Ethical leadership is more than just a buzzword – it’s the foundation of a thriving corporate culture.
When leaders embody ethical principles, they set the tone for integrity and trust throughout the organisation. This commitment to ethical standards not only creates a positive workplace but also drives long-term success.
In this blog, we’ll explore the key aspects of ethical leadership, its impact on corporate culture, and how management training can help leaders integrate these values into their daily practices.
Leadership ethics refers to the principles guiding leaders in making decisions that affect their organisations, stakeholders, and communities.
It is the moral compass that ensures leaders do not just focus on results but on how those results are achieved.
Leadership ethics encompasses fairness, transparency, and accountability—pillars that support trust in leadership.
“Leadership is not about being in charge. It’s about taking care of those in your charge” – Simon Sinek, author and founder of The Optimism Company.
Leadership ethics is the practice of governing with integrity and moral clarity.
It involves aligning personal values with organisational goals, ensuring that decisions are made not just for short-term gains but with long-term ethical considerations in mind.
Areas of special ethical concern include improving worker conditions, minimising supply chain exploitation, keeping prices (of vital goods) fair and affordable, and creating a diverse workforce.
Such a leadership approach creates a culture where employees motivation is high and they feel secure, respected, and act with integrity.
The founders and CEOs of successful companies imprint their personal ethics on their brands, whether they intend to or not.
Compare the different corporate cultures of X (nee Twitter) under Jack Dorsey and Elon Musk.
However you feel about Musk’s attitudes to X’s employees, it is undeniable that when he took over the successful social media channel, the corporate culture changed, almost overnight (and many argue, not for the better).
Leaders can imprint their values and priorities on corporate culture in several ways:
“Leadership is not a position or a title, it is action and example” – Cory Booker, US Senator.
Let’s look a little more closely about how this alignment of personal values and corporate culture happens, and what it means.
Corporate culture is the shared values, beliefs, and behaviours within an organisation. Ethics are the personal beliefs underlying that culture.
Examples of corporate culture that might stand out as unique or unusual might include:
We’ve included the last two to demonstrate that ethics and corporate culture don’t necessarily equate to beliefs we would all agree are “good.” However, if we are talking about ethical leadership in the commonly agreed sense, it will generally include some of the following elements:
Companies stress some or all the above ethical strands, as embodied by their leaders’ priorities.
Ethical leadership plays a critical role in shaping corporate culture by modelling ethical behaviour, setting clear expectations, and enforcing corporate values.
Leaders who demonstrate ethical standards create a ripple effect, influencing their teams and establishing an organisational culture rooted in trust, integrity, and accountability.
Trust in leadership is built through consistent ethical behaviour. When leaders are transparent, make ethical decisions, and communicate openly, they create a climate of trust within the organisation.
Consistency is vital; ensuring that whatever ethical priorities you follow, these are applied consistently. It would make no sense to have a focus on environmental responsibility, for instance, if you develop a product line which is heavy on plastic packaging.
Trust is important both among employees under your leadership, and customers who favour a brand because it aligns with their own values. In terms of leading employees, it is important to remain consistent in your application of ethical principles.
Consistent ethical leadership ensures that employees are treated with respect, which enhances loyalty and reduces turnover, ultimately contributing to a stronger corporate culture.
“There is no checkbox for ethical leadership. It is an ongoing individual and organisational journey.” – Linda Fisher Thornton, Founder & CEO, Leading in Context.
If a corporate leader wishes to maximise their adherence to ethical working practices, there are several leadership styles they can adopt. Let’s turn to those next.
Ethical leadership can manifest through various leadership styles, each promoting ethical behaviour in different ways:
Note that none of these styles say anything about the specific ethical beliefs of the leader. They are simply different ways of infusing or promoting those beliefs within corporate culture.
However, these styles of leadership tend to be favoured by ethical leaders because they involve other voices in the decision-making process, or at the very least, are highly consultative.
Ethical decision-making is the process by which leaders evaluate the moral implications of their choices, ensuring that decisions are aligned with the organisation’s values.
This approach requires leaders to consider not only the potential outcomes but also the ethical impact on stakeholders, including employees, customers, and society at large.
This can be a complex process, involving research, consultation, and the weighing up of different courses of action to choose the more ethical course.
As you might expect, this is not an easy, inexpensive, or fast style of leadership. However, it can offer a range of compensatory benefits. Let’s look a little more closely at how ethical leadership impacts organisational performance.
However challenging it may prove, ethical leadership significantly impacts organisational performance in several positive ways.
