We always read about the superstar CEO.  The company’s leader who is paid millions and is the rock star of business success.  Board members, shareholders and stakeholders support the leader because he/she has brought “success,” meaning the company’s stock price is increasing, the company continues to grow and no one would ever challenge the company’s reliance on the CEO to lead the company.

But there is always more to the story.  Some CEOs lead by example – they commit themselves to adherence to strict ethical principles, to protecting the company’s employees, and advancing the company’s ethical culture.  In other words, these CEOs stand for something – they stand for integrity. 

An ethical CEO may not be the so-called “Rockstar” who is profiled by the business paparazzi.  Indeed, the ethical CEO may not get so much notice by the media.  However, the ethical CEO gets the attention of the most important audience – the company’s stakeholders.  And this audience is important.

An ethical CEO is watched by senior leaders, managers and employees.  Senior leaders take their cues from the CEO.  Senior executives have defined objectives and they observe how the CEO interacts with senior executives and holds them accountable.  Leadership requires clear expectations, communications and accountability.  When these objectives are made clear, senior executives know how to perform.  If they do not follow these requirements, they will fail and will be replaced.

Managers and employees observe or learn about a CEO’s actions or failures to act.  A single act or failure to act can have a significant impact because it becomes part of the CEO’s surrounding “folklore,” the stories that are repeated about a CEO throughout the company with positive or negative results.  When the CEO acts with integrity, managers and employees will learn about the incident – they will hear through the company grapevine.  Very little occurs in the company without others hearing about it and reporting the incident to others and so on. 

A CEO’s performance is often tied to the “folklore” surrounding his or her behaviors or failures to act.  The stories accumulate in the company diary.  Employees will often tell each other about these incidents.  A CEO can quickly develop a reputation – good or bad.  Everything the CEO does is magnified in the corporate landscape.

CEOs who express integrity and empathy will build lasting trust with employees.  This is an important foundation to employee performance which quickly translates into organizational performance.  An ethical CEO who follows ethical values and principles is destined to establish an important relationship with all key stakeholders – including shareholders.  Trust and integrity go a long way. 

When a CEO takes time to explain to employees a difficult business decision which impacts employees, the CEO will be credited for honesty.  That does not mean that an ethical CEO is never wrong.  No, it just means that an ethical CEO begins a task with a leg up, a chance to continue to act in the right way, to treat his or her managers and employees with respect and dignity.  Ethical CEOs will make mistakes but they will not be afraid to admit those mistakes.

It is amazing what commonsense and integrity can accomplish.  A CEO who sets an example, adheres to ethical principles and displays emotional intelligence can be a powerful leader.  Business acumen coupled with these basic values usually results in success, at least as defined by the company’s senior executives, managers and employees.