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EMBEDDINGETHICALLEADERSHIP.pdf
© Academy of Manogement Journal 2012. Vol. 55. No. 5. 1053-1078. http://dx.doi.org/10.5465/ainj.2011.0064
EMBEDDING ETHICAL LEADERSHIP WITHIN AND ACROSS ORGANIZATION LEVELS
JOHN M. SCHAUBROECK Michigan State University
SEAN T. HANNAH Wake Forest University
BRUCE J. AVOLIO University of Washington
STEVE W. J. KOZLOWSKI Michigan State University
ROBERT G. LORD Akron University
LINDA K. TREVIÑO Pennsylvania State University
NIKOLAOS DIMOTAKIS Georgia State University
ANN C. PENG Michigan State University
We develop and test a model linking ethical leadership with unit ethical culture, both across and within organizational levels, examining how both leadership and culture relate to ethical cognitions and behaviors of lower-level followers. The data were collected from 2,572 U.S. Army soldiers representing three organizational levels de- ployed in combat. Findings provide limited support for simple trickle-dovm mecha- nisms of ethical leadership but broader support for a multilevel model that takes into account how leaders embed shared understandings through their influence on the ethical culture of units at various levels, which in turn influence followers' ethical cognitions and behavior. The influences of ethical leadership occur not only directly, among immediate followers within a unit, but also indirectly, across hierarchical levels, through the cascading of ethical culture and senior leaders' influences on subordinate leader behavior. We discuss scholarly and practical implications for understanding how leaders transmit ethical influence both down and across large organizations.
Unethical organizational behaviors have been at- tributed to the effects of individual "had apples" (e.g., Hannah, Avolio, & May, 2011), their leaders
The authors acknowledge the United States Army sol- diers who, despite serving their nation in an active com- bat zone, volunteered to participate in this research. We also thank the Army chaplains who traveled between combat outposts to collect this data, the leadership of Multinational Force Iraq, and the U.S. Army's Center for the Army Profession and Ethic (CAPE), which sponsored this research. We also want to express our appreciation to Megan Huth for her assistance with the data.
(e.g.. Brown, Harrison, & Treviño, 2005), aspects of organizational context, such as low levels of "ethi- cal culture" ("bad barrels" [e.g., Treviño & Young- blood, 1990]), and the interaction of individual pre- dispositions and context (e.g., Treviño, 1986). In this study, we extend previous research and theory to examine how ethical cognitions and behaviors of organization members reflect tbeir responses to a web of direct and indirect influences of ethical lead- ership and unit-level norms, standards, and sanctions pertaining to ethical behavior transmitted across mul- tiple levels of an organizational hierarchy.
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Scholars have called for taking a multilevel ap- proach to more fully understand how leadership at higher levels of organizations influences lower-level followers (e.g., Waldman & Yammarino, 1999]. Yet prior empirical work on leadership has primarily fo- cused on direct relationships between leader behav- iors or traits and the responses of their immediate followers (Yammarino & Dansereau, 2008]. Research- ers have not comprehensively tested the various loci through which upper-level leaders influence the cog- nitions and behavior of lower-level followers. Thus, currently little is known about how leadership and contextual factors at higher organization levels influ- ence outcomes at lower levels. From a metatheoreti- cal perspecfive, how a coherent system of social in- fluence is transmitted across multiple levels of an organization is fundamental to understanding organ- izafional behavior (Kozlowski & Klein, 2000; Si- mon, 1973].
We develop a multilevel model in which ethical leadership, which is seen as a leader's use of social influence to promote ethical conduct (Brown et al., 2005], exhibited at various levels of an organiza- tional hierarchy, not only directly influences im- mediate followers' ethical conduct, but also indi- rectly influences the ethical beliefs and conduct of followers at lower levels owing to (a] the replica- tion of ethical leader behaviors among subordinate leaders and (b] the embedding of shared under- standings that represent observable elements of work unit ethical culture. Our proposed model is tied to a foundational framework of organizational culture developed by Schein (1985, 2010], who posited mechanisms through which leaders embed their assumptions into the "thinking, behavior, and feelings" of groups (1985: 223]. We draw from Schein's "embedding mecbanisms" (1985: 224] and "sbared cultiural elements" (1985: 169] and extend his theoretical framework by developing and test- ing a multilevel model linking leadership, shared cultural elements, and their direct and indirect ef- fects on follower ethical cognitions and behaviors. This approach provides a starting framework for understanding how different leaders influence eth- ical outcomes within a complex multilevel system.
THEORETICAL FRAMEWORK
Our research model draws from Schein (1985, 2010] to explain how senior leaders influence the ethical conduct of followers at lower levels by em- bedding their expectations and assumptions into the observable manifestations of ethical culture. Schein defined culture as a system of shared as- sumptions that can have a strong influence in di- recting followers' behaviors and beliefs. Organiza-
tional culture is represented as varying in layers, with the deepest layer being a broad system of assumptions and deeply held shared meanings, and the surface layer representing more tangible, observable factors that reflect those assumptions. Schein (1985, 2010] argued that leaders at all levels can influence the surface layer of an organization's culture, including visible artifacts such as behav- ioral norms, policies, and standards, particularly as these relate to specific domains of influence that Schein described as shared cultural elements. By influencing these surface elements, leaders can help others interpret their unit and organization's culture in terms of how it relates to their roles and expectations.
Unit Ethical Culture
Shared understandings concerning ethical con- duct can be seen as a shared cultural subelement, or a "microcosm" of an overall organizational culture (Treviño, 1986, 1990]. This aspect is the part of the culture that distinguishes what is "heroic" from what is "sinful" (Schein, 1985: 79] and is composed of patterns of shared understandings related to un- ethical and ethical conduct reflecting the norms, standards, sanctions, and rewards applied to be- haviors deemed desirable and undesirable in an organization. This focus is consistent with how Treviño (1986, 1990] and Treviño, Butterfield, and McCabe (1998] defined ethical culture. Specifi- cally, in their view ethical culture is "a subset of organizational culture, representing a multidimen- sional interplay among various 'formal' and 'infor- mal' systems of behavioral control that are capable of promoting either ethical or unethical behavior" (Treviño et al., 1998: 451-452]. This use of the term "culture" should not be equated with broader def- initions of culture that relate to the shared assump- tions that combine to form deep organizational cul- ture. Rather, in the current study, ethical culture refers to surface-level cultural artifacts that are ob- servable and were called shared cultural elements by Schein (1985]. This conceptualization is similar to descriptions of climate in other research (e.g., Zohar & Luria, 2005]. However, there exists a long- established construct and measure of ethical cli- mate (Victor & Cullen, 1988] in the organizational ethics literature that refers to criteria used in ethi- cal judgment processes and the level of analysis used by parties in making ethical judgments. This construct has spawned a significant amount of re- search over the last 20 years (Arnaud & Schminke, in press]. Thus, we use the label "ethical culture" rather than "ethical climate" to be consistent with Schein (1985, 2010], noting that we are focusing on
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the surface level of ethical culture, following Treviño (1990; Treviño et al. 1998), and to avoid confusion with the established ethical climate con- struct and its different meaning.
"Formal" ethical culture systems include policies (e.g., codes of ethics that are enforced), authority structures, reward systems, and ethics training pro- grams. "Informal" systems include peer behavior, use of ethical language, myths, stories, and ethical norms. When the members of an organization or a unit in an organization have strong shared understandings about such matters, they are expected to be more cognizant of ethical issues, to avoid unethical con- duct personally, and to discourage unethical conduct in others (Treviño, 1986). Such units penalize imeth- ical behavior, reward virtuous behavior, and main- tain strong ethical norms. This conceptualization contains both global properties pertaining to organi- zational codes and shared social properdes within the imit concerning agreed-upon norms and pre- scribed patterns of behavior. Following Schein, we refer to such domains in general as "shared cultural elements" and refer to Treviño and colleagues' (1998) construct as it applies to the domain of ethics at various hierarchical levels as "ethical culture." Whereas one may also use the term "ethical culture" to refer to an organization as a whole, we expect that ethical culture varies across different units and levels of an organization despite common global influences, such as organizational codes of ethics and other norms, rules, and regulations at the organizafion or societal level. In addition, as Schein noted, "'shared'
understanding means that vmit members recognize a particular feeling, experience or activity as common" (1985: 168; emphasis in original). From a multilevel theory perspective, such constructs are composi- tional in form and exhibit restricted within-imit vari- ation (Kozlowski & Klein, 2000).
Overview of Research Model
In this study, we develop a multilevel model for understanding how leadership and culture influ- ence ethics-related cognitions and behaviors, and we test it using survey data collected from a large sample of deployed soldiers at different hierarchi- cal levels. Specifically, we examined leadership by assessing four separate potential mechanisms for leadership effects across organizational levels, as displayed in Figure 1. First, a senior leader's style may be mirrored by that leader's followers (Ban- dura, 1971). To the extent that subordinate leaders' behavior mirrors that oftheir senior leaders, a pos- itive downward relationship exists between the styles of leaders at adjacent levels. Second, indirect effects of higher-level leaders that involve multiple downward linkages are possible; these effects may occur, for example, when subordinate leaders mir- ror senior leaders' styles and those subordinate leaders' styles in turn influence how their followers think and behave. The passage of direct and indi- rect effects down a hierarchy of authority has been variously labeled "the cascade of leadership," "the trickle-down model," and "the falling dominoes
FIGURE 1 Direct and Indirect EÉfects of Ethical Leadership and Ethical Culture across Hierarchical Levels^
Level 3 Ethical Leadership (L3)
Level 2 Ethical Leadership
(L2)
Level 1 Ethical Leadership (LI)
Ethical Culture
(G3)
Ethical Gulture
(G2)
Ethical Gulture
(GI)
Ethical and Unethical
Gognitions and Behaviors
(01)
° Dashed lines denote unexplained direct effects that have been conventionally labeled as "bypass" effects.
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effect" (Bass, Waldman, Avolio, & Bebb, 1987; Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009; Waldman & Yammarino, 1999). Third, an indirect leadership effect may occur through the horizontal and lateral linkages shown in Figure 1; for instance, a more senior leader may foster an ethical culture that then spreads to influence cul- ture and behavior in lower organizational units. This effect of leaders on unit cultures is a more diffuse and complex process involving multiple coactors. It may be reflected in multiple effects showing mediation at different levels, such as through subordinate leader and follower behaviors and through leaders' effects on unit culture at lower levels (Bass & Bass, 2008). Finally, senior leaders' influence can skip levels and directly affect lower- level followers' behavior as a result of their direct interactions (Detert & Treviño, 2010). This creates a fourth potential mechanism of leader influence re- ferred to as a bypass processing model (Yamma- rino, 1994).
