Failure of Ethical Leadership: Implications for Stakeholder Theory and “Anti‐Stakeholders”

• Author: Ronald Paul Hill
• Date: 01 June 2017
• DOI: http://doi.org/10.1111/basr.12114
• Published date: 01 June 2017

Failure of Ethical Leadership:

Implications for Stakeholder

Theory and “Anti-

Stakeholders”

RONALD PAUL HILL

ABSTRACT

Leaders in a variety of organizations are beset by chal-

lenges that test their commitments to ethical behavior in

interactions with stakeholders who make up their work-

ing environments. Situations that present themselves

include complex management of expectations, people,

and resources, which require novel solutions that also

test the boundaries between right and wrong. Such condi-

tions arose after the 9/11 terrorist attacks on the World

Trade Center Twin Towers. President Bush asked the

Central Intelligence Agency to round up persons who rep-

resented a continuing threat of harm to U.S. interests.

What followed was a series of decisions and actions by a

number of internal and external constituencies based on

inaccurate reporting of treatment of and information

gleaned from detainees. Lessons for understanding and

avoiding resulting leadership ethical dilemmas and a nov-

el stakeholder perspective are provided in the close.

Ronald Paul Hill is Visiting Lindner-Gambal Professor of Business Ethics at the George Wash-

ington University School of Business, 2121 Eye Street, Washington, DC 20052. E-mail: ronald-

paulhill@msn.com.

V

C2017 W. Michael Hoffman Center for Business Ethics at Bentley University. Published by

Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford OX4 2DQ, UK.

Business and Society Review 122:2 165–190

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INTRODUCTION

As Freeman (1994, p. 412) notes, businesses [as organiza-

tions] should be viewed in a particular context, which “is

moral in nature.” One common way to capture moral rights

and ethical responsibilities is through stakeholder theory (Brown

and Trevino 2006). This frame has a unique perspective for under-

standing ethical norms and how they should guide organizational

stewardship (Phillips et al. 2003). However, there remain disagree-

ments over why and how obligations should be allocated among

various stakeholders and the levels of equality or equity of expecta-

tions for fairness (Freeman 1994). Who is a stakeholder and what

treatment they should anticipate is uncertain, despite the accep-

tance of stakeholder theory by business ethicists and practitioners

as a useful leadership paradigm (Agle et al. 2008; Hasnas 2013;

Hendry 2001; Marens and Wicks 1999).

Therefore, recognition of its importance does not mean there is

widespread agreement on the ultimate definition, and its breadth

has been both a strength and a weakness depending upon per-

spectives of users. Phillips et al. (2003) hearken back to earlier dis-

cussions that show that stakeholders are individuals or

organizations impacting or impacted by a firm’s pursuit of its goals

and objectives. Value maximization in the form of profit for share-

holders was believed to be the primary responsibility of business

leadership (Eisenbeiss et al. 2015; Knights and O’Leary 2006),

including even enlightened approaches that broaden the mix of rel-

evant constituencies (Jensen 2002). Yet other scholars from busi-

ness ethics, including Freeman (1994), support a more liberal and

expansive notion of who is a stakeholder and the responsibilities

for their ethical treatment. Thus, operationalization of who is and

how to can be vexing, and subjective assessments by possible

stakeholders are proffered in the literature as a possible solution

(Hosmer and Kiewitz 2005).

Given issues associated with this discussion, is it possible for

some individuals or groups impacting or impacted by an organiza-

tion’s leadership to be vilified and disdained by members? Most

competitors are kept at a distance, even though they may be great-

ly influenced by a focal firm’s success in the marketplace. Also,

some marketing scholars believe that uses of terms like “target,”

“informant,” or “customer” suggest a tacit denial of the humanness

166 BUSINESS AND SOCIETY REVIEW