Effective leaders maintain integrity and trust by communicating clearly, leading by example and fostering positive relationships with sponsors, stakeholders, suppliers and employees. When leaders establish a strong commitment to ethical behavior and demand that all employees adhere to a high standard of business conduct, confidence in the company tends to be high. When leaders show disregard for the rules, then morale, productivity and overall success suffer in the long-run.

Disregarding Rules

Autocratic leaders make most of their decisions without input from their subordinates. They tend to remain aloof from their employees. They may not always act in an ethical manner or consider the impact this has on employees. They also risk paying government fines and penalties due to misbehavior. This type of leadership style affects ethical behavior of the employees because they realize that if the leader refuses to follow the rules, they don’t have to either.

Inspiring Change

Transformational leaders foster positive relationships as they help an organization make a transition from one way of doing to business to another. They motivate employees by describing the future state and setting a clear direction. By refraining from activities that don’t support the long-range success of the organization, such as illegal transactions, they inspire employees to do the same. These leaders foster in employees the same values, such as volunteering in the community, helping other employees gain new skills and creating an environment of trust and support.

Focusing on Work

Transactional leaders focus on getting work done, whatever it takes. In some cases, this may lead to unethical behavior. This causes damage to employee morale, productivity and overall company success if left unchecked. Empowered employees speak out about unjust activities, such as outsourcing practices, that they view as harmful to the company. A dialog between employees and leadership typically results in a stronger workforce and committed employees.

Preventing Innovation

Bureaucratic leaders follow all rules rigorously and ensure that all employees do as well. While this works for maintaining high ethical standards, it may also prevent employees from taking a creative or innovative approach to problem solving. Employees may resent blind allegiance to rules that may actually be outdated and no longer relevant. Ethical leaders need to strike a balance. Quiet, modest and steady leadership provides practical support for organizations.