Ethical Leadership

An ethical business establishes an “ethical culture” in the organization that begins with the very top leader.

Top Leader

  • Top leader embraces high ethical standards vs. “success at any cost” operating guidelines
    The top leader of the company will always rule on the side of ethical practices even when it could be more profitable to do otherwise. To a top ethical leader the statement, “the end always justifies the means” does not even enter into his/her thinking and for sure will not apply in any business decision. To do otherwise would be corrupt in the thinking of this top leader.
  • Top leader “walks the talk” regarding character and ethical issues
    To the ethical leader, “Do as I say and not as I do” is never a consideration. This leader knows the ethical culture of the organization depends on a solid positive example and will endeavor to be this example in all they say and do. Crass language, crass humor and bad behavior are never demonstrated by top leaders.
  • Top leader takes responsibility for ethical missteps
    It happens. Organizations large and small make mistakes sometimes by well-intentioned individuals. The ethical test is not that breaches never occur but rather how they are handled once revealed. The ethical leader will not consider a cover up or refuse to acknowledge the problem. Instead a top leader will deal with it in a way that is open, honest and keeps the ethical culture in tact.
  • Top leader demonstrates courage in upholding ethical principles despite potential negative impact
    Leaders are often faced with ethical decisions that might be unpopular with employees, external constituents or the public at large. Ignoring the problem might appear to be the easy way out, but top leaders confront problems head on out of principle. There are always pressures for leaders to compromise. It takes true courage to do the right thing in spite of these pressures. At the end of the day, the ethical leader will not have to apologize for making a principled decision regardless of the cost.

Ethical Culture

  • An environment is created whereby unethical behavior stands out at all levels throughout the entire organization structure
    An ethical culture is created and cultivated from the top, down. This “example” creates the standard for all employees, directing their behavior and making unethical actions clearly definable and recognizable. Without this relativism sets in as one unethical decision can spawn bad decisions at subordinate levels and the lines of right behavior and wrong become blurred.
  • Staff is free to challenge and is comfortable in doing so
    A true ethical culture allows staff at all levels to challenge decisions and actions at all levels when something does not seem right. This does not mean that everyone become a “whistle blower” but rather “the voice from within” when a perceived misstep occurs. This prevents missteps from eroding the culture with immediate corrective action and future avoidance. The ability to openly discuss situations and decisions keeps everyone accountable and reinforces the ethical culture and standards for all involved. At times decisions may be made without complete understanding of the consequences. Those decisions need to be challenged and perhaps changed. This can require “thick skin” on the part of upper management, but principled managers accept smart challenges willingly and objectively.
  • Staff is empowered to make ethical decisions
    Through training and example the staff recognizes that making ethical decisions is part of their job expectations. Empowerment is taken a step further, not only is staff encouraged to make decisions but they are guided by the ethical culture to make decisions based on a “Code of Conduct” and not the bottom line.


  • Company “Code of Conduct” is documented, used and disseminated among the staff
    It is critical for each company to have a “code of conduct.” This code is the guide for employee conduct judged by management and peers. The code includes both company policy for conduct and what steps are taken for improper conduct by the staff at all levels.  It is necessary for staff to know what boundaries of behavior and action exist in the company. This document communicates the standards and provides guidelines and expectations for staff behavior.
  • Staff understands and abides by the company’s ethical policies
    Each employee must understand what the ethical policies and standards are. Management should review policies on a regular basis with current staff and in-coming employees. Staff at all levels must understand and agree that the company they work for operates in an ethical and professional way.
  • Company has internal mechanism for reporting exceptions
    It is the responsibly of management to establish a set internal mechanism for reporting exceptions to reports of misconduct based on the company’s written “code of conduct” and/or violations of the ethical standards of the company.This procedure should allow an employee to report, or discuss, misconduct with their supervisor or an alternative authority within the company without fear of repercussions. This reporting should lead to prompt investigation and where necessary, corrective action.


  • Management listens, evaluates, and to acts on ethical issues or staff concerns
    The first step is recognition.Rotary International’s FOUR-WAY TEST is a good guideline to use and includes these questions:

    1. Is it the truth?
    2. Is it Fair to all concerned?
    3. Will it build goodwill and better friendships?
    4. Is it Beneficial to all concerned?

    Management needs to recognize potential issues, observe, listen to, and sense what may be unethical behaviors in their organization.

    Management must then work to define and determine the source of the problem. After recognizing that a problem exists the following steps should be taken:

    1. Collect data to examine alternatives as well as what and who is involved.
    2. Determine what parts of the problem are the responsibility of the employee(s), management or the effects of an external organization.
    3. Emphasize the “what-is-the-right-to-do” analysis over cost-benefit formulas.
    4. Determine whether or not your decisions will stand the test of time.

    Finally–take action! Knowing the problem and not taking action will involve a cover up that could harm the organization, your customers, employees, even your community. Unethical situations don’t go away on their own.

  • Ethical behavior is assessed throughout the organization and staff periodically and appropriately rewarded
    Use the Company Code of Conduct (see “Communication) to reward and reinforce a culture of ethical behavior. Staff should be rewarded for ethical behaviors whenever they are observed (especially when it runs counter to corporate profits). This can be done as simply as writing a positive note or email, or by stopping by a desk or work station to personally thank a staff member. Celebrating ethical behavior strengthens your corporate culture by recognizing and validating respect throughout.
  • Upper management has the trust of staff at all levels
    Management must see ethics as crucial and important to develop trust not only with internal and external customers and staff but most importantly their own sense of character. Ego, power, or close-mindedness cannot enter the decision making processes. Nor can you rely on doing what has been done before in a changing business environment and risk losing the trust of your staff, customers or industry peers.In today’s world, validation of ethical behaviors is more important than ever. Management must “Walk the walk and talk the talk” to gain the trust of staff at all levels of the organization.