Outcomes of Ethical Leadership and Ethical Culture
Prior research on ethical leadership has assessed a limited set of criteria. A recent review of the ethical leadership literature by Brown and Mitchell (2010) noted that besides research on organiza- tional citizenship behavior (OCB), surprisingly lit- tle empirical research has examined how ethical leadership relates to follower ethical or unethical behavior. Theory and research suggest that the nor- mative and informational influences of a unit with strong ethical leadership should support ethical conduct and cuih organization members' serious ethical transgressions. Collective understandings about ethical conduct that become embedded in shared cultural elements should also encourage stronger beliefs among individual members about their moral agency, including (a) moral efficacy and (b) intentions to report others' ethical violations. Hannah et al. defined moral efficacy as "an indi- vidual's belief in his or her capabilities to organize and mobilize the motivation, cognitive resources, means, and courses of action needed to attain moral performance within a given moral domain, while persisting in the face of moral adversity" (2011: 24). With higher moral efficacy, individuals are more likely to convert moral judgments and intentions into ethical actions. Hannah and Avolio (2010) pro- posed that moral efficacy would be bolstered when followers are immersed in a context that provides the "means" (e.g., leader support and policies sup- portive of ethical actions) to act ethically.
Individuals' intentions to report the ethical vio- lations of others are also related to moral agency. If unethical behavior is to be addressed in organiza- tions, authority figiures must know about it and therefore must set conditions to promote follower reporting. Followers tend to keep their knowledge of ethical problems to themselves for a number of reasons, including fear of retaliation, a sense that nothing will be done, or habituation to silence in authority situations (Detert & Edmondson, 2011; Kish-Gephart, Detert, Treviño, & Edmondson, 2010). Ethical leadership and a strong ethical cul- ture can be expected to enhance followers' willing- ness to speak up because they are more likely to feel protected from retaliation and to believe that positive acüons will be taken to address their concern. In past research, ethical leadership has been posifively re- lated to "voice" and the likelihood that followers will report problems to authorities (Brown et al., 2005; Walvunbwa & Schaubroeck, 2009).
Beyond being seen as promoting followers' moral efficacy and enabling them to report violations and to refrain from ethical transgressions, ethical lead- ers are also seen as moral role models who encour- age followers to strive toward moral ideals and engage in ethical behavior that exceeds expecta- tions (Brown & Treviño, 2006). We draw from scholarly work on virtuous ethical behavior (e.g.. Walker & Henning, 2004) in defining exemplary behavior as undertaking imusual personal risk or sacrifice to achieve a desirable collective purpose.
It is important to note that these outcomes—moral efficacy, intentions to report violations, transgres- sions, and exemplary behavior—are conceptualized as "compilation constructs" (Kozlowski & Klein, 2000). Rather than regarding them as constructs that are emergent and shared at the unit level, as are ethical leadership and ethical culture, we conceptu- alize them as configurations of individual belief states, intentions, and rates that capture the descrip- tive averages among individuals in a unit.
Transmission of Ethical Leadership through Ethical Culture
Direct effects. The notion that there is a relation- ship between what leaders do and the norms and codes of their units—such as the direct effects of ethical leadership on ethical culture shown as L3 ^ C3, L2 -» C2, and Ll -^ Cl in Figure 1, which summarizes our model—is quite well accepted among organizational scholars (Schein, 2010; Yukl, 2002). Leaders establish priorities for their units and expectations for what will be rewarded, pun- ished, and tolerated. In addition to employing these more transactional means, leaders can also serve as
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moral exemplars for followers to help them under- stand what is right and wrong and to be attracted to developing a more ethically centered self-image (Walker & Herming, 2004).
However, previous leadership studies have not explicitly integrated unit shared cultural elements (Schein, 1985, 2010) into either their theoretical framing or their analyses of how these elements may mediate the relationships between leader be- havior and follower outcomes occurring within or between organizational levels. Such cultural ele- ments are likely to be important because, in addi- tion to directly impacting followers' beliefs and behaviors, leaders create shared understandings that affect these outcomes (Depret & Fiske, 1993; Dragoni, 2005). With regard to ethics-related out- comes, follower cognitions and bebavior should tend to align with these shared normative under- standings, which are represented as ethical culture. Thus, in our study, ethical leadership is expected to be associated with ethical culture, which in tvirn promotes more positive beliefs among members about their personal capacity to act as moral agents, as well as reduced ethical transgressions and in- creased exemplary ethical behavior.
Ethical leadership transmitted through embed- ding mechanisms. To influence shared cultural el- ements at a particular unit level and then transmit this influence to lower levels, Schein argued, lead- ers strive to embed their beliefs, values, and as- sumptions into members' shared understandings. Leaders do this by using a range of primary and secondary "embedding mechanisms" through which they influence the visible artifacts of shared cultural elements (Schein, 1985: 223). The primary mechanisms are seen as having the most direct and strongest effects on the beliefs, values, and assump- tions of followers. Among these primary mecha- nisms, Schein described "what leaders pay atten- tion to, measure, and control" as being the most powerful (2010: 237; cf. Feldman, 1984). Other pri- mary embedding mechanisms include "deliberate role modeling, teaching, and coaching" and "allo- cating rewards and status" (Schein, 2010: 236). Fol- lowers' perceptions of a leader's ethical leadership relate directly to these primary embedding mecha- nisms. Specifically, Brown and colleagues defined ethical leadership as "the demonstration of norma- tively appropriate conduct through personal ac- tions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and deci- sion making" (2005: 120). Ethical leadership in- cludes what has been labeled a "moral manager" aspect and a "moral person" aspect (Brown & Treviño, 2006: 597). As a moral manager, a leader
specifies conduct that is proper and improper, ex- plains the rewards and sanctions associated with behaving ethically and unethically, appropriately disciplines infractions, and rewards virtuous be- havior. As a moral person, the leader models exem- plary behavior and leads in a principled, just, and caring manner. Ethical leadership as conceptual- ized by Brown et al. (2005) incorporates elements of Schein's (1985, 2010) primary embedding mech- anisms, including paying attention to, measuring, and controlling followers' behavior, as well as the primary mechanisms of role modeling and coach- ing followers to exhibit exemplary ethical behavior and to avoid unethical behavior.
Other embedding mechanisms may also be rep- resented in ethical leadership. Schein described how a leader's approach to handling "critical inci- dents" (cf. Feldman, 1984), allocating resources, and "selecting, promoting, and excommunicating" (Schein, 1985: 235) followers are additional pri- mary embedding mechanisms. When a member's ethical infraction comes to a leader's attention, this event can be seen as a critical incident. How the leader responds is diagnostic and will influence followers' perceptions of the leader as a moral man- ager. Failing to discipline the follower and use this critical incident as a lesson to others may under- mine her/his authority in ethical matters and per- suade followers that ethical standards are not en- forced in the unit. Alternatively, a significant loss of status or dismissal ("excommunication") of a follower for an ethical infraction may reinforce per- ceptions of ethical leadership and, in turn, increase confidence that sanctions are used to enforce ethi- cal standards. One can also imagine that leaders who allocate resources to teaching proper ethical conduct, such as through ethical training, would more likely be seen as moral managers or ethical leaders.
Ethical culture may also involve secondary em- bedding mechanisms in which leaders engage. Schein (1985, 2010) described these as being less powerful and potentially more ambiguous than the primary embedding mechanisms. These secondary mechanisms refer to such artifacts as stories, work- flow designs, and other organization structures, procedures, and formal statements of leaders. For example, ethical leaders may tell stories of how an individual's exemplary ethical behavior was re- warded, and/or stories of how past organization members' unethical conduct was disciplined. Such stories may be very salient in members' memories, and they may pass them along to others to whom the story will serve as an incentive or as a deterrent. These secondary mechanisms are also consistent with ethical leadership, as stories and formal state-
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ments with implications for ethical conduct are a potential tool for managers seeking to lead ethi- cally. Together, the primary and secondary embed- ding mechanisms are expected to shape the forma- tion of shared, unit-level perceptions of ethical leadership as a compositional construct (Kozlowski & Klein, 2000). Ethical leadership in turn becomes embedded into shared understandings about ethi- cal norms, standards, and sanctions in a luiit—that is, ethical culture—which is also compositional.
Studies by Browm and colleagues (2005) and other recent work collectively indicate that when individuals perceive their leader as a proponent and exemplar of ethical behavior, they report indi- vidual and work unit psychological states that are conducive to more ethical conduct (Walumbwa, Mayer, Wang, Wang, Workman, & Christensen, 2011; Walumbwa & Schaubroeck, 2009). When they perceive stronger ethical leadership, followers are more likely to engage in prosocial behaviors and less likely to engage in deviant or counterpro- ductive bebaviors (Mayer et al., 2009; Neubert, Carlson, Kacmar, Roberts, & Chonko, 2009). How- ever, we are not aware of any research that has examined the linkage between ethical leadership and ethical culture, much less research concerning how ethical culture may aid in the transmission of ethical leadership in a manner that influences im- portant ethics-related cognitions and behaviors of followers within and between organizational levels.
Hypothesis 1. Ethical leadership is positively related to ethical culture within a hierarchical level.
Hypothesis 2. Through ethical culture, ethical leadership is indirectly and positively related to unit members' moral agency (their belief in their capacity to act effectively as moral agents and their intentions to report unethical behav- ior) and exemplary ethical behavior and nega- tively related to their ethical transgressions.
Hypotheses 1 and 2 recognize that differences likely exist in leadership and ethical culture among units at a particular organizational level. In the next section, we discuss how our theoretical framework is operationalized at different hierarchical levels and how higher-level ethical leadership and ethical culture are associated with outcomes at the low- est level.
Cascading Effects of Ethical Culture and Ethical Leadership
Unit-level differences in ethical culture may be determined in part by variation in unit ethical lead-
ership as described above. Importantly, however, these unit differences in ethical culture may also reflect the impact of higher-level leaders who can influence the ethical culture of lower-level units, either directly through their personal contact with members, or indirectly through their influence on the thoughts and behaviors of lower-level leaders. Below, we discuss these direct and indirect pro- cesses further in the context of leader behavior cascades and bypass processes.
Differentiation and cascading of ethical cul- ture. To date, the limited research on ethical cul- ture has focused chiefly on followers' perceptions of ethical culture in their overall organization (e.g., Treviño et al., 1998). Given that culture has both global and local emergent properties, however, eth- ical culture may differ among organizational units (Glisson & James, 2002). For example, differences may emerge between units, both within and across management levels, in the extent to which norms for conduct are made clear to members, ethical standards are enforced, and norms emerge for tol- erating behaviors that conflict with established codes.
Factors other than leader behavior may also in- fluence ethical culture at lower levels of an organ- ization. These include a superordinate ethical cul- ture of the organization that conveys standards of conduct, sanctions for their violation, norms for ethical conduct, and more for the entire organiza- tional community (Schein, 1985). A mechanism that Schein does not explicitly examine is how cultural elements in a particular unit in an organi- zation tend to mimic content from cultural ele- ments established in higher-level units. Ethical cul- tures of lower-level units are nested within broader organizational units and thus may be affected by the cultural elements operating at higher levels. These effects may be somewhat independent of the proximal, within-level influences of leadership. For example, shared cultural elements can be ex- plained in part by the past actions of higher-level leaders, through the creation of designs and struc- tures, systems and procedures, creeds and codes, stories, rituals, and rites (Schein, 1985, 2010).
