Leaders must take responsibility for setting standards of ethical behaviour

The pressure for short-term success led to people making unethical decisions, which almost brought down the whole financial system and potentially the UK economy. The focus on commissions, asymmetrical bonus rewards (an up-side without personal consequences or downside) and very short-term, transactional selling encouraged leaders to sometimes turn a blind eye to the unethical cutting of corners. Provided they brought in lots of profitable revenue, a leader's behaviour and personal integrity were sometimes overlooked.

Public outrage over the lack of measures put in place to curb reckless business behaviour continues and most prominently in the form of anger over the bonuses and pay offered to those in the financial industry. Sir Fred Goodwin, for example, was held up as a prime example as a leader who acted unethically and yet was still rewarded handsomely.

We are moving into a future where uncertainty and chaos are the new normality and if we are to create an upturn, then businesses should be very conscious of the lessons learnt from the recession and lead ethically. Many employees are still shaken by the consequences of the recession and seek security from a trusted leader and employer. Leaders must constantly remind themselves that the organisational culture is set by their own personal behaviours and trustworthiness.

In order for leaders to position themselves favourably for the upturn, they must create a sense of meaning and purpose at their work for those they lead and develop a sustainable culture that is ethically strong and successful.

A litmus test to see whether a business is in good shape is to measure the engagement of staff and ask them for regular feedback on their leadership. Businesses might want to enter pragmatic awards such as the Sunday Times survey, for example, and see whether they can become one of the Top 100 Best Companies to work for - this has the potential to act as both a benchmark and a morale booster.

Leaders should also prepared to have 'get-well programmes' when standards seem to be slipping. For example, leaders maybe tempted to take the ‘'it was only just...(a minor error)‘ attitude to rationalise and justify their unethical behaviour, but this must be eradicated before this behaviour runs the risk of becoming the norm. Penna advises leaders to be tough on unethical behaviour within business and to set the standard for the future; particularly during mergers and acquisitions, restructuring and changeover of leaders, where there is the greatest risk of unethical behaviour.

We recommend companies introduce ethical leadership development and coaching with realistic situations involving actors and online scenarios. This helps employees to spot scenarios where ethics maybe compromised and, furthermore, have the confidence to flag it as an issue. 

For the leaders themselves they should be encouraging collaborative behaviour - not setting teams off against each other; equally they should be actively discouraging a silo mentality. Creating an environment where people can give their best and being enthusiastic and passionate will all help leaders to establish a positive and fruitful workplace.

Finally, authentic leadership isn't something that can be merely preached about, as followers judge a leader's actions and not their words. A lack of authenticity and incongruence leads to a breakdown in trust and is considered unethical and hypocritical. While good ethics are good for business (though sometimes hard to prove), bad ethics are undoubtedly extremely bad for business as has been proven in recent years.

Jonathan Perks is MD of board and executive Coaching at Penna