Is Ethical Leadership Beneficial?

 

Jahanvi Bansal1*, Dr. Dinesh Kumar2

1Research Scholar, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar-125001, Haryana India

2Assistant Professor, Department of Management, KIIT College of Engineering, Gurugram-122102, Haryana India

*Corresponding Author E-mail: jahanvi19@gmail.com, Dinesh_Dhillon4@yahoo.co.in

 

ABSTRACT:

Ethical leadership is one of the important indicators of corporate success. The purpose of this paper is to shed light on the various aspects, dimensions, and outcomes of ethical leadership. The paper initially introduces the conceptual framework of ethical leadership and its relevant traits. And then discusses the propositions related to various aspects and outcomes of ethical leadership based on the review of pertinent studies published during the last few decades. The paper ends with the discussion of noteworthy implications that are relevant to the advancement of ethical leadership in the organization. Limitations and future research directions are also deliberated.

 

KEYWORDS: Ethical leadership, ethical decision-making, employees’ outcomes, organizational outcomes.

 

 

 

INTRODUCTION:

Owing to numerous corporate scandals and moral lapses across the world, the morality of corporate leaders is questioned by the public as well as the organizational stakeholders. Such ethical lapses are a succinct pointer on the lack of ethical behaviour by the corporate leaders (Khalid, 2014; Alshammari, Almutairi, and Thuwaini, 2015; Butt, Butt, and Ayaz, 2016). One rational solution to these ethical crises is having leaders with strong moral character and values. A burgeoning body of literature ethics has witnessed that by having ethical leaders; organizations can improve their corporate image and augment performance (Alshammari et al., 2015).

 

However, ethical leadership requires much more than moral character and values (Freeman and Stewart, 2006). In the opinion of Wood (2014), ethical leadership demands the conversion of moral values into ethical decisions, particularly in instances of complex and dynamic situations.

 

OBJECTIVES OF THE STUDY:

The main objective of the study is to shed light on the various aspects, dimensions, and outcomes of ethical leadership. To achieve this objective, the following are set as sub-objectives:

·           To provide a conceptual framework of ethical leadership based on the review of existing literature.

·           To explore the relationship between ethical leadership and ethical decision-making.

·           To examine the relationship between ethical leadership and employees’ outcomes.

·           To investigate the relationship between ethical leadership and organizational outcomes.

·           To provide practical implications that will strengthen the practice of ethical leadership in the organizations.

 

LITERATURE REVIEW:

Ethical Leadership:

Efficacious ethics management in the organization is all about how the values, ethics, and moral principles are applied by leaders for sound decision-making (Mishra and Sharma, 2010). Researches have supported this contention that ethical leadership right from its inception is allied with ethical decision-making and has a positive impact on employees and organizations (Pandey, Singh, and Pathak, 2015).

 

Brown, Treviño, and Harrison (2005) were among the first researches to empirically study ethical leadership. According to them, ethical leadership is comprised of two main aspects: (1) the moral person component (e.g., integrity, concern for others, justice, trustworthiness), and the (2) moral manager component (e.g., communicating, rewarding, punishing, emphasizing ethical standards, role modelling ethical behavior). According to Freeman and Stewart (2006), ethical leaders articulate and embody organizational values, give priority to organizational success than individual benefits, engage in open communication and discussion on ethical standards and issues, and frame actions in ethical terms. Brown and Mitchell (2010) has advocated that ethical leaders act as moral role models for employees, set and communicate ethical standards, and use rewards and punishments to ensure ethical conducts. In a study of 1,525 employees and their supervisors working in 300 organizations in the United States, Mayer, Kuenzi, and Greenbaum (2010) have viewed that ethical leaders set the ethical tone for an organization by framing and implementing practices, policies, and procedures that promote ethical behavior among employees while reducing the likelihood of malfeasance or unethical conduct. In yet another view, Bello (2012) has established that ethical leaders integrate ethical principles with values, vision and mission, and goals of the organization to derive success.

 

Ethical Leadership- Traits and Characteristics:

Ethical leaders serve as guides not only for employees but also for other stake­holders that in a united way help in achieving organizational objectives and goals (Elçi, Sener, Aksoy, and Alpkan, 2012). Ismail and Duad (2014) have explored and conceptualised seven characteristics of ethical leadership including fairness, power sharing, open communication, people orientation, ethical guidance, integrity, and concern for sustainability of stakeholders and society. Analogous to this, Resick, Hanges, Dickson, and Mitch­elson (2006), in their study, have highlighted six traits of ethical leadership such as character and honesty, societal orientation, ethical awareness, ability to motivate, inspire, and empower, and take ethical responsibility. In a similar tune, Brown et al. (2005) have studied several aspects of ethical leadership such as communicating, caring, role modelling, treating employees fairly, honesty, and listening to employees.

