For better or for worse, leaders in organizations hold the power to guide the ethical behavior of employees—by establishing standards, modeling (setting a good example), and enforcing consequences. Philosophers have been discussing ethical leadership (as in what leaders should do) for quite some time but the topic is relatively new as an area of social-scientific study.
Ethical leaders are role models who communicate the importance of ethical standards, hold their employees accountable to those standards, and— crucially— design environments in which others work and live that are conducive to ethical behavior. Leaders also transmit ethics by building benevolent relationships and teaching others how to think about ethical questions, empowering ethical behavior among employees, and growing future ethical leaders. An essay in Fast Company by ES collaborator David Mayer outlines why it takes more than being a good person for leaders to inspire ethical conduct among employees.
Leaders can influence the policy, culture, and behavior of an organization. As a result, ethical leadership may be the most important lever in an ethical system designed to support ethical conduct.
To improve ethical leadership, it is necessary to investigate its many benefits, as well as the psychological and social mechanisms that produce them. It is also imperative to know what characteristics leaders high on ethical leadership share, and how leaders learn and choose, their leadership style.
IDEAS TO APPLY (Based on research covered below)
Make ethics a clear priority for your leadership. Being an ethical leader means going beyond being a good person. Ethical leaders make ethics a clear and consistent part of their leadership agendas, set standards, model appropriate behavior, and hold everyone accountable. They’re honest, especially when the truth is difficult to share.
Make ethical culture a part of every personnel-related function in your organization. Leaders must work hard through hiring, training, and performance- management systems to bring in the right employees and then help them learn and internalize the organization’s underlying values in large part by understanding what behaviors leaders do and do not reward .
Encourage, measure, and reward ethical leadership at multiple levels. Ethical leadership from the top is important—because it creates an environment in which lower-level ethical leaders can flourish—but ethical leadership at the supervisory level has a huge impact on followers’ attitudes and behavior. Mid-level managers should be encouraged to:
- Regularly communicate about Legal Compliance & Ethics (C&E) issues to employees in their work unit;
- Ensure that C&E “performance” is adequately measured and reflected in employee evaluations and compensation decisions;
- Be alert to exemplary ethical behavior in the work unit, and—as appropriate—praise that behavior to others in the unit (unless the employee prefers privacy).
Actively manage digital communication channels to support leadership messaging. As digitization and virtual/distributed work increase, important choices regarding communication emerge. The quantity, quality, and modes of communication leaders use may impact their ability to engage in ethical leadership or act as role models.
AREAS OF RESEARCH
Do ethical leaders have special characteristics? Researchers have found a few personality traits that are more commonly found in leaders who are rated by their followers as being ethical leaders. These traits include:
- 1) Conscientiousness (the tendency to be organized, responsible, and hardworking) and Agreeableness (the tendency to act in a cooperative, unselfish manner), are positively associated with ethical leadership (Babalola et al., 2019; Kalshoven, Den Hartog, and DeHoogh, 2011; Özbağ, 2016; Walumbwa & Schaubroeck, 2009). Conscientious leaders have higher self-control, act cautiously, and follow through on commitments. Agreeable leaders are more likeable and excel in building relationships.
- 2) Strong moral identity (Mayer et al., 2012), the degree to which people deem it important to define themselves as a good person with moral traits. This is particularly predictive of ethical leader behavior when moral identity is internalized (Chuang & Chiu, 2018; Cohen et al., 2014; Skubinn & Herzog 2016)) and accompanied by authentic rather than hubristic pride (Sanders et al., 2018). Pride is authentic when it is tied to earned confidence through accomplishments and generates pro-social motivation. Hubristic pride, by contrast, involves conceit or arrogance and tends to result in anti-social motivation.
