You give positive rewards to those who behave well and you give negative feedback, punishment to those who don't. But you are always fair. The best managers, the best CEOs, the best teachers, and the best parents are those who know how to give the stick and the carrot well.

Society itself is based on this concept. If you break the law you are in trouble. If you respect it well, your reward is you are seen as a good citizen. 

Knowing how to use the carrot and the stick is a big part of a good leadership. But a few more qualities are necessary. 

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For an alternate view of this approach, see the writings of WilliamEdwardsDeming and Alfie Kohn ("Punished by Rewards"). Dr Deming argued that this approach was merely a lottery that handed out reward and punishment based on results beyond the control of the individual. Mr Kohn argued that rewards were actually destructive and trained people how to work to maximize their rewards rather the meeting the goal the rewards were supposed to represent.
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''Being seen as a good citizen isn't much of a reward; no wonder crime figures are so high''

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