordinates (Tepper, 2000). Such behavior is usually regarded as a form of
unethical leadership, and the research indicates that it results in negative consequences for follow-
ers and the organization. Abusive supervision results in less organizational citizenship behaviors
by employees (Zellers, Tepper, & Duffy, 2002), and it also results in more retaliation and displaced
aggression toward coworkers and the organization (Mitchell & Ambrose, 2007). For example, a
study of abusive behavior by restaurant managers found that it resulted in higher food loss from
employee theft and waste (Detert, Trevino, Burris, & Andiappan, 2007).
In research on ethical leadership, consequences are more often assessed for employees
rather than for measures of organizational performance. Sometimes effects at the individual and
organizational level are consistent, such as when higher employee trust and commitment also
result in improved financial performance for the organization. However, in many cases leader
decisions do not have consistent effects for different criteria or for different stakeholders. Some
ethical decisions will benefit employees or customers but increase costs and reduce short‐term
financial performance. Examples include providing adequate health care benefits to employees,
accepting responsibility for defective products (e.g., recalls and refunds), and keeping commit-
ments despite unexpected expenses.
Conversely, some decisions and actions that improve short‐term organizational perfor-
mance will have adverse consequences for employees or customers. Recent examples include
reducing employee rights and benefits, and outsourcing employee jobs to low‐cost vendors in
other countries. Another dubious practice is to reduce spending on activities that are costly but
essential for longer‐term performance. An example is less maintenance of equipment, despite
the increased risk of costly breakdowns or accidents in the future. How unethical practices
are used to inflate profits was revealed in prominent scandals over the past decade. Examples
include billing the government or other customers for services that were not provided, falsifying
the qualification of applicants for loans or mortgages they are not be able to repay, marketing
securities with inflated quality ratings, and counting future sales revenues as current income to
prop up the value of the company’s stock.

Theories of Ethical Leadership

Several prominent theories in the leadership literature have a strong emphasis on ethical
leadership. The theories include transforming leadership, servant leadership, authentic leadership,
and spiritual leadership. The types of values emphasized in these theories are listed in Table 13‐1,
and each theory is briefly described in this section of the chapter.

Transforming Leadership
As noted in Chapter 12, Burns (1978) formulated a theory of transforming leadership from
descriptive research on political leaders. For Burns, a primary leadership role or function is to
increase awareness about ethical issues and help people resolve conflicting values. Burns (1978,
p. 20) described transforming leadership as a process in which “leaders and followers raise one
another to higher levels of morality and motivation.” These leaders seek to raise the conscious-
ness of followers by appealing to ideals and moral values such as liberty, justice, equality, peace,
and humanitarianism, not to baser emotions such as fear, greed, jealousy, or hatred. Followers
348 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

TABLE 13-1 Explanation of Values Emphasized in Theories of Ethical leadership

1. Integrity: Communicates in an open and honest way, keeps promises and commitments,
acts in ways that are consistent with espoused values, admits and accepts responsibility for
mistakes, does not attempt to manipulate or deceive people.
2. Altruism: Enjoys helping others, is willing to take risks or make sacrifices to protect or benefit
others, puts the needs of others ahead of own needs, volunteers for service activities that
require extra time and are not part of the formal job requirements.
3. Humility: Treats others with respect, avoids status symbols and special privileges, admits
limitations and mistakes, is modest about achievements, emphasizes the contributions by
others when a collective effort is successful.
4. Empathy and healing: Helps others cope with emotional distress, encourages acceptance of
diversity, acts as a mediator or peacemaker, encourages forgiveness and reconciliation after a
divisive conflict.
5. Personal growth: Encourages and facilitates the development of individual confidence and
ability, even when not important for the current job; provides learning opportunities despite
a risk of mistakes; provides mentoring and coaching when needed; helps people learn from
mistakes.
6. Fairness and justice: Encourages and supports fair treatment of people, speaks out against
unfair and unjust practices or policies, opposes attempts to manipulate or deceive people or
to undermine or violate their civil rights.
7. Empowerment: Consults with others about decisions that will affect them, provides an
appropriate amount of autonomy and discretion to subordinates, shares sensitive information
with them, encourages them to express concerns or dissenting views without becoming
defensive.

are elevated from their “everyday selves” to their “better selves.” For Burns, transforming lead-
ership may be exhibited by anyone in the organization in any type of position. It may involve
influencing peers and superiors as well as subordinates. It can occur in the day‐to‐day acts of
ordinary people, but it is not ordinary or common.
Burns described leadership as a process in which leaders and followers influence each other
as the relationships evolve over time. Transforming leadership is an influence process between
individuals, but it is also a process of mobilizing power to change social systems and reform
institutions. The leader seeks to shape, express, and mediate conflict among groups of people,
because this conflict can be useful for mobilizing and channeling energy to achieve shared ideo-
logical objectives. Thus, transforming leadership involves not only the moral elevation of indi-
vidual followers, but also collective efforts to accomplish social reforms. In the process, both
the leader and followers will be changed. They will begin to consider not only what is good for
themselves, but also what will benefit larger collectivities such as their organization, community,
and nation.

