Ethical leadership in a changing world: Nurturing a culture of ethics in organisations

In the rapidly evolving business landscape of today’s VUCA world (Volatile, Uncertain, Complex, and Ambiguous), the words of Alwin Toffler in his book “Future Shock” resonate strongly: “too much change in too short a time.” Similarly, Ray Dalio’s reflections on the rise and fall of empires and economic cycles over the last 500 years warn us that the times ahead will be vastly different from anything experienced in our lifetimes. Amidst these transformations, fostering a culture of ethics within organizations becomes paramount, and strong ethical leadership plays a pivotal role in building resilience.

The question arises: what kind of leaders are ideally suited to navigate these changes? A comparison between two leadership styles sheds light on this issue: transformational leadership versus transactional leadership. Transformational leaders seek to create positive change within the organization by devising a holistic action plan that aligns with the organization’s values and ethics, inspiring their followers to emulate the model. On the other hand, transactional leaders focus solely on achieving their objectives, often disregarding ethical considerations. Transformational leaders take into account the needs of their followers and work towards achieving mutually beneficial outcomes.

As businesses strive to strike a balance between profitability and sustainability, ethical leaders emerge as beacons of hope. For instance, the widespread concern about deforestation and its effects on floods, droughts, and global carbon buildup necessitates a leader who can ensure business growth without harming society. Ethical leaders become role models for their followers by upholding ethical practices and decision-making in day-to-day operations, creating an organization-wide commitment to ethical behavior.

Embracing ethics in business goes beyond mere profit-seeking; it involves contributing to the growth of the local and global economy and the betterment of society. Shareholders’ pursuit of profits aligns with an ethical leader’s inclusive framework, where ethical practices underpin all business goals. Exploitative practices for profit, whether internal or external, are not only unethical but also criminal.

For instance, news of construction companies delivering properties late or using substandard materials showcases unethical profiteering and a breach of trust. Similarly, one of the airline did not respond to the 35 stranded passengers at Chennai airport after issuing the boarding passes to them. It was a total failure and frustration for the passengers after waiting many hours without knowing whereabouts of their checked baggage and the airline staff trying to cover up their mistake. Despite having strong codes of conduct and policies, companies often derail from ethical standards during operations. Thus, the onus falls on transformational leaders to ensure ethical implementation at all levels.

Creating a work culture that promotes ethical conduct requires leaders to openly address unethical practices in day-to-day operations, such as how employees are treated, resources acquired, and products delivered to customers. As Edward Hennessy, the retired Chairman and CEO of AlliedSignal Inc., pointed out, “Ethics must begin at the top of an organization. It is a leadership issue, and the chief executive must set an example.” Leaders must become aware of their power and responsibility in making ethical decisions, paving the way for a culture where ethics are ingrained in all aspects of the organization.

Drawing from the values and ethics inherent in Eastern cultures, leaders can immerse themselves in creating an ethical work culture that fosters compliance and ethical behavior to achieve successful outcomes.

In conclusion, in a rapidly changing world, ethical leadership becomes crucial for organizations seeking resilience and success. Transformational leaders who prioritize ethics and inspire ethical practices throughout the organization are essential for navigating the challenges of the VUCA business world. By fostering a culture of ethics and compliance, organizations can work towards creating a positive impact on society while achieving their goals of sustainable growth and profitability.

(The author is the Professor of Sustainable Livelihoods and Development Communication Models for Sustainable Development at Great Lakes Institute of Management, Chennai)