- Ethical leadership is defined as demonstrating appropriate and thoughtful conduct inside and outside the office, respecting ethical beliefs and values, and being motivated by the dignity and rights of others.
- To be an ethical leader, you need to ensure ethical values are aligned across the organization, promote open communication, avoid bias, lead by example, be willing to accept responsibility and admit mistakes.
- Ethical leadership in your company helps create a positive work culture, improve brand image and reputation, foster employee and customer loyalty, and increase productivity.
- This article is for business owners and managers who want to learn more about ethical leadership, its benefits and how to implement it in their companies.
For a manager, there is a clear difference between being just a boss and being a leader. Where a boss orders, a leader guides; a boss manages, a leader inspires. The contrast lies in how you make your employees feel and how you view your relationship with them. A good leader sees it as their responsibility to inspire, guide and nurture their employees to help them improve, and they lead by example. Above all, they practice ethical leadership.
What is ethical leadership?
Ethical leadership is the practice of demonstrating appropriate conduct inside and outside the office. It is mainly concerned with moral development and virtuous behavior. Ethical leaders display good values through their words and actions.
Ethical leaders do not overlook wrongdoing, even in cases when doing so may benefit their businesses. Showing integrity and doing what’s right is at the core of being an ethical leader. Ethical leaders set an example for the rest of the company.
As Heather R. Younger, founder and CEO of Employee Fanatix, put it, “An ethical leader is someone who lives and dies for integrity. The ethical leader’s mantra is doing the right thing, even when it hurts.”
Key takeaway: Ethical leadership should be demonstrated inside and outside the workplace.
How can you be an ethical leader?
While ethical leadership may sound lofty, it’s more attainable than you might think. Here’s how to become an ethical leader.
1. Define and align your values.
Consider the morals you were raised with: Treat others how you want to be treated, always say thank you, help those who are struggling, etc. But as you grow and society progresses, conventions change, often causing values to shift.
“This is the biggest challenge ethics face in our culture and at work and is the biggest challenge ethical leadership faces,” said Matthew Kelly, founder of Floyd Consulting and author of The Culture Solution (Blue Sparrow Books, 2019). “What used to be universally accepted as good and true, right and just, is now up for considerable debate. This environment of relativism makes it very difficult for values-based leaders.”
Ask yourself what matters to you as an individual, and then align that with your priorities as a company leader. Defining your values not only expresses your authenticity, but also encourages your team to do the same, creating a shared vision for all workers. Kelly said that to succeed with ethical leadership, business owners should demonstrate how adhering to specific values benefits the organization’s mission.
“Culture is not a collection of personal preferences,” he said. “Mission is king. When that ceases to be true, an organization has begun its journey toward the mediocre middle.” [Read related article: Establishing a Company Mission for a Better Business Culture]
2. Hire people with similar values.
While your values don’t need to be identical to those of your workers, you should be able to establish common ground with them. This often starts with the hiring process and is maintained through a vision statement.
“I do not believe that every person is a fit for every company, and that is OK,” said Shane Green, author of Culture Hacker (Wiley, 2017). “Companies need to do a better job ensuring they find people who are aligned with their values rather than just hiring for experience.”
In fact, Kelly believes hiring employees with different experiences and perspectives is valuable because they each offer their own solutions to challenges. [See how healthy workplace conflict can help your business grow.]
“But when it comes to values, I think having and hiring people who share your values is critical,” he said. “Nobody wants to work for somebody who doesn’t share their values … Without mutual respect, it is very difficult to form a dynamic team, and most people find it very difficult to respect someone who doesn’t share their values.”
The same mentality should apply to choosing business partners, consultants, suppliers and even customers. Your ethical values must align across all your business operations. Learn more about hiring for cultural fit.
3. Promote open communication.
With each decision you make, be transparent and encourage feedback from your team. This helps you become a better leader and allows your workers to feel more confident sharing their ideas or concerns.