Servant Leadership
Another early conception of ethical leadership builds on examples found in the New
Testament (Greenleaf, 1977; Sendjaya & Sarros, 2002). In 1970, Robert Greenleaf proposed the
concept of “servant leadership,” and it became the title of a book published in 1977. Greenleaf
proposed that service to followers is the primary responsibility of leaders and the essence of ethi-
cal leadership. Servant leadership in the workplace is about helping others to accomplish shared
objectives by facilitating individual development, empowerment, and collective work that is
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 349

consistent with the health and long‐term welfare of followers. Other theorists have extended the
theory to include a more explicit description of key values and the effects of servant leaders on
followers and the organization (Farling, Stone, & Wilson, 1999; Graham, 1991; Searle & Barbuto,
2011; Smith, Montagno, & Kuzmenko, 2004). Different questionnaires have been developed to
measure servant leadership, but the best way to define and measure the construct has not been
resolved (Barbuto & Wheeler, 2006; Dennis & Bocarnea, 2005; Ehrhart, 2004; Liden, Wayne,
Zhao, & Henderson, 2008).
A servant leader must attend to the needs of followers and help them become healthier,
wiser, and more willing to accept their responsibilities. Service includes nurturing, defending,
and empowering followers. It is only by understanding followers that the leader can determine
how best to serve their needs. Servant leaders must listen to followers, learn about their needs
and aspirations, and be willing to share in their pain and frustration. The servant leader must
empower followers instead of using power to dominate them. Trust is established by being
completely honest and open, keeping actions consistent with values, and showing trust in fol-
lowers. Greenleaf believed that followers of such leaders are inspired to become servant lead-
ers themselves. People should prepare themselves to lead and accept the opportunity when
offered. The result will be more people who serve as moral agents in society.
The servant leader must stand for what is good and right, even when it is not in the finan-
cial interest of the organization. Social injustice and inequality should be opposed whenever
possible. Even the weak and marginal members of society must be treated with respect and
appreciation. Greenleaf proposed that providing meaningful work for employees is as important
as providing a quality product or service for the customer. He advocated that business organiza-
tions should consider social responsibility as one of the major objectives, and the board of direc-
tors should take primary responsibility for evaluating and facilitating progress on this objective.
The potential benefits of servant leadership are similar to those suggested by theories of
supportive and empowering leadership and theories of spiritual and authentic leadership. Leader
integrity and concern for subordinates is likely to increase their trust, loyalty, and satisfaction
with the leader. A favorable relationship and increased referent power for the leader make it
easier to influence subordinates to carry out requests. The potential benefits derived from devel-
opment and empowerment of subordinates have been demonstrated in research on participative
leadership, supportive leadership, and transformational leadership. The attempt to ensure fair-
ness and equity can influence subordinate perceptions of distributive and procedural justice and
increase their loyalty and organizational commitment. If a servant leader is able to influence
other leaders to become servant leaders as well, the result may be an employee‐oriented culture
that attracts and retains talented, committed employees.
Research on the consequences of servant leadership is still limited, but several studies
have found positive outcomes such as more commitment, self‐efficacy, and organizational citi-
zenship behavior (e.g., Liden et al., 2008; Neubert, Kacmar, Carlson, Chonko, & Roberts, 2008;
Walumbwa, Hartnell, & Oke, 2010). The following example provides a good description of a
servant leader (Sacks, 2009):

John Mackey is the CEO and co‐founder of Whole Foods Market, the largest and most profit-
able retailer of organic food in the USA. The company has many stores and billions of dollars
in sales. Whole Foods was listed by Forbes as one of the “25 Best Companies to Work For” in
2005. The following year Mackey announced he would reduce his salary to $1 a year and set
up a $100,000 emergency fund for employees with serious personal problems. He also insti-
tuted caps on executive pay, which was limited to no more than 19 times the average employee
salary. Most stock options are awarded to employees who are not executives. In addition to
350 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

his deep concern for employees, Mackey is a strong supporter of environmental, humanitar-
ian, and animal welfare groups, and 5% of the company's after‐tax profits are given to charity
every year. Whole Foods was the first grocery chain in the USA to set standards for humane
animal treatment by suppliers.

