12 Main Reasons Why Ethical Leadership Is Important In Business

What is Ethical Leadership and Why is it Important?

The Center for Ethical Leadership put it best when they described ethical leadership as “knowing your core values and having the courage to live them every day.”

Ethical leadership is a leadership style that emphasizes integrity, honesty, and fairness in decision-making and behavior. An ethical leader’s actions aren’t only good for themselves or the company’s bottom line—they serve the common good.

Ethical leaders encourage team members to adopt this mindset as well. When workforce members and leaders alike act ethically, they inspire trust, drive purpose, and create a positive workplace.

Below, we further discuss what ethical leadership is and the impact it can have on organizations.

12 Reasons Why Ethical Leadership Is Important in Business

The following are 12 different ways ethical leadership can make a positive impact on a business.

1. Evokes Confidence in Potential Investors

Conducting business in an ethical manner is one surefire way to achieve growth and success. Catching the eye of potential investors and valuable prospects is just one of the benefits of ethical leadership.

If you set a clear standard for ethical business practices, you are sure to inspire confidence in your potential investors. Ethical practices minimize risks linked to legal liabilities and reputational damage, making people more likely to invest in your company.

2. Builds Customer Loyalty

Consumerism has evolved in a way that highlights the values and ethics of a business in addition to the goods and services it provides.

The overall morality of a company has the power to make or break its brand identity. If you exemplify characteristics of ethical leadership in everything you do, the word is sure to spread that you’re a well-intentioned company striving to improve our world in one way or another. Research shows ethical brands experience higher levels of customer loyalty and positive word-of-mouth.

3. Creates More Freedom and Less Micromanagement

Ethical leadership gives you the power to create a workplace community in which employees can be trusted to do their jobs without being micromanaged. Setting an inspiring example and laying the groundwork for a self-motivated team will save you a great deal of time and money in the long run.

This culture of trust and autonomy can encourage team members to take risks and think creatively, leading to increased innovation. They will feel comfortable testing out new ideas and exploring alternative avenues for growth.

4. Provides Good Press

When companies reach a certain level of moral misconduct, word spreads like wildfire, social-media smear campaigns are shared across various networks, and the company receives a great deal of poor public press.

Don’t make the mistake of destroying your brand’s good name through immoral management practices.

5. Establishes Trust in Partners and Vendors

In order to operate smoothly and be successful, businesses need a broad network of trusted partners and reliable suppliers.

By practicing ethical leadership, you can attract partners and vendors who share your beliefs and collaboratively build a dependable foundation of mutual trust and respect. On the flip side, unethical practices will likely attract unethical partners and suppliers, which won’t end well for you (or anyone else).

6. Keep Morale High and Boost Performance

The performance of your workforce is a crucial component of the success or failure of your business. Being an ethical leader means inspiring, motivating, and holding team members to a certain standard of integrity and accountability. In doing so, you can powerfully boost performance by keeping the team’s morale high.

7. Drives Safe and Legal Practices

If making ethical decisions in everything you say and do becomes a habit, it will be easy for you to run your business in a way that is not only inspiring to others but also completely legal.

Ethical leaders make decisions based on a defined set of approved principles and implement robust compliance programs. This, alongside open communication and transparency, enables leaders to steer clear of legal complications.

8. Provides Personal Fulfillment

This one may seem a little contradictory, but just hear us out. Ethical leadership is certainly centered around uplifting others and making decisions that can benefit the greater good, but this selfless behavior can also be incredibly personally satisfying. Manage your team the right way and feel good doing it—what could be better?

9. Nurtures a Healthier Workplace Environment

Nobody wants to get up in the morning and go to work in a place that smacks of negativity and operates through shady decision-making and questionable behavior.

Use the power of ethical leadership to create a better workplace environment—one where your team feels valued, comfortable, and inspired to be their best selves. When ethical leadership is done right, it creates an inclusive and psychologically safe environment.

10. Establishes an Honest Workforce

Unethical practices can produce an unethical workforce, which can result in a myriad of problems for a business, one of the most common being theft.

Make it clear to current and potential workforce members that you conduct your business under a strict code of ethics and remove team members who fail to reach those standards. Setting boundaries via ethical leadership can help encourage individuals to live by honest principles in their roles.

11. Improves Other Aspects of Your Life

Ethical leadership is so much more than how you act in the office; it’s about how you live your life. Knowing what ethical leadership is means having a solid foundation for principled behavior across the board.

If you make incorporating the art of ethical leadership into your daily routine a priority inside and outside of the office, you’re sure to improve other aspects of your life by making better decisions, conveying a more generous attitude, and demonstrating a desire to improve and inspire the world around you.

12. Builds Good Habits That Last

Finally, making a conscious effort to be an ethical leader will help you to build great habits that last over time, both in and out of the workplace.

By refusing to engage in immoral behavior and practicing moral and ethical leadership, you can create a strong basis of principled behavior that will influence the rest of the decisions you make throughout your career and life.

Foster a More Ethical Business and Workforce

Ethical leadership is foundational for a thriving organization. By setting a positive example and fostering a culture of integrity, you can inspire your team to reach new heights.

Take advantage of CMOE’s leadership development workshops to help your team members grow into ethical leaders who inspire and motivate.