Ethical cultures at one level, however, are not necessarily fully replicated at lower levels. In this regard, Schein (1985, 2010) described how cultural elements of different groups in an organization can differ, conflict, or align with one another. As Brown and Treviño (2006) explained, organizational lead- ers and groups develop tools and practices for rea- soning and acting upon ethical matters that can become embedded over time. Unit ethical cultures that are operating at higher organizational levels that are seen as effective by lower-level leaders
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would be expected to result in those lower-level leaders' embedding them into their own units. This is especially likely when lower-level leaders per- ceive that they will be rewarded for reinforcing these cultural elements in their own units.
Another potential lever helping ethical culture to have cascading influences at lower levels derives from leader contact and peer-to-peer contact across units. Such interactions can reinforce key aspects of the culture of the higher-level unit to which they all belong and are nested through normative and informational influences (Cialdini & Trost, 1998]. For example, leaders and members at a particular level collaborate and socialize with peers and lead- ers in the context of meetings held at a higher organizational level. In this way, workers develop a common point of reference for embedding ethical culture into their respective units. Thus, we expect that higher-level-unit ethical culture will be asso- ciated with ethical culture at adjacent levels, as illustrated by the vertical lines linking C3, C2, and Cl in Figure 1.
Hypothesis 3. Ethical culture at higher hierar- chical levels is positively related to ethical cul- ture at lower hierarchical levels.
Influences of ethical leadership on ethical cul- ture at lovi^er levels. The literature further suggests that ethical leadership at higher levels may be as- sociated with ethical culture at lower levels. In some cases, these effects may be direct influences of bigher-level leaders on lower-level ethical cul- ture through direct interactions with lower-level followers. Such direct effects have been called "bypass effects" because they bypass the effects of lower-level leaders (Yammarino, 1994] or low- er-level cultural elements (L3 -^ C2 or L2 -^ Cl]. Detert and Treviño (2010] reported qualitative evidence of such bypass effects of senior leader behavior on voice-related practices of lower-level followers. There is also some evidence of bypass effects from quantitative field studies (Dvir, Eden, Avolio, & Shamir, 2002; Yang, Zhang, & Tsui, 2010]. According to Yammarino, this may occur because leaders often interact directly with members at lower levels. Schein (1985, 2010] observed that senior leaders' expectations are also conveyed by other means to the broader or- ganization, through secondary embedding mecb- anisms such as formal communications, policies, and stories. Such mechanisms may reinforce the leaders' reputation and expectations among members, thereby influencing their cognitions and actions in a way that is distinct from the influence of their immediate leader. Any exami- nation of such processes nevertheless presup-
poses a relationship between higher-level ethical leadership and lower-level ethical culture. Thus, we propose the following:
Hypothesis 4. Ethical leadership is positively related to ethical culture at lower hierarchical levels.
However, what appears to be a bypass effect may actually be a product of embedding processes that are omitted from an analysis. Below, we consider two different indirect pathways through which se- nior leaders may embed their ethical influence at lower levels. Studies presenting evidence of bypass effects have not examined the extent to which high- er-level leaders have embedded their assumptions and expectations in shared cultural elements at their own (higher] level. Given that ethical leader- ship is expected to be positively related to ethical culture within each organization level (Hypothesis 1] and these shared culture elements are in tiirn expected to cascade to lower levels (Hypothesis 3], one indirect way that higher-level leaders can in- fluence ethical conduct at a lower level is by influ- encing the ethical culture at their own level, which then cascades to lower levels (i.e., L3 ̂ C3 -> C2 or L2 -» C2 -* Cl paths].
Hypothesis 5. Higher-level ethical leadership indirectly influences ethical culture at lower hierarchical levels through ethical culture at the same (higher) hierarchical levels.
Another indirect path linking ethical leadership to ethical culture at lower levels is the conventional leader behavior cascade. Leaders at higher levels indirectly affect the beliefs and behaviors of lower- level followers through their subordinate leaders' emulation of their bebavior (as shown by the verti- cal lines connecting L3, L2, and Ll in Figure 1]. Drawing on social learning theory (Bandura, 1971], Mayer and colleagues (2009] examined the indirect effects of ethical leadership on members' behavior transmitted through common ethical leadership practices across two organization levels. They asked followers in multiple organizations to each rate both their immediate supervisor's ethical lead- ership and the ethical leadership of "top manage- ment." These ratings were positively correlated, and the ethical leadership of both top management and immediate supervisor were positively related to OCB and negatively related to levels of deviant behavior followers observed in their units. More- over, the ethical leadership of the immediate super- visor mediated the effects of top management eth- ical leadership on group deviance and group OCB.
Additional research has examined how other leadership constructs, such as transformational
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leadership, correlate across levels (Bass et al., 1987; Chun, Yammarino, Dionne, Sosik, & Moon, 2009; Yang, Zhang, & Tsui, 2010). For example, to ex- plain how the effects of leader behavior cascade across managerial levels, Bass and colleagues (Bass et al., 1987) concluded that junior supervisors mimic the behavior of their senior supervisors, as described by social learning theory (cf. Weiss, 1977), and then become models for their own fol- lowers. Chun et al. (2009) found that subordinate leaders' personal identiflcation with their leaders and internalization of their values explained indi- rect effects of the latter's charismatic and transfor- mational leadership on follower outcomes of satis- faction, helping behavior, and job performance.
Normative and informational influences provide another potential avenue for explaining the cascad- ing replication of leaders' behaviors. People tend to conform their behavior to the expectations of oth- ers, either to be liked or respected (normative in- fluence) or to be accurate or correct (informational influence) (Cialdini & Trost, 1989). Ethical leaders make it clear that they will not condone unethical behavior while also presenting persuasive argu- ments as to the beneflts of ethical practices to sub- ordinate leaders (Brown & Treviño, 2006). Whether through behavior modeling, informational influ- ence, or compliance with authority figures, ethical leadership is expected to be positively correlated across hierarchical levels. Civen the positive rela- tionship we have already proposed between ethical leadership and ethical culture at the same level (Hypothesis 1), this cascading effect of ethical lead- ership provides an additional mechanism through which higher-level leaders may indirectly influ- ence the ethical culture in lower-level units (see, e.g., paths L3 ^ L2 ^ C2 and L2 ^ Ll ^ Cl in Figure 1).
Hypothesis 6. Ethical leadership at higher or- ganizational levels is indirectly related to eth- ical culture at lower hierarchical levels through ethical leadership at lower levels.
Higher-Level Facilitation of Ethical Leadership
To the extent that leader behavior can influence shared understandings about ethical conduct at lower levels, as we have argued above, influence from a higher-level leader may potentially reinforce or countervail the influence that the lower-level leader has on his or her unit. When the higher-level leader is not a proponent of ethical conduct, mem- bers of lower-level units may be less likely to de- velop strong norms and standards for their own ethical behavior (i.e., strong ethical culture), even
though their immediate supervisor exhibits a high level of ethical leadership (Detert & Edmondson, 2011). When the leader of a lower-level unit seeks to develop a more ethical culture in her unit, her own leader may facilitate that by reinforcing the importance of such behaviors to her subordinates. A higher-level leader's influence in facilitating the behavior of the leader at the next lower level is a leadership enhancer (Howell, Dorfman, & Kerr, 1986), which suggests a cross-level interaction pre- dicting ethical culture at the lower level (e.g., L2 X Ll -^ Cl in Figure 1).
Hypothesis 7. Ethical leadership at higher hi- erarchical levels moderates the influence of subordinate ethical leadership: A high level of ethical leadership at a higher organization level is associated with a stronger influence of subordinate leaders' ethical leadership on eth- ical culture in their units.
METHODS
Sample and Procedures
This study was commissioned by the U.S. Army, which asked us to evaluate the ethical conduct, cognitions, attitudes, and well-being of soldiers during their combat deployment in Iraq in May 2009. The surveys were designed by the authors and were administered through the Inspector Gen- eral (IG; the Army's official investigative office) and chaplains. The aim was to maintain a "chain of custody" with a trusted agent to reassure soldiers that their leaders would not have access to their survey responses. To achieve broad representation, the IG randomly selected two brigades from each of the four Army divisions conducting combat opera- tions in Iraq. Two battalions were randomly se- lected from each of those two brigades. Three com- panies were randomly selected from each of those battalions, as were three platoons from those com- panies and three squads from each platoon. We studied leaders and followers from the lowest three managerial levels in the U.S. Army: the typically nine-person squad (lowest level), the three- to four- squad platoon (middle level), and the three- to four- platoon company (highest level). Each level had its own leader who reported to the leader at the next higher level.
The questionnaires were administered to mem- bers of the randomly selected units in person in small assemblies by Army chaplains who traveled between combat outposts in regions with active combat operations. The chaplains received a stan- dardized training course that covered the purpose of the research, protocol, and the survey items. The
2012 Schaubroeck et al. 1061
chaplains returned the completed surveys to the IG, who delivered them to the research team. All re- spondents provided informed consent, and soldiers understood they were free to decline to participate in this study.
The sampling frame included approximately 4 percent of the soldiers in the theater of operations at that time, or about 6,000 servicemen and service- women. A total of 2,572 surveys were returned, for an estimated 43 percent response rate. For squad- and platoon-level aggregate variables, to ensure ad- equate representation at each nested organizational level, we designated that platoons must have at least 2 squads reporting, and each squad in turn must have a minimum of 4 members reporting. Of the 322 squads sampled, 280 (90%) met this crite- rion. Of 130 platoons sampled, 96 (78%) met this criterion. These platoons represented 42 compa- nies. Those units meeting our criteria for the anal- yses required for this study totaled 2,048 soldiers. Missing data on certain variables (and combina- tions of variables across levels) limited our final analysis sample sizes to 172 squads, 78 platoons, and 39 companies for cross-level analyses, and 243 squads, 85 platoons, and 40 companies for within- level analyses. Mean unit sizes for the latter were 6.09 (s.d. = 2.24) for squads, 3.61 (s.d. = 1.50) for platoons, and 4.57 (s.d. = 1.45) for companies.
Most respondents were male (88%), and their average age was 27.5 years. About half (54%) were married, and 48 percent reported having children. All had high school degrees or the equivalent, and 14 percent had college degrees. These statistics ap- proximately mirror the demographic profile of the overall U.S. Army contingent in Iraq (MHAT-IV, 2006). Nearly 68 percent of the respondents were
active duty U.S. Army soldiers. The remainder were activated members of the U.S. Army National Guard or the U.S. Army Reserve. Eight percent were commissioned officers.
Measures
All outcome variables were reported by squad members and aggregated to the squad level. Predic- tors and mediators were reported by multiple and separate rating sources at each of the squad, pla- toon, and company levels, and we aggregated rat- ings at each level. Squad-, platoon-, and company- level variables were reported by squad members, squad leaders, and platoon leaders and sergeants, respectively. As shown on the diagonal in Table 1, coefficient alpha reliabilities for the measures were all above .70. We examined the outcomes only at the squad level. These frontline units had the great- est opportunities and risks for serious ethical mis- conduct arising from contact with combatants, non- combatants, and other operational events. In addition, our research questions concerned only the effects of higher-level leader behavior and eth- ical culture on outcomes at the lowest organiza- tional level.