- 3) Advanced cognitive moral development, which allows leaders to grapple with ethical issues in a sophisticated manner, aligned with theories of justice and rights (Jordan et al., 2013). More advanced moral development/reasoning may lead to less Machiavellian and Authoritarian leadership (Mason & Mudrack, 2019). Machiavellian leaders act out of self-interest and may view other people as somewhat disposable. Authoritarian leaders place trust in legitimate authority figures and promote obedience to social and behavior norms. Leaders with advanced moral reasoning instead make decisions with an approach that is more empathetic, altruistic, contextual, and without strict adherence to norms.
Does ethical leadership matter? Ethical leadership has many benefits. Research has found that ethical leadership is associated with positive employee outcomes, including: employee ethical behavior, commitment, job satisfaction, self-efficacy, job engagement, and organizational identification (Bedi, Alpaslan & Green 2016). Ethical leadership is also associated with more helpful behavior from employees, perhaps because ethical leaders model such behavior (Mayer et al., 2009; Walumbwa & Schaubroeck, 2009). In addition to increasing positive behaviors, ethical leadership reduces deviant or unethical behavior as well (Mayer et al., 2009; Mayer et al., 2012). When unethical acts do occur in the social environment, employees who have an ethical leader are more likely to report the wrongdoing to management because ethical leaders create a psychologically safe environment and are trusted to handle reports fairly and with care.
Ostracism, a major barrier to inclusion, may be prevented via ethical leadership (Babalola et al., 2017; Christensen-Salem et al., 2020). Employees may be ostracized (intentionally excluded) for a variety of reasons, including their beliefs, lifestyle, personality, or other personal characteristics. In workplaces with increasing diversity (demographic, political, cultural), leadership that supports harmony in the workplace could be of tremendous and increasing importance. Creating a stronger relational climate and fostering collective awareness appear to be mechanisms by which ethical leaders can prevent ostracism.
Commitment to ethical leadership appears to pay off. A study summarized in Harvard Business Review reported that good leadership affects the bottom line. Researchers found that CEOs whose employees gave them high marks for character had an average return on assets of 9.35% over a two-year period. That’s nearly five times as much as what those with low-character ratings had; their ROA averaged only 1.93%. More in Kiel, Return on Character, 2015.
If ethical leadership is beneficial, how does it work? True understanding of ethical leadership’s benefits requires knowledge of the psychosocial processes through which it acts. Important explanatory processes for the benefits of ethical leadership appear to come from social learning theory (role modeling), social exchange theory (building trusting relationship), and moral reasoning theory (Ko et al., 2018; Bedi, Alpaslan & Green 2016).
Social learning theory suggests that when leaders are high on ethical leadership, followers emulate their behavior because the leader is a respected role model. Social exchange theory proposes that employees of an ethical leader behave ethically as a form of “giving back,” due to reciprocity or gratitude for the quality of the relationship. Moral reasoning theory posits that ethical leader behavior leads to activation of moral reasoning in followers, changing their thought processes and thus resulting in more ethical decisions/behavior. Within the moral reasoning framework, ethical leadership may influence behavior along two paths—“virtuous synergy” or “saving grace” in ethical decision making, depending on the situation and follower moral identity (Moore et al., 2019). The first path, “virtuous synergy,” is the effect of highly ethical leadership on followers with a strong moral identity, inspiring them toward highly ethical and charitable behavior. The second path, “saving grace,” describes how ethical leadership acts on employees with a weak moral identity, preventing unethical behavior.
We have also learned that ethical leaders indirectly enhance ethical behaviors, by creating ethical cultures that socially influence followers to behave more ethically (Schaubroeck et al., 2012).
What level of ethical leadership matters most: top management or lower-level supervisory leadership? There is some evidence that ethical leadership at the top “trickles down” and affects behavior at lower levels (Mayer et al., 2009). But, in general, research suggests that the leader closest to an employee is the one with the most impact. Which makes sense, as supervisors interact with and influence employees every day, while senior leaders are more distant in the hierarchy and, potentially, work in a different city. Employees are probably most influenced by their supervisor and other members of their work unit. Recent research indicates that work units have a “collective moral identity” that, in combination with an ethical organizational climate, is strongly related to unethical behavior (Kuenzi, Mayer & Greenbaum, 2020). Because this collective moral identity results in strong agreement and conformity, assessing and improving ethical leadership at the work unit level is important.
