Ethically appropriate methods of leadership are central to becoming an ethical leader.

When we think about ethical leadership, the first thing that comes to mind is: What is Ethics? Simply stated, ethics is about knowing what the right thing to do is in a variety of circumstances and carrying out ethical intent with ethical behavior. This is, of course, easier said than done.

Doing the Right Thing

How do we determine what the right thing to do is? Short of making this blog a treatise on philosophy, let me just say there are a variety of perspectives in answering the question. These are described below.

Utilitarianism: This is a cost-benefit analysis of ethical issues by evaluating the costs to take some action that produces an ethical result versus the harms that might come to others by doing so. For example, a leader may be tasked with selecting a method of accounting for revenue. An ethical leader should follow the rules, thinking more harms would come to the organization if they were caught violating accounting rules than might be gained by inappropriately inflating revenue. Ethical leaders must think in the long run when making decisions. There may be a benefit each year by manipulating results (i.e., higher stock price) but manipulating revenues over time catches up to the organization because each year the pressure builds to maintain the falsehood.

Rights Theory. Under Rights Theory, also known as Kantian Rights, an ethical leader would make decisions that emphasize the rights of users of financial statements to receive accurate and reliable financial information to support decision-making.  One way to determine rightness is ask: “How would I want others to decide what is right in a similar situation for similar reasons.” Ethical leaders realize that if everyone falsified earnings then the financial statement numbers would be meaningless. Beyond that, each entity would look for more and more ways to beat the system to keep up with the competition.

Justice: Justice is often thought of in terms of “fairness.” Treating others fairly means to treat them based on their actions, not a preconceived notion about them which may be tainted by race, religion, sexual preference and so on. An ethical leader would treat employees fairly: reward them based on results. In accounting, fairness means to present financial information in accordance with the rules and achieving a fair representation of the financial results; one the stakeholders can rely on.

Qualities of an Ethical Leader

Ethical leaders are honest, trustworthy, fair-minded, responsible, accountable, and have integrity. Integrity is the foundation of an ethical person in general, and a leader should be held to the same standard. Integrity means different things in different contexts. It can mean courage when addressing doing the right thing even when pressures exist to do otherwise. Ethical leaders would have the courage of their convictions to not go along with falsified financial information.

Moving on, Martin Luenendonk addresses “The Qualities of an Ethical Leader.” He describes a variety of core characteristics of ethical leaders including conscientiousness, inclusive, accountable, considerate, consistent, and authoritative. Notice these are behavioral factors that define good leadership and they enhance communication and understanding in an organization. Leaders that incorporate these values into their decision-making build trust with employees, the key to having an ethical organization.

Ethical Leadership Competence

Ethical Leadership Competence refers to the ability to handle all kinds of moral problems that may arise in an organization. It means to develop the problem-solving and decision-making skills to make difficult decisions. Leaders might try to deal with a moral problem in an automatic way, essentially using their authority for the basis of decision making. However, as I discussed in another blog, this System 1 approach is fraught with danger because the interests of all stakeholders may not be adequately considered, subtle moral issues may go unnoticed, and expediency is emphasized instead of thought and deliberation. What is needed is to develop the competency to reason through ethical conflicts in a systematic way, or a System 2 approach to decision-making. There is no shortcut to making ethical decisions. It requires judgment and reflection on what the right thing to do is.

Pathways to Ethical Leadership

Linda Fisher Thornton originally identified five levels of ethical competence: personal, interpersonal, organizational, professional, and societal. More recently, she described 11 paths to "Ethical Leadership Competence." She believes leaders need to develop all eleven paths to be considered ethical leaders. These paths are described as follows.

Legal. 

Following all laws and regulations in one's industry and geographical area.  

Personal.     

Personal awareness of good leadership skills and good moral character.             

Interpersonal.

Treating people with respect and caring and respecting differences.                         

Organizational.

Following internal codes of behavior and organizational expectations.       

Professional.

Following the ethics code in one's industry or profession.                   

Culture Building.

Building a high-trust culture through ethical leadership.                 

Contextual. 

Being morally aware and motivated to act rightly towards others and finding beneficial solutions to ethical problems.       

Societal. 

Improving the lives of others and their communities.

Environmental.

Protecting the planet for future generations.                                                                                                                                               

Global. 

Thinking on a global scale and acting as a responsible citizen.

Ethical leaders that follow these pathways are developing leadership competence.

In conclusion, Edward Hennessy, the Chairman and CEO for the Allied Signal, Inc., is quoted as saying: Ethics must begin at the top of an organization. It is a leadership issue and the chief executive must set the example.” In other words, as I have been preaching on my “Workplace Ethics Advice” blog for many years, an ethical organization starts with an ethical leader who sets an ethical tone at the top and fosters ethical behavior in all organizational systems and in all interrelationships, including with employees, suppliers, customers, the government, and the community at large.

Posted by Dr. Steven Mintz, The Ethics Sage, on August 25, 2021. Steve is the author of Beyond Happiness and Meaning: Transforming Your Life Through Ethical Behavior. You can sign up for his newsletter and learn more about his activities at: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics and on Twitter at: https://twitter.com/ethicssage.

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