Outcome variables. Ethical transgressions of different degrees of severity were measured with a set of items used in a previous study of the ethical behavior of U.S. soldiers during previous years of the Iraq war (MHAT IV, 2006). These items seek personal observations of unethical behavior exhib- ited by members of a respondent's squad. They were adapted for use in this study. The target be- haviors presented after the stem "rate the number of times you are aware that members of your
TABLE 1 Variance Gomponents"
Variables
Variance Components''
Level 1: Squad Level 2: Platoon Level 3: Company
Platoon level Ethical culture Ethical leadership
Squad level Ethical culture Ethical leadership Moral efficacy Peer exemplary behavior Transgressions vs. the Army Transgressions vs. noncombatants Report intentions
56.74% 99.82 78.78 60.69 87.12 87.01 72.54
67.85% 87.85
25.52 0.08
21.18 0.03
12.80 2.65 0.01
32.15% 12.15
17.74 0.10 0.04
39.28 0.08
10.35 27.44
" n = 243 for the squad level, n = 85 for the platoon level, and n = 40 for company level. ^ Percentage of variance between groups at different hierarchical levels.
1062 Academy of Management Journal October
squad . . . " represented two categories of transgres- sions, which in this context refer to a total of seven significant and formally punishable organizational actions of two types: transgressions against non- combatants (i.e., "mistreated non-combatants," "unnecessarily damaged non-combatant's prop- erty," "killed or injured a non-combatant when it was not necessary") and transgressions against the Army (i.e., "defied the ROE [Rules of Engagement, i.e., the policies given by commanders as to tbe proper use of force in combat] to accomplish the mission," "lied or falsified reports," "stole," "de- fied legal orders").
Peer exemplary behavior was measured using items developed specifically for this study. They involve observations of peers undertaking personal risks and engaging in self-sacrifice in ways that are conventionally regarded in the military as virtuous and necessary to accomplish collective goals. Re- spondents were asked to "rate the number of times they had seen fellow squad members "put them- selves in physical danger to protect a fellow Sol- dier/Marine," "put themselves in physical danger to protect a non-combatant," and "challenge lead- ers' orders in order to protect a non-combatant." Transgressions and exemplary behavior frequen- cies were reported on a 0-5 scale ("never" to "five times or more").
Moral efficacy is the belief that one is capable of acting effectively as a moral agent. It was measured with five items developed by Hannah and Avolio (2010) and rated on a scale ranging from 0, "not at all confident," to 10, "totally confident." The items specified an individual perception. Sample items include "I am confident that I can confront others who behave unethically to resolve the issue" and "I am confident that I can determine what needs to be done when I face a moral/ethical decision." We used five items to assess report intentions, which measure an individual's intention to report uneth- ical conduct of other soldiers when it is observed. The items were tailored to the unique context of war in an environment with close proximity to a nonconjbatant population. As with moral efficacy, the items specified an individual perception. A sample item is "I would report a unit member if I saw him or her violating ROEs [rules of engage- ment]." The other items referred to "injuring or killing an innocent non-combatant," "unnecessar- ily destroying private property," "mistreating a non-combatant," and "stealing from a noncomba- tant." Report intentions, together with ethical lead- ership and ethical culture (see below), were rated from 1 ("strongly disagree") to 5 ("strongly agree").
Ethical leadership and ethical culture. We mea- sured ethical culture as a reference shift composition
construct (i.e., items targeted the tmit level [Chan, 1998]) using the ten-item ethical culture scale devel- oped by Treviño et al. (1998). Sample items include "Penalties for unethical behavior are stricfly enforced in this unit" and "The expressed ethical standards serve as "window dressing" only in this unit" (re- verse-coded). Ethical leadership was also measured as a reference shift composition consfruct, via the ten-item scale developed by Bro-wn et al. (2005). Sam- ple items include "My leader discusses ethics or val- ues with unit members" and "My leader sets an ex- ample of how to do things the right way in terms of ethics." One item ("disciplines unit members who violate ethical standards") was omitted from the scale in the analyses because it too closely overlapped with content in the ethical culture scale. Ethical culture and ethical leadership were rated independently at each level. Squad members rated squad ethical lead- ership and ethical culture; squad and section leaders rated platoon ethical leadership and ethical cultiu'e; and platoon leaders and platoon sergeants rated com- pany ethical leadership and ethical culture.
Combat exposure. All hypothesis tests con- trolled for combat exposure, which we measured using items adapted from an instrument developed for combat research by Hoge, Castro, Messer, McCurk, Cotting, and Kofftnan (2004). Respon- dents were asked to rate the number of times they had the following experiences (0, "never," to 5, "five times or more"): "an improvised explosive device/booby trap has exploded near you," "re- ceived direct fire," "received indirect fire," "have been in a threatening situation where you were unable to respond due to ROE," "other members of your unit were killed or seriously wounded in the- ater," and "you have personally seen individuals killed or seriously wounded in theater." For control purposes we used the mean of these items for in- dividuals' reports within each unit, at the lowest (squad) level of analysis. We controlled for combat exposure to reduce the likelihood that effects of ethical leadership on our dependent variables could be explained by psychological distress re- sulting from combat exposure.
Analysis Procedure
We used hierarchical linear modeling (HLM; Bryk & Raudenbush, 1992) to test the hypothesized relationships among our study variables. Several analyses required simultaneous estimation of re- gression models at three distinct levels of analysis (company, platoon, and squad) to predict the study outcomes at the first level of analysis. Because our hypotheses concern comparisons among groups both within and between hierarchical levels, we
2012 Schaubroeck et al. 1063
grand-mean-centered the independent variables at each level. For indexes of variance explained, we present a pseudo-ñ^ [~R^) statistic (Snijders & Bosker, 1999). This statistic indicates the propor- tional reduction in the total variance of each vari- able across levels of analysis that is derived from introducing independent variables at higher levels.
RESULTS
Measurement Models
A number of confirmatory factor analyses (CFAs) were conducted to test the distinctiveness of the constructs in the study. Given our focus on squad- level ethical cognitions and behaviors, we used the mean of squad members' ratings to conduct the first set of CFAs. Because of the relatively small sample sizes, we reduced the total number of indicators in each CFA model by using item parcels as indicators of the latent variables (Landis, Beal, & Tesluk, 2000). We formed item parcels by randomly com- bining two or three items into one parcel. This yielded a total of 24 indicators for the eight latent variables, which is suitable for a sample of 243 squads. The congeneric measurement model, which specifies that indicators load only onto their corresponding latent variables, fit the data well (A^[224] = 393.86, CFI = .97, NNFI = .97, SRMR = .05). The average variance extracted (AVE) for each latent factor ranges from .56 (transgressions against the Army) to .91 (ethical leadership) with a mean of .74. The AVE for each construct exceeds the con- ventional criterion of .50 and is larger than the square of any correlation between the constructs, thus supporting the convergent and discriminant validity of the construct measures (Fornell & Larcker, 1981). In addition, we tested alternative models by specifying the indicators of two or more of the constructs as loading onto the same latent variable. None of the possible alternative models fit the data as well as the hypothesized, conge- neric model.
We then tested a CFA at the platoon level [n = 96) that specified a congeneric model of ethical leadership and ethical culture only, as these are the only factors at the platoon level. The results indi- cate a good fit for this model ( / [ 8 ] = 10.43, CFI = .99, NNFI = .99, SRMR = .04). The AVEs for the ethical leadership and ethical culture latent vari- ables are .74 and .91, which is larger than the squared correlation between them (.31). The small sample of companies (n = 42) provides less confi- dence in the robustness of CFA findings. We nev- ertheless specified the CFA model at the company level using the same item parcels for ethical lead-
ership and ethical culture. The fit with the data was quite strong (x^[8] = 11.45, p = .18, SRMR = .05, CFI = .99, NNFI = .97). The AVEs for the two latent factors of ethical leadership and ethical culture are .85 and .64, which is substantially higher than the squared correlation between them (.42).
Data Aggregation
We conceptualized ethical leadership and ethical culture as composition constructs, assessing the extent to which members of a unit share percep- tions of these constructs. Thus it was necessary to examine evidence for restricted within-unit vari- ance as a justification for aggregating measures of these constructs to the relevant unit level (James, 1982; Kozlowski & Hattrup, 1992). Two indexes assess restricted within-unit variance: (a) r^^giß, an index of within-group consensus or agreement (James, Demaree, & Wolfe, 1984) and (b) the intra- class correlation coefficient, ICCl, an index of within-group consistency, or interrater reliability (Bliese, 2000). The r^g^ß index is known to be bi- ased downwards when unit sizes are small (e.g., n = 5) (Kozlowski & Hattrup, 1992). Because our units were relatively small, we followed other lead- ership research (Den Hartog, House, Hanges, & Ruiz-Quintanilla, 1999) and used the maximum ob- served variance as the "expected value" (Lindell & Brandt, 1997) in the computation of r^g^j^ for each construct within each unit of interest. Kozlowski and Klein characterized this method of justifying aggregation as a "construct-by-group approach" (2000: 35). Median agreement for squad-level com- position constructs was .89 for ethical leadership and .84 for ethical culture; platoon-level median agreement was .82 for ethical leadership and .81 for ethical culture; and company-level median agree- ment was .90 for ethical leadership and .78 for ethical culture. Thus, unit consensus exceeded conventional standards for data aggregation (Bliese, 2000).
ICCl indexes the effect size of unit membership, and ICC2 indexes the reliability of an aggregated unit-level variable (Bliese, 2000). Kozlowski and Klein (2000) characterized this theoretical ap- proach to aggregation as a "construct-by-sample ap- proach" (2000: 35), as the indexes are based on the ratio of between-unit and total overall variance, rather than being unit specific. In the case of our sampling plan, however, we have assessments of three different target levels by different raters; thus, the "sample" is different at each level. The ICCl and ICC2 values for ethical leadership and ethical cultural elements were .12 and .36 (ethical leader- ship), and .14 and .41 (ethical culture) for the squad
1064 Academy of Management Journal October
level; 09 and .19 (ethical leadership] and .32 and .52 (ethical culture] for the platoon level; and .17 and .29 (ethical leadership] and .22 and .36 (ethical culture] for the company level. The range of these ICC values is comparable to those reported in the literature and indicates that these data are suitable for aggregation (Bliese, 2000].
Whereas ethical leadership and ethical cultural elements were conceptualized as composition con- structs that necessitated empirical justification for aggregation, we conceptualized the outcome con- structs as compilation variables that are descriptive of individual-level beliefs, intentions, and rates of observations in a given unit. These constructs are not necessarily shared phenomena and thus an ex- amination of restricted within-unit variance is not needed or proper to meaningfully aggregate them to the squad level (Bliese, 2000; Kozlowski & Klein, 2000].
