On Friday I wrote about empathy as a key component of leadership–and got lots of feedback about the post. One senior executive at a Fortune 500 company called me today to say that he shared it with some community leaders in his hometown. “If you can’t empathize, no one will follow you,” this exec told the group. “Even worse, if you’re not empathetic, you’ll make a bad decision.”

My point exactly. One reason that AIG’s execs and CEOs like John Thain, who got the boot at Merrill Lynch , violated the public trust is that they failed to read the public in the first place.

Dov Seidman, the CEO of an ethics consulting firm called LRN, came by my office today and talked about the big shift to “inspirational leadership.” Carrots and sticks don’t work well anymore, he noted, because everyone is cutting costs. Who can afford carrots?

As for sticks, well, Gen Y, especially, won’t be manhandled. Nor will these young workers necessarily respond to regulations. “You don’t have power over employees or customers anymore,” Seidman noted. “There’s a shift from ‘power over’ to “power through.'”

Power over is issuing rules. Power through is leading by inspiration–via word-of-mouth marketing, blogging, and being a role model your people want to emulate.

Talk about inspiring–I’ll end by telling you about my lunch today with a couple of women leaders. I was at Solera Capital, a Manhattan-based private equity firm, with its CEO, Molly Ashby, and Sherrie Westin, who is EVP and chief marketing officer at Sesame Workshop. Molly and Sherrie are both mentors in this year’s Fortune-U.S. State Department Global Women Leaders Mentoring Partnership, an outgrowth of the Fortune Most Powerful Women Summit. In fact, they are co-mentoring a rising-star leader from Namibia–a managing director of a private equity firm there–and wanted to meet to plan a great experience for the young African mentee .

Molly and Sherrie didn’t know one another before, and over lunch, they shared their stories. They were amazed to discover that they are both crazy-busy moms with two kids–including adopted daughters from China. Molly’s story moved us practically to tears. She said that meeting PBS journalist Judy Woodruff at the Fortune Most Powerful Women Summit years ago inspired her to adopt her daughter from China. Woodruff has a son who has spina bifida–a crippling birth defect—and has done wonders raising money and attention around the cause. Molly went to China five years ago and brought home a three-year-old girl who has spina bifida. Doctors in New York literally saved the little girl’s life.

Today, Molly’s daughter is a strong and healthy eight-year-old–with a mom who is powerful beyond business. That’s inspirational leadership.