ETHICAL LEADERSHIP IN CONTEMPORARY CORPORATE ORGANIZATION

A CASE STUDY OF THE WOLF OF WALL STREET

AZIZ MENSAH

STOCKHOLM UNIVERSITY

Abstract

The effect of moral failures of leaders in our society carries a lot of weight and magnitude than
those who are not considered as leaders. This is because of the public status they have acquired
through their work, and the fact that society sees leaders as role models and god fathers whom
they will want to emulate their actions and inactions to have a better life. In view of this, our aim
is to determine the importance of ethics and reputation in corporate organization. Using the
movie of the wolf of Wall Street movie as a case study, we observe that many upper managers
do not care much about their moral actions in the exercise and performance of their duty. But
rather, concentrate on achieving success and building a reputation for themselves in the
contemporary corporate organization irrespective of the moral implication it will have on the
society.

Keywords: ethics, leadership, fellowship, learning.

1.Introduction

The effect of moral failures of leaders in our society carries a lot of weight and magnitude than
those who are not considered as leaders. This is because of the public status they have acquired
through their work, and the trust that is impose on them by people. Society sees leaders as role
models and god fathers whom they will want to emulate their actions and inactions to have a
better life (Jackson and Parry, 2011, and Ciulla, 2003). Therefore the morality and ethics of a
leader is very important in any corporate organization. Morality is about what is right and what
is wrong in relation to the actions and inactions of an individual. It can be seen as the general
principle that guides an individual’s choices. Kanungo and Mendonca (1996) defined ethics as
“a character or disposition of beliefs, values, and behavior that shape perception of what is right
and what is wrong based on one’s personal, social, cultural, and religious values”(Cited in
Chandler, 2009). This means that what is considered as ethical may be unethical depending on
who is assessing the morality and ethics of the situation. Drawing a thin line between what is
moral and immoral act. Thus, with recent increase in globalization and demographic change and
movement (Hill, 2003) in corporate organization, and with different view point of culture,
political, and economic values (Capurro, 2013); effective ethical leadership has become a
problem for organizations that only concern themselves about their reputation.

Due to this assertion, some upper managers in contemporary corporate organization are
sacrificing competence, skills, greater good, morality (Jackson and Perry, 2001, and Jackall,
2010) for self interest and reputation. Therefore, in order to determine the importance of ethics
and reputation in corporate organization, the following research question was set.

1.1 Research Question:

What do upper Managers in a contemporary corporate organization consider most; Morality or

Reputation?

In this paper we used The Wolf of Wall Street movie as the case study. We analyze the actions
of Jordan Belfort who was the CEO of Stratton Oakmont. Based on the theory of leadership and
management from Jackson and Parry (2011), Hills (2003), Jackall (2010), and Alvesson (2012),
we will analyze the character of Jordan Belfort. This paper is structured into four different parts.
The first part covers the introduction. The second part covers the theory that has been developed
from the four books. Again, the third part covers the analysis of the study. And finally, the last
part covers the conclusion of the paper.

2. Case Study

The wolf of Wall Street is a movie about a 22 year old Jordan Belfort who got a low level job at
an established Wall Street firm. Prior to his job at the firm, he was a decent and honest man who
only wanted to gain success for his family. To him, it was a laudable ambition to succeed in life.
However, Belfort arrival in the firm has now exposed him to the harsh and insane reality of what
happens in Wall Street. His supervisor is a wealthy but morally corrupt, drug addict, and
alcoholic who serve his only interest. Although Belfort did not want to follow the footsteps of his
superior, he later succumbs to the temptation because of his greed for money, success, and
reputation. He now transformed into a hedonistic and voluptuous person. He developed extreme
appetite for sexual promiscuity, alcohol, and drugs. After a black Monday, the firm was forced to
close and he became unemployed. Through his wife’s advice, Belfort started working as a stock
broker in a penny stocks. The job came with low regulation and high commission. Therefore,
Belfort developed a very aggressive pitching style which was full of lies. He managed to
convince many clients with this pitching style and made a lot of money. Belfort set up his own
firm called Stratton Oakmont. Were he recruited many sales men with no moral values. His
success and reputation drew a lot of investors into his firm and he became a millionaire. His love
for money made him to become cruel and a brutal manager. His increasing appetite for alcohol,
sex promiscuity, and drugs caused his arrest by the FBI.

