1.

0 Introduction of Leadership

According to Maqbool & Misra (2014), leadership was defined as a process of

social force that affect a person which will help and support others to complete a job
task. Besides that, it also means need to realize a common goal through organizing the
people in a group (Maqbool & Misra, 2014). Leadership skills can be studied and
improved through coaching by it cannot be taught (Maqbool & Misra, 2014). By
referring to Peter Drucker, who is a writer and consultant had stated that “leadership is
doing the right things, management is doing the things right” (Benincasa, 2012). The
term of leader and manager usually can interchangeably, but actually the role of them
are totally different with each other (Benincasa, 2012). As a leader, they must have
capabilities to creative thinking and taken action based on the different conditions
(Maqbool & Misra, 2014), while managers act as an auxiliary to the success achieved
by their team members (Benincasa, 2012).

In the journal of Svensson & Wood (2006), the sustainability of the management
and business practices will affect the effectiveness of leadership, so the effectiveness
of leadership will always be deemed as a result of dexterity in business practices and
management. Besides that, there are many studies recently mention that leadership
qualities could be a bigger part in the achievement of sustainability (Glen, Hilson, &
Lowitt, 2009; Generation Investment Management, 2012). Leadership commitment to
sustainability could help to reduce the barriers to accomplishing sustainability, those
barriers are narrow in the field of vision, previous practice, out-dated ideas and cultural
frameworks which will prevent a new and fresh vision to be created in the coming date
(Gloet, 2006). There will be various leadership styles displayed by a leader and used as
a strategy to give guidance, carry out the plans, and motivate all team members
(Maqbool & Misra, 2014). For instance, laissez-faire leadership style, transactional
style of leadership, transformational leadership style, autocratic leadership style and
charismatic leadership (Loiseau, 2017).

Laissez-faire leadership style is providing employees with full rights and power
in making decisions (Maqbool & Misra, 2014). According to Vector Study Group
(2017), the definition of laissez-faire in French is “let them do”. Transactional style of
leadership usually adopted by the manager and the manager will focus on giving
rewards to motivate the team members or punishments according to the outcome of

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their performance (Johnson, 2017). Transactional leader will more concern on the
short-term jobs and under this leadership, there may have limited on creative tasks
severely (Vector Study Group, 2017). Transformational leadership style always
motivates their employees to achieve goals and increase productivity and efficiency
through high levels of communication (Loiseau, 2017). Moreover, transformational
leader anticipates the best from their team members, including themselves, therefore
they are inspiring (Corey, 2013). Charismatic leadership is using their personality
power to lead their team members such as they have infusing infinite energy and
enthusiasm to their team members (Bisk, 2017). Indeed, this kind of leaders will have
tendency in more believing themselves as compare to their team members (Vector
Study Group, 2017).

2.0 Issues and Debates

2.1 Ethical Leadership towards Organization Sustainability

According to Endo and Paules (n.d.), most of the researches only focus on
studying leadership competencies, skills and training methods whereas the foundation
of leadership has been disregarded. Ethics are the core foundation of leadership and a
good leader should be ethical and effective (Ciulla, 2004, p. 13). It is commonly being
recognized as the standards of conducts or rules which set acceptable behavior and tell
people what is right and what is wrong (Endo & Paules, n.d.). If ethics are not intrinsic
to the process of decision making, it might be difficult for an organization to survive
(Poff, 2010). This can be shown in the economic crisis in year 2008.

In year 2008, an economy downturn occurred due to the collapse of Lehman

Brothers in U.S. has caused the consumers’ spending on durable goods dropped by over
$200 billion (Bureau of Labor Statistics, 2014). The decrease in spending not only
because of the recessions, a greater perception of unethical business practice is also
considered as a problem (Leonidou, Kvasova, Leonidou & Chari, 2013). This is
because the bankruptcy case of Lehman Brothers due to the unethical behavior of top
managers in the company lead to a lower consumers’ confidence and trust level
(Azadinamin, 2012). Trust is vital for a company as it brings positive impacts on both
word of mouth and intent to purchase behaviors in consumers (Kang & Hustvedt, 2014).
If there is lack of consumers’ trust in the organization, it will lead to a continuous

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declining in the consumers’ spending as well as a long recovery from a recession faced
by the organization (Amisano, 2017). Therefore, the ethical leadership has been under
scrutiny after it. Since there is a connection between ethical leadership and organization
sustainability, the general business issue is that an unethical business practice could
affect the organization sustainability.

