Discuss about the Nature of Business Leader.
Scholars associated with the field of business administration have propounded that it is both personal traits of the leader as well as the environment of the company. It has been found that overconfidence among the CEOs is a cause of them becoming irresponsible towards the integrity of the company. The overconfident attitude of the CEO leads to defective decision-making and has been envisaged by Chen, that overconfidence is the cause of biasness among the leaders in the context of information-processing as well as in making erroneous judgement (Aebi, Sabato & Schmid, 2012). Regarding the ethical framework that guides the company it needs to be kept in mind that if the agent fails to properly reflect on the situation due to overconfidence that emerges during the course of making a decision then the agent needs to be held responsible by the board of governors by keeping checks and balance on the CEO. The board of governors need to ensure that the CEO is communicated that the overconfident attitude is unethical and it is not in conjunction with the interest of the company (Sageer, Rafat & Agarwal, 2012). There have been several studies that have documented the tendency of overconfidence among the CEOs but there have been few studies that offered solution. Petit and Bollaert (2012) have discussed about the development of virtue of reverence among the CEOs as a kind of internal mechanism of prevention. Overconfidence, unscrupulous nature and shirking of duties among the CEOs can be prevented through the alternation in the corporate culture. The institutional investors and the board of governors can monitor the attitude and actions of the CEO and restrain any overconfident attitude. They can further prevent the CEOs from engaging in inappropriate and unethical decisions through the addition of an external and systematic factor that would impede the CEOs from acting and executing in an unethical and unscrupulous manner. The agency theory underscores that the misaligned interest of the corporate managers provokes them to maximize their profit through opportunistic behaviour rather than through maximization of the wealth of the shareholder. Managers have been found to exploit the free cash flow of the company by resorting to investments that have negative impact on the present value (Riucciuci, 2015).
Managers have the tendency to overdbid with the purpose of providing personal benefits to the mangers rather than for building the empire. Managerial overconfidence and inefficiency can be demonstrated in the poor investment as managers have been found to overestimate the investment project returns and thereby there is overinvestment (Park & Chung, 2016). Institutions, in this case the board of governors need to ensure that that there is effective monitoring of the overconfident and the unscrupulous CEOS that would prevent them from making overinvestment. Firms that have higher institutional monitoring system in place report lower levels of negative outcome from the CEOs. There needs to be the most robust approach to the institutional ownership through the quarterly ownership. The board of directors need to ensure that the leader of the organization, in this case the CEO is committed towards establishing an ethical culture both in the boardroom as well as in the public square. This can be done through inspiring the CEO (Chief Executive Officer) of the company to engage in CSR (Corporate Social Responsibility) activities and incorporate it as a part of business practise. The value of CSR need to be infused into everything and it should not be considered as a standalone discipline.
Qualities of a high-performing leader- According to the case study, good governance is concerned with the management of people in an efficient manner. It has been argued that the leader needs to reflect the traits of confidence, honesty, integrity and accountability that would inspire the workforce to deliver their best performance. The values and action of the leader is found in the workforce and establishes the connection between the business and the society. The role of the CEO is to develop and execute the company’s long-term strategy with the view of establishing the shareholder value. The CEO has the responsibility of being performing the day-to-day tasks and seeking the decisions for the long-term implementation and short-term implementations of the plan of the company. The key responsibilities of the CEO are to lead the company and work in conjunction for the development of the strategy of the company. The role of the CEO is to oversee the implementation of the strategies of the company in accordance with the business ethics, values and business model of the company. The role of the CEO is to communicate on behalf of the company to the different stakeholders, employees, shareholders, government authority and the public. In specific words, the responsibilities and duties of the CEO is to lead an organization with the help board of directors in the development of the strategy to be adopted by the company (Hoffman, Casnoch &Yeh, 2013). The duty of the CEO is to exhibit leadership qualities by ensuring that the company is functioning within the ambit of law and the expenditures of the company are within the purview of the allotted budget for the company. A CEO also need to oversee and evaluate the major risks hovering the company and ensure that the risks are monitored and regulated in an efficient manner. Another responsibility of the CEO is to ensure that the Company is organized and staffed in a proper manner. A CEO ensures that employee who are hired would have to terminated easily and is able to accomplish the approved strategy. A CEO need to ensure that the management information and internal controls are in the right place. Another responsibility of the CEO is to ensure that the Company has the adequate system so that it is enable in conducting the activities through ethical and lawful manner. A CEO needs to ensure that that the company establishes, nurtures and maintains high standards (García-Morales, Jiménez-Barrionuevo & Gutiérrez-Gutiérrez, 2012). A CEO need to ensure that there is high standard of corporate citizenship in the company and there is adherence to ethical leadership and accomplishment of social responsibility. A CEO needs to act as the liaison between the Board and the management. Another responsibility of the CEO is to ensure that the company maintains the integrity of the public disclosure. CEOS need to lead by example, they are being scrutinized and continuously monitored by different stakeholders all the time and therefore, the CEOs need to motivated to become exemplary role models especially during moments of turbulences and crisis.