3. Theoretical Framework

3.1 Leadership

According to Jackson and Parry (2011: 25), there are many perceptions about leadership. Some
believe leaders are born and not made. Others believe that even though heredity is important in
leadership, the experience that we have gained from life is what determines our capabilities as a
leader. Hence, one needs a practical experience in leadership (Hill, 2003). Leadership can be
seen in terms of identity (who the leader is), and in terms of behavior (what the leader actually
does). Joseph Rost also defined leadership as “an influence relationship among leaders and
followers who intend real changes that reflect their mutual purposes” (Cited in Jackson and
Parry, 2011: 45). This means leading others. Therefore they must set directions and motivate
others to follow (Hill, 2003). According to Alvesson (2012: 171), an effective leader is able to
make a lazy subordinate active and energetic in his duty. He is able to make an opportunistic
subordinate into a committed one, and finally can make a subordinate who have weak moral
values be guided by strong ethics.

Leadership can be viewed from transformational, transactional, and charismatic perspective

(Jackson and Parry, 2011). Transformational leadership is the ability of the leader to transform
the attitude and motivation of the follower, and also their behavior as well. They generate
strategies in order to meet organizational visions. Some of the characteristics of transformation
leaders as espoused by Alvesson (2012: 175) are leaders who have integrity, and empower and
develop their fellowship potentials. Transactional leadership on the other hand is a leader who
exchanges reward to their followers for compliance and performance in their duty. Finally, in
Charismatic leadership, the leader manages to make the follower identifies themselves with the
leader or the social group which helps them to boost their self-esteem and self worth (Jackson
and Parry, 2011). To be an effective manager in any corporate organization, one must learn to be
both transformational and transactional leader.

An effective manager must be able to cope with both complex situations and changes that come
his way (Hills 2003). New managers must be able to learn on the job to have practical experience
so they can understand what managing is about. Managers in contemporary corporate
organization face ambiguous and complex responsibilities from constituents (subordinates,
bosses, and other stakeholders) who often make diverse and conflicting demands (Hills, 2003:
14). They must develop new attitudes based on the situation to deal with these constituents. They
must also develop new values consistent with their new position they find themselves in and
figure out how to deal with these uncertainties, diversity and interdependence that they are facing
(ibid). This means that managers must transform themselves towards managerial identity, were
they use their interpersonal skills and judgment to enable network building.

3.2 Ethical/ Morality

Leadership is not just about how one gets others to follow their lead, but the process within
which the leader gets constituents to follow him. This is because some managers who get others
to follow them may be done through unethical means. Hence, we must analyze the motive and
the heart of the leader; also look beyond charisma when studying leadership (Jackson and Parry,
2011: 6). Thus, in studying the morality of contemporary managers, we must analyse leadership
qualities through ethical leadership, authentic leadership, and spiritual leadership. These three
types of leadership with a higher purpose share concern for their constituents that is rooted in
intruism. Ethical leadership is the moral reason behind what, how, and why a leader does things.
Spiritual leadership conceptualizes the leader’s actions through service before self, building trust,
listening and strengthening followers to become whole’(Jackson and Parry, 2011: 121). In
authentic leadership, the leader must have a clear knowledge about himself in relation to his
beliefs, preference, and values and behave consistently by acting on that knowledge (ibid). With
this understanding, contemporary managers must act ethically in their managerial functions.

However, according to Jackson and Parry (2011), there are many bad leaders, and they prefer to
exercise and apply coercion and terror on their subordinates and stakeholders. Some of the dark
side traits of these bad leaders are narcissm, dominance, Machiavellian, and aggression. They
only think of themselves and building their reputation and not their subordinate and organization.
This was further mention by Alvensson (2012) that managers benefit at the detriment of their
subordinate. Jackall (2010) mention that, Managers rules for their only survival and reputation in
the organisation. They do not care about the success of the company, but rather how best they
can maintain their reputation and success overtime by achieving the necessary results through
any means. In most contemporary corporations, Managers get what they want because the
organization is set up to benefit the managers who are controlling it (Jackall, 2010: 39).
Therefore, what is right in the organisation is what the manager at the top wants. Morality is no
more an internally structured conviction, but rather based on situational changes and relativity.
Corporations have created a norm that hard work only does not commensurate success. One’s
talent, ability, and dedicated service are not enough. Hence, some managers have adopted
unethical means through which they achieve that success. Thereby, neglecting the corporate
moral rules which must guide their behavior. Alvesson (2012: 99) was also of the opinions that,
the consumers can help in building a strong moral rule-in-use. They can begin to not only focus
on the satisfaction and quality that they get from their producers. But by studying the erosion of
work and morality of the organization that provides them the service. However, it is challenging
to achieve this task because contemporary managers are quite conscious with their public
appearance and face. They have assiduously learned to put on a mask that covers the real
struggles and ethical issues in the organisation (Jackall, 2010: 59).