Variance Components
In a final preliminary step, we conducted a vari- ance components analysis to examine whether variance at the lower hierarchical levels was ade- quate to justify multilevel analyses predicting out- comes at these levels. We examined two nested models: platoons nested in companies, and squads nested in platoons and companies (see Table 1]. For the platoons nested in companies model, both vari- ables included at this level (ethical leadership and ethical cultinre] showed adequate variance at the platoon level (67.9 and 87.9 percent, respectively]. Similarly, all squad-level ethical outcomes dis- played adequate variance at the higher and lower
levels of analysis, as did squad-level ethical cul- ture. Almost all squad-level variance in ethical leadership, however, was at the level of the squad. We nevertheless proceeded in testing Hypothesis 6, which pertains to platoon ethical leadership ef- fects on squad ethical leadership, because there is substantial variance in the outcomes and predictors of squad ethical leadership, and thus multilevel analyses are required to correctly test the appropri- ate models (see LaHuis & Ferguson, 2007].
Hypothesis Testing
Table 2 shows the means, reliabilities, standard deviations, and correlations of the variables. Hy- pothesis 1 posits direct effects of leaders that are such that ethical leadership will be positively re- lated to ethical culture within each hierarchical level. As Table 3 shows, ethical leadership was associated with ethical culture at the company, pla- toon, and squad levels [y = .69, p < .01, y = .56, p < .01, and y = .45, p < .01, respectively). Hy- pothesis 1 is therefore supported.
Hypothesis 2 proposes that ethical leadership will be related to outcomes indirectly through eth- ical culture at the lowest level (e.g., Ll -» Cl ^ 01]. Table 4 shows the results of our tests of Hypothesis 2. We foimd that squad ethical culture provided an indirect path from squad ethical leadership to squad ethical outcomes in terms of report inten- tions (7 = .06, p < .05], moral efficacy (7 = .09, p < .05], transgressions against the Army (7 = - . 0 6 , p < .05], and peer exemplary behavior (7 = .11, p < .01]. There was no significant indirect effect on transgressions against noncombatants (7
TABLE 2 Means, Standard Deviations, and Correlations among Study Variables"
Variable Mean s.d. 10 11 12
1. Squad ethical leadership 2. Squad ethical culture 3. Moral efficacy 4. Peer exemplary behavior 5. Transgressions vs. the Army 6. Transgressions vs. noncombatants 7. Report intentions 8. Combat exposure 9. Platoon ethical leadership
10. Platoon ethical culture 11. Company ethical leadership 12. Company ethical culture
3.22 2.96 6.53 0.46 0.41 0.26 3.60 0.90 3.40 3.03 3.61 3.32
0.58 0.36 1.26 0.41 0.38 0.34 0.61 0.62 0.67 0.47 0.62 0.49
.96
.50*
.19** -.01 -.28** -.17**
.27** -.18**
.17*
.11
.13
.15**
.74
.23**
.10 -.30** -.13
.15* -.08
.36**
.20*
.26**
.35**
.95
.01 -.11 -.20**
.37** -.07
.10
.06
.05 -.04
.72
.32**
.39** -.08
.64**
.22**
.12
.00
.07
.82
.69**
.11
.35**
.01 -.17** - . 1 1 -.12
.80 -.37**
.39**
.03 -.13 -.06
.01
.96
.42**
.08 -.05 -.09 -.06
.88
.16* - . 0 1 -.06
.05
.95
.57**
.14
.53**
.87
.09
.21* .94 .69 .88
" Rows 1-8 represent within-squad correlations. Rows 9-10 represent correlations between platoon leadership and culture variables and squad variables aggregated to the platoon level. Rows 11-12 represent correlations between company leadership and culture variables and squad and platoon variables aggregated to the company level.
Values on the diagonal in italic are alpha reliability esümates. For the company-level correlations, n = 39; for the platoon-level correlations, n = 78; and for the squad-level correlations, n = 172.
* p < .05 **p < .01
2012 Schaubroeck et al. 1065
TABLE 3 Relationships between Ethical Leadership and Ethical
Gulture within Hierarchical Levels (Hjqpothesis 1)"
Dependent Variable: Ethical Culture''
Variables
Company-level model Ethical leadership ~R^ Platoon-level model Ethical leadership -R^ Squad-level model Ethical leadership
ß
.69**
.47
.56**
.24
.45**
.31
5.74
4.18
6.29
" All effects are standardized. In all the analyses, combat exposure was entered as a control variahle (not included in this table). For the squad level, n = 243; for the platoon level, n = 85; and for the company level, Í7 = 40.
^ Ethical culture refers to the culture at the same level as the independent variable; e.g., for the company-level model, the dependent variable is company ethical culture.
**p < .01
= - . 0 1 , p < .20). Hypothesis 2 was therefore sup- ported for all outcomes except one. In addition to these indirect effects, ethical leadership also had significant direct effects on report intentions (7 = .14, p < .05) and transgressions against the Army (7 = - . 2 6 , p < .05).
Hypothesis 3 predicts a positive relationship be- tween higher- and lower-level ethical culture (C3 -^ C2 and C2 —> Cl). To more rigorously test the
cascading relationships of ethical culture as repre- sented in Hypothesis 3 and also to test subsequent hypotheses involving multilevel effects, we simul- taneously estimated the effects of the higher-level variables (platoon and company ethical culture) on corresponding variables measured at the lower lev- els. This relationship was significant for ethical culture in all three hierarchical paths: company to platoon (7 = .26, p < .05), company to squad (7 = .37, p < .01), and platoon to squad (7 = .23, p < .01). Hypothesis 3, pertaining to the cascading ef- fects of ethical culture, is therefore supported. Ta- ble 5 presents a simimary of these analyses.
Hypothesis 4 predicts a positive relationship be- tween higher-level ethical leadership and lower- level ethical culture (L3 -^ C2 or L2 -^ Cl). Table 6 displays the results of a series of models testing this hypothesis. Higher-level ethical leadership was re- lated to ethical culture at lower levels (7 = .21, p < .10, for the company to platoon model; 7 = .22, p < .05, for the company to squad model; and 7 = .41, p < .01, for the platoon to squad model). These findings together support Hypothesis 4.
Hypotheses 5 and 6 elaborate Hypothesis 4 by specifying indirect relationships between ethical leadership and lower-level ethical culture transmit- ted through ethical culture at the same (higher) level (H5; L3 ^ C3 -» C2 or L2 ^ C2 -^ Cl) and through lower-level ethical leadership (H6; L3 -^ L2 -^ C2 or L2 ^ Ll ^ Cl). In tests of Hypothesis 5, only one out of the three possible indirect rela-
TABLE 4 Ethical Leadership Effects on Squad Member Outcomes through Squad Ethical Culture (Hypothesis 2)°
Variables
Squad-level main effects Ethical leadership ~R^ Ethical culture ~R^ Mediated model Ethical leadership Ethical culture ~R^ Decomposition of ethical
leadership effects Total Direct Indirect
Report Intentions
ß
.20**
.14
.22**
.14
.14*
.14*
.15
.20
.14
.06*
t
3.23
3.06
2.24 1.90
1.84
Moral EfiBcacy
ß t
.06 0.75
.00
.17** 2.29
.01
-.05 -0.50 .20* 2.02 .01
.04 -.05
.09* 1.95
Transgressions vs.
Noncombatants
ß *
-.14* -2.02 .17
-.10 -1.52 .16
-.12 -1.38 - . 0 3 -0.43
.17
-.13 -.12 -.01 0.43
Transgressions vs.
the Army
ß t
-.32** -4.33 .22
-.28** -4.25 .19
-.26* -2.56 - . 1 3 * -1.78
.24
-.32 -.26 -.06* 1.73
Peer Exemplary Behavior
ß t
.07 0.90
.22
.22** 3.08
.26
.17 -0.38
.24** 3.21
.26
.28
.17
.11** 2.88
All coefficients are standardized. Combat exposure was included as a control variable (not shown in this table), n = 243.
* p < .05 **p < .01
1066 Academy of Management Journal October
TABLE 5 Standardized Relationships between Higher- and
Lower-Level Ethical Culture (H5rpothesis 3)"
Dependent Variable: Lower-Level Ethical Culture"*
TABLE 6 Standardized Effects of Higher-Level Ethical Leadership on Lower-Level Ethical Culture
(Hypotheses 4 and 5)"
Variables
Company to platoon model Company ethical culture
Company to squad model Company ethical culture
Platoon to squad model Platoon ethical culture
.26*
.04
.37*«
.18
.23*
.10
2.31
5.30
3.12
" All coefficients are standardized. Combat exposure is in- cluded as a control variable (not shown in this table), n = 7Ö for the platoon level and JI = 39 for the company level.
^ Lower-level ethical culture refers to the lower level of the model tested; e.g., for the company to squad model, the depen- dent variable is squad-level ethical culture.
* p < .05 ** p < .01
tionships was significant. Specifically, company ethical leadership was indirectly related to squad- level ethical culture through company ethical cul- ture. There was no significant indirect effect of higher-level ethical leadership on lower-level ethi- cal culture for the company to platoon or the pla- toon to squad models. Thus, Hypothesis 5 is only partially supported. Regarding Hypothesis 6, the indirect path from company-level ethical leader- ship to platoon-level ethical culture through pla- toon-level ethical leadership was significant (7 = .11, p < .05). The indirect path from platoon- level ethical leadership to squad-level ethical cul- ture through squad ethical leadership was also sig- nificant [y = .08, p < .01). Table 7 presents these findings, which overall support Hypothesis 6.
In supplementary analyses, we examined whether ethical leadership has any direct influence on lower-level ethical culture after the indirect ef- fects specified in Hypotheses 5 and 6 have been accounted for. Accounting for the cascading influ- ence of company and platoon ethical culture (Hy- pothesis 5) fully explained the direct effect of com- pany ethical leadership on squad ethical culture. However, the direct influence of platoon ethical leadership on squad ethical culture remained, even after we further accounted for the indirect effect through squad ethical leadership (Hypothesis 6). Insofar as neither lower-level ethical leadership nor same-level ethical culture explain this platoon to squad relationship, it can legitimately be labeled a "bypass effect."
Variables
Company to platoon model—Main effects Company ethical leadership ~R^ Company to squad model—Main effects Company ethical leadership ~R^ Platoon to squad model—Main effects Platoon ethical leadership ~R^ Company to platoon model—Indirect
effects Company ethical leadership Company ethical culture ~R^ Decomposition of company ethical
leadership effects Total Direct Indirect Company to squad model—Indirect
effects Company ethical leadership Company ethical culture
Decomposition of company ethical leadership effects
Total Direct Indirect Platoon to squad effects—Indirect
effects Platoon ethical leadership Platoon ethical culture ~R^ Decomposition of platoon ethical
leadership effects Total Direct Indirect
Dependent'Variable: Lower-Level
Ethical Culture""
ß
.21^
.01
.22*
.07
.41**
.18
-.03 .25 .01
.21 -.03
.15
-.03 .41** .18
.22 -.03
.28**
.35**
.10
.19
.41
.35
.05
f
1.78
2.55
5.26
-0.09 1.18
1.17
-0.46 3.88
3.24
3.72 1.13
1.12
" Combat exposure was entered as a control variable (not shown in this table), n = 172 for the squad level, n = 78 for the platoon level, and n = 39 for the company level.
