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Unethical Leadership: The Real Costs

The importance of ethical leadership can so easily be lost in the rush for growth, profits and investor confidence. Unethical practices by leaders and/or employees threaten the very existence of that which you are trying to build, whether it be your name, reputation or business.

A lack of trust in your organisation can lead to severe financial losses and even bankruptcy. Enron in 2001, who filed for bankrupcy, and Steinhoff, who in 2017, lost 90% of their share price in 48 hours due to unethical practices are case in points. People often automatically assume that businesses are unethical because business seems to be constantly linked to scandals.

Your company’s culture will determine the ethics of the organization. Company culture and the resultant ethical practices are therefore the cornerstones of your organisation. Organisations that operate on strong, ethical businesses practices don’t happen by mistake, they are the fruit of concerted effort from management and employees alike.

The organisation begin to improve its ethics by implementing a business ethics program. Below are some of the committees that an organisation can have to effectively implement workplace ethics. Top management should oversee the ethics program, but will need the support provided by other positions. Determine which roles your organisation requires before executing an ethics program.

Possible Roles:

CEO: The CEO needs to support business ethics and lead by example.

Ethics committee: An ethics committee will develop and supervise the program.

Ethics management team: Senior managers implement the program and train employees.

Ethics executive: An ethics executive or officer is trained to resolve ethical problems.

Ombudsperson: This position requires interpreting and integrating values throughout the organization.

A business that operates on ethical principles will experience the following benefits:

  • Legal compliance reduces the exposure to fines and/or litigation.
  • Increased support from consumers as trust has been fostered between them and the organisation.
  • Employees’ personal moral standards will improve in an ethical business enviroment.
  • A business that practices procedural, informational and distributive justice will build a working environment that facilitates teamwork and productivity.
  • Your organsiaton will reduce attrition by higher employee retention.
  • Many successful financial business practices are reinforced by ethical business practices.
  • Established ethical guidelines will lead the organisation in times of change and stress.

Conclusion:

An organisation’s ethics determines its reputation. Good business ethics are essential for the long-term success of an organization, converesly, dishonesty and poor business ethics erodes trust, which is the cornerstone of business.

© Institute of Competency and Wellness (ICW), 2017

June 27, 2018

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