4. Analysis

4.1 Leadership

Transformational leadership is the ability of the leader to transform the attitude and motivation of
the follower and generate strategies to meet organizational visions (Jackson and Parry, 2011).
Belfort leadership styled exhibited Transformational leadership. He was able to transform the
attitude of his employees from what he called losers to winners. He motivated them when they
were down. This could be seen in the weekly report that he was giving his subordinate and how
he makes them understand that his firm is where people dreams could come true. Again, when
his subordinate became disappointed in the IPO of Steve Maden, he gave them one of the
greatest motivational speeches that build their confidence and just in two days they were making
millions on the stock market. He adopted the strategy of targeting and selling to the upper class
in society to meet his organizational vision. Even though Alvesson (2012: 175) was of the
opinion that transformational leaders empowers and develop their fellowship potentials. It is
important to determine whether the kind of empowerment and motivation he is giving the
followers is ethical. Belfort empowered his Middle managers to not care about the client, but
should only concentrate on putting food on the table. This he meant could only be done by
moving the money from the clients pocket into their pocket. This is consistent with Jackson and
Parry’s view on how transformational leaders are maneuvering than it is generally accepted.

Transactional leadership on the other hand is a leader who exchange reward to their followers for
performance (Jackson and Parry, 2011). Belfort rewarded his entire subordinate in the form of
paying big bonuses, organizing lavishing parties with expensive drinks, and sexual favors. In
return for this offer, these subordinate are ready to bend their own morals and national laws for
the company. Belfort was using this leadership style as a strategy to coerce his subordinate into
doing what he wants.

Finally, Belfort’s leadership style could also be seen as a Charismatic leader; the leader manages
to make the follower identifies themselves with the leader or the social group which helps them
to boost their self-esteem and self worth (Jackson and Parry, 2011).
4.2 Fellowship

According to Jackson and Parry (2011), Leadership can be seen from the fellowship perspective.
He mentioned that a follower as a moderator of leadership is when the characteristics of the
follower decides to what extent the leaders influence will have on his attitude and performance.
This could be seen from the movie when Belfort met Donnie who later became his Vice
President at Stratton Oakmont. Donnie as a character in the movie was someone who already
was into drugs and was a high risk taker. Because of this attitude, Belfort easily influenced him
to into prostitution and corruption. He also influenced him into the money laundry business.
Donnie’s working performance was also influenced by the leader because of his love for money.
He was only interested in success and reputation and not the morality of his actions; therefore he
learnt the aggressive pitch style of sales which was different from his previous experience. This
makes the fellowship perspective in leadership very important. Jackson and Parry (2011) were of
the opinion that, the more followers perceive leaders to be heroes and winners of our time, the
more likely these leaders will keep on winning. This could be seen from the movie when Belfort
met his first manager at Wall street. After hearing of his success he became his role model. He
learnt his every move and style of doing things irrespective of whether it was ethical or
unethical. He was much more interested in the manager’s image and reputation which he has
created for himself and not his competence and potentials.

4.3 Learning

Hills (2003) discusses how new managers have to learn managing through on-the-job
experience. They are constantly faced with ambiguous responsibilities and conflicting demands
which make their work more complex. They are often faced with ambiguous demands of their
constituents and in understanding their managerial role and identity (Hills, 2003: 10). This is
evident in the movie when Belfort started his firm. He first started selling penny stocks but soon
realized that was not enough so he changed into dealing in dicey stocks. He was no longer the
low level employee, but now a new manager faced with different and complex challenges. He
has became an agenda setter, were he must makes complex decision for his followers. He
realized he could not do things the way things were done at his former work place so he
developed a strategy convincing companies on floating on the stock market. Before, he was just
to sell the stocks, now he realized he has to chase the companies to bring the stocks for him to
sell. He had to develop interpersonal skills with his constituents in order to build a key network
of relationship. Belfort interpersonal relationship with Nicky allowed him to meet the Swiss
bankers. He also built a network with his wife’s Aunt and many of his stakeholders which helped
him to bring on board a lot of experience sales men. Even though on-the-job learning is
important in corporate organization, training plays a necessary role in management (Hills, 2003).
Who trains you can affect your managerial style. The manager who trained Belfort taught him
two things. Firstly, he taught him to jerk off in order to stay relax. Secondly, he taught him to
use cocaine to stay effective and think fast. And this is what Belfort developed and used for his
success. Even though becoming a manger, one must learn on the job and be also trained by a
superior, we must learn from ethical leaders.

