The leadership conversation is shifting, especially here in The Bahamas. For ethics and leadership are not separate disciplines. Leadership decisions either reinforce an ethical culture or erode it. When ethics is treated as a secondary consideration or, worse, an afterthought, companies expose themselves to damaged integrity and reputation, internal risk and a long-term decline in trust.

In high-pressure environments, leaders often prioritise outcomes such as performance targets, profitability and stakeholder demands. These are important, but how those outcomes are achieved is equally so. When short-cuts are rewarded or poor conduct is tolerated because the results are favourable, the long-term costs begin to compound.

A Harvard Business Review writer, Esther Han argues that when a company’s culture is grounded in ethics and accountability, it drives employee satisfaction, improves performance and strengthens customer loyalty. She notes that accountability is reinforced through clear policies and procedures that align actions with the company’s stated values.

This article briefly defines the risks created by unethical leadership and provides suggested actions to counter this.

Defining the risk

The gap between stated values and lived experience creates risk. Employees recognise it quickly. According to the 2023 Ethics & Compliance Initiative (ECI) report, 51 percent of employees in weak ethical cultures reported witnessing misconduct. In stronger cultures, that number fell to 33 percent. That is a meaningful difference, and one that reflects the tone set from the top.

Further, 40 percent of employees who observe misconduct choose not to report it. Fear of retaliation, lack of confidence in outcomes, and distrust of leadership all contribute to silence. When people stop speaking up, issues escalate unchecked.

Where power is concentrated, these risks grow. Ethical blind spots are more common when leaders operate without challenge or input. And while positional authority may produce short-term control, it rarely sustains long-term legitimacy.

What leading ethically looks like

Ethical leadership is not theoretical. It involves deliberate actions and clear expectations. Four practices, consistently applied, create a stronger ethical environment:

* Clarify expectations early: A code of conduct must be more than a policy document. It should be reinforced in how decisions are made, how managers experience learning sessions, and how success is defined. Employees need clarity on what behaviour is expected, and what will not be tolerated.

* Share influence, not just responsibility: Leaders should involve others in key decisions, especially those that carry ethical weight. Cross-functional discussions, pre-decision reviews and regular culture audits help surface concerns before they turn into issues.

* Make reporting safe and consistent: Confidential reporting channels are standard. But without consistent and fair follow-through, trust is lost. Employees are more likely to speak up when they see credible action taken, and when those actions apply equally across all levels of the company.

• Monitor behaviour, not just outcomes: Most compliance reporting focuses on what went wrong. Ethical leadership includes reviewing what went right, who made the right call under pressure, who flagged a potential issue early, and who paused a process for the right reason. These moments reinforce culture more than any memorandum.

In short, ethical leadership does not slow the company down. It protects it from drift. It creates a working culture where decisions are sound, people feel respected and results are achieved with integrity. In power-driven environments, the absence of ethical grounding is not neutral; it is a liability.

The companies that perform well over time are those that keep ethics aligned with authority, and principle aligned with performance

• NB: About Derek Smith Jr

Derek Smith Jr has been a governance, risk and compliance professional for more than 20 years with a leadership, innovation and mentorship record. He is the author of ‘The Compliance Blueprint’. Mr Smith is a certified anti-money laundering specialist (CAMS) and holds multiple governance credentials. He can be contacted at hello@pineapplebusinessconsultancy.com