Leading With Integrity: The Impact Of Ethical Leadership On Business

A team leader

Outstanding leadership is increasingly becoming critical in the ever-changing social and business landscape. Leaders influence the success of businesses and shape their ethical culture. Ethical leadership is influential both in organizations and society at large, and ethical leaders serve as an example to other people, helping to create a culture of trust, integrity, transparency, and ethical decision-making. But what exactly is ethical leadership, and why is it important? Find out more as we delve deeper and explain ethical leadership, why it’s essential, and the role leaders play in organizational change.

What is Ethical Leadership?

The Center for Ethical Leadership defines ethical leadership as the conscientious implementation of a set of values. This entails demonstrating good conduct based on recognized values and principles. An ethical leader stands up against wrongdoing and is an excellent example to colleagues and the rest of the organization. Principles governing ethical leadership include integrity, respect, justice, community, and honesty.

Establishing an Ethical Foundation

Ethics are moral rules and values that dictate a person’s conduct or behavior. Everyone has unique ethical foundations. These foundations can be influenced by family, school, communities, or through traveling and exploring different global experiences.

Having a strong ethical foundation is critical, especially for leaders who work and impact individuals locally and globally. How you act, what you say, and how you say it affects the people around you, including employees, colleagues, and other stakeholders. Leaders are in charge of innovation, providing their perspective and creating strategies for success. Enrolling in the Marymount University DBA degree online is an excellent way to understand the current and future challenges you’re likely to encounter as an ethical leader. The course helps you understand the interconnection of technology, data, innovation, and business. It also equips you with vital skills needed to make data-driven decisions.

At the core of ethical leadership is a set of values that determine the moral values that define a leader’s actions and decisions. These key principles that dictate ethical leadership include:

Honesty

Being honest and open defines a good leader and helps build trust with the people around you. When you are perceived to be an honest person, people will more readily view you as trustworthy and dependable. That means you need to be accountable for your decisions and deliver on what you promise. Ethical leaders act with integrity in all their interactions and decisions, but they also know when and how to present certain information.

Respect

As an ethical leader, you need to respect the opinions, rights, and dignity of your employees, colleagues, stakeholders, and everyone around you. While you may not agree with everyone’s opinion, acknowledging people for their views and respecting them makes a difference. Encouraging your employees to realize their values and purpose through mentorship also ensures that ethical qualities spread throughout a business.

Justice

Treating everyone equally should be a top priority for ethical leaders. Avoid offering special treatment to certain individuals unless there are circumstances that warrant it. Nonetheless, there should be guidelines regarding the consistent treatment of all people in an organization.

Building a community

Ethical leaders help to build community by considering the purpose and values of their employees and that of the organization. A strong sense of community ensures that the welfare of those around you is prioritized which builds employees’ self-esteem and leads to increased productivity. Leaders should encourage their employees to participate in empowerment activities, team building, and mentorship to reinforce an ethical culture in their organization.

Establishing a solid ethical foundation also entails being competent. Learning how to handle different types of moral problems that may crop up is essential. Critical decision-making and problem-solving skills define an ethical leader. Using your judgment and reflection to make ethical decisions is a skill every leader should cultivate in their role.

Why is Ethical Leadership Important?

Ethical leadership is significant in modern times as it not only impacts employee engagement but also influences business success and societal well-being. Here’s more on the importance of ethical leadership.

It Inspires Trust and Credibility

Ethical leadership builds trust and credibility among employees, clients, and other stakeholders in an organization. When leaders exemplify ethical conduct, they help establish loyalty, build trust, and strengthen relationships.

By the employees perceiving their organization as ethical and fair, they are assured of fair treatment and trust the vision/mission of their company. With that trust, they become more open to communication and organizational changes that will positively impact their work. It also helps build collaborative teamwork and pioneers long-term business partnerships. Ethical leaders can inspire and build trust in an organization through their ethical conduct and by practicing social responsibility.

Builds a Positive Work Culture

Employees are more likely to follow their leader’s actions rather than their words. As an ethical leader, you should practice what you preach by determining what ethical decision-making entails. That involves weighing your moral principles and understanding what the law says about certain decisions and the long-term consequences of your choices. Leaders create a culture of integrity and fairness that inspires employees and other people to follow suit and exemplify good ethical behavior. Ethical leadership empowers employees to make ethical decisions, which further strengthens the company’s overall ethical framework.

Additionally, ethical leadership impacts employees’ morale. Employees are able to be accountable for their work when they know they can trust their leaders. Through inspiration and motivation, ethical leaders act as role models, encouraging employees to follow similar values. This leads to increased productivity, higher job satisfaction, and loyalty.

Strengthen their Organization’s Reputation

An organization’s reputation is critical to its success. Ethical leadership acts as the foundation of a positive reputation and credibility. Leaders who practice ethical leadership gain the recognition of employees, clients, investors, and other stakeholders. Furthermore, by practicing ethical principles, leaders project a positive brand image, which attracts other investors and gives them a competitive advantage.

Ethical leaders also understand the need for ethical business practices. This can include participating in corporate social responsibility and other sustainable initiatives. Taking part in these initiatives shows a commitment to ethical decisions, and this is reflected in the community in which they are based. This translates to higher stability in the market as there is a reduced risk of sudden as a result of internal factors. Investors want stability and are happy to work with companies with a good reputation and stability.

Improved Relationships with Clients

When clients perceive your organization as ethical, they’re able to trust you to make good decisions and are more willing to do business with you. By consistently practicing ethical values, leaders can boost their organization’s credibility and encourage customers to be loyal.