The CEO needs to be transparent and needs to prepared to answering tough questions as test of his/her integrity that may include ways the CEO can justify the compensation (Tricker & Tricker, 2015). The CEO needs to be transparent with the answers and at the same time balance between the objectives. The CEO needs to deliver consistently through a uniform message about the core value of the company. Another responsibility of the CEO is to tailor this response according to the composition of the target audience. A CEO needs to leverage the loyalty of the employees by making them feel that they belong to the community of the company and motivating them to achieve whatever they want. By instilling in the employees a sense of loyalty, the CEO can expect the employees to deliver their best performance. The CEO can set the limit by letting each employee to behave in the way they feel it is compatible for the purpose of the company. In diverse companies, the employees should have clear objectives about the functioning of the company and there should be the provision of specific rules for the determination of behaviour of the employees. The CEO also needs to think about the goodwill of the customers and therefore, need to utilize the social media to create communities who will in turn foster the growth of the company. In the age of digitization social media is the reality and therefore a company needs to leverage the influential support of the larger community (Yukl, 2013). A CEO needs to ensure that eth directors in a company are informed and that adequate information is disseminated to the Board that enables the directors to consolidate the right judgements. A CEO needs to request for special meetings with the Board of directors. Finally, the responsibility of the CEO is to adhere by the rules set up by the authority and internal establishments. In this situation, the leader needs to govern with personal examples and act in accordance with the applicable laws and the standards and policies of the company that further includes safety measures, health policy and the environmental policies
Leveraging the loyalty of the employees- a leader can leverage the loyalty of the employees through adoption of the values of global leadership, transformational leadership style, using the appropriate change management style to bring about a change in the organizational culture and through teamwork amongst others. In the age of globalization, the essence of leadership should be global and intercultural. A global leader moves beyond the parameters of transformational leadership and infuses the values, principles and ethos of diversity and inclusiveness within the organization (Bolman & Deal, 2017). In the age of inclusiveness and cultural heterogeneity, a leader who practises ethnocentrism and cultural homogeneity will lead to the demotivation of the employees and make them feel excluded from the organization. An organization is composed of people from diverse communities, religious practises, faith and social backgrounds. Therefore, whilst interacting with the employees a leader needs to keep in mind that she or he is not dealing with empty vessels but embodied human beings who bring with them different ideas, beliefs and values that they have inculcated through their life cycle into the organization. A leader needs to identify those values, respect the diversity and acknowledge the employees for their contribution. This will instil a sense of confidence and goodwill among the employees that will be reflected through performance and loyalty of the employees. A leader needs to motivate the employees to engage in CSR (Corporate Social Responsibility) by making the employees more accountable and instilling in them a benevolent attitude towards the society. A leader needs to recognize the power of the workforce and therefore value it. Teamwork and team spirit is an important aspect of establishing and entrenching an effective and powerful organization.
A team comprises of a groups who work with a sense of wee feeling and are aware about their commitment towards the larger goal. The embers in a team have different roles and responsibilities. Team members are accountable to each other and during the phase of conflict, they engage in conflict resolution rather than holding on to their ego. Teamwork indicates staying beside the company during the tough times and distribution of responsibilities for the smooth functioning of the organization. A leader needs to incorporate the change management procedures to ensure that the company the employees in the company remain loyal and can respond to the change in the organization. A bottom-up approach of change management will be effective in bringing together the employees and receiving their opinions. Acknowledging the viewpoints of the employees and providing them with the space to express their opinions would play an instrumental role in the long-time retention of the employees and prevent attrition rate (Avolio & Yammarino, 2013). Employees should be provided with bonus,, incentives and rewards to make them feel valued. Employees require continuous motivation without which they may feel disconnected with the organization. Transformational leadership is the key to initiating and sustaining long-term employee loyalty. Transformational leadership has been defined by MacGegor Burns as a kind of leadership approach that causes transformations in the individuals and thereby in the organizational culture. A transformational leader is known for creating positive and valuable change within the organization and among the followers in advancing the cause of the company through the creation of collective responsibility among the employees (Antonakis & Day, 2017). Therefore, the CEO needs to adopt transformational leadership for the intellectual stimulation of the employees, communicating the vision of the company to the employees and motivating them, and become a role model of the employees by building their trust, understanding, and solving of their problems.
References
Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 36(12), 3213-3226.
Antonakis, J., & Day, D. V. (Eds.). (2017). The nature of leadership. Sage publications.
Avolio, B. J., & Yammarino, F. J. (Eds.). (2013). Introduction to, and overview of, transformational and charismatic leadership. In Transformational and Charismatic Leadership: The Road Ahead 10th Anniversary Edition (pp. xxvii-xxxiii). Emerald Group Publishing Limited.
Bolman, L. G., & Deal, T. E. (2017). Reframing organizations: Artistry, choice, and leadership. John Wiley & Sons..
García-Morales, V. J., Jiménez-Barrionuevo, M. M., & Gutiérrez-Gutiérrez, L. (2012). Transformational leadership influence on organizational performance through organizational learning and innovation. Journal of business research, 65(7), 1040-1050.
Hoffman, R., Casnocha, B. &Yeh, C. (2013). Tours of duty: The new employer-employee compact. Harvard Business Review, 91(6), pp.49-58.
Park, J., & Chung, C. Y. (2016). CEO Overconfidence, Leadership Ethics, and Institutional Investors. Sustainability,9(1), 14.
Riccucci, N. M. (Ed.). (2017). Public personnel management: Current concerns, future challenges. Routledge.
Sageer, A., Rafat, S., & Agarwal, P. (2012). Identification of variables affecting employee satisfaction and their impact on the organization. IOSR Journal of business and management,5(1), 32-39.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
Yukl, G. A. (2013). Leadership in organizations. Pearson Education India.
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