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What Does Ethical Leadership in Business Look Like?

Doing the Right Thing and Being the Right Person

Ethical leadership is a critical component of an ethical organizational environment. The systems must be in place to establish a culture of responsibility, accountability, and trust but that matters little if top management does not walk the talk of ethics. For example, a CEO who acts solely in her best interest is more likely to make decisions that compromise ethical values such as honesty and integrity while one who acts on those values strives to do the right thing regardless of the consequences to oneself or the organization.

Ethical leaders are transparent; they know what decisions have to be made and why. Transparency is a virtue that lies between two extremes: one of secrecy and the other, disclosing everything even if stakeholders do not have a right to know. Transparency produces trust. It enables followers to rely on the information provided for their own decision-making needs.

There are a variety of definitions of ethical leaders. Brown et al. define it as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making.” This definition emphasizes the need to influence others in the organization to act responsibly. Ethical leaders demonstrate good values through their words and actions. Ethical leadership is about influencing those in an organization to do the right thing; make the ethical choice.

There should be only one standard for both. All too many people believe that being ethical in business is less compelling than being ethical in one’s personal life. But ethics is not like a faucet you can turn on or off at whim. Virtuous behavior entails developing good habits and practicing them in each situation one encounters. Leadership

I have previously blogged about emotional intelligence, or the ability to understand and manage one’s own emotions. Leaders who possess this trait of character have the ability to understand and influence the emotions and behavior of others.

Cherry identifies five components of emotional intelligence:[3]

  • Self-awareness. Being conscious of your own feelings and motives. You know how your emotions affect yourself and others, and you don’t allow your emotions to control you.
  • Self-regulation. You don’t make impulsive decisions. You think about the consequences of an action before deciding what to do.
  • Motivation. Motivation is about intent. You think about the big picture and assess how your actions will contribute to long-term success.
  • Empathy. You tend to be a good listener, slow to judge, and understanding of the needs and wants of others. For this reason, an emotionally intelligent person is often seen as a loyal, compassionate friend.
  • Social skills. Social skills make it easier for you to collaborate and work in teams. You tend to be an excellent leader because of your strong communication skills and ability to manage relationships.

The ability to influence others is an important component of establishing an ethical culture. Ethical culture promotes good governance. Consequently, a leader who can positively influence others is aware of the need to satisfy stakeholder needs and to resist the temptation of acting out of self-interest. Instead, they can regulate their behavior and do the right thing including to ward off pressures that might exist otherwise to compromise values and go along with wrongful decisions.

Linda Fisher Thornton her book, 7Lenses: Learning the Principles and Practices of Ethical Leadership, contends that the key to having an ethically run company is employing morally upstanding leaders. Thornton offers practical advice on the most important actions leaders can take to integrate ethical conduct into their organizations, including:

  • Face the complexity involved in making ethical choices: Openly discuss the ethical gray areas and acknowledge the complexity of work life. Be a leader who talks about the difficult ethical choices, and help others learn to take responsibility for making ethical decisions carefully.
  • Don't separate ethics from day-to-day business: Leaders must make it clear to their employees that ethics is "the way we operate" and not a training program or reference manual. Every activity, whether it is a training program, a client meeting, or an important top management strategy session, should include conversations about ethics.
  • Don't allow negative interpersonal behaviors to erode trust: Make respect a load-bearing beam in your culture. Cultivate a respectful environment in which people can speak up about ethics and share the responsibility for living it. Build trust, demand open communication, and share the ownership of organizational values.
  • Don't think about ethics as just following laws and regulations: Leaders need to take action and show consumers and other stakeholders that they are actively engaged with ethical issues that matter. Recognize how ethics influences consumers' reasons to buy from you and demonstrate a commitment to go beyond mere compliance with laws and regulations.

Ethical leaders strive not only to do the right thing but do so for the right reason and communicate to others that the right thing is going to happen at all times. The right reason is not to maximize profits or increase share price but, instead, to build an ethical culture that creates the kind of environment that supports both short-term and long-term ethical decision making.

An ethical manager serves as a role model for ethical conduct in a way that is visible to employees. Ethical managers communicate regularly and persuasively with employees about ethical standards, principles, and values. They use reward systems to hold employees accountable to ethical standards. They understand that doing the right thing is more than having a code of conduct but also requires carrying through ethical intent with ethical action.

So why is it that some leaders in business, otherwise good people, sometimes go astray? The main cause is cognitive dissonance meaning the way they think they should act in any given situation is different than the way they do act. There are many reasons for it including:

  • Being pressured by higher-ups to deviate from ethical standards.
  • Being told it's only a one-time request.
  • Being told to be a "team player.
  • Being told this is the way things get done around here.
  • Being threatened to go along or suffer the consequences.
  • Fear of retaliation for not going along with what is requested.

These are all rationalizations for unethical actions that need to be met by an ethical leader with courage and integrity. In other words, the ethical leader overcomes cognitive dissonance and brings his or her values back in alignment.

In end this blog with a quote from Shakespeare’s Hamlet: “To thine own self be true, and it must follow, as the night the day, thou canst not then be false to any man [or woman].” To thine own self be true is generally thought of as good advice, which is why parts of it are so often quoted. After all, what could be more important than to follow one’s conscience, assuming it is driven by right versus wrong, and to act with integrity? And, of course, being true to oneself is a noble aspiration.

In the spirit of the New Year, I am giving away signed copies of my book to the first ten people who contact me at: steve@ethicssage.com and provide a mailing address. May your 2021 be better than 2020. Let's face it, it can't be worse!

Posted by Dr. Steven Mintz, aka Ethics Sage, on January 5, 2021. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.

 

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