What is ethical leadership? Characteristics & how-to tips

In today's rapidly evolving business landscape, an ethical outlook is critical to effective leadership and growth. It can also make a company more appealing than its competitors. 

With growing focus on corporate social responsibility (CSR), ethical leadership is a great way to keep a company ahead of the curve. This approach prioritizes principles and well-being over profit and productivity. 

A 2023 study from McKinsey and NielsenIQ discovered that companies making ethics-related claims experienced huge growth, especially in the food and personal care markets. 

Let’s explore the importance of ethical leadership, its key principles and how leaders can cultivate it within their organizations. 

What is ethical leadership?

Ethical leadership involves a set of behaviors, attributes and principles that prioritize consistent moral and ethical conduct. 

An ethical organization’s mission and vision focus on transparency, social responsibility and equality, which the leader reflects in their actions.

Always demonstrating ethical behavior helps leaders build trustworthiness, inspire their teams and foster a positive work culture.

Ethical leaders may demonstrate:

  • transparent communication across all levels of an organization,
  • genuine belief and action per DEI and sustainability initiatives,
  • respecting everyone, even during periods of stress,
  • social responsibility and a proactive response to potential ethical violations and
  • loyalty to staff and nurturing a positive work environment. 

The relationship between conventional and ethical leadership

We often measure a leader's effectiveness by their ability to guide their team toward targets, developing products or securing funding. 

However, conventional leaders may not consider the ethics of their actions. They may prioritize short-term efficiency or profitability over employee well-being or environmental sustainability.

Ethical leadership focuses on whether the goals and outcomes are good for the team and society as a whole. It ensures they’re achievable while caring about ethics. 

Why is ethical leadership so important in business?

Today's companies value ethical leadership highly, as it can improve a brand’s reputation. There are also repercussions to consider with unethical behavior, like:

  • high employee turnover rates,
  • damaged brand reputation,
  • loss of customer loyalty,
  • decreased investor confidence and
  • legal and regulatory consequences.

Meanwhile, ethical behavior can result in:

  • a more inclusive organizational culture,
  • affiliations like B Corp status from meeting high social and environmental standards,
  • better working conditions for employees and partners across the supply chain,
  • sticking to ethical promises given to the public,
  • improved risk management and crisis resilience and
  • increased attractiveness to top talent and potential partners.

Five important ethical leadership principles

Let’s examine five core principles of ethical leadership to focus on: 

1. Respect for others  

Ethical leaders genuinely respect everyone, valuing their unique perspectives, experiences and contributions. 

They treat others with dignity, kindness and empathy, fostering an inclusive environment that ensures everyone feels heard and appreciated. 

These leaders know respect is the foundation of building strong, positive relationships within the organization and beyond.

2. Service to others

Ethical leadership prioritizes the needs of their team members, organization and larger community.

They put others’ interests before their own, focusing on empowering and supporting those around them to achieve their full potential.

Ethical leaders recognize that service-oriented leadership creates a culture of collaboration, trust and shared success.

3. Justice for others

Ethical leaders commit to ensuring fairness and equity in all decisions and actions.

They strive to create a level playing field by providing equal opportunities and addressing discrimination or bias.

Promoting justice builds trust, fosters a sense of belonging and ensures everyone receives the respect they deserve.

4. Honesty toward others

Ethical leaders are truthful, transparent and authentic in their communication and actions.

They consistently demonstrate integrity by keeping their word and following through on commitments.

These leaders understand that honesty is essential for building trust, as it allows team members to confidently rely on their guidance and direction.

5. Building community with others

Ethical leaders actively work to create a strong sense of community within their organizations. They encourage collaboration, open communication and a supportive environment.

These leaders create a shared sense of purpose, belonging and mutual respect that enhances team harmony and overall organizational success.

6 key practices for an ethical leader

It's hard to switch to ethical leadership overnight. Even if you’re already demonstrating ethical behavior, your organization might need new protocols to adjust to your developing style.

Reflecting on the five essential principles above can help you move toward more ethical leadership that prioritizes positive outcomes for all.

If you're just starting your journey, work on these five practices to strengthen your ethical leadership skills:

1. Being fair throughout all business operations

Start emphasizing fairness throughout all business activities. This includes actively listening to all perspectives, not just the ones you prefer. 

It’s important to reflect on difficult decisions like assigning tasks or evaluating performance. Are you acting fairly? Or are biases impacting your business decisions?

2. Communicating with empathy

Empathetic communication is a hallmark of ethical leadership. Take strides to:

  • practice active listening and truly understand other perspectives in a conversation,
  • acknowledge the struggles employees and stakeholders are dealing with,
  • try to find meaningful compromises and
  • understand your team's preferred communication styles and use those where possible.

3. Demonstrating accountability

Focus on accountability and communicating it to your team. Set clear objectives, share progress and acknowledge shortcomings, especially when they affect your team.

It’s important to be open about poor results rather than trying to hide them. Being transparent inspires trust in your team, and gives them a healthy accountability model to follow.

4. Leading by example

Your behaviors as a leader are an example for others to follow. Always acting ethically shows people how they should behave and ensures you don’t come across as a hypocritical dictator. 

5. Staying aware of implicit biases

Assessing and correcting biases you may not realize you have is one of the hardest elements of ethical behavior. 

Implicit biases are unconscious attitudes, stereotypes or preferences that influence our judgment and behavior toward others. 

For example, a manager might unconsciously favor team members with the same cultural background. They may only assign them high-profile projects, even if other team members are equally qualified. 

To reduce these types of biases: 

  • seek diverse perspectives, 
  • engage in self-reflection and 
  • participate in training programs to increase awareness and promote inclusive decision-making practices.

6. Continuously learning

Embracing new perspectives and staying informed on evolving management styles and social trends can help leaders see the bigger picture. Constant learning can expose you to ideas that challenge your beliefs and practices, leading to growth and better decision-making. 

Ethical leaders accept they may be wrong and correct their behavior when necessary. 

How to be a more ethical leader

Whether your organization is striving to build an ethical culture or you want to become a more ethical leader, it requires thoughtful and purposeful change.

Continuously strengthening your team's interactions, communicating honestly with your team and valuing everyone's perspectives will set the foundation for a more ethical organization. 

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