^ Lower-level ethical culture refers to the lower level of the model tested; e.g., for the company to squad model, the depen- dent variable is squad-level ethical culture,
^ p < .10 * p < .05
** p < .01
Hypothesis 7 proposes that ethical leadership at higher hierarchical levels will moderate the rela- tionship between lower-level ethical leadership and lower-level ethical culture. As shown in Table
2012 Schaubroeck et al. 1067
TABLE 7 Standardized Higher-Level Ethical Leadership Effects on Lower-Level Ethical Culture through
Lower-Level Ethical Leadership (Hypothesis 6)"
Dependent Variable: Lower-Level Ethical Culture""
Variables ß
Company to platoon model—Main effects Company ethical leadership -R^ Company to squad model—Main effects Company ethical leadership ~R^ Platoon to squad model—Main effects Platoon etbical leadership
Company to platoon model—Indirect effects Company ethical leadership Platoon ethical leadership
Decomposition of ethical leadership effects Total Direct Indirect Company to squad model—Indirect effects Company ethical leadership Squad ethical leadership ~R^ Decomposition of ethical leadership effects Total Direct Indirect Platoon to squad model—Indirect effects Platoon ethical leadership Squad ethical leadership ~R^ Decomposition of ethical leadership effects Total Direct Indirect
.02
.15
.03
.22*
.05
1.69
1.39
2.99
.01 1.78
22" 07
41** 18
08 54** 33
20 08 11*
19** 45** 18
45 45 03
32** 42** 20
41 32 08**
2.55
5.26
0.78 4.10
1.58
2.80 6.31
1.37
4.60 5.99
2.71
" Combat exposure was entered as a control variable (not shown in this table), n = 172 for the squad level, n = 76 for the platoon level, and /I = 39 for the company level.
^ Lower-level ethical culture refers to the lower level of the model tested; e.g., for the company to squad model, the dependent variable is squad-level ethical culture,
^ p < .10 * p < .05
**p < .01
8, a significant moderating effect was found for both the company to platoon and the platoon to squad model (interaction y = .22, p < .05, and y — .08, p < .05, respectively). Specifically, although the effects of lower-level ethical leadership are pos- itive and significant in each case, the slopes are significantly stronger when higher-level ethical leadership is high rather than low, thus supporting Hypothesis 7. Figures 2 and 3 illustrate these relationships.
To follow up on our analyses of Hypothesis 7, we conducted two supplementary analyses. First, we examined whether higher-level ethical culture moderates the relationship between lower-level
ethical leadership and ethical culture at the lower level (similar to the hypothesized moderating role of higher-level ethical leadership). Second, we as- sessed whether the moderating effects of higher- level ethical leadership discussed in Hypothesis 7 are mediated through higher-level ethical culture. Higher-level ethical culture was found to moderate the effects of lower-level ethical leadership in a way that was similar to the moderating effect of higher-level ethical leadership. Platoon-level ethi- cal leadership and squad-level ethical leadership exhibit a stronger relationship to platoon and squad ethical culture when company and platoon ethical culture levels are both high (interaction y = .34, p
1068 Academy of Management Journal October
TABLE 8 Interactions of Higher- and Lower-Level Ethical
Leadership Predicting Lower-Level Ethical Culture (Hypothesis 7)"
Variables
Company to platoon model Company ethical leadership Platoon ethical leadership Cross-level interaction term ~R^ Company to squad model Company ethical leadership Squad ethical leadership Cross-level interaction term ~R^ Platoon to squad model Platoon ethical leadership Squad ethical leadership Cross-level interaction term ~R^
Dependent Variable: Lower-Level Ethical Culture""
Y
.05
.39**
.22*
.56
.11**
.27**
.04
.34
.17**
.26**
.08*
.37
f
0.54 5.29 2.01
2.74 5.57 0.68
4.77 6.69 2.06
" Combat exposure was entered as a control variable (not shown in this table), n = 172 for the squad level, n = 78 for the platoon level, and n = 39 for the company level.
^ Lower-level ethical culture refers to the lower level of the model tested; e.g., for the company to squad model, tbe depen- dent variable is squad-level ethical culture.
* p < .05 ** p < .01
< .05, platoon, and y = .16, p < .05, squad, respec- tively). The simple slopes, although significant in each case, were significantly stronger for high eth-
ical culture than for low ethical culture (p < .05); Figures 4 and 5 illustrate. Findings from this set of mediated moderation analyses indicate higher- level ethical culture mediates the moderating ef- fects of higher-level ethical leadership. This sug- gests that higher-level ethical culture, as a more proximal moderator of lower-level ethical leader- ship effects, is a mechanism that may more fully explain the effects of ethical leadership that were specified in Hypothesis 7.
DISCUSSION
Ethical leadership represents a domain of leader behavior that accords with what Schein (1985, 2010) described as primary mechanisms through which leaders embed their expectations and as- sumptions into the fabric of an organization. Schein's model, however, does not precisely spec- ify how these embedded understandings and ex- pectations of leaders become suffused tbrough mul- tiple organizational levels and influence follower outcomes. Our study builds on Schein's theoretical framework in a way that begins to lay out the spe- cific modes of transmission through which ethical leadership at different hierarchical levels may per- meate an organization. In our model, the role of ethical culture is essential to understanding these relationships.
We described and tested three basic categories of ethical influence transmission down and across an organizational hierarchy. First, we found that
FIGURE 2 Interaction of Company-Level Ethical Leadership and Platoon-Level Ethical Leadership Predicting
Platoon-Level Ethical Culture"
3.5
Platoon Ethical Culture
3.3
3.1
2.9
2.7
2.5 Low Platoon Ethical Leadership High Platoon Ethical Leadership
•Low company ethical leadership High company ethical leadership
" For low company ethical leadership, simple slope = .26, f = 2.54, p < .05. For high company ethical leadership, simple slope = .53, Í = 4.29, p < .01.
2012 Schaubroeck et al. 1069
FIGURE 3 Interaction of Platoon-Level Ethical Leadership and Squad-Level Ethical Leadership Predicting
Squad-Level Ethical Culture*
Squad Ethical Culture
3.5
3.3
3.1
2.9
2.7
2.5 Low Squad Ethical Leadership High Squad Ethical Leadership
• Low platoon ethical leadership • • •• • High platoon ethical leadership
" For low platoon ethical leadership, simple slope = .20, t = 3.81, p < .01. For high platoon ethical leadership, simple slope = .31. t = 8.07, p < .01.
FIGURE 4 Interaction of Company-Level Ethical Culture and Platoon-Level Ethical Leadership Predicting
Platoon-Level Ethical Culture"
3.5
3.3
Platoon 3.1 Ethical Culture
2.9
2.7
2.5
Low Platoon Ethical Leadership High Platoon Ethical Leadership
»Low company ethical culture • • #t • High company ethical culture
° For low company ethical culture, simple slope = .21, í = 2.12, p < .05. For high company ethical culture, simple slope = .56, í = 4.12, p < .01.
1070 Academy of Management Journal October
FIGURE 5 Interaction of Platoon-Level Ethical Culture and Squad-Level Ethical Culture Predicting
Squad-Level Ethical Culture"
3.5
3.3
3.1
Squad Ethical Culture 2.9
2.7
2.5 Low Squad Ethical Leadership High Squad Ethical Leadership
»Low platoon ethical culture • • • • • High platoon ethical cultiu-e
" For low platoon ethical cultiire, simple slope = .06, f = 1.02, p > .20. For high platoon ethical culture, simple slope = .23, f = 3.90, p < .01.
ethical leaders embed their expectations into the ethical culture that is shared and understood by members of their own units (Hypothesis 1). Through this mechanism, ethical leaders indirectly infiuence their immediate followers' cognifions (e.g., moral efficacy) and behaviors (e.g., transgressions) through unit ethical culture (Hypothesis 2). Thus, ethical leadership appears to infiuence ethical cul- ture within each hierarchical level, and much of the infiuence of leaders at each level is indirect, transmitted through ethical cultvu'e at the same hi- erarchical level. Second, ethical culture cascades across hierarchical levels to a substantial extent (Hypothesis 3), thus enabling a new and previously unstudied pathway for leadership influence to transmit across levels. Further, we predicted (Hy- pothesis 4) and found that ethical leadership is positively related to ethical culture at lower levels. Direct influences of leader behavior on the behav- ior of followers at lower levels have been examined previously (e.g., Dvir et al., 2002). Of greater inter- est in this study was to determine whether ethical leadership's influence is embedded through effects of ethical culture at the same level (Hypothesis 5) and/or through effects of lower-level ethical lead- ership (Hypothesis 6) in ways that explain these overall cross-level effects of ethical leadership on
the lower-level ethical culture. Both hypotheses were partially supported, and of three overall cross- level direct effects stated in Hypothesis 4, only one—the connection between platoon ethical lead- ership and squad ethical culture—was not ex- plained by indirect processes transmitted through lower-level leadership or higher-level ethical cu.lture.
Third, we found that leaders who exhibit a high level of ethical leadership may facilitate the influ- ence of subordinate leaders' ethical leadership on their followers (Hypothesis 7). Post hoc analyses showed that ethical culture at the higher level me- diated the facilitating effect of higher-level ethical leadership. This highlights the importance of con- gruence in ethical leadership across multiple levels and how ethical leaders depend on support from their principals. Such cross-level interactions are thought to be critical for understanding complex systems (Page, 2007), but they have rarely been examined generally, nor specifically with respect to ethical leadership and culture. These interac- tions and the direct and indirect effects of ethical leadership transmitted through ethical culture in- dicate that a more holistic view of both proximal and distal leadership processes that impact fol- lower behavior is required to more fully appreciate
2012 Schaubroeck et al. 1071
the locus and transmission of leadership influence in complex organizations.
Table 9 summarizes all the findings concerning the hypotheses. The most interesting of our find- ings was that local leadership, higher-level ethical culture, and higher-level ethical leadership influ- ence local luiderstandings of ethical culture. These findings suggest that much more attention should be paid to the role of shared understandings about ethical conduct (ethical culture) at each hierarchi- cal level in an organization.
A Multilevel Systems Perspective on Ethical Leadership and Ethical Culture
From a meta-theoretical perspective, the notion of organizations as social entities of interacting and coacting elements operating at multiple levels of a system is one with a long history in the organiza- tional sciences, one going back at least to Roethlis- berger and Dickson (1939) and apparent in the writ- ings of the many systems theorists of the 1950s and 1960s (e.g., Likert, 1961; Katz & Kahn, 1966). A persistent theme in the writings of these and other scholars is the central role of leaders in the enact- ment of a system of human relations across levels of
organizations. Likert's concept of leaders as linking pins who transmit values and shape cultural inte- gration goes to the core of "classic" organizational systems theory. Although leadership is widely viewed as central for linking organizational sys- tems together, for the most part it has not been researched from a multilevel theory and integrated systems perspective (Yammarino & Dansereau, 2008). Such research is critical to evaluating system cohesion as a fundamental assumption of organiza- tional behavior (Kozlowski & Klein, 2000).