Increases Profitability

A company renowned for upholding high ethical and moral standards attracts profitable business partnerships. People are more willing to invest in companies they deem worthy of trust and respect, as this typically means the company is stable.

Additionally, leaders may notice an increase in client base and customer loyalty when practicing ethical leadership. Ultimately, this translates to increased business profitability.

Leadership Styles that Foster Ethical Conduct

Leaders play a critical role in shaping the ethical conduct of an organization. Although leadership has previously been termed as having control and command, you’ll find that some leadership styles excel for their ability to foster ethical behavior among team members. These styles inspire trust and cultivate integrity among employees. Here’s a look at these leadership styles that foster ethical conduct.

Transformational leadership

Transformational leadership is a type of leadership that nurtures ethical conduct. It emphasizes helping people achieve their goals through motivation and inspiration. Transformational leaders instill ethical behavior in the culture of an organization to ensure individuals achieve their highest potential.

This leadership style also fosters the values of fairness, honesty, loyalty, and authenticity, which are guiding principles in ethical leadership. With their charismatic influence, transformational leaders practice what they preach by setting an example that elevates the importance of moral principles in making decisions.

Henry Ford is a great example of a transformational leader. He believed in doing more for the world than the world does for you. Ford valued human capital and always thought about his employees’ well-being. His great ideas revolutionized the transportation industry, and he was referred to as a man with a vision. 

Authentic leadership

Authentic leadership entails leaders being true to themselves and their values. It’s a leadership style that emphasizes consistency, transparency, and alignment between one’s words and actions, creating a powerful motivation for ethical conduct within a company.

Additionally, authentic leadership encourages followers to feel safe being themselves. It goes back to the famous saying: “One cannot lead others if one cannot lead themselves.” Authentic leaders exhibit self-awareness, which involves understanding their strengths, values, and areas where they fall short. By encouraging others to self-evaluate, leaders get to support their followers and create an environment of self-awareness that ensures ethical decisions are made.

A great example of an authentic leader is Warren Buffet. Over the years, Buffet has run Berkshire Hathaway with a straightforward approach to business, ensuring that its operations align with its values. He believes that the key to great leadership is the willingness to confess mistakes and invite others to do the same. Steve Jobs was also viewed as an authentic leader as he was honest with himself and others. He also worked and inspired others to work for the common good of Apple.

Servant leadership

Servant leadership is at the core of ethical leadership. This type of leadership prioritizes the well-being of others. Leaders who embrace this style of leadership build a culture of collaboration, empathy, and ethical decision-making.

These leaders work closely with their team members and listen to their concerns. Using this empathetic approach creates an environment that is free of judgment and bias. Leaders take time to determine the impact of their choices on their employees. With this style of leadership, both the leaders and team members understand that ethical considerations are critical to decision-making.

Another outstanding aspect of servant leadership is its community-centric approach. Servant leaders create an environment where ethical conduct is a shared value that binds everyone together. These leaders instill a sense of community as a way to achieve organizational success. Servant leadership helps to build stronger teams, cultivate a conducive working environment, and improve organizational agility.

Abraham Lincoln is a fantastic example of servant leadership. Lincoln was famous for being able to mingle with different types of people and for his desire to serve everyone, regardless of their background.

The Role of Ethical Leadership in Establishing Organizational Change

The business landscape is constantly evolving, and this has led to the need for more ethical leaders to establish organizational change. As an ethical leader, you’re not only involved in setting the ethical standards for your organization but also influencing employees’ attitudes and behaviors.

Ethical leaders also need to build trust through transparency as a way of establishing organizational change. Not everyone is open to change, and you may face resistance from some employees. Being able to build and maintain trust in such circumstances is critical. Honesty and transparency become essential tools that allow you to communicate to your employees the reasons behind the change. Take time to explain the impact to expect and the steps you intend to take to reduce any negative consequences.

Taking time to explain the factors driving change helps to build trust and inspire collaboration. By creating an environment where employees can openly communicate and voice out any concerns in the change process, leaders exemplify the principles of ethical leadership.

Adaptability is also a critical factor in organizational change. Ethical leaders have a role to play in cultivating a culture that’s open to change and adheres to ethical principles. It’s realizing that having employees adapt to these changes also involves communicating to them the need to have a mindset that values ethical behavior and not only adopting new technologies or processes.

With that, employees get to embrace organizational change as an opportunity for growth and not a threat. Promoting a culture of ethics and adaptability also involves creating an environment for continuous learning. Employees are encouraged to avoid hiding mistakes and instead view them as opportunities for improvement. Ethical leadership becomes the motivation behind an organizational culture that thrives in the face of change.

Embracing Ethical Leadership for a Better Future

The importance of ethical leadership must be promoted in the ever-changing global business landscape. Being an ethical leader isn’t just a choice but also a commitment to building a future of trust, integrity, and sustainability. To implement ethical leadership in your company, you need to define your values and align them across the company. It’s also imperative to practice and demonstrate these values, avoid biases, and be honest when making decisions. By working together and committing to ethical principles, leaders pave the way for companies and society to thrive on shared ethical values and trust.

Francis Nwokike

Francis Nwokike is the Founder and Chief Editor of The Total Entrepreneurs. A Social Entrepreneur and experienced Disaster Manager. He loves researching and discussing business trends and providing startups with valuable insights into running a profitable business. He created TTE to share ideas and tips to help entrepreneurs run and grow their businesses.

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