How will ethical leadership be affected by an increasingly distributed workforce? Remote work and digital communication have rapidly changed the way leaders and employees interact with one another. This provides opportunities for free travel, enhanced work-life balance, and a more global organization. However, threats to ethical leadership emerge as distance and digitization may undermine the human connections through which social cohesion, modeling, and leadership flourish. Social distance might increase while social presence decreases (Chuang, 2016), and some employees could no longer feel the connectedness that leads to guilt when loafing or violating ethical norms. The technology we use, and its richness (e.g. video vs. audio), synchronicity, and anonymity will make a difference. A distant (socially and geographically) work environment may lead to deindividuation and a reduction in feelings of personal responsibility, a risky outcome for those concerned about ethical conduct.
Ethical leadership is potentially more difficult in remote work when richness or synchronicity of interactions is low, due to overlooking subtle emotional cues, reactions, and non-verbal communication (Cortellazzo et al. 2019). As a result, the lack of real-time, vibrant, human interactions may pose a risk to effective leadership in remote interactions. However the answers are not as simple as fostering more richness or more synchronicity. Instead a variety of appropriately-applied technologies is likely the best way to balance the benefits and drawbacks of each.
The potential for lower quantity of verbal leader-follower interactions in virtual settings presents a challenge of adequate communication “bandwidth.” Phone and video conference interactions rarely add up to the total amount of verbal interaction that would take place in an office. Can outcomes such as role modeling and transfer of moral reasoning truly take place remotely? Or will the limited interactions focus on necessary and pressing issues, without time to explore nuance and rationale?
It is well known that leadership is more easily recognized with greater quantity of verbal interactions (e.g. MacLaren et al., 2020), even more so than the quality of that communication. But more research is needed to determine if a leader can adequately display their ethical leadership when communication quantity is diminished. Ethical leaders need to seek optimal communication frequency, which may not be an easy task. It would appear that more familiar teams can excel with less communication than newer teams (Marlow et al. 2018), though the relationship between communication quality and performance only strengthens as teams spend more time together. Sometimes over-communicating through multiple channels is recommended, such as during crises or to ensure full participation on important topics (Haddon et al., 2015).
These examples constitute a mere introduction to the complexities leaders might need to consider in a new communication environment. The most successful ethical leaders in distributed/virtual settings will likely be those who adapt communication richness, frequency, synchronicity, and content to build relationships and match situational factors.
How do people become ethical leaders? Research in this area is insufficient for a clear answer at this time. There are a small number of studies focused on business students and even fewer on workplace interventions. Regardless of where it is implemented, developing more ethical leaders through training has mixed results, with little agreement on how to measure effectiveness (Steele et al., 2016). One way to create ethical leaders for tomorrow may be as simple as providing ethical leadership today. Having had an ethical role model has been shown to contribute to being perceived by one’s current followers as an ethical leader (Brown & Treviño, 2014; Ko et al., 2018). Emulation of ethical leadership is more likely to take place when the leader is viewed by the mentee as both highly competent and worthy of gratitude (Badrinarayanan, Ramachandran & Madhavaram, 2019).
- Is there a limit to how ethical most employees want their leaders to be? Recent research has found that employees behave in a more cooperative manner for moderately ethical leaders than highly ethical leaders (Stouten et al., 2012).
- Are the criteria for being an ethical leader different in distinct cultures (countries)? Do employees and society more broadly respond differently to ethical lapses (or ethical greatness) from leaders in different cultures?
- To what extent do leaders think of ethics as part of their responsibility at work? Do they tend to think ethics and values should be relegated to family and religious domains? What is the influence of a leader’s orientation about ethics at work on their own behavior and the behavior of their employees?