Owe model included three levels of leadership in a complex organization which, combined with a large sample size, allowed us to establish how eth- ical leadership becomes embedded in a multilevel, multiperson system with both direct effects of lead- ers on their immediate followers and indirect, cross-level effects on lower-level organization members. Research and scholarship about leader- ship has thus far examined the processes through which leaders suffuse their influence in an organi- zation primarily by referencing the trickle-down relationships between leaders' behavior at different levels (Bass et al., 1987; Mayer et al., 2009) and/or direct effects of behavior across levels (e.g., Dvir et al., 2002). By integrating horizontal (within-level)
TABLE 9 Summary of Hypothesis Test Results"
Hypothesis Figure 1 Relationships Results
HI. Ethical leadership is positively related to ethical culture within each hierarchical level.
H2. Through ethical culture, ethical leadership is indirectly and positively related to unit members' moral agency (moral efficacy and report intentions) and exemplary ethical behavior and negatively related to their ethical transgressions.
H3. Ethical culture at higher hierarchical levels is positively related to ethical culture at lower hierarchical levels.
H4. Ethical leadership is positively related to ethical culture at lower hierarchical levels.
H5. Higher-level ethical leadership indirectly influences ethical culture at lower hierarchical levels through ethical culture at the same (higher) hierarchical levels.
H6. Ethical leadership at higher organizational levels is indirectly related to ethical culture at lower hierarchical levels through ethical leadership at lower levels.
H7. Ethical leadership at higher hierarchical levels moderates the influence of subordinate ethical leadership in such a way that high ethical leadership at a higher organization level is associated with a stronger influence of subordinate leaders' ethical leadership on ethical culture in their units.
L l ^ C l Ll -^ Cl ^ 0 1 (moral efficacy)
Ll —> Cl ^ 0 1 (report intentions) Ll —> Cl —>• 0 1 (transgressions vs. Army)
Ll -» Cl -» 0 1 (transgressions v. NC) Ll —> Cl - • 0 1 (exemplary behavior)
C3 ^ C 2
C3 ^ C l
L 2 - > C 1 L3 ^ C3 -> C2 L3 ^ C3 -^ Cl L2 ^ C2 -^ Cl L3 ^ L2 -* C2 L2 - • Ll ^ Cl
L3 X L2 L2 X Ll
•C2 • C l
S S
S S N S S S S S s s s N S N S S
S S
" See Figure 1 for path diagram. Abbreviations: C = "ethical culture"; L = "ethical leadership"; N = "not supported"; NC = "noncombatants"; O = "outcomes"; S = "supported." Numbers after abbreviations denote hierarchical level; e.g., L3 denotes ethical leadership at company (3rd) level.
1072 Academy of Management Journal October
influence processes with vertical and diagonal cross-level linkages, we are proposing ways not only to study ethical leadership in organizations, but also to highlight the different transmission mechanisms for leadership constructs more generally.
Horizontal (within-level) effects. We found sfrong horizontal, within-level effects of ethical leadership on ethical culture at each of the three levels. Such results are consistent with the widely held assimip- tion that the ethical leadership of an individual's immediate supervisor affects the proximal ethical culture of the individual's unit. Further, at the lowest level, squad-level ethical culture was significanfly related to fovir out of five of the outcome measures, including report intentions, moral efficacy, transgres- sions against the Army, and exemplary ethical behav- ior. These simple horizontal effects indicate the value of selecting and developing ethical leaders at lower levels who proactively maintain favorable ethical norms and uphold high standards for ethical conduct in their own units.
Vertical direct and indirect effects of embed- ded ethical culture and leadership. Our model specifying the indirect transmission of leadership influence has two core elements: First, leader be- haviors at higher levels tend to be similar to leader behaviors at adjacent lower levels. Second, we ob- served that more senior leaders influence lower- level leaders' and followers' behaviors and cogni- tions via indirect pathways. One of these indirect pathways observed in the cvu"rent study was through the ethical culture at adjacent lower levels. Ethical culture at the highest hierarchical level (company, in this study) was positively related to ethical culture at both lower levels, as per Hypoth- esis 3. This served as a foundation for subsequent hypotheses concerning indirect effects of ethical leadership on lower-level outcomes.
Cross-level indirect effects. In addition to the vertical and horizontal effects proposed in ovir model, the diagonal dashed lines in Figure 1 rep- resent direct effects of higher-level ethical leader- ship on lower-level ethical culture. Company-level ethical leadership exhibited significant diagonal ef- fects on ethical culture at both the platoon and the squad levels, and platoon-level ethical leadership also directly influenced squad ethical culture (Hy- pothesis 4). This relationship would convention- ally be interpreted as a bypass of the lower-level leaders, but we suggest that is a rather liberal inter- pretation unless one also accounts for mechanisms that may explain such direct cross-level effects, such as mediation through lower-level leaders' be- havior or through the cascading influence of shared culture. We found that the indirect relationship of
company ethical leadership through platoon ethi- cal leadership fully accounted for the relationship between the former and platoon ethical culture. In addition, accounting for the cascading influences of ethical culture explained the aforementioned direct effect of company ethical leadership on squad ethical culture. The authors of one previ- ous study observed bypass effects of leader be- havior after accounting first for cascading leader- ship to the next level (Yang et al., 2010), but no previous study has simultaneously accounted for indirect pathways through shared cultural ele- ments in which leaders embed their influence. This suggests the possibility that bypass effects of leader influence across levels may be at best a weak phenomenon once all embedding processes (indirect relationships through lower-level lead- ers and same-level culture elements) are taken fully into consideration.
One direct cross-level relationship, that between platoon ethical leadership and squad ethical cul- ture, persisted after we accounted for the other hypothesized influences on squad ethical culture (i.e., the simultaneous effects of L2 ^ Ll —> Cl and L2 —> C2 —» Cl). Even using our more conservative definition and test, this qualifies as a leadership bypass. This finding is similar to the results pre- sented by Dvir et al. (2002) in that the platoon leaders' transformational leadership in their study had a significant effect on their indirect followers' behavior, but not on the behavior of their immedi- ate followers (squad leaders). Explaining direct ef- fects of this nature remains an interesting question for future research. One interpretation may be that senior leaders serve as more powerful role models when they are similar to and represent a potential possible self for subordinate leaders (Bandura, 1971). In the current study, the leaders at level 1 (squad leaders) were all noncommissioned officers (NCOs), whereas the formal leaders at level 2 (pla- toon leaders) were commissioned officers. The most salient role models to the squad leaders may have instead been the informal leaders who were the more senior NCOs in the organization (i.e., pla- toon sergeants and first [company] sergeants). This alternative senior leadership referent may have at- tenuated squad leaders' emulation of their platoon leaders, which in turn enabled platoon leaders to influence squad ethical culture in distinct ways. As we noted above under the heading "Variance com- ponents," although platoon ethical leadership ex- plained a significant portion of the between-squad variance at tbe platoon level, the total variance of squad ethical leadership at the platoon level was very small.
Outcomes of ethical leadership and ethical cul-
2012 Schaubroeck et al. 1073
ture. Our study examined the extent to which eth- ical leadership at different levels, both directly and through ethical culture, is associated with ethical transgressions, exemplary behaviors, and the moral agency cognitions of moral efficacy and reporting intentions. In measuring transgressions and peer exemplary behavior, we aggregated individuals' re- ports about frequencies of certain bebaviors occvir- ring among members of their squads. We expected this approach to enhance reliability of reporting and encourage more honest reporting than might be expected if soldiers were reporting about them- selves or specific peers. Transgressions included mistreatment of noncombatants as well as the more general rule breaking that typifies behavior in many other organizations, such as thievery, misreporting performance, and defying directives. Peer exem- plary behavior and moral efficacy showed the strongest positive relationships with squad ethical culture, and transgressions against the organization (e.g., stealing) were negatively related to squad- level ethical culture.
Moral efficacy and report intentions are manifes- tations of moral agency, reflecting orientations to respond in purposeful ways to opportunities to confront unethical behavior (Hannah et al., 2011). Ethical context may influence these dispositions, as we observed significant, positive effects of both squad- and platoon-level ethical culture on squad mean levels of moral efficacy and report intentions. To ovu" knowledge, this is the first empirical study linking ethical leadership to such constructs of moral agency. To better test causality, future re- search might profitably examine baseline levels of moral efficacy and report intentions before follow- ers are exposed to particular levels of ethical lead- ership and ethical culture that may encoiuage them to be more (or less) effective moral agents.
Importance of Context: Ethical Culture and Multilevel Leadership
In keeping with the embedding of leadership as described by Schein (1985, 2010), much of the in- fluence of ethical leadership on ethical outcomes that was observed in this study was mediated by unit-level ethical culture. Consequently, models of leadership and ethical behavior that omit the ef- fects of ethical culture at different hierarchical lev- els may be underspecified. For example, one migbt conclude that senior leaders have a direct influence on outcomes at a lower level that results from direct interactions between these leaders and lower-level followers (Yammarino, 1994), whereas the influ- ence of these leaders may in fact be indirect, trans-
mitted through their influence on culture at their own levels, which then cascades to lower levels.
This study also begins to address calls for exam- ining leadership in context (e.g., Avolio, 2007); in this instance, shared cultural elements (Schein, 1985) relating to ethical conduct represents con- text. Importantly, the effects of lower-level ethical leadership on ethical culture at the same level were contingent on ethical leadership at the higher level. Ethical leadership at a lower level had a stronger positive influence on ethical culture at that level when the leader at the next higher level was re- ported to exhibit a high level of ethical leadership. Additional analyses indicated that this facilitating effect of higher-level ethical leadership may occur through the mediating role of ethical culture. Spe- cifically, ethical leadership at higher levels pro- motes ethical culture at those levels, which in turn facilitates a more favorable impact of etbical lead- ership on ethical culture at the next lower level. Thus, when studying ethical leadership in the con- ventional way, focusing chiefly on the influences of the immediate leader, one can potentially be mis- led into drawing inferences about the magnitude of these effects, when in fact they may be to some extent contingent on qualities of ethical leadership at higher levels. This moderating effect of higher- level ethical leadership suggests that senior leaders play a significant role in cultivating shared ethical understandings at lower levels, working not only through direct effects and indirect influences through ethical culture, but also by constraining or facilitating the influence of ethical leadership at lower levels.