In the opinion of Brown, Treviño and Harrison (2005), ethical leadership is

defined as the “demonstration of normatively appropriate conduct through personal
actions and interpersonal relationships, and the promotion of such conduct to followers
through two-way communication, reinforcement, and decision-making.” It means that
ethical leader inherently possesses the characteristics of honesty, trustworthiness,
fairness, and care. They advocate ethical behaviour by continuously practicing ethics
as well as holding everyone accountable via ethical standards with appropriate rewards
and punishments. Ethical leader as a credible role model must make fair decision and
consider the ethical consequences of the decision made (Brown et al., 2005). According
to Trevino, Hartman and Brown (2000), ethical leader is focused on two aspects of
ethical leadership: (1) moral person who is characterized in term of individuals’ traits
such as fairness and honesty; (2) moral manager who deal with the efforts to encourage
ethics and influence the thoughts and actions of others. Both are essential to be
considered by the ethical leaders.

There are some debates on the relationship between ethical leadership and
organization sustainability. Leadership is influencing group of people to accomplish
common goals with a focus of success while ethical leadership is achieving those goals
with concerning fairness and justice (Rowe & Guerrero, 2013). Therefore, there is a
good question of “Is behaving ethically more important or being a leader more
important for the sustaining an organization?” Theoretically, there is nothing hinder
both from arising simultaneously. A research found that the ethical leadership led to a
positive outcome on the employees’ job satisfaction, willingness to deal with problems
and voice out suggestions, willingness to put more effort on jobs, and organizational
commitment (Brown et al., 2005; Neubert, Carlson, Kacmar, Roberts, & Chonko, 2009;
Toor & Ofori, 2009; Walumbwa & Schaubroeck, 2009). Also, the ethical leadership
can enhance the employees’ perceptions of vital job characteristics such as task
significance and independence (Piccolo, Greenbaum, Den Hartog & Folger, 2010).
Additionally, organization able to gain consumers trust, confidence, satisfaction and

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loyalty with the conduct of ethical business practices (Leonidou et al., 2013). By having
the support of loyal consumers and competent employees, the company will able to
sustain in the competitive market.

However, there are also numerous case of conflict between ethical leadership
and company sustainability for certain cases. For instance, a leader who faces the ethical
dilemma of either going bankrupt or doing unethically. In this condition, will the leader
able to retain their integrity at the same time sustain the company? If not, how the leader
will make decision among the choices? This is the condition which always happens in
the organization. Based on a survey conducted by EY (2011), 59% of employees
expected that the managers will cut corners during the financial difficulties times in the
company. Under such situations, the organization’s leadership will tend to meet the
financial objectives instead of give priority of acting ethically in order to maintain the
organization sustainability. Moreover, a research shows that the leaders who is model
aggressive and short-term orientation will not punish but promote their followers’
unethical behavior within organization as long as they able to improve the
organizational performance (Sims & Brinkmann, 2002).

2.2 Stakeholder Considerations affect Sustainable Leadership

In order to have an effective long-term organizational performance, it is

important to understand various interests of stakeholders for a sustainable employment
relationship (Paauwe, 2009; Francis, Holbeche, & Reddington, 2012; Barr & Dowding,
2012). Donaldson and Preston (1995) defines “stakeholders” as groups or individuals
who have legal interests in the formal and/or fundamental operations carried out by
enterprises. Some examples of stakeholders are employees, creditors, debtors,
managers and investors. Freeman (1984) defines stakeholders as any group or
individual that can affect or be affected by the realization of a company’s objectives.
According to Mercier (1999), stakeholders are all of the agents for whom the firm’s
development and good health are of prime concern. Today, we normally classify
stakeholders into two groups, which are “primary” stakeholders who have direct or
contractual relationship with the company and “secondary” stakeholders who do not
have any contractual relationship but maybe affected by its action as they are situated
at the boundary of the company (Caroll, 1989).

