Benchmark 4

1

The Role of Organizational Culture in Moderating Ethical Leadership and Employee Decision-Making

Thaddeus Cain

Dr. Kevin Ellsworth Arizona State University

OGL 593 November 2, 2025

Literature review

Organizational culture and ethical leadership

Ethical leadership entails influencing other people by being ethical and accountable and ensuring that ethical behavior and awareness are promoted in the organization (Ko et al., 2018). It is a synthesis of moral personhood and moral management, which denotes the ethical values that leaders possess and the way they articulate those values (Ko et al., 2018). Nevertheless, the examples of Volkswagen deceiving its emissions and Wells Fargo cheating in its sales prove that even the ethics of leadership do not help to avoid misbehavior in the cases when corporate culture permits unethical conduct (Maheshwari et al., 2024); Peng & Kim, 2020).

The organizational culture refers to the mutual assumptions and norms that define what is right or wrong in a workplace to the individuals. Falode (2021) explains that a culture that supports openness and justice can increase the moral power of leaders, whereas a performance-oriented culture that focuses on profit decreases it. Kuenzi et al. (2020) also observe that culture serves as an ethical infrastructure that either consolidates or destroys the power of leaders to make decisions. Employees become committed to behaving ethically when they believe that ethical conduct is encouraged and even rewarded (Kaptein, 2019). On the other hand, when productivity measurements are used to determine success, employees justify unethical shortcuts (Deng et al., 2023). As such, ethical culture and leadership are interdependent factors that can be used to determine the moral nature of an organization.

Theoretical Foundations of the Cultural Alignment and Ethical Leadership Framework (CAELF).

Cultural Alignment and Ethical Leadership Framework (CAELF) is a synthesis of three theoretical pillars of moral management, social learning, and transformational leadership. The theory of moral management theories views leaders as moral custodians who institutionalize norms of ethical practices within systems and communication (Zheng et al., 2022). According to social learning theory (Schunk & DiBenedetto, 2020), the employees learn and follow the ethical behaviors exhibited by their leaders and this means that visibility of leaders enhances morality in the group. Transformational leadership, in its turn, makes followers act in the best interest of the organization, putting organizational interests in accordance with moral values (Mostafa, 2018); Deng et al., 2023).

According to CAELF, these theoretical processes are organizational culture filtered through which the degree to which moral intentions translate into ethical decision-making is determined. The cultures that embrace transparency, moral dialogue, and trust increase the moral impacts of the leader (Ko et al., 2018; Gamarra & Girotto, 2022). On the other hand, ethical leadership becomes ineffective in terms of its behavioral influence when informal norms support efficiency or profit through breaching of the rules (Kussatz, 2023). The model therefore incorporates the connection between leadership and culture as dynamic and interacting systems that influence moral reasoning and behavior in organizations.

Ethical climate and decision-making

The operational connection between leadership ethics and employee decision-making is ethical climate which is a shared understanding of doing things right (Maheshwari et al., 2024). The studies have shown that caring-based and rule-based ethical climate promote moral attentiveness, whereas instrumental ethical climates promote moral disengagement and self-interest (Wang et al., 2018). Such climates are created and sustained by ethical leadership by using communication, modeling, and reinforcement (O’Keefe et al., 2020).

There is empirical evidence in support of this interaction: Kuenzi et al. (2020) discovered that ethical leadership is a strong predictor of the strength of ethical climate and a weaker predictor of decreased unethical behavior. Equally, Gamarra & Girotto. (2022) found that there is a mediation effect by ethical cultures between leadership integrity and corporate social responsibility outcomes. Ko et al., (2018) note that ethical climate established by leaders is self-reinforcing as employees acquire ethical norms through observation and organizational support. Thus, both culture and leadership contribute to the development of the moral infrastructure to provide consistency of ethical decision-making (Gamarra & Girotto, 2022); Kaptein, 2019).

Cross-Cultural and contextual dimensions.

MNCs expose complex ethical settings that are influenced by the national culture. The cultural dimensions that Kaptein. (2019) identifies and their influence on the employee perception of the ethical messages are power distance, individualism, and uncertainty avoidance. Moral voice can be silenced in the presence of a high level of power-distance, whereas collective responsibility can be encouraged in a collectivist environment (Zhu et al., 2025); Ng et al., 2021). Rukh and Qadeer (2018) noted that subcultural differences in the international companies tend to contradict universal codes of ethics, which requires cultural alignment policies.

Zheng et al. (2022) reveal that the performance of ethical leadership is determined by the employees internalize how well the organizational values and how much they believe in integrity identity. Equally, Hoch et al. (2018) discovered that leadership performance is largely different across culture based on shared value congruence. CAELF responds to these differences by introducing an assessment element that measures cultural preparedness to ethical change, which guarantees that moral systems are context-specifically modified, and yet retains ethical consistency on a global scale.