Despite the potential benefits from servant leadership, there may also be some negative con-
sequences for an organization when the welfare of followers is considered more important than
financial performance (Anderson, 2009; Graham, 1991). When a corporation is facing difficult
economic problems and cuts in expenses are necessary to remain profitable, it is very difficult for a
servant leader to balance the competing preferences of owners and employees (Schneider & George,
2011). Conflicts between financial objectives and employee welfare are less intense in nonprofit,
voluntary, and public sector organizations, but even for these organizations a reduction in employee
benefits may be necessary in a weak economy. More research is needed to clarify the implications
of servant leadership for different stakeholders in organizations.

Spiritual Leadership
Spiritual leadership describes how leaders can enhance the intrinsic motivation of followers
by creating conditions that increase their sense of spiritual meaning in the work. The popularity
of books on spirituality in the workplace suggests that many people are seeking deeper meaning
in their work (Chappel, 1993; Fairholm, 1997). Several types of research indicate that people
value the opportunity to feel interconnected to others in a mutually supporting community of
people who are collectively involved in meaningful activities (Duchon & Plowman, 2005; Pfeffer,
2003). The integration of spirituality with work is difficult if not impossible in organizations that
encourage or require employees to act in ways that are inconsistent with their values (Mitroff &
Denton, 1999). Consistency between personal values and work objectives is important to leaders
as well as to followers.
Fry (2003) makes the point that religion usually involves spirituality, but spirituality
does not need religion to be meaningful. Theories of spiritual leadership include values found
in major religions (Kriger & Seng, 2005), but the theories do not explicitly include any other
aspects of these religions. Confusion about the difference between spirituality and religion
may be the major reason why most earlier leadership theories did not include spirituality (Fry,
2003). The leadership theorists wanted to avoid any controversy about implied support for one
favored religion.
The definition of spirituality provided by Fry (2003, 2005) includes two essential ele-
ments in a person’s life. Transcendence of self is manifest in a sense of “calling” or destiny, and
the belief that one’s activities, including work, have meaning and value beyond being instru-
mental for obtaining economic benefits or self‐gratification (need for power, achievement,
esteem). Fellowship is manifest in the need for meaningful relationships and being connected
to others in a way that provides feelings of joy and wholeness. Both elements involve altruistic
love and faith. Altruistic love is associated with values or attributes such as kindness, compas-
sion, gratitude, understanding, forgiveness, patience, humility, honesty, trust, and loyalty. Faith
or hope is associated with values or attributes such as optimism, confidence, courage, endurance,
persistence, resilience, and serenity.
By doing things to help people satisfy the two essential needs for transcendence and fel-
lowship in the workplace, spiritual leaders increase their intrinsic motivation, confidence, and
organizational commitment. As in the case of transformational leadership, spiritual leaders can
enhance the meaningfulness of the work by linking it to follower values and self‐identities. In
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 351

addition, spiritual leaders increase mutual appreciation, affection, and trust among members of
the organization. As a result, spiritual leadership can increase cooperation, encourage collective
learning, and inspire higher performance.
Much of the knowledge about spiritual leadership for leaders is provided by research on
related subjects, and Reave (2005) reviewed more than 150 studies that appeared relevant for
understanding spiritual leadership. A few of the studies provide evidence that the opportunity
to express spiritual values in one’s work is related to a person’s mental health, life satisfaction,
and intrinsic motivation (e.g., Chappel, 1993; Duchon & Plowman, 2005; Fry, Vitucci, & Cedillo,
2005; Milliman, Czaplewski, & Ferguson, 2003). Research in medicine and positive psychology
provides evidence that altruistic love can overcome negative feelings such as fear, anxiety, anger,
guilt, hatred, pride, envy, and resentment. Other studies show that a high‐commitment organi-
zational climate and highly motivated members will improve organizational performance (e.g.,
Harter et al., 2002).
The limitations of spiritual leadership theory are similar to those for servant leader-
ship. How leader values and skills influence leader behavior is not clearly specified in the theory,
and the processes by which leaders influence followers are not clearly explained. The relative
importance of calling and fellowship and how they are interrelated is not clear. The theories
include many different values, and it is not clear whether some values are more important than
others, or how the values are related to leader behavior. It is not clear how a person becomes a
spiritual leader, or what types of life experiences can explain why some leaders are more spir-
itual than others. Even though the theorists emphasize that spirituality is distinct from religious
beliefs, some religious beliefs and cultural values may encourage spiritual leadership, especially
for individuals in an organization, community, or nation with strong cultural values and reli-
gious traditions. More research is needed to identify conditions that favor spiritual leadership
and enhance the influence of such leaders on followers and the organization.

