Leadership and Business Ethics: Does It Matter? Implications for Management

This paper reviews the relationship between organisational leadership, corporate governance and business ethics, and considers the implications for management. Business ethics is defined, and the causes and consequences of unethical behavior are discussed. Issues pertaining to leadership, subordinate and organisation responsibility for business ethics are considered. The changing role of business leaders and the new concept of 'corporate governance' are examined, with an increasing importance being placed on ethical and socially responsible attitudes towards business. Organisational effectiveness and organisational efficiency, formerly central issues for practising managers, with directors thinking in terms of goal achievement for their respective organisations, have now been augmented by an awareness of issues in business ethics, and a requirement for members of the corporate governance to behave in more socially responsible ways. A secondary aim of the paper is to introduce an approach which illustrates how corporate governance and management could deal with some of the moral dilemmas that they may have to face.     

Business Executives’ Perceptions of Ethical Leadership and Its Development

This paper summarized the findings of a qualitative study that examines the perceptions of ethical leadership held by those who perceived themselves to be ethical leaders, and how life experiences shaped the values called upon when making ethical decisions. The experiences of 28 business executives were shared with the researcher, beginning with the recollection of a critical incident that detailed an ethical issue with which each executive had been involved. With the critical incident in mind, each executive told the personal story that explained the development of the values he or she called upon when resolving the ethical issue described. The stories were analyzed through the use of constant comparison, which resulted in the development of two models: (1) a framework for ethical leadership illuminating valued aspects of ethical leaderships and the value perspectives called upon when making ethical decisions, and (2) a model explaining how the executives’ ethical frameworks developed. The paper concludes with a brief discussion on virtue ethics, experiential learning, and human resource development.     

Do Perceptions of Ethical Conduct Matter During Organizational Change? Ethical Leadership and Employee Involvement

Ethical leadership matters in the context of organizational change due to the need for followers to trust the integrity of their leaders. Yet, there have been no studies investigating ethical leadership and organizational change. To fill this gap, we introduce a model of the moderating role of involvement in change. Organizational change and involvement in change are proposed as context-level moderators in the relationships of ethical leadership and work-related attitudes and performance. We employ a sample of 199 supervisor–subordinate pairs from a wide variety of organizations. Results support a three-way interaction (ethical leadership, organizational change, and involvement in change) for performance and OCBs. Our results have important implications for organizational change since ethical leadership appears to complement follower involvement when change is happening.     

Generation Y’s Ethical Ideology and Its Potential Workplace Implications

Generation Y is a cohort of the population larger than the baby boom generation. Consisting of approximately 80 million people born between 1981 and 2000, Generation Y is the most recent cohort to enter the workforce. Workplaces are being redefined and organizations are being pressed to adapt as this new wave of workers is infused into business environments. One critical aspect of this phenomenon not receiving sufficient research attention is the impact of Gen Y ethical beliefs and ethical conduct in workplace contexts. It is widely accepted that distinct generational experiences shape ethical ideologies and ethical ideologies in turn affect the way people function in the workplace. Thus, Gen Y’s unique cohort experiences are likely to shape their ethical ideologies and consequent workplace judgments and actions. In this article, we examine Gen Y’s ethical ideology and study its impact on workplace functioning regarding leadership style, teamwork, and judgments about ethical violations. Our analyses indicate that Gen Y’ers tend toward situationalism (high idealism and high relativism), and their socially connected orientation produces more lenient judgments of collaborative vs. unilateral ethical violations. However, Gen Y’ers do exhibit individual variation. Relativist Gen Y’ers are more tolerant of ethical violations, whereas, Gen Y Idealists are less tolerant of ethical violations. High Idealists also show stronger teamwork and leadership characteristics. In addition, Gen Y’ers possessing servant leader traits exhibit incrementally better teamwork, and greater perceived unacceptability of ethical violations. We conclude by discussing implications of these findings for managing ethical climates and conduct.     

Does Ethical Leadership Lead to Happy Workers? A Study on the Impact of Ethical Leadership,Subjective Well-Being,and Life Happiness in the Chinese Culture

Business ethics has been emphasized throughout the past decade and organizations are aware of the influence it has on the organization’s performance. As a result, ethical leadership is important as it influences the employees profoundly. This study aims to address this issue and explore the influence ethical leadership has on employees by examining job satisfaction, subjective well-being at work, and life satisfaction. Two groups of independent data were collected and a multi-group analysis was conducted before pooling together for a two-step structural equation modeling test. The results revealed that ethical leadership has a negative direct effect on employee well-being which offers significant findings for the meaning of ethical leadership in the Chinese culture. Useful managerial implications are provided for managers and supervisors at the end of this study.     