“I believe that one of the important responsibilities for the modern company is to create an environment where open communication is encouraged and that, more importantly, people are listened to,” Green said. “We are seeing a lot of employees calling on their companies to change policies, drop customers or take a stand on current issues. Companies cannot bend to every employee’s demand, but what they do need to start executing is creating forums where employees can raise their viewpoints, feel they are listened to and receive follow-up explaining why certain things can or cannot happen.”
Gathering feedback from your team helps you improve as a leader and propels your business forward. “Management is all about the people,” said Alain Gazaui, co-founder and CEO of SpaKinect. “Understanding where they come from is crucial.”
4. Beware of bias.
As humans, many of us have beliefs, subconscious or otherwise, that are outdated or erroneous. No leader wants to admit their flaws, but failure to practice self-awareness can have detrimental consequences.
“Everyone has bias, but for the longest time, you were not called out on it because you were never really challenged,” Green said. “Now that the workforce is more diverse … some unexposed biases are being called out. Managers need to … look at themselves and be honest that they do in fact have biases that may impinge on another person feeling comfortable at work.”
Recognize the biases, preconceived notions and stereotypes in every situation, and be sure you’re not doling out unfair treatment as a result of them.
Did you know?: If you’re an open-minded leader, you’ll be able to build and maintain better relationships with your workers.
5. Lead by example.
To build an ethical company, you must start from the top down. Your employees will see your behavior, choices and values and adopt them in their own practices.
“To effectively lead, the ethical leader walks the line he or she wants others to follow,” Younger said. “Leading by example is the best way to ensure an ethical business.”
Leading by example means displaying the characteristics and behaviors you want your staff to embrace and practice. It instills respect and lets your employees know that you truly believe in them and trust them to work in accordance with the example you’ve set.
6. Don’t be afraid to admit mistakes.
As the saying goes, to err is human. When mistakes are made, thoughtful and ethical leaders put their egos aside and hold themselves accountable. If something goes wrong, don’t make excuses or try to downplay the damage. Instead, be honest, admit what happened, apologize if needed and share a proposed recovery plan with all stakeholders.
Don’t shy away from assuming full responsibility for negative actions and mistakes made by your employees. Present yourself as a strong, caring leader who stands by their team and is focused on finding solutions rather than pointing fingers.
Tip: Make sure to identify worst-case scenarios in advance and create a crisis management strategy with an assigned response team. This way, when something does go wrong, everybody will know exactly what needs to be done to minimize the damage.
7. Find your role models.
“There are many [ethical] leaders throughout history,” said Mike Sheety, director of ThatShirt. “Do a little research of good, powerful leaders, and try to identify what they do [well]. Then, implement it into your own leadership style.”
Some examples of stellar ethical leaders are Mahatma Gandhi, Martin Luther King Jr., Warren Buffett, Eleanor Roosevelt, Howard Schultz (former CEO of Starbucks Coffee), Dame Anita Roddick (founder of The Body Shop), James Burke (former CEO of Johnson & Johnson) and Andy Grove (former CEO of Intel Corporation). Study their careers, wins and mistakes to learn what to emulate, how to rebound from missteps and how their experiences can influence the way you ethically lead others at your own company.
8. Embed corporate social responsibility into your business strategy.
Corporate social responsibility (CSR) is a form of business self-regulation with the aim of practicing social accountability and commitment to make a positive impact on society. There are many ways in which your company can embrace CSR. For instance, you can ensure you’re being eco-conscious; promote equity, diversity and inclusion in the workplace; give back to the community; and treat your employees with respect.
The danger, however, lies in launching disjointed CSR initiatives rather than implementing a holistic program that aligns with your business’s values and goals. That is likely to undermine your brand, signaling to your customers and employees that you might be doing this solely for the sake of appearances. Instead, as an ethical leader, facilitate CSR initiatives that correspond to your business’s mission, vision and goals, and ensure they are integrated into your company strategy and workplace culture.
9. Do your reading.
You can expand your general understanding of ethics through the classic works of Jeremy Bentham (the father of utilitarianism), John Stuart Mill and Peter Singer. Similar to learning from role models, these leaders in the field can teach you the philosophies behind applied ethics so you better comprehend the principles you should hold fast in the workplace and why.