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 Recognizing the most impactful stakeholder in their industry is vital for
organization sustainability (Amran & Say, 2014). One of the most important
stakeholders is employees. They should be participating, healthy and motivated in order
to achieve sustainable outcome, although the emphasis should be focus on all
stakeholder (Francis et al., 2012). Sustainable leadership arguably builds on elements
of the leader member exchange theory due to the importance placed the stakeholder and
relationship aspects; which are essential in the implementation and success of
sustainable leadership (Gerard, McMillan, & D’Annunzio-Green, 2017) This can
depend on the cohesion that is felt throughout the organisation; the internal environment
must arguably be effective and developmental in nature for sustainable leadership to be
developed and achieved (Hargreaves & Fink, 2011).

Bennis and Nanus (2007) emphasise the parties interconnected that play an
active role in the leaders’ position in organisations, arguing leadership is a tripod and
relationships are crucial. However, this ideology although emphasising the linking
between stakeholders, on the other hand, seems to represent the leader and follower as
cogs in a machine rather than complex entities which many authors argue must be a
consideration within today’s organisations (Crews, 2010; Groves & LaRocca, 2011).
Consequently, Ewen et al. (2013) reemphasize the importance of social connections
and suggest the view and understanding of social relationships as having the greatest
influence. The interdependence relationship with all stakeholders and the way in which
this influences organisational success and goal achievement is crucial within
organisation (Yulk, 2013).

On the other hand, someone may argue that leader should only focus on
shareholder for organization sustainability. Shareholders are the one who own share of
company stock. In the other words, shareholders are the “owner” of the company.
Therefore, shareholder’ wealth maximization has been the main objective of capitalists
and corporations (Lazonick & O’Sullivan, 2000). Shareholder theory stated that the
primary goal of a business is to maximize shareholder’s wealth (Smith, 2003). Jensen
and Meckling (1976) defined the organization as a legal entity in which shareholders
were principals and managers were their agent. They also emphasized that leaders who
pursued goals other than maximising the wealth of shareholders were reducing social
good by imposing agency costs.

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 However, due to rising of corporate accounting scandals such as Enron and
Tyco International, the shareholder-oriented perception has been increasing questioned
(Smith, 2003). Enron that implement shareholders’ wealth maximization was
eventually collapsed because of bad business decisions and accounting fraud by CEO
and top management (Stout, 2012). Some of the researchers have claimed that these
scandals are the proof of the failure of the Shareholder Theory (Smith, 2003). At the
same time, researchers who disagree with stakeholder theory may argue that will the
leader still take into consideration of all stakeholders’ interest even though it will
decrease the company profitability.

In conclusion, both stakeholders and shareholders theory are normative theories

of corporate social responsibility, it means that which parties that the company need to
put in priority and take care of. As the purpose of stakeholder theory is the concern of
continue existence, it must be achieved by balancing the interests of all
stakeholders, including the shareholders, whose interests are usually measured in term
of profit.

2.3 Leadership Competencies on the Effectiveness of Organization Sustainability

As we know, an organization’s performance and sustainability is influenced by

how the leader control the followers. A leader had influences the organization in
achieving the goals by which the members contributes their effort toward
accomplishment certain goals and objectives. Recently, the identification of the linkage
between the leadership competencies and managerial performance will influence the
sustainability of the organization (Young & Dulewicz, 2009; Robertson, Gibbons,
Baron, MacIver & Nyfield, 1999). However, a fundamental role found that a political
leader describes the leadership based on three elements which are value, process, and
relationship to guide against the effectiveness of organization (Collinson, 1998).

Moreover, many researchers have been focused on the efficient of leadership

style rather than the effectiveness of leadership. This is because the researchers think
that transformational leadership behavior influence performances service firm after
controlling for transactional leadership behavior. Besides that, the issue arises from a
Public University found that transformational leadership was highly practiced by most

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academic leader in pertaining the effectiveness of organization sustainability as the
transformational leadership supported knowledge sharing among educators. Some
people have supported that the different of leadership style are appropriate to different
circumstance that affect the effectiveness of sustainability of organization leading to
superior performance (Muller & Turner, 2007).

In fact, leadership effectiveness itself may be seen to influence the sustainability

of organization. It concerns with the issue of sustainable development and sustainable
competitive advantage that derived from the outcome of leadership. It seen that the
leadership effectiveness in the organizational performance is often regarded as being
the outcome of skillfulness rather than involvement of management and business
practice (Bigler, 2001).

