When it comes to inspiring, innovative executive leadership, purpose-driven, ethical decision-making is vital. Crossing subtle ethical lines is a slippery slope that can lead to flagrant ethical violations and a toxic work culture.
Doing “the right thing” may be easy to discern when looking at the big picture. For example, corporate scandals such as Bernie Madoff’s ponzi scheme or the Lehman Brothers’ large role in the subprime mortgage scandals of 2008 clearly crossed an ethical line.
However, what does ethical behavior mean when defining necessary executive leadership characteristics? What should you look for in your next CEO, CIO, COO, and other C-suite positions? Why are ethics so vital to successful leadership?
Let’s take a look at ethical leadership and the core characteristics of ethical leaders.
What is ethical leadership?
Ethical leadership in business prioritizes integrity, morals, and value-based decisions, and can be integrated into many different leadership styles. Ethical leaders consistently “do the right thing,” prioritize fair and equal treatment, promote honest and open communication, lead by example, and put people over profits.
A survey from LRN found that companies with strong ethical cultures tend to outperform their competition by at least 40%. Ethical leadership can inspire your workforce to respect their teammates and to ensure their professional actions align with the foundational principles of your organization.
Why ethical leadership is important in business
Ethical leadership offers vital benefits for businesses of any size and in any industry. Principled leaders can establish credibility and trust among shareholders, board members, employees, and consumers.
Other short and long-term benefits of ethical leadership can include:
- Brand Trust
- Compliance
- Community Trust
- Consumer Loyalty
- Financial Stability
- Healthy Workplace Culture
- Increased Profitability
- Positive Press and Public Relations
- Protection Against Liability Risk
- Talent Acquisition and Retention
Ethical leadership can support and sustain your business during a time of crisis, and can help to ensure your organization survives relatively unscathed. When your company is known for ethics and value-driven policies, it can help you to attract top tier C-suite candidates as well.
The five Ps of ethical leadership
The framework for transparent ethical leadership often includes five foundational principles referred to as the “five Ps.” By ensuring these principles are in place with your executives, you might find your business leadership team consistently remains calm under pressure and leads with innovation and clarity.
The five Ps include:
- Patience:
Taking time to make thoughtful decisions rather than quick, reactive choices can establish growth and sustained success.
- Persistence:
Persistence in ethics, even when faced with challenges, can pay-off in dividends.
- Perspective:
Ethical leadership promotes active listening and considers all perspectives and possible outcomes when making vital decisions.
- Pride:
Leading with dignity, respect, and self-confidence allows ethical leaders to take pride in their decision-making.
- Purpose:
Purpose-driven businesses support clear, measurable and value-based goals and use these goals to inform their actions. A 2020 study from Zeno found that consumers are four times more likely to purchase from purpose-based companies and 4.1 times more likely to trust a purpose-based business.
Real-life examples of ethical leadership
Some of the most successful corporations are well-known for ethical leadership and use ethics as the basis for their strategic business plans. Popular examples include:
- CostCo:
CostCo adheres to its employee-centric values and remains committed to ethical leadership through paying high wages, offering comprehensive employee benefits, and a focus on sustainable sourcing.
- Deere & Company (John Deere):
The long-standing agricultural brand uses purpose-driven values to inform business practices, including an emphasis on occupational safety and a significant reduction of CO2 emissions.
- Ecolab:
Ecolab’s ethical leadership is evident in practices that include diversity, environmental stewardship, and support of labor rights.
- Patagonia:
The outdoor outfitting giant remains committed to conservation and environmental sustainability.
- PepsiCo:
PepsiCo focuses on responsible business practices and integrity. The company also prohibits bribery and corruption from influencing their strategies.
10 core characteristics of ethical leaders
Ethical leaders are often transformational leaders as well. Ethics provide a foundation that allows these leaders to inspire change and growth. Ethical leaders may display a variety of commendable characteristics. However, every ethical leader will have the following core qualities in common.
Accountability
An ethical leader owns their mistakes, takes responsibility for their actions, and celebrates their victories. Accountability starts with leadership but is fundamental for all employees. For example, ethical leaders will not blame external circumstances or the actions of others for failures, and will hold themselves and those on their team accountable for their choices.
Active Listening
An ethical leader considers all viewpoints and perspectives and makes their team members feel valued and heard. Active listening skills in ethical leadership can create a productive and thriving work culture.
Consistency
Ethical leadership prioritizes leading by example and actionable behavior. Ethical leaders will never live by a “do as I say, not as I do” mantra. These leaders hold themselves to the same standards they expect their team to follow.
For example, a CEO who expects their employees to adhere to a code of conduct that includes treating all coworkers with respect, will not berate or personally insult an employee in front of the entire team.
Courage
An ethical leader will always “do the right thing,” even if it’s unpopular. For example, if a company client demonstrates unethical and abusive behavior toward employees and wants your company to cut legal corners, an ethical leader may sever ties with the client, even if the client’s contract produces significant revenue.
Empathy
Ethical leaders display empathy by compassionately considering all sides in every situation and understanding the needs of those who their decisions will impact.
Encouragement of Initiative and Innovation
Ethical leadership supports collaboration and rewards team members for initiative. Under an ethical leader, employees feel empowered to share innovative ideas and solutions. Morale increases when employees feel valued for their contributions.
Fairness
An ethical leader doesn’t play favorites and treats all team members equally. Value-driven equality and diversity eliminates ethnicity, gender, and nationality biases, and more. Preferential treatment never plays a role in an ethical leader’s choices. This decreases competition among employees and supports collaboration.
Integrity
Ethical leadership focuses on integrity to build trust and credibility. A leader who displays integrity through every decision can inspire team members to consistently do the right thing and work with honesty.
Open Communication
Open communication allows team members to voice their concerns, their ideas, and their wins. An ethical leader shares all pertinent information with their team and clearly defines expectations, which empowers employees to make decisions and focus on team contributions, and increases productivity.
Transparency
Transparency supports all of the vital characteristics needed in ethical leadership. A leader that demonstrates transparency promotes accountability, credibility, and trust with their workforce, shareholders, and the public.
Transparency empowers executive decision-making and reflects alignment with purpose-driven values. A transparent leader inspires the free sharing of Information, collaboration, integrity throughout an organization, and trust.
Connect with Y Scouts
If you’re ready to find your next executive with ethical and transactional leadership characteristics, Y Scouts can help. A small but mighty boutique executive search firm, we use a purpose-based approach to find the right executives who can immediately contribute to your needs and lead your organization into a thriving future.
Our proprietary Leadership Model for Hiring on Purpose allows us to find purpose-driven, ethical leaders to contribute to work that matters. Connect with Y Scouts today.
