Ethical leadership is based on ethical behavior. That begs the question, then, what is ethics? Ethics is doing the right thing. But since everyone has a slightly different definition of what constitutes “right,” it’s almost easier to explain ethics in terms of what it is not. Show Enron hid liabilities from investors and creditors resulting in its downfall in 2001. Before declaring bankruptcy in 2008, Lehman Brothers played a starring role in the subprime mortgage debacles. Most people can agree that these are examples of dodgy corporate ethics. Although everyone thinks about ethical behavior differently, there are generally a handful of common themes. For some people, practicing good ethics means abiding by the golden rule. For others, it’s the law of universality: Would the world be a better place if everyone behaved this way? For companies, ethical leadership can create a positive environment in which employees and profitability flourish. Here’s a closer look. What Is Ethical Leadership?Of course, we want all leaders to follow a strict moral compass and recognize the direction of true north. Leaders should know what they stand for and understand their own values lest their organizations become headline news in the next corporate scandal. Ethical leadership, however, consistently demonstrates and promotes behavior that respects the rights of others within the values-based boundaries. Ethical leadership is not a mutually exclusive style. There are many people who lead and manage governed by ethical principles integrated within another management framework. Ethical leadership theory, in contrast, is keenly focused on setting ethical direction within the organization and directing the organization accordingly. Ethical Leadership ExamplesThere are ethical dilemmas around every corner. And it’s not just in the most obvious sectors like banking and finance. Nor is it limited to common breaches like manipulating statistics, hiding assets or liabilities, or spending company money inappropriately. It can take more subtle forms. Although these subtle forms may go unreported, they are usually not unnoticed, particularly when the offense is committed by managers and leaders. This includes, for example, accepting gifts from vendors, theft of company property, employee favoritism or “harmless” jokes that contribute to a negative culture. Yet there are many more opportunities to do the right thing. For example, the importance of ethical leadership is evident in many of the world’s leading companies. Here are three:
The Value of Ethical Leadership and Its ImpactsPractices maintained by ethical leadership impact companies in a myriad of ways, including:
Both short-term and long-term benefits accrue when organizations are led by highly principled leaders. Ethical leadership matters not only for companies but for their stakeholders and their broader communities. These impacts include: CultureEnvironments that are short on ethics can be toxic. Ethical people like to work for ethical companies. In a more nurturing environment, employees are treated respectfully and are more likely to demonstrate respect for fellow workers and clients. EmployeesMillennials aren’t the only ones who want to work for values-based companies. There is support among baby boomers, as well. Additionally, people feel proud to work for ethical leaders. Researchers from Robert Half found that proud employees are three times more likely to be happy — and more productive — than those who lacked this emotion. InvestorsMany investors, both individual and institutional, want to put their dollars into ethical organizations that share similar values. Scandals are never a good look for a mutual fund. Business PartnersSuppliers, vendors and other companies want to work with companies they trust. Their reputations are at stake, as well. CustomersResearch shows that customers are more loyal to companies that follow ethical business practices. Facilitated by social networks, they share their positive feelings with others and they are also less price sensitive than customers who don’t share the same sense of loyalty. Generation Z is already starting to exhibit strong preferences for brands that share their ethical sensibilities. Ethical Leadership CharacteristicsAs mentioned, ethical leadership is not mutually exclusive. An ethical leader’s traits may cross over into, for example, the transformational style. However, here are 10 leadership characteristics that are common among the best ethical leaders: An ethical leader is fair and just. They have no favorites, and everyone is treated equally. Ethical leadership eliminates biased treatment based on gender, ethnicity, nationality or any other factor. An ethical leader demonstrates respect for all members of the team by listening compassionately, valuing diverse contributions and considering opposing viewpoints. Ethical leaders convey facts transparently, no matter how unpopular the facts may be. These leaders understand that transparency breeds trust, empowering others to make their own decisions with the information they need. Being humane is one of the most revealing traits of a leader who is ethical and moral. Ethical leaders place importance on being kind and act in a manner that is always beneficial to the greater good. Ethical leaders foster a sense of community and team spirit within the organization. When an ethical leader strives to achieve goals, it’s not just about a personal mission. They make genuine efforts to achieve objectives that benefit the entire organization — not just themselves. In ethical leadership, decisions are first