The importance of ethical reasoning in business and how coaching can develop it

In an era where businesses are scrutinised for their actions and values, ethical reasoning is more important than ever. With the rise of corporate scandals, customer backlash, and growing demands for transparency, companies are under immense pressure to act with integrity. But how can businesses ensure their employees are equipped to make ethical decisions? One promising solution lies in coaching - an approach that can help develop individuals' capacity for ethical reasoning and responsible leadership.

Why ethical reasoning matters in business

Ethical reasoning is the ability to evaluate and make decisions based on what is morally right, considering the wellbeing of others, the organisation, and society. It goes beyond just following the law; it involves acting with integrity even when no one is watching. In a business context, ethical reasoning helps employees navigate complex situations where there may be competing interests, conflicting values, or ambiguous guidelines.

As NYU Stern ethics professor Alison Taylor points out in her book ‘Higher Ground’: “Any company that aspires to maintain an ethical culture needs to help employees build moral reasoning and capacity.” She argues that amid stockholder demands and transparency pressures, organisations can no longer treat ethics as merely a legal and reputational defence mechanism and advocates that “building capacity for ethical reasoning is a useful strategy in general, particularly in the face of rising employee and corporate activism.”

Avoiding corporate scandals through ethical decision-making

A lack of ethical reasoning has been at the heart of numerous corporate scandals in recent years. Take the 2015 Volkswagen emissions scandalas an example. The company was found to have rigged software to cheat emissions tests, affecting millions of vehicles worldwide. Had the engineers and decision-makers involved been equipped with strong ethical reasoning skills, they might have questioned the morality of their actions and avoided the widespread damage to the company’s reputation and financial standing.

Similarly, the Enron collapse in 2001 was found to have resulted from systematic fraud and deceit by top executives. A coaching culture that promoted ethical reflection might have helped key figures at Enron recognise the consequences of their actions and potentially avoid one of the biggest business failures in history.

This sentiment echoes the reflections of coach and leadership expert John Blakey, who famously asked, “Where were the coaches when the banks crashed?” in the aftermath of the 2007-2008 financial crisis. Blakey’s critique highlights how a stronger presence of executive coaches could have helped guide banking leaders through ethical dilemmas, potentially avoiding the risky, short-term decisions that led to the collapse. He argues that coaching shouldn’t just be about driving performance but also about fostering integrity and long-term accountability in leadership. Had coaches been present to challenge leaders during this time, they might have encouraged more responsible decision-making, ultimately mitigating the catastrophic impact the crisis had on the global economy.

The role of coaching in developing ethical reasoning

Coaching goes beyond standard training. It offers employees and leaders a space for personal growth, reflection, and the development of critical thinking skills, all of which are essential for fostering ethical behaviour. Here’s how coaching can play a transformative role in shaping ethical decision-making in the workplace.

1. Encouraging self-awareness and reflection

Ethical reasoning begins with self-awareness. Employees must first understand their own values, biases, and decision-making patterns before they can evaluate ethical dilemmas. Coaching helps individuals reflect on their behaviour, question their assumptions and consider how their actions affect others. By fostering self-awareness, coaching encourages employees to pause and think critically before making potentially harmful decisions.

2. Building empathy and perspective-taking

Empathy is a cornerstone of ethical reasoning. When employees can understand the perspectives of others - whether it’s customers, colleagues, or stakeholders - they are more likely to consider the broader impact of their decisions. Coaching promotes empathy by encouraging employees to step into others’ shoes and explore how different decisions might affect those around them. This heightened sense of empathy leads to more thoughtful, ethically sound choices.

3. Creating a culture of accountability

One of the key benefits of coaching is that it promotes personal accountability. Rather than focusing solely on rules or external consequences, coaching encourages employees to hold themselves responsible for their actions. This mindset shift can have a profound impact on ethical reasoning, as employees begin to internalise the importance of acting with integrity, even when there is no immediate consequence for unethical behaviour.

Real-world examples of ethical failures

The value of ethical reasoning becomes even clearer when we look at real-world examples where its absence led to disaster. Apart from Volkswagen and Enron, other examples include the 2016 Wells Fargo scandal, where employees opened unauthorised accounts to meet aggressive sales targets. Coaching that emphasised ethical reflection could have helped those employees recognise the unethical nature of their actions and resist pressure to engage in deceitful practices.

Another example is the 2008 financial crisis, where risky lending and unethical practices in the banking industry contributed to a global economic meltdown. Ethical coaching might have challenged the leaders or prompted them and employees to question their accountability, the long-term sustainability and fairness of these practices, potentially avoiding the far-reaching consequences that followed. As Blakey pointed out, the absence of a strong ethical coaching framework allowed risky, short-term gains to take precedence over sustainable, responsible decision-making.

A competitive edge through ethical leadership

Companies that invest in developing ethical reasoning through coaching gain more than just a moral high ground. Ethical behaviour builds trust with customers, improves employee morale, and fosters long-term success. In an age where consumers and investors are increasingly valuing transparency and corporate responsibility, businesses that prioritise ethics will find themselves ahead of the competition.

Microsoft’s CEO, Satya Nadella, has famously focused on building a culture of learning and empathy, helping transform the company from a competitive, insular environment to one that embraces collaboration and ethical leadership. This shift, driven by a coaching mindset and desire to conduct business with high ethical standards of integrity, transparency and honesty, have been key factors in Microsoft’s renewed success and reputation.

Conclusion: coaching as a catalyst for ethical business

Ethical reasoning in business is no longer just an option - it’s a necessity. Organisations that fail to prioritise ethical decision-making risk damaging their reputation, financial health, and long-term viability. By investing in coaching, organisations can foster the development of ethical leaders who are equipped to navigate complex challenges and ensure that integrity remains at the heart of their operations.

If businesses want to thrive in an increasingly transparent and unforgiving world, developing ethical reasoning through coaching is a step they can’t afford to ignore.