close

Menu

What’s wrong with being right? The need for ethical leaders in business (Part 1)

Insight

08 August 2019

5

2 ratings

This blog is the first of a two-part series on ethics in leadership. 4-minute read.

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 11 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.

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? The next blog in this two-part series answers these two questions to help you and your organisation reap the benefits of focusing on ethics in leadership. Read it here.

Click here to learn more about how ethical leadership fits into the concept of an interconnected worldview.

 

[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 Ethics128(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 Ethics107(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 Psychology9, 1-12.

How would you rate this content?

Want to know more about how a leader's sense of purpose can drive future business success?

View white paper