Top management view that leadership is a major contributor that directs cause
of organizational performance in the society. The issue arises on which the subordinates
often do their work incontestably a great upon to the ultimate result but the management
always had much greater effect on it. They believe that a top-down approach to
leadership effectiveness is superior to the bottom-up approach. It also proffers a
mechanism view of staff performance and ignores the worth of the idea of subordinates
that might contribute to the organization sustainability. Lastly, we found that there is
an issue as it is important that the leadership has been long recognized as a success
factor for an organization. However, there is still insufficient of study to support the
relationship between leadership style and project success toward organization
sustainability (Muller, Geraldi, & Turner, 2012; Yang, Huang, & Hsu, 2014).

However, recent debate amongst scholars revealed their conceptual and

practical distinctions in their interpretation. Eventually, some researchers said that the
term competency leadership defined as person related concept referring to the
dimensions of behavioral action to support the competent performance of the
organization while competence related to individual’s ability to meet a range of
externally agreed standard in order to ensure the sustainability of company (Cheng,
Dainty & Moore, 2003). On the other hand, Young’s (2005) said that for these two
discrete concepts may also be complimentary to improve the performance of
organization effectively. According to Jones, Michelfelder and Nair (2015), projects’

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executive leadership play an important role on sustainability within which the success
of sustainable projects rests on effective leadership competencies of the leaders.

From the issue above, there is a great deal of concerning between the
relationship of leadership effectiveness and the organization sustainability. Grusky
(1963) argue that the change in the frequency of leadership tend to have impact on the
organizational performance and sustainability. However, Gamson (1964) and Eitzen
and Yetman (1972) argue that the change in leadership has only little impact that
influence the organizational performance. On the other hand, Lieberson and O’Connor
(1972) and House and Baetz (1979) think that the association between leadership
effectiveness and organizational sustainability is weak, non-existent and even
contradictory.

Furthermore, Fiedler (1967) argues that the competencies of leadership will

definitely affect the organization performance toward sustainability. Leadership
effectiveness is often seen to predict the performance of organization. But for the
perception of Jaffee (2001) had provided a normative conclusion and viewpoint argue
that the theory about the effect of leadership effectiveness and competencies on the
organizational sustainability are simple false. Lastly, we found that Thomas (1993)
argue that he only belief in leadership competencies and effectiveness may be just one
of the most deeply rooted in human assumption, but at the same argue that it is difficult
to confirm that the leadership effectiveness will influence the organization
sustainability since the empirical support is doubtful.

3.0 Arguments

3.1 Argument on Ethical Leadership towards Organization Sustainability

Ethics commonly being recognized as the standards of conducts, rules or

guidelines which to tell people what type of behavior is right and wrong. Besides, ethic
as the core foundation of leadership but often been disregarded by most of researchers
because most of researchers only focus on studying leadership competencies, skills and
training methods. However, ethical leadership has been under scrutiny after the
bankruptcy case of Lehman Brothers in economic crisis year 2008. The bankruptcy case
of Lehman Brothers not only because of the recessions also involves of unethical

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business practice which is the top manager has an unethical behaviour lead to a lower
consumers’ confidence and trust level. Thus, there is a connection between ethical
leadership and organization sustainability which an unethical business practice could
affect the organization sustainability.

Ethical leadership led to a positive outcome on the employees’ job satisfaction

and also enhance the employees’ perceptions of vital job characteristics which enable
organization to gain consumers trust, confidence, satisfaction and loyalty with the
conduct of ethical business practices therefore will able the company sustain in the
competitive market. The case to prove that ethical leadership does bring influence is
Kimberly-Clark. Kimberly-Clark set business ethic as their core business model which
has a good management practices and strong labour-management relationships
therefore it recognized by the general public as a highly respected employer because
they set business ethic as their core business model, has a good management practices
and strong labour-management relationships (CIMA, 2010).

While, there are also numerous case of conflict between ethical leadership and
company sustainability which and “what decision of a leader will make when facing
the ethical dilemma of either going bankrupt or doing unethically?” and in order to
improve the organizational performance the leaders who is model aggressive and short-
term orientation will not punish but promote their followers’ unethical behavior within
organization. However, an organization prospects long-term sustainable rather than
short term. Without ethical embedded in process of decision making decision difficult
for organization to survive long term just like Bear Stearns and Wachovia choosing
huge short-term gains at the cost of their long-term survival (CIMA, 2010).