TO LEARN MORE
In a radio interview, Nick Epley talks about understanding the human mind, particularly the minds of others, which is no doubt vital in leading others:
Adam Grant on one way leaders can foster ethical conduct:
Articles – Academic
Babalola, M., Walumbwa, F. O., Guo, L., Misati, E., & Christensen, A. (2017). Being Ignored OR Pushed Out? A Relational Perspective To Understanding Workplace Ostracism. In Academy of Management Proceedings (Vol. 2017, No. 1, p. 11428). Briarcliff Manor, NY 10510: Academy of Management.
Babalola, M. T., Bligh, M. C., Ogunfowora, B., Guo, L., & Garba, O. A. (2019). The mind is willing, but the situation constrains: why and when leader conscientiousness relates to ethical leadership. Journal of Business Ethics, 155(1), 75-89.
Badrinarayanan, V., Ramachandran, I., & Madhavaram, S. (2019). Mirroring the boss: Ethical leadership, emulation intentions, and salesperson performance. Journal of Business Ethics, 159(3), 897-912.
Bedi, A., Alpaslan, C. M., & Green, S. (2016). A meta-analytic review of ethical leadership outcomes and moderators. Journal of Business Ethics, 139(3), 517-536.
Brown, M. E., & Treviño, L. K. (2014). Do role models matter? An investigation of role modeling as an antecedent of perceived ethical leadership. Journal of Business Ethics, 122(4), 587-598.
Christensen-Salem, A., Walumbwa, F. O., Babalola, M. T., Guo, L., & Misati, E. (2020). A Multilevel Analysis of the Relationship Between Ethical Leadership and Ostracism: The Roles of Relational Climate, Employee Mindfulness, and Work Unit Structure. Journal of Business Ethics, 1-20.
Cohen, T. R., Panter, A. T., Turan, N., Morse, L., & Kim, Y. (2014). Moral character in the workplace. Journal of personality and social psychology, 107(5), 943.
Chuang, M. Y. (2016). Electronic Ethical Leadership: A Preliminary Research Framework. American Journal of Information Technology, 6 (1), 17-34.
Chuang, P. J., & Chiu, S. F. (2018). When moral personality and moral ideology meet ethical leadership: A three-way interaction model. Ethics & Behavior, 28(1), 45-69.
Haddon, A., Loughlin, C., & McNally, C. (2015). Leadership in a time of financial crisis: what do we want from our leaders?. Leadership & Organization Development Journal.
Ko, C., Ma, J., Bartnik, R., Haney, M. H., & Kang, M. (2018). Ethical leadership: An integrative review and future research agenda. Ethics & Behavior, 28(2), 104-132.
MacLaren, N. G., Yammarino, F. J., Dionne, S. D., Sayama, H., Mumford, M. D., Connelly, S., … & Cao, Y. (2020). Testing the babble hypothesis: speaking time predicts leader emergence in small groups. The Leadership Quarterly, 101409.
Marlow, S. L., Lacerenza, C. N., Paoletti, J., Burke, C. S., & Salas, E. (2018). Does team communication represent a one-size-fits-all approach?: A meta-analysis of team communication and performance. Organizational Behavior and Human Decision Processes, 144, 145-170.
Mason, E. S., & Mudrack, P. E. (2019). Moral Reasoning and Its Connections With Machiavellianism and Authoritarianism: The Critical Roles of Index Choice and Utilization.
Mayer, D. M., Aquino, K., Greenbaum, R. S., & Kuenzi, M. (2012). Who displays ethical leadership and why does it matter? An examination of antecedents and consequences of ethical leadership. Academy of Management Journal, 55(1), 151-171.
Mayer, D. M., Kuenzi, M., Greenbaum, R., Bardes, M., & Salvador, R. (2009). How low does ethical leadership flow? Test of a trickle down model. Organizational Behavior and Human Decision Processes, 108, 1–13.
Mbonu, C. N., & Worlu, R. E. (2018). Ethical Leadership in Organisations: A Synthesis of Literature. IOSR Journal Of Humanities And Social Science, 23(9), 38-43.