Practical Implications
Leaders should be encouraged to embed tbeir assumptions and expectations concerning ethical conduct among organizational members by engag- ing in ethical leadership and by seeking to create strong ethical cultures in their units. Through the mechanisms examined in the current study, this leadership strategy may influence ethical culture at lower levels. As conceptualized by Brown and col- leagues (2005), ethical leadership involves many of the primary and secondary mechanisms that Schein (1985, 2010) noted are critical for a leader to embed influence. Specifically, ethical leaders pay attention to providing contingent consequences for desired eind undesired bebavior. Tbey serve as models and coaches to followers in ways that en- courage them to exhibit exemplary ethical behavior and to avoid unethical behavior. Critical incidents concerning ethical conduct, such as severe em- ployee infractions, can be bighlighted as a key
1074 Academy of Management Journal October
means to teach followers about ethical standards and sanctions and to reinforce the message that they can be effective moral managers and agents. Ethical leaders can also allocate resources to im- prove followers' ethical understandings, while also using levers such as selection, promotion, training, and performance appraisals in ways that reinforce these actions. An ethical leader can further rein- force such understandings by utilizing Schein's secondary mechanisms, such as telling engaging stories about ethics that are likely to be repeated by others, or using formal means, such as speeches and policies, to communicate expectations.
Using the concept of ethical culture was helpful to our understanding and ability to explain the infiuences of ethical leaders within and across lev- els. Organizational leaders might pay more atten- tion to the role that ethical culture plays in estab- lishing the standards and boundaries for ethical conduct in their organizations. These shared ele- ments can be tracked by surveying organization members to determine whether leaders are creating unit ethical cultures that support ethical behavior or whether they are creating obstacles to it that might reduce followers' moral agency and increase the frequency and severity of unethical conduct.
Another important practical implication of this study is that to understand the infiuence of a direct leader, it may be necessary to look up one or more levels in an organization to obtain a more complete picture of the locus ofthat leader's style and effects. Our results suggest that building the full leadership capacity of an organization requires viewing lead- ership more as an integrated system of relation- ships that operate across hierarchical levels, driven substantially by both leader behaviors and ethical culture that are present within and across levels.
It is also important for leaders to understand how their inñuence on their direct reports who are lead- ers themselves can be used to transmit and rein- force their indirect leadership to followers at lower levels of their organization. Such leadership may focus on aligning performance and ethical expecta- tions or emphasize the importance of a particular "guiding" message that the more senior leader wants all lower-level leaders and organization members to embrace. To lead, therefore, requires that an individual think about both direct and in- direct impacts as represented through his or her subordinate leaders and the assumptions and ex- pectations the individual is embedding in the eth- ical culture. Furthermore, knowing how senior leaders can facilitate the effects of subordinate leaders' ethical leadership by exhibiting strong eth- ical leadership themselves reinforces how impor- tant it is for organizations to ensure senior leaders
are selected and developed to exhibit high levels of ethical leadership.
Study Strengths and Limitations
A number of distinct empirical strengths are as- sociated with this study. First, unlike most prior studies of leadership transmission across levels (e.g., Chun et al., 2009; Mayer et al., 2009], we used independent ratings of leader behavior at each or- ganizational level. This may at least partially ex- plain why the leader bebavior cascade effects in our study are somewhat weaker than those found in previous studies. We also encourage researchers to obtain independent measures of ethical culture at different levels, as we did. Relying upon the same lower-level participants to evaluate shared under- standings about cultural elements (e.g., Zohar & Luria, 2005] or the behavior of leaders (e.g., Mayer et al., 2009] at multiple higher levels potentially inflates levels of agreement. This inflation of ob- served relationsbips may occur because of same- source bias but also because participants at lower levels may lack adequate information with which to gauge the behavior of leaders and the cultures of units at higher levels.
By measuring ethical culture using distinct sources, we were also able to identify very satis- factory levels of discriminant validity of etbical culture at different levels. Whereas a general or- ganizational culture may explain a portion of the variance in ethical culture shared across levels, these cross-level relationships were low to mod- erate in magnitude, indicating that global organ- izational culture could not explain the homoge- neity within units. We also examined whether variance in company (platoon] ethical leadership and in ethical culture ratings was related to vari- ance in platoon (squad] ethical leadership or pla- toon (squad] ethical culture ratings. The highest correlation, which concerned the relationship be- tween tbe variances of squad and platoon ethical culture ratings, was quite low (r = .15]. Second, unlike earlier multilevel leadership studies, our analyses related to ethical leadership also ac- counted for the effects of subunit ethical culture. Not only did the influences of ethical culture from higher levels explain additional variance in outcomes, but also, after controlling for these elements, we no longer observed some direct (by- pass] effects of higher-level leadership on out- comes that have been the subject of previous research and theory (Yammarino, 1994; Yang et al., 2010]. Third, although the effects of ethical leadership transmitting through lower-level lead- ers' behavior explained only a small portion of
2012 Schaubroeck et al. 1075
the variance in outcomes among lower-level members, when also considering indirect ethical leadership effects that were transmitted through ethical culture at different levels, we found that higher-level ethical leadership was broadly re- lated to squad members' ethical cognitions and behavior.
A fourth advantage of our study involved our examination of the various links in the chain of influence from company-level leader behavior to squad-level beliefs and behavior. We took a conser- vative approach toward examining these paths, by taking only two-segment paths (e.g., variable A to variable B and variable B to variable C) that were found to represent statistically significant indirect effects when we calculated total indirect effects. We pursued this strategy because sampling varia- tion around the indirect effects is too substantial in a multilevel study of this scope to cumulate indi- rect effects that were expanded across multiple bi- variate relationships.
As with any field research project, however, a number of limitations could impact the interpre- tation of our findings. One issue is the potential to generalize the findings to other organizational contexts. Over 89 million people serve in militar- ies worldwide (International Institute for Strate- gic Studies, 2010). Police officers and firefight- ers, who constitute a large segment of the global workforce, in some ways share the often extreme context of military work (Hannah, Uhl-Bien, Avo- lio, & Cavarretta, 2009). Nevertheless, the U.S. military, like other militaries around the world, is a unique organization. Additional research will need to be conducted in other types of or- ganizations before one can be confident as to the generalizability of our findings. For example, militaries have hierarchical structures, and thus it would be useful to study more organically structured organizations to determine if the means by which higher-level ethical leadership is conveyed to lower-level followers is different in such organizations. Another example of how or- ganizational context may influence the general- izability of our findings concerns leader selec- tion. Yammarino (1994) noted that to the extent that leaders play a role in selecting their subor- dinate leaders, they may be inclined to choose individuals who are more likely to behave in a manner similar to how they themselves would behave. Subordinate leaders may also tend to have a closer relationship with leaders who have selected them, and this close interaction may promote behavioral similarity. In the U.S. Army, however, at lower levels of leadership the assign- ments of leaders are normally made at higher
levels. Future studies examining samples in which such selection processes are more preva- lent may be able to determine if leaders' selection of their immediate junior leaders enhances the cascading of leader behavior.
A number of unmeasured variables may help to explain the pattern of results we reported. For example, it would be useful in future research to incorporate other potential influences on unit ethical culture, such as the presence or absence of formal ethical codes at each level. In addition, other potential mechanisms could be assessed in future research, such as leaders' influencing the identities of followers at lower levels (Chun et al., 2009). Future studies may also examine whether disagreement among members about cultural el- ements, as reflected in within-unit variance on such measures (Zohar & Luria, 2005), is itself a moderator variable that influences the strength of cascades of such elements or relationships be- tween leader behavior and the mean levels of cultural elements of a given unit or lower- level units.
Given that our data collection was based on a cross-sectional design, we cannot make definitive inferences about causal processes. To address alter- native models, we conducted supplementary anal- yses in which the order of ethical leadership and ethical culture was varied at each level. These anal- yses determined that the direct effects of ethical culture on squad-level ethical outcomes were stronger than the effects of ethical leadership. Nev- ertheless, we cannot rule out alternative causal or- ders and mechanisms. In addition, the dependent variables examined in this study were obtained from self-reported data provided by squad mem- bers. Although there was reasonable agreement among members of a squad as to the frequency with which their members engaged in transgressions or exemplary behaviors, we cannot be certain as to the validity of their reports, and it is likely that some transgressions were not reported accurately or were underreported. Aggregating to the squad level, however, made it less likely that individuals' idio- syncratic attributions about the same observed be- haviors would bias the study findings.
Conclusions
We developed a multilevel model to guide a study of the effects of ethical leadership and shared understandings about ethical conduct (ethical cul- ture) on lower-level followers' ethical cognitions and behavior. Otir findings indicate that ethical cognitions and conduct reflect multiple normative and informational influences, including not only
1076 Academy of Management Journal October
ethical leadership and ethical culture inherent in an immediate unit, but also reflecting the influence of leaders and ethical cultiu-e at higher levels. The understandings concerning norms, standards, and sanctions for ethical behavior (that is, ethical cul- ture), which reflected the expectations and desires of leaders at various levels, were found to be the most potent and proximal influence on follower cognitions and behavior.
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John M. Schaubroeck ([email protected]) is the John A. Hannah Distinguished Professor of Psychology and Management at Michigan State University. He re- ceived his Ph.D. from Purdue University. His research interests relate to primarily to leadership processes, em- ployee well-being, and ethical behavior.
Sean T. Hannah ([email protected]) is a colonel in the U.S. Army and the director of the Center for the Army Profession and Ethic, at West Point. He received a Ph.D. in organizational behavior with a focus on leadership
from the University of Nebraska-Lincoln. His research focuses on leadership development; character develop- ment; leader identity, self-efficacy, and courage; and leadership in extreme and complex contexts.
Bruce J. Avolio ([email protected]) received his Ph.D. from the University of Akron. He is the Marion B. Ingersoll Professor and the director of the Center for Leadership & Strategic Thinking in the Foster School of Business, University of Washington. His current research focuses on examining how to accelerate leadership de- velopment across levels and determining the value of leadership.
Steve W. J. Kozlowski ([email protected]) is a professor of psychology in the Organizational Psychology Program at Michigan State University. He received his Ph.D. from The Pennsylvania State University. His meta-theoretical work focuses on multilevel phenomena and the dynam- ics of emergence. Substantive research centers on indi- vidual and team learning, team effectiveness, leadership, and use of simulation to create synthetic experience.
Robert G. Lord ([email protected]) is a distinguished professor of psychology at the University of Akron. He received his Ph.D. from Carnegie-Mellon University. His research interests include leadership, motivation, infor- mation, and ethical behavior.
Linda K. Treviño ([email protected]) is Distinguished Professor of Organizational Behavior and Ethics in the Smeal College of Business, The Pennsylvania State Uni- versity. She received a Ph.D. from Texas A&M Univer- sity. Her current research focuses on behavioral ethics in organizational context with an emphasis on values, eth- ical leadership, ethical culture, internal reporting and whistle-blowing.
Nikolaos Dimotakis ([email protected]) is an assis- tant professor at Ceorgia State University. He received his Ph.D. from Michigan State University. His research focuses on affective processes, well-being and motivation.
Ann C. Peng ([email protected]) is a doctoral student in management at Michigan State University. She received her M.Phil, in management at Lingnan University of Hong Kong. Her research interests include leadership, employee well-being, and proactive work behavior.
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