Gap and new directions

Although there is substantial evidence on the connection between ethical leadership and favorable outcomes, the existing studies do not directly examine the moderating effect of organizational culture on the relationship between the two (Kussatz, 2023). The majority of researches consider culture as a background factor but not a changing process influenced by the dialogue between leaders and social learning (Kussatz, 2023). In addition to that, the literature is dominated by Western-centric samples, which overlook non-Western contexts in which informal power systems and collective norms have a powerful moral socialization (Gamarra & Girotto, 2022); Ng et al., 2021). The CAELF framework therefore plays its part by redefining culture as an active moderator, the kind of moderator that intersects with leadership ethics to influence the quality of decision-making in various organizational settings. In this light, sustainable ethical behavior involves not just good moral leadership but also an ethical culture which justifies and supports such values at the levels and geographies.

Methodology

Research design

The present applied research has a qualitative, multiple-case study design to examine the moderating effect of organizational culture on the role of ethical leadership in employee decision-making. The qualitative methodology will enable subtle insights into the moral processes in the real-world scenario (Kaptein, 2019). The research question will be: How does organizational culture reinforce or undermine the relationship between ethical leadership and employee ethical decision-making in multinational corporations?

Case selection and sources of data.

Three companies were carefully chosen based on their opposing ethical profiles: Volkswagen Group (technical excellence and ethical failures), Wells Fargo (profit-oriented culture and lack of integrity), and Patagonia (high ethical and sustainability orientation) (Maheshwari et al., 2024); Kaptein, 2019). The sources of the data will be secondary sources, such as peer-reviewed literature, corporate ethics audit reports, sustainability reports, and practitioner articles found in databases (SAGE Journals, Emerald Insight and Business Source Complete). The inclusion criteria will include publications of 2018- 2025 covering ethical leadership, culture, and decision-making; non-empirical or old-fashioned materials will not be included.

Data analysis

Data interpretation will be guided by thematic analysis with six steps outlined by Braun and Clarke (2019) as the familiarization, coding, theme development, review, definition, and synthesis steps. NVivo software will facilitate systematic coding based on the categories of CAELF, i.e., ethical leadership inputs, cultural moderators, and decision-making outcomes. Wolfs and Wells Fargo themes will be compared with Patagonia ethical role model to establish the trends that demonstrate the role of cultural fit in meditating leadership impact.

Trustworthiness and ethics

Rigor will be achieved using the criteria of credibility, dependability, confirmability, and transferability as applied by Ng et al., (2021). Scholarly and practitioner triangulation will increase the validity, and analytic decisions will be documented using an audit trail. The ethical compliance will be maintained through the transparent citation and the respect to the intellectual property.

Expected outcomes

The study will focus on creating a validated Cultural Alignment and Ethical Leadership Framework (CAELF) that depicts the directions, connections between ethical leadership, culture, and ethical decision outcomes. The framework will provide the action plans which the leaders and compliance officers can take to assess the cultural preparedness, reinforce the ethical environments, and internalize moral conducts throughout the global operations.

References

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Deng, C., Gulseren, D., Isola, C., Grocutt, K., & Turner, N. (2023). Transformational leadership effectiveness: an evidence-based primer.  Human Resource Development International,  26(5), 627-641.

Falode, A. (2021). Found: a definition of intelligence.  Journal of Social Sciences,  4(1), 70-73. https://www.ceeol.com/search/article-detail?id=1225445

Gamarra, M. P., & Girotto, M. (2022). Ethical behavior in leadership: A bibliometric review of the last three decades.  Ethics & Behavior,  32(2), 124-146.

Hoch, J. E., Bommer, W. H., Dulebohn, J. H., & Wu, D. (2018). Do ethical, authentic, and servant leadership explain variance above and beyond transformational leadership? A meta-analysis.  Journal of management,  44(2), 501-529. https://journals.sagepub.com/doi/abs/10.1177/0149206316665461

Kaptein, M. (2019). The moral entrepreneur: A new component of ethical leadership.  Journal of Business Ethics,  156(4), 1135-1150.

Ko, C., Ma, J., Bartnik, R., Haney, M. H., & Kang, M. (2018). Ethical leadership: An integrative review and future research agenda.  Ethics & Behavior,  28(2), 104-132. https://www.tandfonline.com/doi/abs/10.1080/10508422.2017.1318069

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Kussatz, S. B. (2023). The Dynamics of Ethical Leadership: Unraveling Influences on Individual Behavior within Organizations. https://osuva.uwasa.fi/handle/10024/16651

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