Why we need more ethical leadership in business
27th October 2022
Authors: Professor Karin Lasthuizen, Brian Picot Chair in Ethical Leadership, Te Herenga Waka - Victoria University of Wellington, New Zealand
Bad apples, bad barrels & bad orchards
In recent decades, an increasing number of ethics scandals in various industries and countries have come to light. Numerous studies show why organisational ethics cannot be taken for granted, and that there is much room for improvement to create workplaces that can reduce ethical failures (cf. Lawton et al., 2013). Today, too, more and more people are questioning the way we do business, pointing out that our underlying economic growth model will collapse our planet in a future that may not be so distant (e.g. Hickel, 2021).
Unethical behaviour may result from flawed individuals (bad apples), unethical workplaces (bad barrels) or wrong systems (bad orchards) (e.g. Epstein and Hanson, 2021; Kaptein, 2012), but in all three cases ethical leadership is crucial to realise change.
Ethical leadership is more than having a moral compass
A common misunderstanding is the assumption that leaders with good, ethical values and a strong moral compass are therefore ethical leaders. But ethical leadership involves more than having a moral character as a leader. When demonstrating leadership, ethics must be visible in everything the leader does. If not, there is a risk of being seen as an ethically neutral or amoral leader (Treviño et al., 2000), ultimately making ethics seem unimportant in everyday practice.
Ethical leadership has an explicit focus on promoting and managing organisational ethics. Four behavioural dimensions (Bushell et al., 2021) are important:
- being a moral person and having ethical values that can guide leaders in how they want to do business and that are a clear beacon for decision-making when the environment and priorities change;
- having an ethical purpose with tangible ethical goals that are within the leader’s control and for which they are responsible and accountable;
- being a moral manager, who sets the tone and leads by example, gives direction to the ethics message throughout the organisation and reinforces ethical standards through rewards and sanctions;
- having real and meaningful relationships with people as the foundation of ethical leadership. Ethical leaders understand the need for diversity and inclusion in the workplace, and initiate ethical conversations to build a shared understanding of what is ‘the right thing to do’.
Performed in this way, ethical leadership can deliver many positive outcomes for the organisation and their employees, customers, shareholders, stakeholders and the environment (Bedi, et al., 2015).
Ethical leadership reflects & shapes the values of society
Ethical leadership, and expectations of it, changes over time because it is formed by values, circumstances and situations that are never static. In an organisational context, the changing workforce and new technologies, the way work is organised and the nature of the work itself will affect ethical leadership.
For ethical leadership to reflect the values of society, it must nurture, listen and respond to society's expectations. Leadership faces a major challenge when it is out of step with the expectations of society as a whole. Examples include excessive remuneration and bonuses, or sexual harassment and discrimination in the workplace and how they are dealt with. In addition, in today's connected world dominated by global social media, unethical actions are more easily noticed, discussed and condemned by the general public. We may not just hold leaders against a higher ethical standard; in our more individualised world, leaders will also be held more accountable for what happens within their organisations, emphasising the importance of their ethical leadership role more than ever before.
For ethical leadership to shape the values of society, it must have a clear vision of the way businesses can implement the values and actions needed for a more sustainable future. Even short-term decisions by organisations and industries might impact the generations after us and their chances for a good life. There is an urgency to provide alternatives to our unsustainable capitalist business model and champion a new business ethic that defines profit and prosperity in a different way.
Ultimately, without ethical leadership businesses are at risk of running out of business because ethics is at the heart of understanding and giving meaning to the human interactions and business dealings in our rapidly changing world.
That is why we need more ethical leadership in business.
- Bedi, A., Alpaslan, C. M., & Green, S. (2015). A Meta-analytic Review of Ethical Leadership Outcomes and Moderators. Journal of Business Ethics, 139 (3), pp. 517-536
- Bushell, J., Cain, C., Duncan, L-A. & Lasthuizen, K. (2021). HUMANGOOD. A field guide to ethical leadership. New Zealand: Brian Picot Chair in Ethical Leadership I Aritahi, Wellington School of Business and Government
- Epstein, Marc J., and Hanson, Kirk O. (2020). Rotten - Why Corporate Misconduct Continues and What to Do about It. Lanark Press
- Hickel, Jason (2021). Less is More. How Degrowth Will Save the World. Random House UK
- Kaptein, Muel (2012). Why Good People Do Sometimes Bad Things: 52 Reflections on Ethics at Work. Available at SSRN
- Lawton, A., Rayner, J., & Lasthuizen, K. (2013). Ethics and Management in the Public Sector. Textbook. London and New York: Routledge
- Treviño, L.K., Hartman, L.P., & Brown, M.E. (2000). Moral person and moral manager: How executives develop a reputation for ethical leadership. California Management Review, 42 (4), 128-142
About the author
Professor Karin Lasthuizen is the Brian Picot Chair in Ethical Leadership - Aritahi at Te Herenga Waka - Victoria University of Wellington, New Zealand.
Through her work, she provides evidence-based insights and international best practices to improve ethical leadership practices in business and government across New Zealand and help mitigate the ethical risks that can lead to organisational failures. Her latest book is ‘HUMANGOOD. A field guide to ethical leadership’ (2021). She also offers a free online course (MOOC) Ethical Leadership in a Changing World via the EdX platform to professionals and students worldwide.