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Abstract

Governments are imposing new rules and restrictions on businesses and their leaders in the wake of the recent economic crisis, attempting to address the regulatory failure and corporate avarice frequently blamed for the global recession. The ever‐present incentive for leaders to show profitability, coupled with the inability of governments or private industry to support continuous controls or monitoring, condemns these new rules, restrictions, and enforcement mechanisms to relative ineffectiveness.
Scandal can ruin an organization and a leader's reputation, and cosmetic or even actual compliance with new rules and restrictions will not always insulate corporate harm from unethical conduct. This article suggests that a leader wishing to avoid fines or business failure should prevent abusive or improper business conduct not by adoption of codes of conduct and periodic rules‐based ethics training, but by establishing and maintaining a values‐based organizational culture supportive of ethical behaviour, largely through the principles of ethical leadership.

Copyright © 2010 John Wiley & Sons, Ltd.