Ethical leaders pave the way for a positive culture of ethics. They help the company’s customer loyalty skyrocket. They are the ones investors fully trust. When ethical leadership is consistently displayed, even partners and vendors realize they can trust the company and work well with it. What’s more, leadership guided by ethics becomes a powerful magnet for good press. The benefits of ethical leadership are endless. But what makes a leader truly ethical?
Leaders who value ethics operate with absolute honesty and transparency. They treat everyone in the workplace fairly and with kindness. They lead by example and are often great communicators. Ethical leaders are driven by values and know exactly how to navigate ethical dilemmas and ultimately do the right thing.
Read on to understand why ethical leadership is critical for an organization and what qualities ethical leaders must possess.
What is Ethical Leadership?
By definition, ethical leadership is “leadership demonstrating and promoting ‘normatively appropriate conduct through personal actions and interpersonal relations’.”
When you really dissect it, ethical leadership comes down to having a deep understanding of ethical dilemmas and doing the right thing, every single time. Leaders with ethical characteristics are those who promote and become the strongest examples of ethical conduct in their relationships and actions.
What Makes it So Important for an Organization?
Leaders who always do the right thing have ethics ingrained in their very nature. They don’t particularly look for incentives to do the right thing. That said, ethical leadership positively impacts the organization in both the short and long terms!
In the short term, ethical leadership helps boost positivity, promotes smooth team collaboration, and makes everyone feel “heard”, satisfied, and happier at the workplace. Ethical leaders constantly boost employee morale and even get them to feel excited about working with the management.
In the long term, ethical leadership shields the organization from company scandals, keeps ethical issues at bay, and ensures everyone approaches ethical dilemmas in the right manner. This helps the organization build an army of loyal employees, and attract more customers, partnerships, and profits.
Qualities of an Ethical Leader
The importance of ethical conduct from top leadership cannot be stressed enough. But what are the qualities that define an ethical leader? The following are:
The equation here is simple: when leaders are honest, they earn the trust of their team. Operating with honesty helps leaders communicate openly. With trust and communication, employees know they can fully depend on their leaders. What’s more, when employees see leaders lead with honesty, they feel encouraged to discuss any concerns or ethical dilemmas they might face as well.
Be it their superiors or employees – ethical leaders are respectful towards everyone, equally. Not treating everyone with respect is a recipe for a hostile work environment. It’s a sure-shot way to lose trust and spark ethical issues within a company. After all, when people don’t receive the same level of respect, it’s natural for them to assume they’re treated unfairly.
Driven by Values
A moral leader takes every step by keeping the organization’s values in mind. They only partner with organizations that share similar values. An ethical leader also ensures everyone in the organization follows the values of integrity and honesty during every decision-making process.
Think about it this way – when communication is absent, issues go undetected for a long time. This, in turn, infests the company with distrust and hostility.
Leaders with ethical characteristics are masters of communication. They turn the organization into a safe space, governed by trust, honesty, and accountability.
Most organizations include an open-door policy in their company handbook. But leaders who value communication understand how the policy applies to their own office door.s When a team member is encouraged to communicate, they don’t hold back from discussing their own ethical dilemmas, asking relevant questions, and sharing valuable ideas.
Kind (and Fair)
Your team members are not machines. They are humans and deserve to be treated with kindness. When an employee is cherished at work, they work tirelessly to help meet the company’s goals. An ethical leader also treats everyone the same, leaving no room for bias. They don’t discriminate against employees on factors like religion, gender, sexual orientation, ethnicity, and marital status.
Leads by Example
A leader can only expect others to be ethical when they have similar expectations for themselves. In other words, they perform their duties and display the ethical conduct they expect their team to uphold.
When employees see their leaders make decisions with honesty and integrity, they are naturally willing to take a similar approach in their work.
Examples of Ethical Leadership
To gain a deeper insight into what makes an ethical leader, let’s look at some examples of ethical leadership:
- Costco’s leadership made a single ethical decision that would help the company attract the best talent and escape high turnover rates that often negatively impact other retailers. This decision revolved around paying wages to employees that were well above average industry rates.
- The leadership at outdoor clothing company Patagonia took a massive step to contribute towards environmental protection. The decision was to donate at least 10% of profits or 1% of sales (whichever was higher) to environmental protection groups. The company also involved customers in environmental activism by encouraging them to exchange (or repair) their old clothes instead of buying new ones.
- Gary Ridge, CEO of WD40, worked tirelessly to create a culture of trust, not fear. Thanks to his ethical leadership, the company saw a considerably higher employee retention rate, with its share value increasing every year.
Examples of Poor (Unethical) Leadership
When leaders fail to have an ethical judgment in decision-making, it is the organization that suffers from irreparable damages. Here are two examples of unethical leadership:
- Enron concealed billions of dollars in liabilities by deploying special-purpose entities to create an illusion of profits. The result? Their share price stooped by $90.56 to below $1!
- In 2015, the US Environmental protection Agency (EPA) revealed Volkswagen had been “cheating” emissions tests through its software. This scandal affected about 11 million cars worldwide, with each car emitting up to 40 times more nitrogen dioxide into the environment.
Over to You
Leaders who value ethics follow a strict moral compass and always lead their organization toward “true north.”
Of course, no company is immune to ethical dilemmas. The right leader, however, knows how to detect and resolve these issues and encourages their team to do exactly the same. They are the leaders who pave the path for a solid culture of compliance – one of the most important elements for a company’s success.
Giovanni Gallo is the Co-CEO of Ethico, where his team strives to make the world a better workplace with compliance hotline services, sanction and license monitoring, and workforce eLearning software and services.
Growing up as the son of a Cuban refugee in an entrepreneurial family taught Gio how servanthood and deep care for employees can make a thriving business a platform for positive change in the world. He built on that through experience with startups and multinational organizations so ComplianceLine’s solutions can empower caring leaders to build strong cultures for the betterment of every employee and their community.
When he’s not working, Gio’s wrangling his four young kids, riding his motorcycle, and supporting education, families, and the homeless in the Charlotte community.
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