Ethical leadership - Culture and role of the board

Based upon respect for ethical beliefs and values and for the dignity and rights of others, ethical leadership is concerned with the kinds of values and morals an individual or a society finds desirable or appropriate. Unethical business practices such as forced labour, child labour, unsafe working conditions or damage to the environment can damage a company’s credibility to such an extent that, in the worst case scenario, the company shuts down.

In the current climate of distrust in business, the importance of ethical leadership and the related concepts of trust, honesty, consideration and fairness are clear. Overbilling, misleading marketing and unfair wages are likely to get a company noticed for all the wrong reasons. Similarly, one only needs to look at the sad demise of Patisserie Valerie to see the consequences of a business falsifying its financial statements to present a more favourable picture than actually exists.

There are increasingly high expectations of how companies should behave and the kinds of issues they can be considered responsible for. As CGIUKI's Next Generation Governance report shows, governance and reporting requirements such as the EU Non-Financial Reporting Directive, the Modern Slavery Act 2015 and the EU General Data Protection Regulation all seek to respond to pervasive social concerns relating to environmental, social and employee matters.

The general public is looking to business to solve societal challenges and employees want to work for a company with values, that has a purpose and that is answering societal needs. Furthermore, employees look to business owners and managers to lead by example and provide direction on how they should conduct themselves. If the board is failing to make ethical decisions, monitor the people they put in charge of embedding the company’s values or failing to reinforce consequences for unethical behaviour such as unethical accounting or discrimination in the workplace, then employees are unlikely to act in an ethical manner themselves.

Ros O’Shea, Independent Director, Governance Consultant, Lecturer and Author shared her thoughts on the defining characteristics of ethical leaders, why leaders sometimes lose their way and the role of the board in overseeing and fostering a culture of integrity.