Moreover, some company have given themselves a competitive edge by

establishing strong credentials in this area. For instance, McDonald’s is investing
heavily in activities aimed at associating it with ethical and environmental awareness
as it rebuilds its brand and attempts to overcome decades of negative publicity.
Therefore, it’s important to remember the consequences of having unethical business
practice and the connection between ethical leadership and organization sustainability.
In order to sustainable organization, ethics must be embedded in business models,
organizational strategy and decision-making processes (CIMA, 2010).

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3.2 Argument on Stakeholder Considerations affect Sustainable Leadership

In general, we believe that it is necessary for a leader to consider not only the
shareholder’s interest but also the stakeholders to attain an effective long-term
organizational performance. Some researchers believe that social relationships with
stakeholders is crucial, especially employees to have sustainable employment
relationship. While other researchers believe that a leader should only consider and
prioritize shareholders interest. Both shareholder and stakeholder theory can be viewed
as business ethics, however these two theories are greatly at odds about which is right
due to the misconception of both theories. Shareholders theory is misinterpreted in
many ways. For instances, urge managers to do anything possible to make profit,
although this theory obligates managers to do it only legally, and some claimed that this
theory forbids corporate funds from being used for employee morale improvement and
charitable projects (Smith, 2003).

Likewise, stakeholder theory is occasionally misread, it is occasionally

professed that this theory does not require a company to emphasize on profitability.
This theory originally meant that all stakeholders’ interest needs to be considered even
though a company’s profitability may be reduced. Although the ultimate goal is the
continuous existence concern, it is essential to attain through counterbalancing the
interests of the shareholders and all stakeholders. Furthermore, because stakeholder
theory has no formula some argue that this theory cannot be applied, thus the law does
not enforce it. However, cases like Enron and ImClone contradicts shareholders theory
since these companies emphasizes on shareholders’ interest yet still committed fraud
and made bad business decision, this is why this issue has yet to be resolved. These are
the reasons why there are misconception between these two theories and why
researchers have their own believe (Smith, 2003).

Moreover, if organization consider all relevant stakeholders’ benefit, it can be

enhancing the companies’ reputation and gain more trust given by others. For instances,
employment which the wage levels mirror between type of business tactic and
employment structure, the likelihood of lower pay occurs when more emphasis on low
cost as against high quality operations it will eventually affect employee’s living
standards and gradually have an adverse effect on their business performance.
Consequently, it is important for managers and leaders to look into the nature and extent

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of managerial hierarchy and human resource practices, and punish and rewards system
because they have significant influence on employees (Sisson, 2009).

An organization cannot truly success if it ignores any of its stakeholders.

However, it might be short-term profits but as the stakeholders feel let down and
dissatisfied, the company cannot survive. In other words, the stakeholder consideration
is paramount and recognized as chief instruments to make long term sustainable come
true (LawTeacher, 2013).

3.3 Argument on Leadership Competencies on the Effectiveness of Organization

Sustainability

In general, we believe that leadership competencies have influence over the

effectiveness of an organization’s sustainability. Especially transformational leadership,
since it is the ability of a leader to transform or influence the subordinates’ behaviour,
action and decision. Some of the researchers agree that a transformational leader has
significant influence on an organization’s sustainability. This is due to the leader
inherits charisma and able to influence their team to accept change, exhibits high ethical
and moral behaviour, and become a role model for their team. Thus, able to inspire and
motivate the team to the path and vision set beforehand known as inspirational
motivation. Furthermore, is intellectual stimulation whereby a leader is able to
stimulate creativity and innovation among the team. Hence, a leader appreciates and
values the contribution of new ideas by the team for the benefit of the organisation.
Lastly, they value the variation of all members of the team and may consider different
consideration for each member. To prove that transformational leader does bring
influence, the example of a leader like this is Tony Fernandes, the CEO of AirAsia
(Cruz, 2015).