 

THEORETICAL DEVELOPMENT AND PROPOSITIONS:

Ethical Leadership and Ethical Decision-making:

The key responsibility of ethical leadership includes two aspects, namely, ensuring ethical decision-making at all levels and developing an ethical climate that fosters ethical conduct (Hitt, 1990). Mihelič, Lipičnik, and Tekavčič (2010) have conceptualised that ethical leaders incorporate ethical dimension in the decision-making process, consider the ethical consequences of their decisions, think about employees ‘welfare, and endeavour to make fair choices. In a similar vein, Mishra and Sharma (2010) have advocated that ethical leaders aspire to treat all stakeholders legitimately and ensure fairness in their decisions. Further, it has been observed that different ethical leadership style may have varying impact on ethical decision-making (Chikeleze and Baehrend Jr., 2017). Cianci, Hannah, Roberts, and Tsakumis (2017) have observed that authentic leaders are more likely to retrain employees from making unethical decisions in the face of temptation as compared to neutral or less authentic leaders whose followers are more vulnerable to give up to temptation. Hence, the following proposition is advanced:

 

Proposition 1: Ethical leadership is significantly related to ethical decision-making

Ethical Leadership and Employees’ Outcomes:

A mounting body of research has suggested that ethical leadership is substantially associated with beneficial employees’ outcomes such job satisfaction (Brown and Mitchell, 2010), job performance (Walumbwa, Mayer, Wang, Wang, and Workman, 2011; Bello, 2012), organizational commitment (Zhu, May, and Avolio, 2004; Ismail and Daud, 2014), willingness to report malfeasance (Brown and Mitchell, 2010), desire to engage in extra-role behaviour (DeConinck, 2015), group learning behaviour (Walumbwa, Hartnell, and Misati, 2017), perceived organizational fit, organizational identification, and citizenship behaviour (DeConinck, 2015), reduced turnover intention and work related stress (Elçi et al., 2012; DeConinck, 2015), and leaders trust (Zhu et al., 2004). An ethical leader has the power and ability to influence employees’ behaviors (Çelik, Degeoglu, and Inanir, 2015) that in turn derive several outcomes such as perceived effectiveness of leaders, job satisfaction and dedication, and employees’ willingness to report problems to management (Brown et al., 2005). DeConinck (2015), using a sample of 331 salesperson, has revealed that ethical leaders positively influence employees’ job attitudes, work behaviors, and organizational identification. Okpozo, Gong, Ennis, and Adenuga (2017), in a survey of 203 residents of three teaching hospitals in the South Atlantic Division of the U.S., have discovered that ethical leaders have the potential to nurture confidence and self-sufficiency among employees, thereby, boosting employees’ self-efficacy levels while reducing the instances or levels of burnout in organizations. Likewise, Walumba et al. (2011) have observed a positive linkage between ethical leadership and employee performance, which is fully mediated by leader-members exchange, self-efficacy, and organizational identification. Highlighting the strength of ethical values, Sabir, Iqbal, Rehman, Shah, and Yameen (2012) have advocated that corporate ethical values act as a catalyst in leveraging ethical leadership and employees’ performance. Therefore, on the basis of above discussion, the following proposition is suggested:

 

Proposition 2: Ethical leadership is significantly related to employees’ outcomes.

Ethical Leadership and Organizational Outcomes:

In this highly competitive and global business environment, organizations need to have effective and ethical leaders to motivate and direct employees toward accomplishing organizational sustainability, success, and growth (Madanchian, Hussein, Noordin, and Taherdoost, 2016). Ethical leadership stimulates a progressive and positive attitude among various stakeholders toward the organization. This positive attitude creates a culture of care, trust, and integrity that substantially improves organizational performance. In a study of public and private sector organizations of Pakistan, Khalid (2014) has discovered that ethical leadership is positively related to organizational performance and this relationship is significantly mediated by corporate governance. Analogous to this, ethical leadership through corporate governance helps in minimizing the overall cost of operations, improves efficiency, and builds organizational image (Khalid, 2014). In a much similar study, Butt et al. (2016) have explored ethical leaderships paves a way for corporate social responsibility which in turn enhances the organizational performance. Further, Pučėtaitė (2014) has confirmed a partial mediating role of organizational trust in the association of ethical leadership and innovation development and thus, organizational innovativeness can be stimulated through ethical leadership when partially mediated by organizational trust. In the light of above discussion, the following proposition is advanced:

