How ethical leadership fosters better organisations

Ethical leadership is always in demand. That’s because there are always new issues arising that challenge our ethics. LEAD has written previously on the risks that AI technology presents to recruiting processes. Political philosopher Dr Vafa Ghavazi agrees, and argues in an interview with the Australia and New Zealand School of Government (ANZSOG) that 'the question of [AI’s] ethical design and development, as well as… their deployment, is becoming increasingly relevant…'

He cautions against viewing this issue, and others, as simply the responsibility of government. 'From modern slavery in global supply chains to the integrity of financial markets, legislation and regulation can provide a framework for responding, but market players must see themselves as part of supplying solutions too'.

The benefits of ethical leadership

Being an ethical leader is important not just for wider society, however, but also for one’s own organisation. 

Ethical leaders build trust. They encourage open communication and expect others to be ethical as well. According to organisational trainers KS Training, 'academic research find[s] a link between ethical leadership and positive organisational outcomes, such as lower turnover rates and higher employee satisfaction'.

Ethical leaders build strong organisations by creating an environment where employees feel secure, valued, and respected – and can therefore do their best work. So it’s no surprise that, as per a Victorian Government blog on ethical leadership, '82% of professionals say they’d take a lower-paying job to work for an organisation with more ethical business practice'. 

So how exactly do ethical leaders improve their organisations?

Ethical leaders build trust

By demonstrating honesty, transparency and integrity, ethical leaders build trust among their teams. This trust is also built on a reciprocal basis: if you want others to trust you as an ethical leader, you must also show them respect by listening closely when they speak; sharing information freely; demonstrating empathy when they're struggling; asking questions rather than telling them what to do; and being open about mistakes so that others know they don't need perfection in order for their ideas to matter.

Ethical leaders encourage openness

By demonstrating transparency, ethical leaders encourage openness and honesty in their employees, which makes it easier for everyone to be honest with each other. This creates an environment where people can do their best work and feel confident that they will not be judged or penalised for speaking up about problems or concerns.

Part of transparency is accountability, which means being honest about what you know or don't know, taking responsibility without blaming others when something goes wrong, admitting mistakes without making excuses for them, apologising when necessary and making amends whenever possible – even if it means giving up some power or control over a situation.

Ethical leaders encourage others to be ethical

Ethical leaders serve as role models. They do not just talk about the importance of ethics; they live it every day. This encourages others to follow their example. People feel reassured to act because they can see clearly what is expected.

Ethical leaders create more creative teams

Research by the University of Melbourne suggests that ethical leadership helps to foster creativity. The authors of the research describe how this may be contrary to traditional intuition, but that 'leaders shouldn’t fear that setting moral values and norms can act as a constraint on their teams’ creative work because they can still positively impact team creativity by strengthening team members’ collective attachment to the team'. Thus collective attachment is created by the example of trust and integrity set by the leader, which in turn encourages team members to maintain their own integrity and trust in each other, strengthening team cohesion.

Investors are looking for ethical leadership

Investors are increasingly looking beyond simple financial returns, instead turning their attention to things like environmental, social and governance (ESG) indicators. KS Training draws the connection by commenting that 'investors look to see whether a company stands behind its values and principles, and ethical leadership helps companies achieve this'. They suggest that investors may ask questions including:

• What are the CEO’s core beliefs?
• How does the CEO treat their colleagues?
• What is the company doing to support diversity?
• How well does the company live up to its code of conduct?

The need for a system of ethics

Many leaders may well understand the need to be ethical, but this may not always translate into a system of ethics applied throughout a company. Consulting firm BEXceptional illustrates the difference: 'leaders generally make ethical decisions and tackle ethical dilemmas using… their unique values and subjective views, informed by organisational culture and policy. This approach, though important, can often miss a more objective, rational, and systemic approach to appropriate ethical decision-making… It also often overlooks the importance of the socio-cultural context within which the… organisation operate[s]'.

This approach is seconded by Cheryl Hayman, Non-Executive Director of AI Media Technologies, Beston Foods, and Gore. Writing for Digital Nation, she argues that 'while businesses understand that integrity is crucial for success persist', and that 'perhaps it is time for board to consider an integrity strategy'.

Ethical leadership, then, is not just about personal behaviour, but about the measures put in place to develop ethical organisations. 

Ethics training

Research cited by the University of Notre Dame clearly shows that ‘Ethics training really can improve the behaviour of working professionals.’ Implementing ethics training programs across your organisation can thus have a positive impact. 

Middle managers play an outsized role in shaping organisational culture. Targeting them for ethical leadership programs can thus have disproportionate benefit. According to BEXceptional, such programs can have a two-fold focus. First, increasing individuals’ 'ethical sensitivity, and, second, training in how to utilise ethical decision-making models. 

Developing an ethical decision-making model

Having a standard decision-making protocol for all employees to follow can help reinforce ethical behaviour. Such a model could take the following form:

1. Define the stakeholders involved in a situation and the socio-cultural context
2. Define the central ethical issue and possible courses of action
3. Review relevant professional standards, ethical guidelines, contractual obligations, laws and regulations that must be considered
4. Decide on the ethical principles to apply to the situation
5. Consult with experts and relevant stakeholders
6. Make a decision taking into account all information
7. Document the process
8. Review after the fact

An effective way to lead

Ethical leaders are effective leaders. Ethical leadership is good for the organisation, it's good for your community and it's good for you. Ethical leaders are able to inspire both their employees and the public at large by setting an example of what can be achieved when we put our best foot forward. They create change through positive influence rather than negative influence – which means that ethical leadership doesn't just benefit those who are directly involved but also has ripple effects that extend far beyond them.