Why Ethical Leadership and Conduct Matters

I recently had a coffee and discussion with a leader in technology innovation, we were discussing why doing the right thing, morally and ethically, in leadership can be the right thing to do.

As the coronavirus COVID-19 has seeped its way more deeply across the world, many tech companies are asking employees to stay at home. And work, of course.

The case in the matter we were discussing was prompted by Microsoft and their CEO, Satya Nadella, in an act of intelligent goodwill, Microsoft will continue to pay employees. No, not a reduced rate, but their full regular pay.

Have you ever noticed how decisions are so much harder when you try to do the right thing and make an ethical decision, rather than focusing on what’s easiest or most practical? This is mainly because “the right thing” means different things to different people.

The world of business is full of ethical dilemmas, from where to direct scarce resources to serving the local community. Every leader will make ethical decisions, whether or not they acknowledge them at the time. But the decisions they do make can determine whether their leadership is based on an ethical framework or not.

Yet making ethical business decisions is increasingly important in today’s world. News of a leader’s questionable behaviour can spread around the globe in seconds, and bring down an entire organisation.

Employees who trust their immediate boss have higher job satisfaction, more commitment to the company, and feel they are treated more fairly in processes and decision making. Employees who trust their business leaders feel more committed to the company, feel the organisation supports them more, and feel that leaders fairly allocate resources, treat others well, and follow procedures transparently.

Trust works in different ways, depending on where you are in the organisation. For this reason, C-suite leaders should consider focusing on different elements of trust-building than managers closer to the bottom of the organisational hierarchy.

Humans are social creatures and both historic and current findings confirm that strong, supportive communities have higher survival rates, prosper better and enjoy more content and fulfilled lives. This is also true of business communities.

Leaders today are constantly in the spotlight and are often called upon to earn authority without control. Economic and social change demands leadership by consent rather than by control. What we perceive as good leadership tends to be created by leaders, followers, and the context and purpose of the organisation, thus it is a collective rather than individual responsibility.

Trust is a key ingredient of successful leadership. Trusted leaders are the guardians of the values of the organisation. Trust can release the energy of people and enlarge the human and intellectual capital of employees. In a trusting environment when we are committed to our shared purpose we play active roles both as leaders and as followers.
We talk a lot about trust these days because it tends to be a precious and scarce resource.

When we listen to the emerging needs of the workplace we step into the most relevant and useful roles and make relevant and valuable contributions both when leading and when following. Members of organisations who are sensitive to people’s reactions trust themselves and each other. They build and nurture trusting relationships and allow the future to emerge organically.

No heroic leader can resolve the complex challenges we face today. To address the important issues of our time we need a fundamental change of perspective. We need to start questioning many of our taken for granted assumptions about our business and social environments.

My business partner, Mark Herbert, recently shared The Edelman Trust Barometer with me and discussed the findings of the report, The report found that people are suspicious of change and innovation when they do not see the long-term benefits for all stakeholders. Fifty-four per cent of respondents believe that business growth or greed/money are the real impetuses behind innovation, and only 27% say that business innovates because of a desire to make the world a better place or improve people’s lives.

Leaders need to treat employees as adults, openly and honestly discuss the organisation’s challenges and take responsibility for their decisions and actions.

Leaders also need to listen more. The trouble is that most are unable to recognise, let alone change, the structural habits of attention in themselves and in their organisations to drive key factors such as trust. Learning to recognise our blind spots in any business culture requires a particular kind of deep personal and collective listening.

The benefits of connecting mind, heart and our senses are well documented both in scientific and popular publications. Integrating such practices into the organisational culture increase not only the level of wellbeing but also the levels of trust, honesty and openness of communication.

In spite of decades of discussions and research on ethical leadership, the available information is largely anecdotal and remain highly normative until very recently little has been done to systematically develop an ethical leadership construct necessary for testing theory about its origins and outcomes with business.