If you want to learn how ethical theory applies to modern management, look at Peter Drucker’s works. Drucker’s management theory revolves around the concepts of decentralization, knowledge work, management by objectives and setting SMART (specific, measurable, achievable, relevant, time-specific and recorded) goals for your employees. Drucker advocated for creative rather than bureaucratic management, where leaders treat their team with respect and make them feel valued, encourage collaboration and innovation, and make socially conscious business decisions.
10.Care for yourself so you’re able to care for others.
You can’t pour from an empty cup. Leaders who take care of themselves and regularly refill their metaphorical cup are more likely to manage better and care for others.
“Having a calm and capable demeanor is the foundation for strong leadership,” said Christine Matzen, founder of Oak Street Strategies. “This can be accomplished through making sure that you, as a leader, are focused on meeting your own needs, [like] sleep, nutrition [and] true connection with loved ones.”
Matzen said that devoting time to self-care might sound simple, but it’s critical to support your capabilities as a leader. “The leader that is happy and content in life wants happiness and contentment for those they lead.”
What are examples of ethical leadership?
The above tips are all crucial components of being an ethical leader. But how do they translate in practice? Here are several ways you can demonstrate ethical leadership:
- Remember that actions matter more than words. Ethical leaders don’t make false promises. If they make a promise, they do whatever they need to in order to keep it. Always act unselfishly and kindly to everyone on staff. As a golden rule, never treat the janitor any differently from how you treat the CFO.
- Provide appropriate training. Ethical behavior should always be emphasized through training opportunities. Schedule learning sessions with employees that drive home how ethically treating others promotes a positive workplace. Host listening sessions so all voices can be heard.
- Engage in good communication. Remain transparent in all business dealings. Never lie or mislead others for the benefit of the company or yourself. Keep employees and associates in the loop about all dealings. For example, if your company must downsize, let staff know far in advance.
What is the importance of being an ethical leader?
Ethical leadership is a management style that works for any organization. But while 97% of business executives and employees believe integrity is important, only 33% think ethical behavior is an important part of integrity, according to the EY Global Integrity Report 2022.
Those who do recognize the value of ethical behavior have a lot to gain. These are the top benefits for companies that embrace ethical leadership:
- Positive culture: Employee morale and productivity improve when team members know they’re working behind an ethical leader. Ethical leaders can inspire employees to perform at their best. Staff won’t feel as if they’re helping a corrupt person earn even more money; instead, they’ll see themselves as vital parts of the business’s operations and culture.
- Improved brand image: When leaders act with integrity, they represent the business in the best possible light. They make decisions designed to improve the well-being of staffers and customers alike, building a reputation as a company driven by principles and a sense of what’s right. They earn respect inside and outside of the office.
- Scandal prevention: Ethical leaders don’t create bad PR for their company. Because they adhere to agreed-upon values and lead by example, they don’t find themselves in situations that cause damage to the organization’s reputation and prompt customers to turn to a competitor. This, too, helps the business’s brand image.
- Increased loyalty: Both employees and customers are more likely to remain loyal to companies that hire ethical leaders. Because these leaders strive to be fair and equitable, staffers and clients will want to continue working with the business. They know they can rely on consistent, conscientious treatment and aren’t motivated to look elsewhere.
- Stronger emotional well-being: Workplace stress can hurt productivity levels. If leadership is weak, efficiency will decrease. Conversely, when ethical leaders show they value mental health and social responsibility, they encourage workers to maintain healthier habits so they perform well personally and professionally and combat burnout.
“In today’s transparent, social-media-driven world, senior executives, especially those with a high profile, will be tested and called to task over their morals and ethics in how they do business,” said Green. “This used to be more focused on business practices but is now shifting [to] leadership practices. Businesses, and their leaders, are under a microscope. How they act and interact with those around them professionally will have a significant impact on their ability to attract new talent and, ultimately, their bottom lines.”
Nadia Reckmann contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.