Book review: The Practice of Ethical Leadership – Insights from Psychology and Business in Building an Ethical Bottom Line, by Claas Florian Engelke and Richard B. Swegan 

Corporate scandals have become so prevalent that they now appear commonplace. From Boeing’s faulty (and deadly) production of its 737 Max planes, to FTX founder Sam Bankman-Fried’s seven counts of fraud, to PricewaterhouseCoopers’ use of government secrets to help clients avoid taxes, it seems ethical leadership is an oxymoron. Our trust in corporate leaders to do the right thing continues to wane.

With Claas Florian Engelke and Richard B. Swegan’s new book, The Practice of Ethical Leadership, the authors take up the cause of describing the key ethical leadership competencies that will not only help leaders avoid their company’s name appearing on the front page with a scandalous headline, but create the type of positive business environment that attracts top talent, gains consumers’ trust, and increases long-term sustainability. They argue that leading with integrity, empathy, and a sense of societal purpose transcends a focus purely on results and profits. Priorities become the well-being of employees, clients, and the communities they serve.

The Practice of Ethical Leadership describes the foundation upon which leaders should consciously make decisions. A profound sense of right and wrong is critical, along with knowing that what may be right or wrong for themselves personally may be different when leading others. However, ethical behavior follows moral principles that cut across all cultures. Concepts such as do no harm, social justice, non-aggression, respect, and so on must undergird every action.

Ethical leadership demands moral courage when faced with weighty decisions that fall into grey areas, as most decisions do. Leaders must balance the needs of their organization, the interests of stakeholders, and the expectations of society when pondering the consequences of their decisions. Engelke and Swegan pose an array of scenarios and case studies to illustrate several considerations when faced with taking ethical action. For example, is turning down a potential new client based on ethical values a sound business decision? And if so, how do you communicate your rationale to the client you turned down, your board of directors, and company management? Is there a price to pay for displaying such integrity and authenticity?

The authors advocate that leaders not only adopt and embrace ethical principles for themselves, but also work to instill an ethics-based culture within their organizations. To do so, they recommend defining guiding organizational principles and embedding them into organizational systems and practices. The process of defining principles must involve team members across the organization, giving them input regarding what they wish to commit to organizationwide. Once defined, all decisions and actions must align to the guiding principles — from hiring, to promotions, to overall performance. Clearly defining the ethical behavior upon which the organization operates impacts the ways in which processes are followed, people cooperate, and conflicts are resolved.

The benefits of both an individual and organizational focus on ethics are profound. Engelke and Swegan chronicle the boosts to employee engagement, production, and retention; the improved standing the organization earns among consumers and the community; and, not least of all, reports by Ethisphere that, over a span of five years, ethical companies have outperformed the large cap sector by 13.5 percent. The authors refer to these gains as the Return on Ethics (ROE).

For purpose-seeking employees, discerning customers, and a values-deprived corporate world, The Practice of Ethical Leadership shows the way to creating a positive business culture, fostering trust, inspiring loyalty, and contributing to the development of a new generation of leaders who take to heart their responsibility for doing the right thing.  To learn more, visit ethicalbottomline.com.

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