This has to be questioned, why boards, CSuite and senior managers have never questioned the moral and ethical standing of organisations, why corporate governance is only now an inclusion around the values and standing of the largest component in business, people.

It is particularly in times of corporate scandals and moral lapses that the broader public and interest groups in a corporation ask themselves the fundamental question, namely, who are corporate managers and are they ethical.

Being ethical is about playing fair, thinking about the welfare of others and thinking about the consequences of one’s actions. However, even if one grows up with a strong sense for good or bad, the bad behaviour of others can undermine his ethical sense as well.

Ethical leaders think about long-term consequences, drawbacks and benefits of their decisions. For the sake of being true to their own values and beliefs, they are prepared to compete in a different battle on the market, where the imperative is: Do what is right.

Leaders serve as role models for their followers and demonstrate the behavioural boundaries set within an organisation. The appropriate and desired behaviour is enhanced through culture and socialisation process of the newcomers. Employees learn about values from watching leaders in action. The more the leader “walks the talk”, by translating internalized values into action, the higher level of trust and respect he generates from followers.

When leaders are prepared to make personal sacrifices for followers or the company in general for the sake of acting in accordance with their values, the employees are more willing to do the same.

Unethical behaviour by business damages not only a company’s health but also public virtues. Reputational capital is difficult to repair once it has been damaged.

One of the reasons why many corporates that still behave badly, with leaders that don’t take ethics seriously, is that sometimes shareholders and boards place singular emphasis on competence and quantitative results at the expense of good behaviour. There are leaders who are competent technically, who get the job done, and show good quantitative results, yet are found wanting when it comes to ethics.

The rise of ethical leadership can be traced back to the scandals inside the corporate world in recent decades. The fall of big organisations such as Enron and the Lehman Brothers has partly been blamed for unethical behaviour and therefore, there’s been a call for more ethical leadership to appear.

Ethical leadership is considered to be one solution for creating a balance between the wellbeing of the subordinates and the wider community, and the organisation’s profitability. The theory understands the importance of trust and good relationships. In essence, modern ethical leadership theory places importance on the idea of service.

Ethical leadership often takes the form of three separate approaches to leadership. The three have historical and philosophical foundations and all three emphasise different aspects of decision-making.

The first approach is Utilitarianism Theory, which sees the leader maximizing the welfare of the subordinates. The focus is on ensuring the subordinates feel good and are happy, before deciding on an action.

The second approach focuses on the Libertarianism Theory. The leader is to protect the freedom of the individuals as the main concern. If an action or decision would restrain the subordinate’s freedom, then the leader would not proceed with the course of action.

The third approach is an approach to leadership emphasizing Immanuel Kant’s Ethical Theory of doing the right thing. The approach to decision-making is, therefore, looking at the proper means.

Moral and ethical actions come from understanding what are the rules and customs of the organisation and following these. The idea is that by understanding these common, agreed values, a leader can make the right decisions.

Final thought, ethical leadership should also be understood through the lens of its influence over other leadership theories. Being ethical is a core part of other leadership styles and a strong ethical foundation is required for styles such as transformational and charismatic leadership.
While the strong ethical outlook is required for these leadership theories, ethical leadership places the biggest emphasis on implementing ethical values to every aspect of leadership.

Can a company be successful and competitive on the market and at the same time ethical? Akers believes that market success and ethical conduct go hand in hand: “Ethics and competitiveness are inseparable. We compete as a society. No society anywhere will compete very long or successfully with people stabbing each other in the back; with people trying to steal from each other; with everything requiring notarized confirmation because you cannot trust the other fellow; with every little squabble ending in litigation; and with government writing reams of regulatory legislation, trying business hand and foot to keep it honest”

Pope Benedict XVI once said:

“To me, it really seems visible today that ethics is not something exterior to the economy, which, as a technical matter, could function on its own; rather, ethics is an interior principle of the economy itself, which cannot function if it does not take account of the human values of solidarity and reciprocal responsibility.”

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