Proposition 3: Ethical leadership is significantly related to organizational outcomes

CONCLUSIONS AND PRACTICAL IMPLICATIONS:

In this modern and highly competitive business environment, ethical issues have become a worldwide phenomenon. Hence, it is crucial for organizations to take protective measures to avoid ethical lapses. In this direction, ethical leaders are perceived to nurture and promote ethical behavior by setting examples for others in ethical terms, acting as ethical role model, setting ethical standards and principles, engaging in open communication about ethical matters with employees, guiding employees on ethical issues, and creating an internal mechanism that leads to the development of ethically responsible employees. Thus, ethical leadership fosters ethical behavior that assist in stimulating and advancing ethical decision-making among followers. Besides, it has been manifested in the study that ethical leadership leads to significant employees’ and organizational outcomes. Above and beyond, leadership that foster unethical behaviour is harmful and even poisonous for the organization (Sabir et al., 2012).

 

However, to derive maximum benefits from ethical leadership, it must be supported and facilitated by the top management. Further, it must be supplement by a strong ethical culture that will reduce the chances of unethical behaviour and misconduct among employees. This calls for the congruence of organizational and individual values, typically known as organizational-individual value fit. Organizations should endeavour to hire ethical people by considering ethical skills along with the technical and interpersonal skills. Orientation programs with ethical implications for new entrants are equally significant. As well, implementation of code of ethics, ethical training, and establishment of ethics helplines are instrumental in building an ethical culture that will assist ethical leaders in deriving affirmative organizational and employees’ outcomes. Practical implications, therefore, suggest that corporate leaders should lead through ethical role modelling, develop performance criteria that reward ethical behaviour, facilitate ethical decision-making, stimulate an ethical code of conduct, mentor followers on ethical standards and policies, institutionalise ethical training, monitor misconduct through internal and external audit systems, investigate ethical issues and complaints, and ultimately protect employees from retaliations.

 

LIMITATIONS AND FUTURE DIRECTIONS:

Despite the promising observations in the study, we have noted three major limitations that further give directions for future researches. First, the study is theoretically developed and hence, lacks the empirical testing of the propositions to validate the findings. This way, future researches can empirically test the propositions by gathering primary data through questionnaire and interview methods. Second, many studies have highlighted that the association of ethical leadership and employees’ and organizational outcomes is mediated by many variables such as job satisfaction, corporate values, ethical training, corporate social responsibility, corporate governance, leader-members exchange, self-efficacy, and organizational identification (Walumba et al. 2011; Sabir et al., 2012; Khalid, 2014; Pučėtaitė, 2014; Çelik et al., 2015; Butt et al., 2016). However, the present study has overlooked this perspective. Thus, the inclusion of one or more mediating variables in the relationship of ethical leadership and its significant outcomes by future researchers can provide a broader and comprehensive view. Third, the present study has noted that ethical leadership is considered as a promotor of significant outcomes and antecedent of ethical behavior in organizations. However, the negative implications of ethical leadership such as psychological reactance have largely been ignored in this study and previous researches (Smith, Rees, and Soderberg, 2016). Thus, the future researchers should endeavour to explore the negative implications of ethical leadership.

 

REFERENCES:

Alshammari, A., Almutairi, N. N., and Thuwaini, S. F. (2015). Ethical leadership: The effect on employees, International Journal of Business and Management, 10(3), 108-116.

Bello, S. M. (2012). Impact of ethical leadership on employee job performance, International Journal of Business and Social Science, 3(11), 228-236.

Brown, M. E. and Mitchell, M. S. (2010). Ethical and unethical leadership: Exploring new avenues for future research, Business Ethics Quarterly, 20(4), 583-616.

Brown, M. E., Treviño, L. K., and Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing, Organizational Behavior and Human Decision Processes, 97(2), 117-134.

Butt, A. A., Butt, A. N., and Ayaz, M. (2016). Impact of ethical leadership on organizational performance and mediating role of corporate social responsibility: Evidence from banking sector of Pakistan, International Journal of Management Sciences and Business Research, 5(6), 25-37.

Chikeleze, M. C., and Baehrend, W. R. (2017). Ethical leadership style and its impact on decision‐making, Journal of Leadership Studies, 11(2), 45-47.

