If I asked you whether you are an ethical leader, the chances are you’d say ‘yes’.
And yet, the reality of ethical leadership is far more complex than a simple yes or no answer.
Ethical leadership is not just about following a moral code; it’s about making difficult choices in the face of ambiguity and peer pressure, resisting the lure of convenience, and confronting the biases that shape our decision-making.
In a world increasingly shaped by corporate scandals, media scrutiny, and shifting societal expectations, ethical leadership is both a moral imperative and a strategic necessity.
So, where do you start? What does ethical leadership development require?
What is Ethical Leadership?
Ethical leadership is concerned with standards and expected behaviours that follow specific norms. An ethical leader demonstrates “normatively appropriate conduct” through personal actions, communication, decision-making, and relationship-building. When reinforced, those behaviours can impact the employee’s ethical behaviour.
If you want more on this topic, it is worth reading this article in Leadership Quarterly.
Ethical leadership requires honesty, integrity, transparency, and a willingness to act in the best interest of stakeholders, even when it is inconvenient or costly. By living out those behaviours and focusing on a long-term vision, ethical leaders can create more resilient and credible organisations.
However, ethical leadership is not just about doing what is ‘right’ in a vacuum. It is about navigating competing interests, recognising biases, and questioning assumptions. It is guarding against self-rationalisation, where what is easy or beneficial in the short term becomes falsely justified as ‘right’.
Why Ethical Leadership Matters
Ethical leadership is not just a moral ideal but an essential foundation for organisational success, economic stability, and public trust. The World Economic Forum highlights how trust in leadership is at an all-time low, with scandals in both the public and private sectors eroding confidence in institutions.
Government bodies, such as the UK Financial Conduct Authority, U.S. Securities and Exchange Commission and Australia’s corporate regulators, including ASIC and APRA, have repeatedly emphasised that ethical lapses in leadership contribute to economic instability and corporate failures. The collapse of companies like Carillion in the UK and the Wells Fargo fake bank account scandal demonstrates how unethical practices—whether in financial misrepresentation or exploitative business tactics—can have significant economic and reputational consequences.
Additionally, the investigation into Google’s corporate culture (as reported in The Age) revealed how unethical practices, when concealed over time, can become entrenched within an organisation, leading to reputational damage and longer-term consequences.
As regulatory scrutiny intensifies and consumers become more values-driven, organisations prioritising ethical leadership can better mitigate organisational and reputational risks while building a more sustainable and prosperous future.
Four Hidden Challenges of Ethical Leadership
The challenge, however, is that while most leaders believe they are ethical, ethical lapses can occur subtly and at the margins.
Often, ethical decision-making is not a clear-cut battle between right and wrong; instead, it involves shades of grey where the best path forward is obscured by personal biases, incomplete information, and external pressures.
It’s helpful for you to be consciously alert to the challenges you might confront. Here are four to be alert to.
Challenge One: Small Ethical Slips Add Up
Many organisations fall into ethical dilemmas not through outright fraud but by slowly eroding standards.
An organisation might not outright lie, but it may engage in ‘lying around the edges’—stretching the truth just enough to stay legally defensible while ethically questionable.
This gradual decline can be seen in many corporate failures, where leaders who once prided themselves on integrity found themselves justifying questionable decisions in the name of competition or survival.
Without vigilance, you can find yourself on an ethical slippery slope.
Challenge Two: The Fallibility of Human Perception
It is comforting to believe that our brains, with their vast processing power, can reliably assess complex ethical dilemmas. However, research suggests the opposite. The famous “Selective Attention Test” on YouTube demonstrates how easily our brains filter out critical information when focused elsewhere.
Ethical blind spots work similarly; we tend to miss information that contradicts our worldviews or threatens our existing decisions.
In leadership, this cognitive bias can lead to dogmatic decision-making, where you can fail to recognise alternative perspectives. During times of change, you might hold onto outdated assumptions, making it harder to identify and then wisely respond to arising ethical challenges.
Challenge Three: The Allure of Power
Having power shapes how we see ourselves, often distorting our perception of right and wrong.
Research by Professor Dacher Keltner from Berkeley University suggests that power can make people more impulsive, leading them to engage in behaviours they might previously have condemned.
His studies indicate that those who feel powerful are more likely to have affairs, drive aggressively, communicate in rude or disrespectful ways, and even lie—demonstrating a disconnect between ethical standards and personal conduct.