It creates an environment of trust, accountability, and integrity. These elements contribute to employee satisfaction, lower turnover rates, and increased productivity, ultimately enhancing the company’s bottom line.
Increasingly, these benefits convey competitive advantage too, as well as shaping a more sustainable business model. Let’s look at those aspects next.
Ethical behaviour in business is not just a moral obligation; it is a competitive advantage. Companies with strong ethical leadership tend to attract and retain top talent, build stronger customer loyalty, and enjoy better relationships with stakeholders.
Ethical companies are also better positioned to avoid scandals and regulatory penalties, leading to a more stable business environment.
“Integrity is doing the right thing, even when no one is watching.” – Charles Marshall, author of Shattering the Glass Slipper.
Here are six ways ethical leadership can increase competitive advantage:
Almost every employee would prefer to believe they work for an ethical company. It’s good for the bottom line too.
Writing in Forbes magazine in 2023, Ryan McGrath wrote “Organisations that prioritise ethical behaviour tend to attract loyal customers and retain talented employees, ultimately leading to improved financial outcomes.”
In other words, having satisfied loyal customers and employees who are advocates for their employers’ ethical beliefs, make for a company ahead of the curve.
A sustainable corporate culture is one that thrives on ethical behaviour, long-term vision, and social responsibility. It doesn’t adopt these principles because they are fashionable or expected; it does so because the culture’s leaders really believe in the principles they espouse.
Typically, ethical leadership promotes sustainability by prioritising the well-being of employees, communities, and the environment over short-term profits.
Let’s turn to some case studies and find out how different leaders have succeeded in imbuing their companies with an ethical vision.
There is no single way to be an ethical leader. We’ve chosen nine different leaders to demonstrate different approaches to ethical leadership.
Patagonia is renowned for its ethical leadership, focusing on environmental sustainability and social responsibility. The company sets a high standard in the industry by integrating eco-friendly practices into its business operations, showing that profitability and sustainability can go hand in hand.
Katrina Lake, founder of Stitch Fix, revolutionised fashion retail by blending data science with personalised styling. Under her leadership, Stitch Fix prioritised workplace diversity and ethical practices, showcasing how technology and sustainability can coexist in the fashion industry.
Richard Branson, founder of Virgin Group, exemplifies ethical leadership by promoting corporate responsibility across Virgin’s companies. Through initiatives like reducing Virgin Atlantic’s carbon footprint, he demonstrates that businesses can thrive while committing to environmental sustainability and fair treatment.
Unilever has made sustainability a core part of its business strategy, embedding ethical leadership into every aspect of its operations. The company focuses on reducing environmental impact and improving social welfare, proving that large corporations can be both responsible and successful.
Starbucks has established a reputation for ethical leadership by prioritising employee well-being, fair trade sourcing, and community involvement. The company’s commitment to these values has helped it build strong customer loyalty and a positive brand image.
Ben & Jerry’s is known for its social activism, integrating fair trade, environmental responsibility, and social justice into its business model. The company has successfully combined profitability with a purpose-driven approach, setting a standard for ethical leadership in the food industry.
Sara Blakely, founder of Spanx, emphasises ethical leadership by supporting women in business and creating a positive corporate culture. Through transparency, employee well-being initiatives, and philanthropy, Spanx has grown into a successful brand while maintaining a strong ethical foundation.
Marc Benioff, CEO of Salesforce, leads with a strong commitment to corporate social responsibility, emphasising equality and sustainability. Under his leadership, Salesforce has become a pioneer in ethical business practices, balancing innovation with a dedication to social impact.
Arlan Hamilton, founder of Backstage Capital, champions diversity and inclusion in venture capital. Her leadership focuses on supporting underrepresented entrepreneurs, particularly women, people of colour, and the LGBTQ+ community, highlighting ethics in promoting equity and innovation in the startup world.
Looking more closely at the leaders explored above, what lessons can we derive from their leadership styles?
Here are a few examples from these and other ethical leaders:
Paul Polman advocated for corporate responsibility by focusing on long-term sustainable growth rather than short-term profits. His leadership at Unilever set a precedent for balancing financial performance with environmental and social impact.
Lesson: Prioritising long-term social and environmental impact can make a business more viable.
Howard Schultz, former CEO of Starbucks, prioritised ethical sourcing and community involvement. Under his leadership, Starbucks became a model for corporate social responsibility, demonstrating that businesses can thrive while supporting ethical practices and local communities.
Lesson: Promoting the ethical treatment of suppliers can enhance a company’s corporate reputation, and continuing success.
