The ripple effect: How ethical leadership impacts organisational culture

In any organisation, leadership is the silent architect of culture. The type of leadership practiced within an organisation, whether ethical or unethical, profoundly influences organisational culture in subtle yet powerful ways. The values that business leaders embody, the standards they establish, and the behaviour they demonstrate create a ripple effect throughout the organisation, shaping interactions and setting the tone for workplace dynamics and culture. Ethical leadership has a profound impact on organisational culture, acting as the cornerstone for trust, accountability, and long-term success. It is not merely about sticking to moral principles but about setting the tone for integrity in business operations.

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Ethical leadership transcends merely adhering to regulatory frameworks; it strives to embed integrity within the organisation’s very DNA. By fostering a culture of trust, ethical leaders not only enhance employee engagement but also position their organisations for sustainable, long-term success. In an era of increasing organisational complexities and regulatory scrutiny, embracing this form of leadership is not just beneficial; it is imperative. A case in point is Volkswagen, a globally renowned company rocked by the 2015 emissions scandal. The scandal was not just a technical failure but a reflection of a corporate culture that prioritised short-term gains over ethical responsibility. In the aftermath, Volkswagen restructured its leadership, emphasising transparency and accountability. This shift not only helped rebuild trust but also repositioned the company as a leader in sustainable mobility.

Furthermore, the connection between ethical leadership and organisational culture is not just theoretical; it is backed by research. Studies by corporate governance and business ethics experts worldwide have consistently shown that leaders who exhibit ethical behaviour inspire similar conduct among their teams. Supporting this notion, Valerie Kirk’s Harvard article, “What is Ethical Leadership and Why is it Important?”, illustrates how ethical leadership fosters a transformational culture where employees are empowered to innovate and take ownership of their work. A research study examining ethical leadership in Nigeria’s banking sector, particularly in deposit money banks such as Unity, Keystone, Sterling, Stanbic IBTC, Skye, Eco, FCMB, Diamond, Fidelity, Union, UBA, Access, and Zenith Bank, reveals that ethical leadership has significant positive effects on corporate governance, corporate performance, and financial outcomes.

One of the most compelling examples of ethical leadership shaping culture is seen in companies that actively integrate integrity into their hiring, training, and reward systems. Google, for instance, has embedded ethical principles into its organisational DNA, encouraging open dialogue and fostering an inclusive work environment. Employees are not just expected to meet performance metrics but to embody the company’s values in their everyday interactions. This alignment between leadership behaviour and company culture has been instrumental in sustaining Google’s reputation as an industry leader in workplace ethics.

However, while ethical leadership is a powerful force, it does not exist in a vacuum. It thrives in organisations that prioritise ethical behaviour at all levels. This means that businesses must invest in ethical training programs, implement clear codes of conduct, and create systems that hold everyone, from entry-level employees to top executives, accountable for their actions. Without these reinforcements, even the most ethical leader may struggle to drive lasting cultural change.

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In essence, ethical leadership serves as a vital catalyst for positive change, capable of influencing corporate culture from within and creating a resilient foundation upon which a successful organisation can thrive. These transformative potentials underscore the necessity for leaders to prioritise ethical practices not just as a compliance measure but as a strategic advantage in an ever-evolving business environment. It is a ripple effect: a leader’s commitment to ethical principles shapes the culture, which in turn shapes the organisation’s success.

Rubby Anike is a Research and Programme Management Assistant at the Christopher Kolade Centre for Research in Leadership and Ethics, Lagos Business School.