An ethical SEO firm is one that only uses white hat SEO techniques (as opposed to black hat). Black hat techniques might have huge benefits at first, but they are also very risky and can get your site blacklisted by Google because they use shady techniques against Google's policies. Examples of black hat SEO are buying text links from other sites instead of growing backlinks organically.
There is soooo much deception in SEO that it is practically impossible to differentiate a master from a manipulator. The largest SEO companies in Canada, and the most reputable, basically take your money and send a bit of it to link building outsourcers usually in India, Pakistan or Indonesia.
Most SEO services are great at marketing themselves, they have amazing skill at scamming people out of the money. They know that link building schemes can influence search engine rankings and give some of it away to "SEO experts" in far away lands who think they too have some kind of incredible copy/paste skill.
My rule of thumb, show up at their web site and they have the same stupid happy smiling people pleasing landing pages as the rest of the illusionists then hit the back button. Check the size of their web site. Do they really need 5,000 web pages to describe a service that only really requires two paragraphs? How many artificially genetaed links are pointing to their crap. Are they good at optimizing content and working web page HTML tags or are they just link spammers like the rest of them.