The why, what, who and how of ethical business leadership

The importance of ethical business

Ethics in business is a subject so vast, and which has been studied for so long, that strict definitions are always challenging.

Larry Alton’s classification of business ethics in his article ‘How Much Do A Company's Ethics Matter In The Modern Professional Climate?’ outlines five main areas that archetypically ethical companies perform well in or stringently avoid. They are:

  1. Fraud and manipulation, including bribery and insider trading
  2. Sustainability; for example, choosing renewable forms of energy and decreasing use of pollutants
  3. Diversity and inclusion, such as hiring practices that aim to help the business represent a broad cross-section of the community
  4. Exploitation; for instance, taking advantage of workers, local populations and tax loopholes
  5. Donations and contributions to worthy causes

But why are these categories – and ethical conduct by businesses in general – important today more than at any other time in the history of commerce?

New expectations in a new era

There is an argument that being a virtuous corporate citizen is all well and good, but it must be secondary to whatever the shareholders want. And, the argument goes, most shareholders are interested principally in the bottom line.  

If that line of reasoning isn’t losing ground in the 21st century, it’s certainly being strongly challenged. And part of the reason for that is that shareholders (and the general public) have more information than they’ve ever had before. As Alton puts it:

[W]e’re living in the information age. And no, that isn’t just a buzzword used by digital marketers – it’s being studied and treated as a major leap forward in human history.”

As we enter a new phase of the digital revolution, businesses that wish to remain opaque to the public are finding it increasingly more difficult to hide their activity. Those that seek to carefully manipulate public opinion have a much more challenging job on their hands than their counterparts from even 20 years ago.

Case studies across centuries

Take ExxonMobil and BP as examples.

The Exxon Valdez oil spill is today famous, almost synonymous with corporate malfeasance and negligence. But when in 1989 the tanker let 35,000 metric tonnes of crude oil leak into waters off the shores of Alaska, social media, smartphones, 24 news and mainstream internet didn’t exist.

After news of the spill hit the papers and TV news, ExxonMobil’s share price dropped by 3.9 per cent over a fortnight. It had recovered within a mere month.

The Deepwater Horizon spill happened at a time when, as Sara Murphy writing for The Motley Fool blog puts it, “[p]eople [were] watching and selling [stock].” She says “BP ultimately handled the aftermath of its spill much better” than ExxonMobil but BP’s shares fell by almost 50 per cent in two months.

The two incidents weren’t, of course, identical, but the period in which they took place surely played an enormous part in the reaction of the market. This is an era where ethical behaviour – or at the very least the appearance of being socially responsible – matters like never before.

And shareholders aren’t the only people modern business leaders need to worry about when it comes to principled governance.

The hallmarks of ethical leadership

Good, ethical leaders can be defined by several common qualities or characteristics. But they’re also often unorthodox in their approaches and practices – not to mention willing to accept the criticisms against their deviation from the norm.

For David Truffley and Amy Antonia, who published the ‘Five traits of an ethical leader’ in The Conversation, a truly ethical leader - above all - refuses to treat people as “mere units of production”. Empathy and compassion are critical to their practice. They are also:

  • Able to set a good example. They “act from their own well-developed set of ethical principles, setting a consistently good example for others to follow. The steady force of their attitude over time trickles down and becomes embedded in the culture.”
  • Selfless. “Ethical leaders are strong on selfless service in the interests of the greater good.”
  • Open to new ideas. The leader encourages everyone to become part of the discussion about ethics. “The moral DNA of the organisation is a work in progress; a living entity that evolves becomes stronger. It is not enshrined in a framed mission statement, then forgotten about.”
  • Unafraid to be challenged. “There can be no “I’m the boss – don’t you dare challenge my authority”. Ethical leaders do not identify too closely with the position they occupy, such that they will be tempted to overstay their welcome. They cultivate successors and know when to step aside, leaving on a high rather than being pushed.”
  • Willing to responsibility for everything. “The ethical leader accepts that they are either directly or indirectly responsible for everything that happens in the organisation. They understand that blame shifting and finger pointing is a failure of leadership.”

Truffley and Antonia conclude that, in the end:

Good ethics is good business. The organisation that does the right thing and is seen to be doing the right thing is the one that will prosper in today’s more connected and accountable world.”

That sounds relatively straightforward on paper, but as Harvard Business Review points out, it’s often much more difficult in practice. How, then, does an aspiring leader work through the challenges and competing priorities of heading an ethical organisation?

Education and ethics

The RMIT online MBA recognises that ethics is a critical part of any business leader’s education, and so the discipline underpins each topic within the course, from governance and compliance to marketing.

Those who’ve designed the MBA recognise that technology, and indeed social structures, are moving fast. In some cases, they’re moving so quickly that legislators and regulators can’t keep up.

Leaders will emerge from the course able to communicate with authenticity, to think innovatively, to lead change within an organisation, to solve problems and to deal with the complexity of emerging technologies.

They will have the ability to fully comprehend the risks associated with key business decisions and know how to develop governance frameworks that deal with this rapidly-evolving commercial environment. 

In this landscape, that makes the RMIT MBA a truly modern and truly valuable business qualification. Prepare for a new kind of future in business by reaching out to our Enrolment team on 1300 701 171 to learn more.