Trust and Face

Since last year,Made-in-China prod- ucts have been in the international spotlight and undergone a"confidence crisis".Foreign media have been full of stories covering the alleged poor quality of Chinese products.The United States,EU and Japan have made several accusations, including the excessive level of formalde- hyde in kids' clothes,lead in toys and the pesticide residue found on vegetables,and     

The Relationship Between Ethical Leadership and Unethical Pro-Organizational Behavior: Linear or Curvilinear Effects?

In this study, we examine the nature of the relationship between ethical leadership and unethical pro-organizational behavior (UPB), defined as unethical behavior conducted by employees with the aim of benefiting their organization, and whether the strength of the relationship differs between subordinates experiencing high and low identification with supervisor. Based on three-wave survey data obtained from 239 public sector employees in China, we find that ethical leadership has an inverted u-shaped (curvilinear) relationship with UPB. As the level of ethical leadership increases from low to moderate, UPB increases; as the level of ethical leadership increases from moderate to high, UPB decreases. Further, we find that the strength of this inverted u-curve relationship differs between subordinates with high and low identification with supervisor. That is to say, the inverted u-shaped relationship between ethical leadership and UPB was stronger when subordinates experienced high levels of identification with supervisor. The theoretical and managerial implications of our findings for understanding how to manage UPB in an organizational context are discussed.     

Harmony,Justice, Confusion,and Conflict in Family Firms: Implications for Ethical Climate and the “Fredo Effect”

In this study, we analyze the financial performance and the managerial abilities of religious mutual fund managers, implementing a comparative analysis with conventional mutual funds. We use a broad sample, free of survivorship bias, of religious equity mutual funds from the US market, for the period from January 1994 to September 2010. We build a matched-pair conventional sample in order to compare the results obtained for both kinds of mutual fund managers. We analyze stock-picking and market timing abilities, topics widely neglected for the specific case of religious mutual fund managers. We also study style timing abilities. As far as we are aware, this aspect has not been studied previously for religious mutual fund managers. Our results indicate that religious mutual fund managers underperform both the market and their conventional counterparts. This result is driven by negative stock-picking ability which could be generated by excluding “Sin” stocks from their portfolios. Moreover, they are not able to time the market or any of the following styles: size, book-to-market, and momentum.     

Does the Ethical Leadership of Supervisors Generate Internal Social Capital?

Ethics has recently gained prominence in debates surrounding social capital creation. Despite the significant theoretical progress in this field, it still lacks empirical research. The goal of this study is to empirically explore the ethical leadership of supervisors as an antecedent of the firm’s social capital. We build on social learning theory to argue that employees can learn standards of appropriate behavior by observing the behavior of role models. By displaying and enforcing ethical behavior, supervisors can facilitate the process through which employees learn to feel empathy toward others and establish profound affective relationships with them. Data were collected from 408 Spanish, French, and Portuguese part-time MBA students. Using structural equation modeling techniques, we show that the ethical leadership of supervisors exerts a significant influence on the structural, relational, and cognitive dimensions of social capital.     

Duties Owed to Organizational Citizens – Ethical Insights for Today’s Leader

Organizational citizenship behavior (OCB) has been widely recognized as a contributor to improving organizational performance and wealth creation. The purpose of this article is to briefly summarize the motives of many employees who exercise OCB and to identify the ethical duties owed by organizational leaders to the highly committed employees with whom they work. After reviewing the nature of OCB and the psychological contracts made with highly committed employees, we then use Hosmer’s framework of ten ethical perspectives to identify how OCB is viewed from each of those ethical viewpoints. We offer six propositions about OCB that relate to building employee commitment and trust.     

Corporate Social Responsibility and Ethical Leadership: Investigating Their Interactive Effect on Employees’ Socially Responsible Behaviors

This research investigates the interlinkage between corporate social responsibility (CSR) and ethical leadership in inducing employees’ socially responsible behaviors (SRBs). Specifically, building on organizational identification theory and cue consistency theory, we develop and test an integrated moderated mediation framework in which employees’ perception of ethical leadership moderates the mediating mechanism between their perceptions of CSR (i.e., perceived CSR–environment and perceived CSR–community), organizational identification, and SRBs (i.e., green and societal behaviors). The findings highlight the need for consistency between employees’ perceptions of CSR and ethical leadership to foster their propensity to further social good through relationship-building activities with their organization. The results, which largely verify the theoretical framework, contribute to and have implications for both research and practice.     

