Why Virtue Ethics is the Key to Ethical Leadership
The Missing Piece That Can Change Everything
What if the key to building ethical organizations isn’t found in rules, policies, or codes of conduct? What if it’s rooted instead in the vision, principles, and courage of those who lead them? What if character, not compliance, is the foundation of lasting success?
This idea has reshaped how I view ethics in business—and it could transform how we all approach leadership.
For decades, companies have leaned heavily on compliance programs to ensure ethical behavior. These programs were designed to keep organizations on the right side of the law, preventing misconduct and managing risk. On paper, they’re effective. Employees know the rules, follow the codes, and avoid legal trouble.
But beneath the surface, cracks are showing.
Scandals like Enron, Lehman Brothers, and Theranos, among many others, are painful reminders that compliance alone isn’t enough. Despite having rules and policies, these organizations were undone by greed, dishonesty, and lack of integrity.
The problem? Compliance manages actions but often fails to inspire the moral convictions that drive truly ethical decisions. That’s where character building comes in—fostering the inner strength and virtues required to uphold what is right, even in the face of competing pressures.
A Lesson in Empathy and Fairness During Crisis
During the height of the pandemic, I witnessed an act of leadership that changed how I think about leading with integrity.
One of my clients, a medium-sized architecture and construction firm, faced a devastating reality. The pandemic had slashed their business significantly, and the owners decided that downsizing was the only way to survive.
On paper, it seemed logical to reduce costs by cutting jobs. However, this company had always prided itself on an organizational culture rooted in empathy, compassion, and fairness.
For the leaders, the thought of laying off employees who were simply victims of an unprecedented crisis was gut-wrenching.
Implementing the owners’ decision felt like a massive contradiction to the very values they had been promoting.
For these leaders, it wasn’t just a financial decision: it was an ethical dilemma that forced them to reconcile their responsibility to the organization with their commitment to the culture they had worked so hard to cultivate.
As the leadership team gathered to discuss the layoffs, they faced a moral crossroads.
How could they preach empathy, compassion, and fairness, only to turn around and dismiss loyal employees who had done nothing wrong and were simply in the same boat as everyone else?
And yet, how could they deny the financial strain the company was under?
The tension between their values and the harsh realities of survival was like an unrelenting storm that forced them to navigate one of the most pressing ethical challenges of their lives.
Then, one leader made a bold proposal that changed everything: instead of cutting jobs, the leadership team could take salary reductions.
These weren’t small cuts—they would impact the leaders' lifestyles and, for some, even their financial security. Yet, they saw this as the only way to align their actions with the values they had built their company on.
The decision was unanimous. The leaders chose to lead with empathy, compassion, and fairness, sacrificing their own financial ease to live their values, turning them from ideals into actions.
In a move that reflected true collaboration, employees were consulted and they ultimately voted to agree on smaller, proportional salary reductions to share the burden equitably.
By choosing character over convenience, these leaders not only saved jobs, but also reinforced the trust and loyalty of their workforce.
This collective act of character, however, was made possible by the leadership team’s example that demonstrated the power of virtues.
When the business recovered, so did the salaries of everyone.
This wasn’t just about weathering a storm; it was a masterclass in ethical leadership, showing how decisions rooted in character lead to lasting resilience.
Why Compliance Falls Short
In contrast, compliance programs focus on mitigating risks and enforcing rules. They’re like a GPS—helpful for navigation but powerless if you choose to ignore the directions.
In compliance-driven cultures, employees often follow rules out of fear of punishment, not necessarily because they believe in the principles behind them. The result is superficial adherence to ethics, with little, if any, genuine commitment.
A truly ethical organization requires more than ticking boxes and managing risks. It requires people who embody virtues—leaders and employees whose moral compass guides their behavior, even when there’s no external pressure or oversight.
The Case for Virtue Ethics in Business
Virtue ethics, rooted in the teachings of Aristotle, asks a powerful question: Who do we want to become? Unlike compliance, which focuses on external rules, this approach emphasizes inner moral growth and the virtues that guide us in everyday life.
It’s about building character through the cultivation of virtues—specific moral qualities like courage, prudence, and justice—that guide our decision-making, govern our interactions with others, and drive how we lead through challenges.
Virtues aren’t innate; they’re developed through practice. Think of them as moral muscles. Just like physical muscles, they grow stronger the more you use them.
For example, practicing the virtue of honesty in small, everyday situations—like owning up to a minor mistake at work—builds the habit that will guide you in larger, more challenging situations.
Over time, behaving virtuously becomes part of our human nature. In any work context, this shift can transform not only individuals but entire organizational cultures.
Building a Virtue-Based Workplace
So, how do we move from compliance to character at work? Here are some steps to get started:
Redefine Leadership: Leaders must embody virtues. Leadership has to be ethical or it simply isn't leadership. Leaders should be trained not just on skills but on virtues like honesty, loyalty, empathy, and fairness.
Rethink Training: Its primary goal should be to develop character, not just ensure employees understand rules, risks, and legal implications. Create programs that simulate real-world dilemmas and encourage participants to practice decision-making and actions rooted in virtues.
Measure What Matters: Performance evaluations should include metrics for ethical behavior. Recognize and reward employees who demonstrate virtues in their daily work. By evaluating how virtues are embodied in practice, organizations can strengthen their ethical foundation and reinforce a culture where character drives performance.
The Ripple Effect of Virtue
When businesses prioritize character, the benefits extend far beyond compliance. Internally, teams become more cohesive and resilient. Externally, organizations build trust with stakeholders, enhancing their impact.
More importantly, this approach contributes to a greater good. By developing leaders and employees with strong moral character, businesses can drive societal change. They can show that success doesn’t have to come at the expense of integrity—that excellence and ethics can, and should, go hand in hand.
A Paradigm Shift
Moving from compliance to character starts with small, meaningful steps. It requires additional effort, commitment, and a willingness to challenge the status quo. But the rewards are worth it. Organizations that embrace virtue ethics create lasting value for their people, their communities, and the world.
It’s time to reimagine what it means to be an ethical organization. Let’s move beyond compliance and start a new conversation about building workplaces where virtues thrive and character defines success.
This paradigm shift starts with each one of us.
Now it’s your turn—how do you see virtues playing a role at work? Have you experienced moments where character shaped the outcome of an ethical dilemma? Share your thoughts, insights, or stories in the comments, and let’s continue this important conversation!
Together, we can build workplaces where virtues thrive and make integrity the foundation of lasting success.
On this journey with you,
Alma