Authentic Leadership
The idea of authentic leadership has received a lot of attention in recent years, and several
scholars have provided versions of authentic leadership theory (e.g., Avolio, Gardner, Walumbwa,
Luthans, & Mayo, 2004; Gardner, Avolio, Luthans, May, & Walumbwa, 2005; George, 2003; Ilies,
Morgeson, & Nahrgang, 2005; Shamir & Eilam, 2005). Authentic leadership is based on positive
psychology and psychological theories of self‐regulation. The theory attempts to integrate earlier
ideas about effective leadership with concerns for ethical leadership. The definition of authentic
leadership varies for different theorists, but they all emphasize the importance of consistency in
a leader’s words, actions, and values. Additional aspects of authentic leadership include positive
leader values, leader self‐awareness, and a trusting relationship with followers.
Authentic leaders have positive core values such as honesty, altruism, kindness, fairness,
accountability, and optimism. These core values motivate authentic leaders to do what is right
and fair for followers, and to create a special type of relationship that includes high mutual trust,
transparency (open and honest communication), guidance toward worthy shared objectives, and
emphasis on follower welfare and development. The self‐concepts and self‐identities of authentic
leaders are strong, clear, stable, and consistent. These leaders have a high self‐awareness about
their values, beliefs, emotions, self‐identities, and abilities. In other words, they know who they
are and what they believe. They also have a high degree of self‐acceptance, which is similar to
emotional maturity (see Chapter 6).
The behavior of authentic leaders, including their espoused values, is consistent with
their actual values. They do not seek leadership positions to gratify a need for esteem, status,
352 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

and power, but rather to express and enact their values and beliefs. Their actions are strongly
determined by their values and beliefs, not by a desire to be liked and admired or to retain
their position (e.g., be re‐elected). Because authentic leaders are motivated by a desire for self‐
improvement and self‐verification, they are less defensive and more open to learning from feed-
back and mistakes.
The influence of authentic leaders with some followers is enhanced by their confidence,
clarity of values, and integrity. It is easier for followers to be influenced by a leader who is
perceived to be credible, focused, and confident. Followers of authentic leaders have more
personal identification with the leader and more social identification with the team or organi-
zational unit. There is also an indirect effect through influence on follower self‐concepts and
self‐identities.
A few of the leadership behaviors used to influence followers are the same ones that
are included in other leadership theories. The leader can enhance follower commitment and
optimism by articulating an appealing vision, modeling appropriate behaviors, and express-
ing optimism and encouragement when there are setbacks and difficulties. However, with
regard to other leadership behaviors, there is less agreement among different versions of
authentic leadership theory.
In most versions of the theory, an authentic relationship means that leader behavior is con-
sistent with the leader’s values, and both are consistent with follower values. However, the rela-
tive importance of the different types of consistency is unclear. If a leader’s values and actions are
consistent but most followers reject these values, will followers judge the leader more favorably
than a leader who conforms to follower values despite not believing in them? In addition, com-
plete transparency in revealing emotions can have unintended negative effects. For example,
when it is essential to build confidence that a team can successfully deal with a serious crisis, a
leader who has personal fears or doubts must be careful not to communicate these emotions in a
way that will undermine follower confidence.
Follower perception of leader authenticity may be jointly influenced by the leader’s ability
to express emotional values skillfully enough to be credible, on the extent to which the expressed
values and emotions are consistent with follower perception of the situation, and on follower
ability to accurately perceive when a leader is expressing genuine emotions and values. Trust will
be undermined if the leader appears genuine but the values and emotions are inappropriate for
the situation, or if the values and emotions are appropriate but they do not appear to be genuine
(Gardner, Fischer, & Hunt, 2009).
Like the other theories of ethical leadership, the authentic leadership theories suffer from
a lack of clarity in the definition of essential qualities and the explanation of influence processes
(Cooper, Scandura, & Schriesheim, 2005; Guthey & Jackson, 2005; Ladkin & Taylor, 2010). It
is unclear whether the theory is a description of attributes actually possessed by effective lead-
ers, or only an ideal form of ethical leadership that people can hope to attain (Caza & Jackson,
2011). More research is needed to verify key propositions and to resolve the paradoxes and ethi-
cal dilemmas inherent in some aspects of the theory.

Evaluation of Ethical Leadership Theories

The theories of servant, spiritual, and authentic leadership all share some features in com-
mon with theories of transformational and charismatic leadership, but important differences are
also evident. This section will compare the various theories and identify issues that require more
research and clarification.
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 353

