The Importance of Ethical Leadership in Business

Running a successful business in 2022 is about much more than quality products or services. Ethics is increasingly important to today’s consumers; in fact, research shows that 56% of American consumers will stop buying from a company they perceive to be unethical.

If you want your business to succeed in today’s market, ethics needs to be at the core of your organization. What’s the best way to make that happen? By leading by example through ethical leadership.

What is Ethical Leadership?

According to the Center for Ethical Leadership, “Ethical leadership is knowing your core values and having the courage to live them in all parts of your life in service of the common good.” To be an ethical business leader, you must shape your business around core values that serve your employees, your clients, and your community.

Ethical leadership also means fostering these same values throughout your organization. It’s not enough to be ethical yourself! You must also encourage your colleagues and employees to make ethics the foundation of their daily work — and when you do, your business will be more likely to thrive.  

Elements of Ethical Leadership

Ethical leadership takes different forms depending on the values a business owner focuses on. For example, an entrepreneur who values community service may make charitable donations or mentorship a major element of her business. A business that values inclusion may take special care to hire a diverse team and give everyone a chance to contribute to major projects. 

But no matter what, there are some values that all ethical leaders share. These include:

Honesty

Honest leaders inspire trust from their employees, their investors, and even their competitors. When you are straightforward with others (both in business and in life), you’ll find that more people are willing to be honest with you, too.

Justice

Ethical leadership means holding your employees to your standards, from your newest hire to your most senior partner. Favoritism or other forms of misconduct cannot be tolerated — and sometimes, that means taking action to condemn poor behavior within your organization.

Respect

As an entrepreneur, you probably understand that a great idea can come from anywhere. This is why respect is a key element of ethical leadership. If you treat everyone in your organization with the same level of respect, people will feel more comfortable sharing their work and ideas with you. This can lead to incredible opportunities for collaboration and growth for your business.

Integrity

An ethical corporate culture starts from the top. As a business leader, you must prove to your organization that ethics matter by aligning with your values in everyday life. When you behave ethically and with integrity, it will inspire others to follow suit.

Responsibility

As a business leader, you will likely have to put out more than a few fires over your career. However, this is another opportunity to demonstrate ethical leadership. Taking responsibility and control in challenging situations will help you ensure that your business is centered on ethics (and it will earn you more respect).

Transparency

Finally, ethical leaders must practice transparency with their employees, customers, and shareholders. Clear and open communication is the key to building a loyal relationship, which will help sustain your business for years to come. 

How Ethical Leadership Affects Business

Now that we’ve discussed what ethical leadership is, let’s discuss why it matters to your business. When you center your business and your leadership around ethical values, you help build better relationships with other people in your company, your industry, and your local community. This can lead to several benefits, including the following. 

Employee Loyalty

Businesses spend lots of money attracting and training top talent. So, why would you want to lose those employees due to an unpleasant work environment? Ethical leadership gives your employees the respect they deserve and a sense of purpose, which makes them more likely to remain in your company for many years. 

Improved Customer Relations

As we’ve already mentioned, customers today are very interested in brand ethics. When you practice ethical leadership (which, remember, includes transparency), you show your customers that your values align with theirs. This can help create a more loyal and long-term customer base.

Increased Productivity

We just mentioned that ethical leadership gives employees respect and a sense of purpose. Well, what happened when employees feel respected and fulfilled in their work? They work harder! Treating your employees well and leading with integrity can lead to huge productivity boosts that will help your company succeed.

Ethical leadership can do incredible things for your business — but that’s not the only reason to adopt this leadership style. Ultimately, your employees, customers, shareholders, and others deserve respect and honesty from you, and ethical leadership is a simple way to be an excellent business leader AND a great person at the same time. 

Author Bio:

Giovanni Gallo is the Co-CEO of ComplianceLine, where his team strives to make the world a better workplace with compliance hotline services, sanction, and license monitoring, and workforce eLearning software and services.

Growing up as the son of a Cuban refugee in an entrepreneurial family taught Gio how servanthood and deep care for employees can make a thriving business a platform for positive change in the world. He built on that through experience with startups and multinational organizations so ComplianceLine’s solutions can empower caring leaders to build strong cultures for the betterment of every employee and their community.

When he’s not working, Gio’s wrangling his four young kids, riding his motorcycle, and supporting education, families, and the homeless in the Charlotte community.