In his book, The Power Paradox, Keltner argues that power is not something one takes but rather something that is granted by others in recognition of actions that benefit a community or organisation. However, he found that the very experience of power can erode the same qualities—such as empathy, humility, and self-awareness—that enabled the leader to gain influence in the first place. Over time, this erosion of ethical sensitivity can lead to poor judgement, ethical blind spots, and, ultimately, the loss of the power they once held.
This paradox is evident in recent political and corporate scandals where influential individuals, once seen as ethical and competent, have engaged in questionable practices, damaging their reputations and those of their organisations. A recent exposé on political leadership in Australia, for example, highlighted how entitlement and unchecked authority can lead to ethically dubious decisions, such as accepting gifts or preferential treatment.
Understanding the corrupting influence of power is crucial for leaders. Ethical leadership requires an ongoing commitment to self-awareness, accountability, and checks and balances that prevent eroding the values that granted you power in the first place.
Challenge Four: The Comfort of Convenient Truths
Who do you believe?
More often than not, people believe what they want to believe—what is convenient, what aligns with their existing perspectives, or what justifies their decisions.
For example, a New York Times article on alcohol research highlights how statistical significance can be manipulated to serve particular narratives, influencing public perception of health risks.
The same principle applies in business and government, where selective interpretation of data can lead to unethical yet seemingly justified decision-making.
If you want to be an ethical leader, you will want to guard against confirmation bias, the tendency to interpret information in a way that supports your preexisting beliefs. This requires a commitment to critical thinking, open dialogue, and challenging one’s assumptions.
How Leaders Embrace Ethical Leadership
So given all the challenges, where do you start? Here are some crucial ideas to consider.
Guard Your Integrity
Ethical leadership starts with self-awareness.
You must be vigilant against rationalising unethical behaviour, even when it appears minor or justified by business or organisational pressures.
Challenge Your Perspective
It is easy to judge others and label decisions as right or wrong. However, ethical leadership requires curiosity, empathy and understanding of why people make certain decisions rather than condemning them outright. This means acknowledging that there are rarely black-and-white answers.
You want to embrace the complexity of decision-making, recognise multiple perspectives, and be open to revising your stance when new information, elevated insights and more profound understanding emerge.
Spend Time with Different Opinions
Spending time with colleagues and stakeholders you disagree with helps you examine your assumptions, broaden your understanding of issues, and strengthen your ethical decision-making.
Sure, this can be extremely hard, but on the flip side, it is also extremely worthwhile. When you engage with differing viewpoints, you are forced to confront biases, question entrenched beliefs and develop a more nuanced understanding of ethical dilemmas.
Foster Open Conversations
American writer Thomas Moore once said, “We need people in our lives with whom we can be as open as possible. To have real conversations with people may seem like such a simple, obvious suggestion, but it involves courage and risk.”
Courageous conversations—where your team members feel safe questioning decisions, challenging leadership, and discussing ethical dilemmas—are essential to maintaining an ethical culture and positive work environment.
You will want to actively foster an environment where ethical concerns can be raised without fear of retribution.
Balance Short-Term with Long-Term Commitments
Many ethical failures stem from the pressure to achieve short-term results. Overcoming this obstacle starts with resisting the temptation to prioritise immediate gains at the expense of long-term trust and sustainability. Consider the organisation’s mission, vision, values and strategic alignment. Next, consider how ethical practices are embedded into everyday decision-making.
To do this effectively and ensure integrity isn’t sacrificed for expediency, you will want to embed ethical considerations into the core business strategy, operations and practices. In short, you are building an ethical culture.
Where to from here?
Ethical leadership is not a fixed state. Consequently, you can’t claim ethical leadership without being willing to do the hard work each day.
It requires an ongoing commitment to integrity, self-reflection, and a willingness to confront uncomfortable truths. Moments of uncertainty demand leaders who bring insight, integrity, and the courage to influence the decisions that shape outcomes.
Your approach isn’t about striving for perfection (that’s unrealistic). There will be slip-ups. Instead, it’s about persistence, humility, and the courage to choose integrity over expedience, no matter how difficult the choice may be.
Getting you ready for tomorrow, today®
Michelle Gibbings is a workplace expert, the award-winning author of three books, and a global keynote speaker. She’s on a mission to help leaders, teams and organisations create successful workplaces – where people thrive and progress is accelerated.