As employees are instrumental in driving a company’s bottom-line integrity and leadership impact organizational performance. The review also found a positive correlation between profits and focus on corporate social responsibility.
As the world is still struggling to come out of the 2008 financial crisis, people have realized the need to follow strong ethical conduct in business dealings. Most of the organizations in the early 21st century started following the practice of rewarding the managers, who showed high profits, with huge bonuses and pay packets with no regard to the means they were adopting. Corruption, back stabbing and data fudging by managers were accepted as part of the game and the performance linked bonuses increased their greed at every success. This review aims to understand how ethics and leadership impact an organization. It attempts to understand how a leader can demonstrate ethical behavior and what impact it has on the overall performance of the organization?
The importance of integrity and leadership has always been an important topic for study by researchers. This can be demonstrated by a number of studies that were done during the late 20th century to show the link between ethics and business performance as well as leadership integrity. Preston conducted a research on 67 companies over a period of 11 years to find out whether there was any causal relationship between financial performance and the company’s CSR policy (Corporate Social Responsibility which can be considered as a proxy to integrity) (Verschoor, 1998). He found that there was no significant negative relationship between the two. However, he found that both were positively related implying higher the CSR performance (integrity perception) higher the business performance. Other studies too found a positive relation between the two. There were some studies which found no or mixed relation