Sara Blakely, founder of Spanx, built her company by prioritising employee well-being and giving back to the community. Her focus on empowering women through leadership, philanthropy, and a positive corporate culture exemplifies ethical entrepreneurship that leads to both personal and professional success.
Lesson: Giving weight to employee wellbeing improves both corporate morale, and individual employee trust and performance.
Yvon Chouinard, founder of Patagonia, led with a strong focus on environmental activism, proving that ethical leadership can coexist with profitability. His commitment to sustainability has made Patagonia a pioneer in responsible business practices, inspiring others to prioritise the planet.
Lesson: There is no necessary conflict between the profit motive and environmental responsibility.
Jerry Greenfield and Ben Cohen, co-founders of Ben & Jerry’s, built their brand by aligning corporate values with social causes. Their leadership demonstrates how ethical business practices like fair trade and sustainability can drive both financial success and social change.
Lesson: Leaders can promote their ethical beliefs and causes without damaging the bottom line.
Katrina Lake, founder of Stitch Fix, showed that leaders can prioritise inclusion and sustainability while scaling a successful business. Her focus on ethical decision-making, diversity in hiring, and customer-centric practices illustrates how business success can be aligned with social responsibility.
Lesson: Companies can grow while maintaining ethical employee practices including inclusion and sustainability.
Marc Benioff, CEO of Salesforce, advocates for “stakeholder capitalism,” prioritising employees, communities, and the environment alongside shareholders. His leadership highlights the importance of leveraging business success for social good.
Lesson: Ethical leadership can create long-term value for all stakeholders.
Whitney Wolfe Herd, founder, and CEO of Bumble revolutionised the online dating industry by embedding respect, equality, and safety for women into the platform. Her leadership underscores the importance of incorporating ethical values into product design and company culture, particularly in industries that shape social behaviour.
Lesson: Ethical leadership can and should infuse product and service design.
Richard Branson, founder of Virgin Group, emphasises a “people-first” approach, believing that happy employees drive business success. His philosophy, “Take care of your employees, and they will take care of your business,” demonstrates the value of trust, empathy, and ethics in leadership.
Lesson: Employee satisfaction and company growth can go together.
“The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” – Martin Luther King.
Ethical leadership, while beneficial in a host of diverse ways, does come with challenges.
The largest two issues ethical leaders face are the moral dilemmas they may occasionally encounter and the need to balance profitability with ethical behaviour.
Ethical leadership is not just about doing the right thing when it’s easy—it’s about maintaining integrity and a commitment to core values, even when it could come at a cost.
Let’s finish by looking at these two issues in more depth.
Leaders often face ethical dilemmas where the right course of action is not always clear, and competing interests make decision-making difficult.
Ethical leadership involves navigating these dilemmas through transparent decision-making, prioritising open communication with stakeholders, and consistently aligning actions with the organisation’s core values.
Leaders may need to choose between equally important outcomes, such as fiscal interests and social responsibilities.
Addressing these situations requires a deep understanding of the company’s ethical framework and the courage to make decisions that may not be universally popular but are rooted in integrity.
Ethical leadership does not mean sacrificing profitability, but it does mean finding a balance between financial performance and moral obligations.
Leaders must carefully evaluate how business strategies impact not just the bottom line but also the environment, workforce, and broader community. This requires a long-term view, where profitability is linked to sustainable, ethical practices.
Ethical leaders must seek innovative ways to drive growth while staying true to core principles. They must prove that financial success and social responsibility are not mutually exclusive but can reinforce each other for long-term competitive advantage.
“A leader is one who knows the way, goes the way, and shows the way.” – John C. Maxwell, author of Leading the Charge of Change – A Vision for Childhood in 2040.
Ethical leadership is essential for creating a corporate culture of trust, accountability, and integrity.
Ethical leadership is essential for creating a corporate culture of trust, accountability, and integrity. By embedding ethical standards into leadership practices, organisations can create an environment where employees thrive, customers remain loyal, and stakeholders trust the company’s direction.
While this path may not always be the easiest, it is undoubtedly one of the most rewarding – leading to a more engaged workforce and a resilient, purpose-driven organisation.
Ready to take the next step in building ethical leadership in your organisation?
Explore our Management Courses and Team Leader Courses to strengthen your foundation, or dive deeper with our Advanced Management Skills Course.
For a comprehensive approach to leadership growth, consider our Leadership Development Programmes designed to equip you with the skills to lead with integrity and vision.
Thanks again,
Sean
Sean McPheat
Managing Director
Updated on: 15 October, 2024
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