Comparison to Transformational and Charismatic Leadership

The ethical leadership theories have more emphasis on leader values than on leader behav-
ior, and more emphasis on consequences for stakeholders than on enhancement of subordinate
motivation and performance. For charismatic and transformational theories, these priorities
are reversed. The ethical theories are primarily focused on leader values and how they affect
the leader’s relationship with subordinates. The types of values emphasized in the ethical lead-
ership theories indicate that some types of leadership behavior are more revelant than others,
and the behaviors should be consistent with the leaders’ values. However, the theories do not
specify a list of essential behaviors. The theories describe how ethical leaders can improve the
lives of followers, and the leader’s effects on followers have implications for improving collective
performance, but maximizing performance is not a primary concern.
The initial version of transformational leadership was focused on the effects of specified
leader behaviors on subordinate motivation and performance. Leader values are not explicitly
specified, and there is no requirement that leader behavior (including espoused values and beliefs)
must be consistent with the leader’s actual values and beliefs. The transformational behaviors
can be used in a manipulative way to influence follower task commitment and loyalty to the
leader (Stephens, D’Intino, & Victor, 1995; White & Wooten, 1986). For example, individual-
ized consideration can be used in an inauthentic way to build subordinate loyalty. Inspirational
motivation can be used to increase subordinate commitment to task objectives, even though the
leader cares only about self‐enhancement and career advancement. Intellectual stimulation can
be used to increase creative ideas that will enhance the leader’s reputation (e.g., the leader may
claim credit for them). Idealized influence includes leading by example and making sacrifices,
but this behavior may be used to manage follower impressions and gain their trust rather than to
express a leader’s true concern for the mission or subordinates.
When the potential for unethical use of transformational behaviors was pointed out,
the theory was modified to distinguish between authentic and inauthentic transformational
leadership (Bass & Steidlmeier, 1999). Both types of leaders use transformational behaviors,
but the authentic leaders have integrity and do not attempt to manipulate or exploit follow-
ers. However, even in the revised version of the theory, improvement of performance remains
a stronger priority than improvement of subordinate welfare and happiness. History is full of
examples of leaders who caused much suffering and misery in their dedicated pursuit of virtu-
ous objectives (Price, 2003).
The theories of charismatic and transformational leadership described in Chapter 12
emphasized the effects of leader behavior on the motivation of followers and their relationship
with the leader. As the charismatic leadership theories evolved, there was more emphasis on
leader values and socialized charismatics were differentiated from personalized charismatics
(e.g., Brown & Trevino, 2006a; Howell, 1988; House & Howell, 1992). Nevertheless, follower
attribution of charisma to the leader remains a central feature of the theory. In theories of servant,
spiritual, and authentic leadership, the leader’s values for humility, openness, and transparency in
decision making and the emphasis on follower development and empowerment make it unlikely
that the leader will be viewed as charismatic.
Proponents of the revised versions of transformational and charismatic leadership theo-
ries have attempted to clarify the criteria for determining when this type of leadership is ethical
(e.g., Bass & Steidlmeier, 1999; Howell & Avolio, 1992), and examples of these criteria are shown
in Table 13‐2. The criteria appear plausible, but they may not take into account all of the com-
plexities and dilemmas in evaluating ethical leadership. How the various criteria can be applied
remains a question of discussion and debate.
354 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

TABLE 13-2 Suggested Criteria for Evaluating Ethical Leadership

Criterion Ethical Leadership Unethical Leadership
Use of leader power and • To serve followers and the • To satisfy personal needs and
influence organization career objectives
Handling diverse interests • Attempts to balance and • Favors the stakeholders who
of multiple stakeholders integrate them provide the most benefits
Development of a vision for • Develops a vision based on • Attempts to sell a personal
the organization the followers’ input about vision as the only way for
their needs, values, and ideas the organization to succeed
Integrity of leader behavior • Acts in a way that is consistent • Does what is expedient to
with espoused values attain personal objectives
Risk taking in leader • Is willing to take personal risks • Avoids necessary decisions or
decisions and actions and actions to accomplish actions that involve personal
mission or achieve the vision risk to the leader
Communication of relevant • Makes a complete and timely • Uses deception and
information disclosure of information distortion to bias follower
about events, problems, and perceptions about problems
actions and progress
Response to criticism and • Encourages critical evaluation • Discourages and suppresses
dissent by followers to find better solutions any criticism or dissent
Development of follower • Uses coaching, mentoring, • De-emphasizes development
skills and self-confidence and training to develop to keep followers weak and
followers dependent on the leader

Evaluation of the Ethical Leadership Theories

The ethical leadership theories described in this chapter are still in the early stage of devel-
opment, and like most new theories there is substantial conceptual ambiguity (Cooper et al.,
2005). Conceptual confusion is increased and theory testing made more difficult when theories
include many different types of constructs (i.e., leader traits, skills, values, and behaviors; follower
values, perceptions, and needs; dyadic, group‐level, and organizational explanatory processes;
and several different outcome criteria). The development of new measures of ethical leadership
is still in the early stages, and more validation research is needed for them. Only a few studies
have compared different theories or examined their implications for improving leadership in
organizations. The research involves mostly anecdotal accounts and testimonials, plus a few case
studies and field survey studies. More research, including some intensive, longitudinal studies,
will be needed to clarify the relationships proposed by the theories and determine their utility for
explaining effective leadership.

