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To be an ethical leader, it’s not enough to be an ethical person

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The 2008 global financial crisis brought to light immense corporate greed and raised the issue of ethics in business leadership. But what’s changed in the years that have passed since then?

Although there haven’t been any scandals equal to the 2008 crisis in scale, huge organisations such as Facebook, General Electric and Uber have all been involved in major ethical scandals in the last few years. Each of these organisations has in turn faced the consequences, being subject to hefty punishments either financially or reputationally.

40%

of UK employees say that their leader behaves ethically.7

1 in 10

employees report feeling pressured to compromise their ethical standards.7

The benefits of ethical leadership

I strongly believe that an increased focus on ethics in leadership can quell the likelihood of such ethical scandals. In essence, ethical leaders have been described as “fair, honest and principled individuals that use various forms of rewards, punishments, and communication mechanisms to influence their followers’ ethical behaviour.”[1].

In addition to minimising the possibility of ethical scandals, both reason and evidence lead me to believe that ethical leaders carry the following wide-ranging benefits:

  1. Benefits for the whole organisation

The ethics and financial performance of businesses have sometimes been described as mutually exclusive or at least at odds with one another. However, recent research has suggested that ethical leadership is actually positively related to the objective economic performance of organisations [2]. For me, this is evidence that leading ethically is not a ‘nice to have’; it’s a genuine business imperative.

  1. Benefits for employees

Leaders who are judged as ethical have positive effects on the people that they lead. For instance, employees who rate their leaders as ethical generally have higher levels of job satisfaction [3]. They’re also more likely to show ‘prosocial work behaviours’ such as helping or looking out for their colleagues and are less likely to display ‘counterproductive work behaviours’ such as hiding knowledge or manipulating others [4].

  1. Benefits for leaders themselves

Finally, demonstrating ethics in their leadership brings benefits to leaders themselves. They are, for example, more likely to be trusted by their employees, judged as effective and have direct reports who are dedicated to their work [1].

As far as I’m concerned, these benefits speak volumes about the need for ethical leaders in businesses today. I truly believe that, if we place greater emphasis on developing or becoming ethical leaders, we can build organisations that don’t fall prey to the scandals that we’ve seen so much of in recent years.

So, if ethics in leadership is critical for organisations to function effectively in the 21st century, what can organisations do to develop ethical leaders? Or, if we are leaders ourselves, what can we do to hone our ethical skills?

I would argue that being an ethical leader requires, first and foremost, being an ethical person. Without being an ethical person, attempts to lead ethically will be seen as hypocritical and disingenuous by employees. So, let’s start with what it means to be an ethical person.

Being an ethical person

Being an ethical person, for me, means having traits such as integrity and honesty. It means trying to do the right thing, living one’s values and showing concern for others and for society. Fortunately, I personally believe that the vast majority of leaders are ethical people.

However, research has suggested that many senior leaders feel that being an ethical person and making ethically sound decisions is enough [5]. Indeed, by having principles, taking into account societal needs and being fair and caring when making decisions, leaders often feel they can be classified as ‘ethical leaders’.

The same research nevertheless suggests that these leaders are widely perceived as ‘ethically neutral’ by their employees. In other words, these leaders have falsely assumed that their own morals, values and decisions will have been observed and understood throughout the organisation.

Realisations such as this have led to a dual-pillar approach to ethics in leadership which argues that being an ethical person is necessary, but not enough, to be an ethical leader [6]. This begs the question then: ‘What do leaders need to do to make the jump from being ethical people to ethical leaders?’

Leaders falsely assume that their own morals, values and decisions will have been observed and understood throughout the organisation.

What it takes to be an ethical leader

To realise the full range of benefits of ethics in their leadership, leaders need to demonstrate socially observable behaviours that make them stand out as ethical figures against an otherwise ethically neutral ground[1]. Just three key behaviours that can help them to do so:

  • Openly communicating ethics and values – ethical leaders have a sophisticated understanding of their own ethics and values and those of the organisation. They then openly communicate these to employees, using methods such as storytelling to bring their values to life and make them memorable.
  • Role modelling their ethics and values – ethical leaders embody rather than simply articulate personal or organisational values. They understand that their actions speak louder than words and so actively demonstrate the behaviours that show others what’s important to them and the business.
  • Rewarding and challenging ethical and non-ethical behaviours – ethical leaders actively and publicly reward behaviours that are ethically sound, whilst simultaneously taking steps to challenge or confront behaviours that conflict with their personal or organisational values.

I hope this short, non-exhaustive list demonstrates that being an ethical leader requires a lot more than simply being an ethical person. But, given its noteworthy benefits, I think it’s a facet of your leadership approach that’s worth developing.

What should I be thinking about?

To further develop how you use ethics in your leadership, consider asking yourself questions such as the following:

What are my important values and principles? How do I actively communicate these to others?
To what extent do my decisions (i.e. what I prioritise as important when push comes to shove) and my calendar (i.e. how I spend my time and attention) reflect these values?
How often do I publicly reward positive behaviours that embody this organisation’s values? How often do I challenge or confront behaviours that conflict with this organisation’s values?

You can learn more about leading with ethics and meaning in our white paper: The future of leadership: developing a new perspective

 

[1] Brown, M. E., Treviño, L. K. & Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational Behaviour and Human Decision Processes, 97(2), 117-134.

[2] Eisenbeiss, S. A., Van Knippenberg, D., & Fahrbach, C. M. (2015). Doing well by doing good? Analyzing the relationship between CEO ethical leadership and firm performance. Journal of Business Ethics, 128(3), 635-651.

[3] Avey, J. B., Wernsing, T. S. & Palanski, M. E. (2012). Exploring the process of ethical leadership: The mediating role of employee voice and psychological ownership. Journal of Business Ethics, 107(1), 21-34.

[4] Belschak, F. D., Den Hartog, D. N., & De Hoogh, A. H. (2018). Angels and demons: The effect of ethical leadership on Machiavellian employees’ work behaviors. Frontiers in Psychology, 9, 1-12.

[5] Treviño, L. K., Brown, M. & Hartman, L. P. (2003). A qualitative investigation of perceived executive ethical leadership: Perceptions from inside and outside the executive suite. Human Relations, 56(5), 5-37.

[6] Treviño, L. K., Hartman, L. P. & Brown, M. (2000). Moral person and moral manager: How executives develop a reputation for ethical leadership. California Management Review, 42(4), 128-142.

[7] Purposeful leadership. CIPD. 2017. Retrieved from: https://www.cipd.co.uk/Images/purposeful-leadership_2017-technical-report_tcm18-24076.pdf