4.4 Ethical

In studying the leadership in contemporary corporate organisation, we must look beyond

charisma and analyse the motive of the leader (Jackson and Parry, 2011). Belfort leadership style
can be seen as unethical. Belfort has become successful with his firm through hard work. He has
to deal with diverse and complex demands from peers. However, for him it does not matter how
he choses these successes. His entire firm operation is illegal, and indulges in gambling, fraud
and money laundering. For him it was only about the money and the reputation that he wants to
build for himself. Jackall (2010) mention that, Managers rules for their only survival and
reputation in the organisation. Those who did not know him personally could not know of all the
unethical behavior which is driving his success. As Jackall (2010: 59) stated, some managers
assiduously learned to put on a mask that covers the real struggles and ethical issues in the
organisation (Jackall, 2010: 59).

Spiritual leadership conceptualizes the leader’s actions through service before self, building trust,
and strengthening followers (Jackson and Parry, 2011: 121). Even though the movie shows
Belfort as strengthening his followers by motivating and teaching them how to talk to clients,
and building trust by assigning middle management position to Donnie and others. He did not
consider service before self, but rather considered self before service. According to Alvesson
(2012), managers benefit at the detriment of their subordinate. Managers get what they want
because the organization is set up to benefit the managers who are controlling it (Jackall, 2010:
39)
In authentic leadership, the leader must have a clear knowledge about himself in relation to his
beliefs, preference, and values and behave consistently by acting on that knowledge (Jackson and
Parry, 2011, and Hill, 2003). Belfort is seen as an authentic leader because he discovers himself
and his potential after working for the penny stock. He acted on that self knowledge by quitting
his job and establishing his own firm. He discovers his style of employing subordinate with
unethical background. And develop a high pressure sales stock tactics that manipulate clients. He
remained consistent with this self-knowledge to obtain his success and reputation by insisting not
to resign even though the FBI was out for his head.

4.5 Cultural and Power

The culture perspective could be seen in the values, beliefs and rituals of the corporation
(Jackson and Parry, 2011). Their organization culture is the way they do things. The
organizational culture in Wall Street shaped Belfort who was a decent young man into an
unethical ambitious man who manipulates stocks and security. Again, a young man in the firm
was fired by Donnie for putting on bow tie which was in contrary to the way they dress at the
firm. This action saw a loud applaud by the employees who believe in the culture of the firm.
Donnie’s action was using Behavioural power to fire the employee. Jackson and Parry (2011)
saw this behavioural power as an authority that is automatic and legitimate in hierarchical
structure of an organization. However, Belfort did not exercise too much power with his
position and authority, but rather showed support to his fellowship in order to become trust
worthy (Hill, 2003).

5. Conclusion

From the above it can be seen that many upper managers do not care much about their moral
actions in exercise and performance of their duty. But rather, concentrate on achieving success
through getting more money and building a reputation for themselves in the contemporary
corporate organization. Therefore, effective leadership must be studied through ethical
perspective and not just the way we get people to follow us (Jackson and Parry, 2011). Even so,
we have to examine what is considered as moral, and must be done based on context. This is
because, morality can differ from one’s perspective based on his culture and traditions. For one
to be an effective leader, one must be both ethical-transformational leader and ethical-
transactional leader. The greater responsibility of a leader is to produce social and material
conditions for their followers and constituents to flourish (Ciulla, 2003). The ethical system that
is design in many organisation must be examined through the interaction of many forces. The
leader must set the ethical underpinning through policy, which will also guide the organization in
hiring and operationalizing its functions. This cannot also be attained without the efforts of
constituents and stakeholders.
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