Moore, C., Mayer, D. M., Chiang, F. F. T., Crossley, C., Karlesky, M. J., & Birtch, T. A. (2019). Leaders matter morally: The role of ethical leadership in shaping employee moral cognition and misconduct. Journal of Applied Psychology, 104(1), 123–145. https://doi.org/10.1037/apl0000341
Özbağ, G. K. (2016). The role of personality in leadership: five factor personality traits and ethical leadership. Procedia-Social and Behavioral Sciences, 235(Supplement C), 235-242.
Rahn, S. (2014). 3M: beyond the 15% rule. In Management of the Fuzzy Front End of Innovation (pp. 195-199). Springer, Cham.
Sanders, S., Wisse, B., Van Yperen, N. W., & Rus, D. (2018). On ethically solvent leaders: The roles of pride and moral identity in predicting leader ethical behavior. Journal of Business Ethics, 150(3), 631-645.
Schaubroeck, J., Hannah, S., Avolio, B., Kozlowski, S., Lord, R., Treviño, L.K., Dimotakis, N, & Peng, C. (2012). Embedding ethical leadership within and across organizational levels. Academy of Management Journal, 55(5): 1053-1078.
Skubinn, R., & Herzog, L. (2016). Internalized moral identity in ethical leadership. Journal of Business Ethics, 133(2), 249-260.
Steele, L. M., Mulhearn, T. J., Medeiros, K. E., Watts, L. L., Connelly, S., & Mumford, M. D. (2016). How do we know what works? A review and critique of current practices in ethics training evaluation. Accountability in research, 23(6), 319-350.
Treviño, L. K., Brown, M., & Hartman, L. P. (2003). A qualitative investigation of perceived executive ethical leadership: Perceptions from inside and outside the executive suite. Human Relations, 56, 5–37.
Walumbwa, F. O., & Schaubroeck, J. (2009). Leader personality traits and employee voice behavior: mediating roles of ethical leadership and work group psychological safety. Journal of applied psychology, 94(5), 1275.
Books – Practitioner
Broughton, K. (2019). Russian Telecom Agrees to Pay $850 Million to Resolve Bribery Charges. The Wall Street Journal: Risk & Compliance Journal. https://www.wsj.com/articles/russian-telecom-agrees-to-pay-850-million-to-resolve-bribery-charges-11551920694
DiCamillo, N. (2017). How one CEO has made the most of relationships over a 30-year career. American Banker. https://www.americanbanker.com/creditunions/news/how-one-credit-union-ceo-has-made-the-most-of-relationships-throughout-his-career
Gibson Dunn (2020). (2019). Year-End FCPA Update. https://www.gibsondunn.com/2019-year-end-fcpa-update
Glassdoor, Inc. (2020). Top CEOs 2019. https://www.glassdoor.com/Award/Top-CEOs-LST_KQ0,8.htm
McLean, B. (2017). How Wells Fargo’s Cutthroat corporate culture allegedly drove bankers to fraud. Vanity Fair. https://www.vanityfair.com/news/2017/05/wells-fargo-corporate-culture-fraud
Jaeger, J. (2019). Top ethics and compliance failures of 2019. Compliance Week.
Silverstein, S. (2019). KPMG’S Ethics Crisis — and the Lesson It Teaches Leaders About Accountability. The Compliance & Ethics Blog. https://complianceandethics.org/kpmgs-ethics-crisis-and-the-lesson-it-teaches-leaders-about-accountability/
U.S. Securities and Exchange Commission (2019). SEC Charges Multinational Telecommunications Company With FCPA Violations https://www.sec.gov/news/press-release/2019-254
Weinstein, B. (2019). Seven Bold Leaders Reveal How Ethical Leadership Is A Boon To Business. Forbes. https://www.forbes.com/sites/bruceweinstein/2019/10/14/seven-bold-leaders-reveal-how-ethical-leadership-is-a-boon-to-business/?sh=4a800bfe454c