Guidelines for Ethical Leadership

Different approaches have been used to increase ethical behavior in organizations. One
approach is for individuals to encourage ethical practices and oppose unethical activities or deci-
sions. Another approach is to use laws, professional standards, and organizational programs
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 355

to increase awareness of ethical issues, encourage ethical behavior, and discourage unethical
practices. The different approaches are not mutually exclusive and can be used together. Each
approach will be described briefly.

Ways for Individuals to Promote Ethical Practices

Leaders can do many things to promote ethical practices in organizations (Nielsen, 1989),
and they are summarized in Table 13‐3. Following are some guidelines for ethical leadership.

• Set clear standards for ethical conduct.

Leaders can set clear standards and guidelines for dealing with ethical issues (e.g., help to
establish an ethical code of conduct), provide opportunities for people to get advice about deal-
ing with ethical issues (e.g., ethics hotline), and initiate discussions about ethical issues to make
them more salient. Leaders can reinforce ethical behavior by including it in the criteria used to
evaluate and reward follower performance. Recognize unusual examples of ethical conduct. Use
appropriate disciplinary procedures for intentional violations of clear ethical standards.

• Model ethical behavior in your own actions.

Providing advice and guidance about correct behavior on the job and avoidance of ethical
problems is useful, but to reduce unethical behavior, it is essential for the leader to model proper
behavior as well as espousing it (Dineen, Lewicki, & Tomlinson, 2006). Leaders can do many
things to promote honesty, fairness, mutual respect, and transparency. A leader’s own actions
provide an example of ethical behavior to be imitated by people who admire and identify with
the leader. The examples include an honest and open examination of problems involving ethical
issues, rather than attempts to ignore them or arrange a coverup. If something said or done by
the leader has unintentionally encouraged subordinates to use unacceptable practices, the error
should be admitted.

• Help people find fair and ethical ways to resolve problems and conflicts.
One important leadership function is to influence people to acknowledge an important
problem, rather than denying it, discounting the seriousness of the problem, procrastinating
about corrective action, or providing fake remedies and stress‐reducing diversions (Heifetz,
1994). Another important function is to help frame problems by clarifying key issues, encour-
aging dissenting views, distinguishing causes from symptoms, and identifying complex inter-
dependencies. Leaders can facilitate problem solving by helping people get information, by
identifying points of agreement and disagreement, and by encouraging people to find integrative
solutions to conflicts. It is important to proceed at a pace that people can tolerate, because if

TABLE 13-3 Guidelines for Ethical Leadership

• Set clear standards of ethical conduct.
• Model ethical behavior in your own actions.
• Help people find fair and ethical ways to resolve problems and conflicts.
• Oppose unethical practices in the organization.
• Implement and support programs to promote ethical behavior.
356 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

pushed too fast, people may resort to defensive avoidance mechanisms, such as concluding that
temporary relief or limited progress is a complete solution. As noted in the guidelines for leading
change (see Chapter 4), it is important to ensure that people understand the difficulties that will
be encountered and the self‐sacrifices that will be necessary to succeed, but it is also important
to build hope and optimism about finding a solution. These ideas seem especially relevant for
evaluating political candidates who oversimplify problems, promise unrealistic solutions, and
pander to short‐term individual interests rather than collective needs.

• Oppose unethical practices in the organization.

Opposition to unethical practices can take many different forms, and it should be
viewed as a responsibility of all people, not just formal leaders (Hinrichs, 2007; Nielsen,
1989). Examples include refusing to comply with unethical assignments or rules, threatening
to complain to higher management, making actual complaints to higher management, threat-
ening to publicize unethical practices to outsiders, and actually revealing unethical practices
to outsiders or a regulatory agency. Opposition to unethical practices is usually a difficult and
risky course of action. Speaking out against injustices and opposing unethical practices may
put one in danger of retaliation by powerful people in the organization. Many “whistleblow-
ers” discover that their actions can result in dismissal or the derailment of their career in the
organization.

