Mastering the Art of Ethical Leadership

Before we dive into the content, I want to acknowledge the complexity of being an Ethical Leader.  

• Ethical, relating to moral principles or the branch of knowledge dealing with these. 
• Leadership,the action of leading a group of people or an organisation. 

Simple definitions but both of these concepts contain grey areas, blurred lines and serious consideration to do well.  

The art of ethically leading people, maintaining customer and staff satisfaction, managing commercial requirements, complying with legal obligations, and creating a positive and safe culture can be challenging.  There are times when there  is conflict between a decision, what is morally right, what is best for your people and best for the business.  The privilege and sometimes pain of juggling all of these  priorities can build up. 

Operating as an ethical leader will have a resounding impact on your team, but it is not always easy.  

As businesses strive to make a positive impact and build trust with their stakeholders and clients, we feel that mastering the art of ethical leadership is essential and acknowledge that it is not always easy. This article dives deeper into what it means to be an ethical leader and offers practical tips and strategies to enhance your leadership skills. From fostering transparency and integrity to promoting diversity and ethical decision-making, below  we explore the key pillars of ethical leadership.

External Focus: 

Why Does Ethical Leadership Matter in Business Today?

Ethical leadership is now more important than ever in the business world. In a time of heightened public scrutiny, businesses are expected to operate with honesty and integrity, while also taking into account the needs and interests of all stakeholders. Consumers, employees, investors, and other stakeholders are increasingly aware of unethical business practices and as a result, they are demanding higher standards from companies and their leaders. The challenge this presents to businesses is how to balance commercial interests with ethical concerns.

“When organisations demonstrate that they are practising ethical leadership, it can be hugely beneficial for their individual and collective reputations.”

The Impact of Ethical Leadership on Individual and Business Reputations

Perhaps the most prevalent example of how this challenge affects organisations is in its impact on both individual and business reputations. In the current climate, ethical leadership has become a key factor in determining the success of businesses. When organisations demonstrate that they are practising ethical leadership, it can be hugely beneficial for their individual and collective reputations. 

On an individual level, ethical leadership reflects positively on a leader’s personal brand, which can open up opportunities for career advancement. Leaders who demonstrate strong ethical values can develop a positive reputation that can be beneficial both professionally and personally. A leader’s ethical behaviour can create a lasting impression on stakeholders, which in turn can lead to greater trust and respect from the public. Conversely, a leader who fails to uphold ethical norms can suffer severe reputational damage, potentially jeopardising their career and personal credibility. 

One example of unethical business practices impacting businesses was in 2010, when the Deepwater Horizon oil rig, operated by BP, suffered a catastrophic explosion, resulting in one of the largest environmental disasters of all time.  BP was criticised for cutting corners on safety measures, leading to the explosion, loss of lives, and 4.9 million barrels of oil spilling into the Gulf of Mexico. This unethical decision had severe financial and reputational consequences for BP including a drastic drop in their share price, and being made to pay billions of dollars in compensation. The reality is, unethical behaviour can have serious consequences for businesses – both reputational and financial. Companies involved in misconduct face the risk of hefty fines, bad publicity, legal actions, boycotts from customers, and the loss of investors’ trust. Ethical leadership doesn’t have to be as complicated as it sounds – the controversy faced by BP shows us what not to do, but ethical leadership can consist of small, daily actions, not just periodic and on a large scale.

Businesses that uphold ethical leadership principles are seen as trustworthy entities, attracting a loyal customer base, dedicated employees, and potential investors. The company’s reputation for ethical conduct can differentiate it from competitors, particularly in industries where customers are becoming increasingly conscious of corporate ethics. However when businesses fail to exhibit ethical leadership, they may face reputational damage, which could result in loss of consumer trust, reduced employee morale, and decreased profitability. Therefore, ethical leadership is not just a moral imperative; it is a strategic necessity for businesses that want to thrive in today’s increasingly socially conscious marketplace.

About the Author: The Leadership Sphere

The Leadership Sphere helps small and medium businesses and larger organisations in Australia, in creating value through leadership. The Leadership Sphere provides a humanistic approach to the way it delivers leadership, performance and coaching services. We work with leaders and senior teams who need to gain increased clarity, build capability and ensure contribution at every level in the organisation, and enable a safe, inclusive and  high trust organisation.