The European model of corporate governance calls for an ethical approach towards fulfilling the responsibility towards all stakeholders. It calls for positive and revolutionary processes to create value and true wealth for all in a sustainable way. This is possible only with a committed leadership in the organization. The paper is based on secondary research to understand and explain what it requires to create wholesome ethical leadership for sustainable development.

Many research articles are written on ethical leadership which leads to better corporate governance practices, but the concept of wholesome leadership is new. Before we proceed on this subject, let us examine what ethics and ethical leadership means. Thereafter, the issue of wholesome leadership will be dealt with.

Donaldson and Dunfee (1994 and 1995) proposed the Integrated Social Contract Theory (ISCT) which was an informal agreement concerning behavioral norms developed from shared goals, beliefs and attitudes of groups of people or communities. Donaldson held that `business organizations gain legitimacy through a social contract theory with the society'. According to him, a productive organization is one that ensures customer satisfaction and protects the interests of its workers, thereby enhancing the welfare of the society and business. Donaldson (1982) argued that social contracts can be used as a tool to measure the performance of a productive organization. If the organization fulfills the terms of the contracts, it has performed well. This as per the European model, is the essence of corporate governance systems. If the contracts are not fulfilled, then the society is justified in condemning the organization. The main elements of the social contracts are hypernorms, like human rights, physical security, personal freedom, right to own property, etc. Secondly, macro social contracts like `moral free space' must be based on free will of all parties involved, all of whom have right to exit when they please. However, Strong and Ringer (2000) argued that it must be compatible with hypernorms. Finally, micro social contract means norms developed by a community, a group either economic or social. For example, an industry, a company or a non-profit organization are all communities. As stated earlier, in the case of conflict of macro social contract with hypernorms, the latter will prevail. Donaldson and Dundee (1994 and 1995) further stated that in case a community decides to do business with another community, the norms of the host community shall prevail and be the guiding factor. Husted (1999) added that the more extensive or global the community is, the greater will be the priority given to its norms. The norms that are helpful to preserve the economic environment will have priority over the norms that damage the economic environment.

Corporate Governance Journal, Ethical Leadership, Customer Satisfaction, Economic Environment, Social Contracts, Business Organizations, Corporate Governance Systems, Wholesome Leadership, Business Environment, Free Market Economy, Subprime Crisis, Corporate Culture, Ethical Decision Making Models.