Programs to Promote Ethical Behavior

An indirect form of leadership influence on the behavior of followers is to establish pro-
grams and systems (see Chapter 11). Many large organizations have ethical programs, and they
often involve both an attempt to strengthen relevant internal values, and features to enforce com-
pliance with ethical guidelines and policies (Weaver, Trevino, & Cochran, 1999). Examples of
typical features of ethics programs include a formal code of ethics, an ethical committee that is
responsible for developing policies and practices, methods of reporting ethical concerns to the
ethics committee or top management, ethics education programs, methods to monitor ethical
behavior, and disciplinary processes to deal with unethical behavior.
A study conducted in large U.S. corporations (Weaver et al., 1999) found that top execu-
tives with a strong concern for ethical behavior are more likely to implement ethical programs,
and the scope of the programs is likely to be broader. The types of leadership values associated
with the use of ethics programs are similar to the ones discussed earlier in this chapter (e.g., treat-
ing people fairly, doing what is right, ensuring justice is done). The research also indicates that
responsibility for ethics should be taken seriously by all executives and not simply delegated to
staff professionals. Some ways a top executive can influence the ethical climate in an organiza-
tion include talking about the importance of positive values, setting an example of ethical behav-
ior, making decisions that show integrity is as important as profits, and enforcing discipline for
ethics violations.
The use of ethical programs in an organization is also influenced by environmental pres-
sures, such as media attention for ethical failures and corporate scandals. However, it is better to
avoid scandals and financial failure by being proactive and creating a strong ethical climate. An
example of the type of policy that can be used to avoid problems is provided by Costco. The
company ethics policy includes not accepting gifts from vendors. Costco also sends a yearly let-
ter to the president of every vendor stating that gratuities are not accepted.
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 357

Cultural Values, Laws, and Professional Standards

Ethical leadership is also influenced by cultural values, social norms, legal requirements,
and professional standards in countries where an organization is located (Svensson & Wood,
2007). It is much easier for managers to oppose unethical practices when there is strong and
explicit support for such opposition and the standards for unacceptable behavior are clear rather
than ambiguous (Reynolds, 2006a). It is more difficult to discourage unethical behavior in
countries where bribes and kickbacks, gender and religious/ethnic discrimination, child labor
abuse, hazardous working conditions, unsafe products, deceptive advertising, sexual harass-
ment, and falsifying accounting records to evade taxes are widely accepted practices in organiza-
tions. Top executives, political leaders, religious leaders, and opinion leaders in universities, the
news media, and professional associations (e.g., American Management Association, Academy of
Management) all can help to establish clear ethical standards and a strong concern for the social
responsibility in companies, nonprofit organizations, and government agencies.

Summary
Interest in ethical leadership has been increased by cynicism about the motives, compe-
tence, and integrity of business and political leaders. Conceptions of ethical leadership include
nurturing followers, empowering them, and promoting social justice. Ethical leadership includes
efforts to encourage ethical behavior as well as efforts to stop unethical practices. Ethical lead-
ers seek to build mutual trust and respect among diverse followers and to find integrative solu-
tions to conflicts among stakeholders with competing interests. Ethical leaders do not foster
distrust or play favorites to gain more power or achieve personal objectives.
Determinants of ethical behavior by a leader include situational influences and aspects of
leader personality such as level of cognitive moral development. Leader personality and cogni-
tive moral development interact with aspects of the situation in the determination of ethical and
unethical behavior. It is easier to understand ethical leadership when both the individual leader
and the situation are considered together.
The criteria for evaluating ethical leadership include leader values and intentions, and the
extent to which leader behavior is morally justifiable. Evaluation of morality for individual lead-
ers is complicated by multiple stakeholders, diverse consequences of a leader’s actions, delays
in visibility of outcomes, and disagreements about the extent to which ends justify means. The
difficulties in assessing the effects of ethical and unethical leadership are increased by long delays
before consequences are evident and the diverse outcomes for different stakeholders. How ethi-
cal leadership is defined and measured deserves more attention in the future.
The theories of ethical leadership emphasize the importance of integrity and ethical behav-
ior. Ethical leaders influence followers to recognize the need for adaptive problem solving that
will improve their long‐term welfare rather than denying the need or settling for superficial
remedies. Transforming leaders seek to raise the consciousness of followers by appealing to ide-
als and moral values rather than to materialistic desires or negative emotions such as fear and
jealousy. Servant leadership theory explains why the primary concern of leaders should be to
nurture, develop, and protect followers. Spiritual leadership theory explains how leaders can
enhance the spiritual meaning in the work experienced by followers. Authentic leadership theory
describes an ideal leader whose behavior is guided by strong positive values. The three theories
all focus on the interpersonal relationship between leader and followers, and the ideal relation-
ship is one with high mutual respect, trust, cooperation, loyalty, and openness. The theories all
358 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership

emphasize the importance of leader self‐awareness (about values and beliefs) and consistency
between values and behavior. The positive values or attributes in the theories are very similar,
and they include honesty, altruism, kindness, compassion, empathy, fairness, gratitude, humility,
courage, optimism, and resilience.
The theories of ethical leadership described in this chapter emphasize leader values more
than behavior, and the long‐term welfare and development of followers rather than financial per-
formance. The theories provide important insights about effective leadership by making explicit
ethical concerns that are only implicit in most other leadership theories. The theories are still
evolving, and they have not been adequately tested with strong research methods. Nevertheless,
some ways to encourage and support ethical practices have been identified.