(Un)Ethical Leadership and Identity: What Did We Learn and Where Do We Go from Here?

The purpose of this article is to highlight and comment on the key findings emerging from the collective efforts of the special issue on leadership, ethics, and identity. Highlights include definitional advancements, processes comprising ethical leadership, as well as outcomes and moderating factors. In addition, I attempt to synthesize work across authors by identifying common themes as well as conflicting elements in the article. I conclude with a discussion on emerging areas in need of future research investigation in the leadership and ethics arena.     

Not All Followers Socially Learn from Ethical Leaders: The Roles of Followers’ Moral Identity and Leader Identification in the Ethical Leadership Process

Journal of Business Ethics - Recent literature suggests that ethical leadership helps to inhibit followers’ unethical behavior, largely built on the premise that followers view ethical...     

‘Trust is good,control is better’: The 1974 Herstatt Bank Crisis and its Implications for International Regulatory Reform

With its international supervisory and regulatory implications, the failure of Bankhaus Herstatt is one of the landmarks of post-war financial history. This article offers the first comprehensive historical account of the Herstatt crisis, and contributes to the wider discussions on international supervisory and regulatory reform since the mid-1970s, including regulatory capture, markets' self-regulation and resolution of failed banks. In doing so, it first argues that contrary to a widely held view, the German authorities received early and repeated warnings about Herstatt's dealings but this involved only limited and ineffective regulatory/supervisory responses, then it turns to the actual collapse of the bank in June 1974, and finally explores the wider regulatory issues raised by the Herstatt case.     

Chinese Traditionality Matters: Effects of Differentiated Empowering Leadership on Followers’ Trust in Leaders and Work Outcomes

Drawing on ethical principles of fairness and integrative social contracts theory, moral obligations of fair dealing exist between the firm and all shareholders. This study investigates empirically whether privileged investors of publicly traded firms engage in legal, but morally questionable, trading that at the expense of non-privileged institutional or atomistic investors. In this context, we define privilege as the access to material, nonpublic earnings surprise information. Our results show that the opportunity for procedural unfairness (e.g., the likelihood of an earnings surprise and information asymmetry) increases with the presence of privileged investors. However, this procedural unfairness does not appear to lead to distributive unfairness even though the level of abnormal trading also increases with the presence of privileged investors. That is, our findings suggest that other shareholders are in fact better off from an outcome perspective given that the abnormal stock price returns upon the announcement of an earnings surprise are either more positive (in response to a favorable surprise) or less negative (in the case of an unfavorable surprise) when the firm has a high proportion of privileged investors. We extract the important implications of our study for future research on the fairness of capital markets and information asymmetry amongst classes of investors, as well as for public policy.     

How Ethical Leadership Shapes Employees’ Job Performance: The Mediating Roles of Goal Congruence and Psychological Capital

Drawing from research on ethical leadership, psychological capital, and social learning theory, this study investigated the mediating effects of goal congruence and psychological capital in the link between supervisors’ ethical leadership style and followers’ in-role job performance. Data captured from 171 employees and 24 supervisors showed that ethical leadership has a positive effect on followers’ in-role job performance, yet this effect is explained through the role of psychological capital and follower–leader goal congruence, providing evidence of mediation. These findings have significant implications for research and practice.     

How Does Ethical Leadership Trickle Down? Test of an Integrative Dual-Process Model

Although the trickle-down effect of ethical leadership has been documented in the literature, its underlying mechanism still remains largely unclear. To address this gap, we develop a cross-level dual-process model to explain how the effect occurs. Drawing on social learning theory, we hypothesize that the ethical leadership of high-level managers could cascade to middle-level supervisors via its impact on middle-level supervisors’ two ethical expectations. Using a sample of 69 middle-level supervisors and 381 subordinates across 69 sub-branches from a large banking firm in China, we found that middle-level supervisors’ ethical efficacy expectation and unethical behavior–punishment expectation (as one form of ethical outcome expectations) accounted for the trickle-down effect. The explanatory role of middle-level supervisors’ ethical behavior–reward expectation (as the other form of ethical outcome expectations), however, was not supported. The theoretical and practical implications are discussed.