How To Create Value Through Ethical Leadership

In today’s turbulent world, many executives and managers devote their time and energy to leading the process of “value-creation,” a broader concept of ethical leadership empowers leaders to incorporate and be explicit about their own values and ethics. As a journalist, as well as an advisor, I have seen facets of ethical leaders that help me to understand that this is more complex than just a matter of “good character and values”. The imperatives of ethical leadership are:

1. Articulate and embody the purpose and values of organization. It is important for leaders to tell a compelling and morally rich story, but ethical leaders must also embody and live the story — a difficult task in today’s business environment, where everyone lives in a fishbowl. Therefore, many political leaders fail to embody the high-minded stories they tell at election time, and, more recently, business leaders have become the focus of similar criticism through the revelations of numerous scandals and bad behaviors. CEOs in today’s corporations are really ethical role models for all of society.

2. Find the best people and develop them. Ethical leaders pay special attention to finding and developing the best people, precisely because they see it as a moral imperative — helping them to lead better lives that create more value for themselves and for others. Finding the best people involves taking ethics and character into account in the selection process. Many CEOs have said to me that judging someone’s integrity is far more important than evaluating their experience and skills.

3. Create mechanisms of dissent. It is critical to have an established and explicit way for employees to “push back” if someone thinks that a particular market, region, or internal process is out of line. In a company that takes its purpose or values seriously, there must be mechanisms of pushing back to avoid values becoming stale and dead. Indeed, many of the current corporate scandals could have been prevented if only there had been more creative ways for people to express their dissatisfaction with the actions of some of their leaders and others in the companies.

4. Make tough calls while being imaginative. The ethical leader inevitably has to make a lot of difficult decisions, from reorienting the company’s strategy and basic value proposition to making individual personnel decisions such as working with employees exiting the organization. There should not an attempt to avoid difficult decisions by using an excuse of “I’m doing this for the business.” The ethical leader consistently unites “doing the right thing” with “doing the right thing for the business.” However, the idea that “ethical leadership” is just “being nice” is far from the truth. Several years ago, the CEO of DuPont implemented a new, stringent company-wide commitment to reduce factory emissions. He visited one facility where the plant engineers insisted that such requirements could not be met. The chairman responded that the particular plant would then have to be closed — causing hundreds of job losses. Several weeks later, the plant engineers delivered the news to the CEO that they had figured out how to meet the requirements — and save money.

Becoming an ethical leader is relatively simple. It requires a commitment to examining your own behavior and values, and the willingness and strength to accept responsibility for the effects of your actions on others. For instance, many companies have leadership development programs which need to be strengthened by adding and engaging in conversation about the idea of “ethical leadership.”

Many fear that anarchy would be the result of such a process. My experience is just the opposite. Values, purposes, principles, an enterprise approach — all deliver a disciplined way to think about how to make the business better and more effective, and help to develop pride in the organization — and ultimately will help you to improve your competitive edge.

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Barack Obama electrified the world with his historic — and in the end, comfortable -victory in the US presidential election. His style has inspired business and other leaders across the world. Obama’s plans, for example in fighting both climate change and the credit crunch by creating thousands of new “green jobs” through transparently building a new energy infrastructure for the US, shows that he is thinking big. Faced with the bleak economic prospects of 2009 caused to a lrge part by a fasilure of moral values in governemnt and business, this is exactly what business needs: strong leadership with an ethical backbone.