Cianci, A. M., Hannah, S. T., Roberts, R. P., and Tsakumis, G. T. (2014). The effects of authentic leadership on followers’ ethical decision-making in the face of temptation: An experimental study, The Leadership Quarterly, 25(3), 581-594.

DeConinck, J. B. (2015). Outcomes of ethical leadership among salespeople, Journal of Business Research, 68(5), 1086-1093.

Elçi, M., Şener, İ., Aksoy, S., and Alpkan, L. (2012). The impact of ethical leadership and leadership effectiveness on employees’ turnover intention: The mediating role of work related stress, Procedia-Social and Behavioral Sciences, 58, 289-297.

Freeman, R. E., and Stewart, L. (2014). Developing ethical leadership. Business Roundtable Institute for Corporate Ethics, Retrieved from http://www.corporate-ethics.org/pdf/ethical_leadership.pdf (accessed 10 December, 2017).

Hitt, W. D. (1990). Ethics and Leadership: Putting Theory into Practice. Columbus: Battelle Press.

Ismail, B. I., and Daud, B. Y. (2014). Influence of ethical leadership towards organizational commitment in schools, International Journal of Scientific and Research Publications, 4(9), 2250-3153.

Khalid, W. (2014). The study of relationship among ethical leadership and organizational performance in corporate governance in the public and private sectors of Islamabad/Rawalpindi, Pakistan, European Journal of Business and Management, 6(14), 153-161.

Madanchian, M., Hussein, N., Noordin, F., and Taherdoost, H. The Relationship between ethical leadership, leadership effectiveness and organizational performance: A review of literature in SMEs context, European Business and Management, 2(2), 17-21.

Mayer, D. M., Kuenzi, M., and Greenbaum, R. L. (2010). Examining the link between ethical leadership and employee misconduct: The mediating role of ethical climate, Journal of Business Ethics, 95, 7-16.

Mihelič, K. K., Lipičnik, B., and Tekavčič, M. (2010). Ethical Leadership, International Journal of Management and Information Systems, 14(5), 31-42.

Mishra, I., and Sharma, G. (2010). Ethical organization and employees. Asian Journal of Management Research, 59-80.

Pandey, P., Singh, S., and Pathak, P. (2016). Ethical leadership: The need for a new approach in retail, Purushartha: A Journal of Management Ethics and Spirituality, 8(1), 91-99.

Resick, C. J., Hanges, P. J., Dickson, M. W., Mitch­elson, J. K. (2006). A Cross-Cultural Examination of the Endorsement of Ethical Leadership, Journal of Business Ethics, 63:345-359.

Sabir, M. S., Iqbal, J. J., Rehman, K. U., Shah, K. A., and Yameen, M. (2012). Impact of Corporate Ethical Vaulues on Ethical leadership and Employee Performance, International Journal of Business and Social Science, 3(2), 163-171.

Smith, I. H., Rees, M. R., and Soderberg, A. T. (2016, January). The Negative Side Effects of Ethical Leadership and how LMX mitigates Psychological Reactance, In Academy of Management Proceedings,16(1), 12417. Academy of Management.

Walumbwa, F. O., Mayer, D. M., Wang, P., Wang, H., Workman, K., and Christensen, A. L. (2011). Linking ethical leadership to employee performance: the roles of leader-member exchange, self-efficacy, and organizational identification, Organizational Behavior and Human Decision Processes, 115(2), 204-213.

Zhu, W., May, D. R., and Avolio, B. J. (2004). The impact of ethical leadership behavior on employee outcomes: The roles of psychological empowerment and authenticity, Journal of Leadership and Organizational Studies, 11(1), 16-26.

Okpozo, A. Z., Okpozo, A. Z., Gong, T., Gong, T., Ennis, M. C., Ennis, M. C., and Adenuga, B. (2017). Investigating the impact of ethical leadership on aspects of burnout, Leadership and Organization Development Journal, 38(8), 1128-1143.

Pučėtaitė, R. (2014). Stimulating organizational innovativeness through ethical leadership practices: The mediating role of organizational trust, Procedia-Social and Behavioral Sciences, 156, 231-235.

Çelik, S., Dedeoglu, B. B., and Inanir, A. (2015). Relationship Between Ethical Leadership, Organizational Commitment and Job Satisfaction at Hotel Organizations, Ege Akademik Bakis, 15(1), 53-63.

 

 

 

Received on 20.12.2017          Modified on 11.01.2018

Accepted on 15.02.2018           ©A&V Publications All right reserved

Asian Journal of Management. 2018; 9(1):539-542.

DOI: 10.5958/2321-5763.2018.00084.7