This is because he has successfully turned AirAsia around from owing a $40
million debt to a successful profit earning company. By possessing strong leadership,
since he was able to stress the importance to work as a team and create good
organization culture, and because Tony was able to establish good organizational
culture he can articulate the behaviours, values and rules of the team that is critical to
accomplishment of an organization’s strategies and mission. Hence, all employees can

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access his office freely when something important comes up that has to be discussed or
needs an urgent solution because there is no bureaucracy. This is because he believes
that excessive bureaucracy could obstruct the business growth and stressed on the
significance of good interaction among all employees through maintaining non-
hierarchy practice at workplace. The aftermath was him gaining the trust and respect
from his devoted employees (Pusiran, & King, 2013).

While other researchers believe that transformational leaders have little impact
for none at all towards organizational sustainability. This is known as pseudo-
transformational leadership because it has the ability to impersonate plenty of the same
trade and tool of the true transformational model whilst inflicting negative image and
message to influence behaviour instead of positive ones. Gathering around a common
fear or loathing can influence a call for action, thus the results can be quite catastrophic.
Such companies that failed using transformational leader is such as GM and Enron.
Although there are negative influences, research displays that it still leads strong team
spirit sense of belonging towards an organization (Pusiran, & King, 2013).

Therefore, it is important to remember that transformational leadership is not

the problem when used appropriately, leaders should seek to comprehend the imagery
and message being framed by their leaders and safeguard that there is no negative
imagery involved and no fear or shame is contained within the messages used to
encourage efficiency, productivity and results because the outcome of the impact can
be pretty costly (Pusiran, & King, 2013).

4.0 Conclusion

Leadership is not something that could be teach but it must be learned by

someone because if a person possesses leadership traits, then it he or she will have more
ability to complete their tasks with their creative thinking even though there is in
different situations. The effectiveness of leadership might be influenced by the
sustainability practices of business and management; therefore, company must put
more attention on the sustainability issues arisen in the company. Example of leadership
style are transactional style of leadership, transformational leadership style, autocratic
leadership style and charismatic leadership. There are three issues regarding the
leadership have been found in the journal, which are ethical leadership towards

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organizational sustainability, stakeholder considerations affect sustainable leadership,
and leadership competencies on the effectiveness of organizational sustainability.

Ethical leadership have strong relationship with the sustainability of an

organizational. The unethical business practice will lead to a bad effect on the
organization’s sustainability and this is common problem always faced by the
organization. An ethical leader must have good attitude like honesty and able to
influences others to behave ethical behaviour. Ethical leadership will benefit the
organization because it assists in increasing satisfaction of employees and customers.
However, when there is ethical dilemma condition, the organization will not focus on
acting ethically but it will give more attention to achieve their financial goals. Whereas,
ethical embedded in the business models, organizational strategy and process of
decision making is very important for the long-term survival of an organization.

Stakeholder considerations is vital for the sustainability of an organization.

Employees is the most important stakeholders within the organization. When there is
an independence relationship among the stakeholders, then it will lead to success and
goal achievement of an organization. However, shareholder theory mentioned that the
maximize the shareholder’s wealth should be the primary goal of a business, which is
different objectives with the stakeholder theory that focus on achieving and balancing
the interest of stakeholders and shareholders. Although there may be misunderstanding
on the stakeholder theory that it does not care about profit of the company, but actually
it is focus on balancing the profit between stakeholders and shareholders. Both theories
can be deemed as business ethics. When shareholders’ interest is take into account by
the organization, it will thus improve the companies’ image and obtain stakeholders’
trust towards the companies.

The competencies of a leader will affect the performance and sustainability of

organization. Nowadays, the leadership style is getting more attention than leadership’s
effectiveness, just like the transformational leadership behavior will give an impact on
the organization’s performance. A leader inherits will guide their team to behave
ethically and they will more willingness to accept the change. If there is frequently
change in the leadership will influence the performance and sustainability of the
organization. However, the relationship between leadership and organizational
sustainability was weak according to Lieberson and O’Connor (1972) and House and

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Baetz (1979). Besides, although there might be a negative influence, but it still able to
foster strong team spirit sense among the employees.

In conclusion, there are different view regarding the leadership issues from
different journal and researchers. But it is important to concern on those issues since
they will affect the sustainability of the organization. Sustainability of organization is
very important for an organization to continues survive and achieved their objectives
and goals effectively and efficiently. Therefore, leadership and sustainability have close
relationship and the organization should focus on improve leadership and solve the
leadership issues in order to success and achieve their goals.

(4818 words)

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