validated for alignment with the overall organizational values. Only the decisions that meet this criterion are implemented. Under an ethical leader, employees thrive. Employees are rewarded for coming up with innovative ideas and are encouraged to do what it takes to improve the way things are done. Employees are praised for taking the first step rather than waiting for somebody else to do it for them. The ethical leader has high expectations for themselves and others. They demonstrate unwavering commitment to their ideals by not just talking the talk, but walking the walk. Leaders also expect others to lead by example. An ethical leader regularly promotes the high values and expectations they hold. By regularly communicating and discussing values, they ensure that there is consistent understanding and compliance across the company. An ethical leader expects employees to do the right thing at all times, not just when it is convenient for them. They will not overlook or tolerate ethical violations. If you’re looking for your next executive hire, Y Scouts can help. Using our proven and proprietary leadership model, we hire on purpose, finding the right fit for your company, its culture and the leadership team. This blog article was updated for clarity in August 2021
Written by Giulia Villirilli | Apr 9, 2021 7:00:00 AM
Ethical leadership must be a conscious decision. As Fred Kofman writes in his book Conscious Business, “To be conscious means to be awake, mindful. To live consciously means to be open to perceiving the world around and within us, to understand our circumstances, and to decide how to respond to them in ways that honor our needs, values, and goals.” He continues, “To be unconscious is to be asleep, mindless… Consciousness enables us to face our circumstances and pursue our goals in alignment with our values. When we lose consciousness, we are swept away by instincts and habits that may not serve us. We pursue goals that are not conducive to our health and happiness, we act in ways that we later regret, and we produce results that hurt us and those we care about.”
There are many good reasons to be an ethical leader. From a collective perspective, leaders can inspire those around them to behave ethically. By setting an example and giving the direction for ethical behavior, others will observe and act similarly. In this way, ethical leaders can positively influence many others, presenting them with a set of actions that they can adopt for the greater good. On a personal level, being an ethical leader is essential for credibility and reputation. If one aims to be a leader, it is a long game. Behaving unethically can automatically take a leader out of the A-league and may heavily damage their personal or company brand. Moreover, unethical behaviors often deteriorate one's self-esteem, leading to a suboptimal outcome and a missed opportunity to express one’s full potential.
Ethical leadership encompasses many things but ultimately boils down to these six main elements.
“The best way to do is to be.” – Lao Tzu Leaders play a crucial role in corporations, as they have been chosen to guide others. What do great ethical leaders do, and what ethical traits do they have in common?
Ethical leadership provides enormous benefits to organizations, in many ways.
Great leaders know there is always room for improvement. Here are some ways you can become a better ethical leader.
Want to see what ethical leadership looks like in action? These ethical leadership examples will demonstrate some real-world scenarios.
An ethical leadership example in actionImagine you’re on a call with your biggest customer, alongside your boss, and the customer is extremely dissatisfied. Your product had an outage that severely impacted their business and they want to make sure it doesn’t happen again. Your boss assures them this is a one-time occurrence, and that it won’t be a problem in the future. When you hang up, you remind your boss that this issue has been occurring among customers with increasing frequency and that a fix is still in the works. Your boss nods and says, “Yes, but they don’t need to know that just before their contract renewal.” Fast forward a couple of months, and your customer calls to cancel their contract following another outage. Your boss again gets on the line to say how sorry they are and that this is a rare occurrence, but that they can’t cancel their contract without ample notice. Is that the kind of person you want to work for? Or do business with? They knowingly put their customer in a bad position, so they could get credit for a contract renewal. This not only creates a strained relationship with your customer, but it also demonstrates to everyone on your team that this sort of behavior is expected. As others emulate this behavior, your company begins to get a bad reputation, lose customers, and struggle to find new customers. Now imagine if your boss had owned up to the outages, promised to keep the customer in the loop about fixes, and sincerely asked the customer to stay onboard. The customer may or may not renew, but they wouldn’t be leaving with bad blood. They may even come back at a later date or refer other potential customers. That’s the difference ethical leadership can make. It may literally be the difference between survival and failure.
Ethics and leadership go hand-in-hand. While some tend to think there is a choice to make between being profitable and successful, or behaving ethically, That’s simply not the case. Ethical people and leaders are necessary drivers for success. What if we give ethical leadership a chance? |