As organizations increasingly delegate high stakes decisions from talent acquisition to resource allocation to autonomous systems, a responsibility gap emerges. This paper investigates the concept of moral residue in the age of automation the lingering ethical obligation that remains with a leader even when an algorithm executes a choice. While AI driven innovation promises unparalleled efficiency, it often creates algorithmic distance, potentially leading to moral decoupling and an abdication of leadership oversight. This research proposes a governance framework for ethical accountability, shifting the focus from technical black box mechanics to the leader’s duty of understanding. By integrating Human in the Loop HITL protocols and transparency audits, the study argues that true organizational sustainability is only achievable when innovation is anchored in human centric responsibility. The paper concludes that leaders must embrace, rather than outsource, the moral consequences of automated outcomes to maintain stakeholder trust and long term social legitimacy. Moral Residue, Ethical Leadership, Algorithmic Responsibility, Social Sustainability. 15-17 International Conference on Reimagining Management-Sustainability and Innovation in the AI Era Special Issue Moushmi Prasad