Errors, bad behavior, and poor judgment in leadership can negatively impact a company’s brand and reputation. For business success, it’s critical for organizations to fill their C-suite with ethical leaders.
Ethical leadership involves leaders and managers making decisions based on the right thing to do for the common good, not just based on what is best for themselves or for the bottom line.
While profits are important, ethical leaders take into consideration the needs of customers, communities, and employees in addition to company growth and revenue when making business decisions.
Ethical leaders encourage their team members to model this behavior, too. They help to build a workplace culture that values transparency, collaboration and inclusion, and where everyone feels safe to share their voice.
They can also help organizations recruit and retain top talent. Professionals are increasingly seeking out companies whose leaders strive to do the right thing. Generation Z, who will make up 25 percent of the workforce by 2025, demands leadership ethics more than generations that came before them.
“Gen Z is not going to negotiate. They have really strong values and ethics, and they don’t bend them because of intimidation or because they are just getting a paycheck,” said Michael McCarthy, instructor at Harvard Division of Continuing Education’s Professional & Executive Development and host of the “Happy at Work” podcast. “The idea of letting harmful or hurtful behavior slide is not acceptable.”
Leaders who weigh ethical considerations before making key business decisions drive a company’s long-term success.
The 6 Main Principles of Ethical Leadership
Having ethical leaders isn’t as simple as hiring “good” people. Companies should strive to fill their leadership ranks with people who embody the principles of ethical leadership. The six main principles include:
1. Respect
Respect includes valuing others’ skills and contributions. While historically respect in the workplace may have been one-way (leaders demanding respect from employees), in an ethical work environment, respect is mutual.
Mutual respect leads to healthier workplace relationships where both sides appreciate and support what the other is doing and feel secure in talking through issues and challenges. Healthy relationships create positive work environments, which drives increased productivity.
Current and upcoming business leaders should take mutual respect into account as workforce expectations continue to shift.
“I tell current leadership to respect Gen Z. They have values and morals, and you’re going to have a better organization because of them,” McCarthy said. “They aren’t going to put up with the old hierarchy that doesn’t offer mutual respect.”
2. Accountability
Ethical leaders hold themselves accountable for their actions. They make decisions based on integrity and stand behind their work. They also lead by example, communicate openly about challenges, and don’t look to place blame on others for any shortfalls.
3. Service
Leaders make ethical decisions based on doing what is right for employees, customers, and the community. Because these constituents are always top of mind for ethical leaders, they often have a strong sense of service. They engage in activities such as charitable giving and volunteer work to give back to their communities — and encourage their teams to do the same.
4. Honesty
Leaders who are transparent build trust amongst their organizations and amongst customers.
To build and maintain trust, leaders must be good communicators who speak openly and honestly about issues. Regardless of the issue’s severity or unpopularity, leaders’ responsibility to be clear and candid empowers others to make the right decisions with the information they have.
Honesty and transparency also help to build a brand’s reputation, leading to long-term customer loyalty.
5. Justice
Justice is not just about following the law, but about ensuring that everyone is getting what they deserve. Ethical leaders approach situations with a focus on treating everyone fairly, and they expect their teams to treat each other and customers the same way. Through their actions, they build equitable work environments where everyone feels respected.
6. Community
Ethical leaders view their companies as communities and consider everyone involved when evaluating situations and making decisions. By viewing their organizations this way, they build equity and inclusion into their decision-making process and create work environments that encourage collaboration across teams.
Examples of Positive and Negative Ethical Leadership
The following three examples are of companies that were faced with ethical dilemmas and how different leadership styles led to vastly different outcomes.
Johnson & Johnson
One of the most famous examples of ethical leadership was the case of the Tylenol cyanide poisonings in the early 1980s. Seven people died of cyanide poisoning, and the only connecting factor was that they had all taken extra-strength Tylenol. During investigation, it was discovered that the tablets were laced with cyanide.
Johnson & Johnson’s leaders acted quickly and pulled all Tylenol products off the shelves — 31 million bottles, worth over $100 million — and stopped all production and advertising. The swiftness of their decision, although costly, put customers’ well-being first and saved lives.
They partnered with law enforcement to find the perpetrator and subsequently developed the first-ever tamper-resistant packaging. They were transparent with the public about what they were doing to ensure this tragedy never happened again.
The Tylenol brand recovered from the incident, largely because of Johnson & Johnson’s ethical leadership team’s swift action and transparent care for customers.
JetBlue
In 2008, JetBlue left passengers stranded on the tarmac at the John F. Kennedy International Airport for more than five hours during a snowstorm. The delay had a ripple effect — JetBlue had to cancel more than 1,000 flights over the following five days.
In response, JetBlue’s CEO wrote a letter of apology to customers. He also directed his team to draft a customer bill of rights, which outlined customers’ rights to information about flights and information about compensation in the event of delays or cancellations.
The CEO also participated in a public apology tour, taking full responsibility for the incident rather than blaming it on the weather.
His transparency and accountability created trust with customers, who stayed loyal to the airline.
Wells Fargo
In September 2016, it was revealed that employees of Wells Fargo, one of the largest banks in the United States, opened millions of unauthorized accounts in order to meet aggressive sales targets.
This widespread fraudulent activity was the result of a work culture that prioritized quantity over quality and pushed employees to engage in unethical practices.
Company leaders denied knowledge of fraudulent practices. The bank was hit with significant financial penalties, but because of the lack of accountability, they damaged the trust of their customers and investors. They reported a 50 percent profit loss in the quarter following the scandal.
Meeting the Ethical Challenges of Leadership
Companies cannot underestimate the power of different leadership styles on their growth and long term success.
Those who practice ethical leadership have positive corporate cultures where employees are engaged, motivated, and feel good about coming to work. Companies without ethical leadership face lower productivity and high turnover rates, impacting the organization’s bottom line.
Ethical leaders aren’t just born with these skills — they develop them over years of experience and training.
Harvard DCE Professional & Executive Development offers a two-day Ethical Leadership program that helps leaders develop skills to make ethical choices and lead companies through challenging dilemmas.
Topics covered include:
- Making ethical decisions with conflicting responsibilities
- Building a moral framework within yourself and the organization
- Understanding the role of employees in both their professional and personal lives
- Navigating a slippery slope when seemingly good people do bad things
- Building a corporate culture that values moral behavior
Learn more about the ethical leadership program, including how to register.
Leaders looking to expand their ethical leadership skills should also consider the two-day Authentic Leadership program, where they will learn how to develop mindfulness and authenticity to build trust, create engagement, and promote productivity.