Review and Discussion Questions

1. Why is it so difficult to evaluate ethics and morality for individual leaders?
2. What are some examples of ethical and unethical leadership?
3. Can unethical behavior occur for a leader who has proper values and intentions?
4. Why is it important to study ethical leadership?
5. Compare and contrast the following theories: transforming leadership, servant leadership, spiritual
leadership, and authentic leadership?
6. What are some individual and situational determinants of ethical leadership?
7. What can be done to increase ethical behavior and decrease unethical practices?

Key Terms
authentic leadership multiple stakeholders cognitive moral development
ethical dilemmas servant leadership transforming leadership
ethical leadership self‐awareness
integrity spiritual leadership

CASE
Unethical Leadership at Enron
Enron was an energy and communications company that grew rapidly after the 1988 dereg-
ulation of the energy markets in the United States. Early in 2001, the company employed around
22,000 people, and at that time Kenneth Lay was the Chairman of the Board and the CEO was
Jeffrey Skilling. Fortune magazine named Enron “America’s Most Innovative Company” for 6
consecutive years from 1996 to 2001. The company was on Fortune’s list of 100 best companies
to work for in America for the year 2000, and it was widely praised for having good benefits and
for effective management. However, the public image of benevolence and effective management
was false, and the company was not as successful as it appeared.
With the help of their accountants and attorneys, top executives created subsidiaries that
looked like partnerships and made it possible to sell assets and create false earnings. Offshore
entities were used to avoid taxes, inflate assets and profits, and hide losses. Risky new ven-
tures were initiated, such as EnronOnline, a web‐based service for buying, selling, and trading
 Chapter 13 • Ethical, Servant, Spiritual, and Authentic Leadership 359

energy contracts. Conflict‐of‐interest rules were relaxed to allow executives to benefit personally
from questionable ventures that in most cases were a drain on company funds and resulted in
losses. Contorted financial deceptions were used to hide losses and create the illusion of billions
in profits. This practice drove up the price of Enron stock to new levels, and in August of 2000,
the stock reached its highest value of $90.
Unethical practices were not limited to top executives, and the company culture of individu-
alism, innovation, and unrestrained pursuit of profits eroded the ethical behavior of many Enron
employees. In one scheme used to increase profits, energy was transferred out of California to
create blackouts and increase the price of electricity. Then the energy was transferred back to
California and sold at higher prices, generating billions of dollars in extra profits. Under Skilling,
Enron began using an accounting practice in which anticipated future revenues from any deal
were counted as actual earnings in the current reporting period. To attain unrealistic profit
objectives and increase their bonuses, employees were encouraged to exaggerate estimated future
profits from sales. Employees involved in arranging sales were pressured to out‐perform each
other wherever possible. Each year 15 to 20% of the employees with the lowest performance
were fired and replaced by new employees. Anyone who questioned the unethical practices or
conflict of interests at Enron was fired, reassigned, or passed over for promotion.
Top executives at Enron who knew about the financial deceptions and growing losses
began selling millions of dollars worth of their own company stock. At the same time, they told
the investors and employees to buy the stock because it would continue to climb much higher. As
executives sold their shares, the price began to drop, but Kenneth Lay made appearances to calm
investors and assure them that Enron was headed in the right direction. Skilling resigned in
August of 2001 for “personal reasons” and was allowed to sell significant amounts of stock at a
premium price. He was replaced as CEO by Kenneth Lay, who promised the public there were
no hidden problems at Enron. By August 15, 2001, the stock price was down to $15, but many
investors still trusted Lay and continued to hold their stock or buy more of it. The final plunge
in stock values occurred after the discovery that Enron’s recorded assets and profits were inflated
and the company’s debts and losses were not being reported accurately. At that point some exec-
utives attempted to cover up their unethical actions by destroying records that could be used as
evidence against them, and they attempted to shift the blame for the problems to others.
Enron filed for bankruptcy in December, 2001. It was the biggest and most complex bank-
ruptcy case in U.S. history, and it had a devastating effect on thousands of employees and inves-
tors. The scandal also caused the dissolution of Arthur Andersen, one of the largest accounting
firms at the time, after employees of the firm were discovered to have destroyed documents con-
cerning the auditing of Enron finances. Andersen was supposedly serving as an independent
auditor of Enron finances while at the same time charging millions of dollars in fees as a manage-
ment consultant. This conflict of interest could explain why Enron’s financial deceptions were
not revealed by Andersen audits.
Copyright © 2008 by Gary Yukl
Note: Sources of information for this case include Fox (2003), Fusaro and Miller (2002), McLean and Elkind (2003),
Sims and Brinkmann (2003).

Questions
1. How can the theories in this chapter and the theories of leader influence on organizational
culture (Chapter 10) be used to explain the unethical practices at Enron?
2. What can be done to reduce this type of unethical leadership in the future?