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Ethical Leadership Behavior and Employee Justice Perceptions: The Mediating Role of Trust in Organization

Angela J. Xu • Raymond Loi • Hang-yue Ngo

Received: 12 May 2014/Accepted: 31 October 2014/Published online: 22 November 2014 Springer Science+Business Media Dordrecht 2014

Abstract Using data collected at two phases, this study examines why and how ethical leadership behavior inﬂuences employees’ evaluations of organization-focused justice, i.e., procedural justice and distributive justice. By proposing ethical leaders as moral agents of the organization, we build up the linkage between ethical leadership behavior and the above two types of organization-focused justice. We further suggest trust in organization as a key mediating mechanism in the linkage. Our ﬁndings indicate that ethical leadership behavior engenders employees’ trust in their employing organization, which in turn promotes their justice perceptions toward the organization. The theoretical and practical implications of these ﬁndings are discussed, and some directions for future research are suggested.

Keywords Distributive justice Ethical leadership Organization-focused justice Procedural justice Trust in organization

Introduction

Ethical leadership has emerged as a core stream of leadership research following the recent ethical scandals in

reputable corporations worldwide (e.g., the collapse of Enron in the United States and the Sanlu milk scandal in China). Deﬁned as ‘‘the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to subordinates through two-way communication, reinforcement, and decision-making’’ (Brown et al. 2005, p. 120), ethical leadership has been found to affect some important employee outcomes such as job satisfaction, voice, unethical behavior, job performance, employee wellbeing, and innovation (Chughtai et al. 2014; Miao et al. 2013; Ogunfowora 2014; Tu and Lu 2013; Walumbwa et al. 2011; Walumbwa and Schaubroeck 2009). Despite the rapid development of this stream of research, little has been known about the impact of ethical leadership on perceived organizational justice among employees. Such omission is surprising as fairness is a fundamental value and virtue within an organization (Rawls 1971) and employees’ perceived fairness toward their employing organization is strongly related to their ethical assumptions regarding how human beings should be treated in the workplace (Loi et al. 2012). Furthermore, the well-known whistleblowing case of Enron reveals that when managers behave unethically, employees would not only query managers’ ethnicity but also question whether the organization’s policies and procedures are proper or not (Premeaux 2009). Thus, it is both theoretically and practically important to examine why and how ethical leadership behavior exerts its effect on employees’ fairness perceptions toward their organization. Deﬁned by researchers (e.g., Colquitt et al. 2001) as people’s subjective perception of fairness in organizations, organizational justice is commonly classiﬁed into four types: distributive, procedural, interpersonal, and informational. Distributive justice and procedural justice are

A. J. Xu (&) R. Loi Department of Management and Marketing, University of Macau, Macau, China e-mail: [email protected]

R. Loi e-mail: [email protected]

H. Ngo Department of Management, The Chinese University of Hong Kong, Hong Kong, China e-mail: [email protected]

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J Bus Ethics (2016) 134:493–504 DOI 10.1007/s10551-014-2457-4

generally considered as the structural forms of justice with the focus on the organization, whereas interpersonal justice and informational justice are viewed as the interactional forms of justice with the focus on the supervisor or manager (Greenberg 1993; Loi et al. 2009). It has been pointed out that, compared to interactional forms of justice, organization-focused procedural justice and distributive justice are more robust predictors of organizational outcomes such as turnover intentions and organizational deviance (Akremi et al. 2010; Olkkonen and Lipponen 2006). Interestingly, existing literature largely relates ethical leadership to the supervisor-focused interactional justice (e.g., Neubert et al. 2009), leaving the connection between ethical leadership and organization-focused justice under-examined. This is an unfortunate oversight as leaders are often viewed as the core members of the organization carrying the prototypical characteristics of the organization and exercising social inﬂuence to the subordinates (Loi et al. 2014). Empirical evidence showing that leadership behavior could inﬂuence both distributive and procedural justice (e.g., Li et al. 2014; Pillai et al. 1999) provides partial support for our speculation. In addition, given the close connection between workplace ethics and organizational fairness (Cropanzano and Stein 2009), ethical leaders are thought to be moral agents of the organization who undertake a crucial role in promoting just organizational procedures and outcomes (Cropanzano and Rupp 2002). Colquitt and Greenberg (2003) suggested that ethical leadership behavior, such as accountability for ethical standards, should echo the procedural and distributive aspects of justice. The present study aims to ﬁll the above research void. Previous research has identiﬁed trust as an important driver of procedural and distributive justice (Hoy and Tarter 2004; Tyler 1994). The way how leaders behave has been found to have signiﬁcant impact on initiating employees’ trust (e.g., Whitener et al. 1998). Our study takes a step further to investigate why and how ethical leadership affects followers’ justice perceptions toward the organization by exploring trust in organization as a main underlying mechanism. By addressing ethical leaders as unique moral agents of the organization, we argue that the actions demonstrated by ethical leaders provide a base for nurturing employees’ trust in their organization, which in turn enhances their evaluations of organization-focused justice. This study makes several important contributions to the extant literature of ethical leadership and organizational justice. First of all, it advances our existing knowledge which focuses mainly on ethical leadership and interactional forms of justice (Brown et al. 2005; Neubert et al. 2009). By evaluating the impacts of ethical leadership behavior on procedural and distributive justice, our study extends current research by highlighting ethical leadership as an important source of organization-focused justice.

Second, by exploring trust in organization as a mediating mechanism, this study not only integrates the existing knowledge on ethical leadership, trust, and justice, but also illuminates the process as regard how employees make sense of organization-focused fairness through leadership behavior. It also reveals the proactive role that ethical leaders may play in helping the organization build trust with the employees, which in turn foster employees’ favorable justice evaluations toward the organization. Third, on a practical level, this study indicates that organizations should hire and nurture ethical leaders in an attempt to develop employees’ trust and positive justice perceptions. We test our hypotheses using a sample of bank employees in Macau, the southern part of China. With the vast development of China’s ﬁnancial sector and the heavy emphasis of business ethics in the banking industry (Green 1989; Ip2009), the ﬁndings of our study also inform bank managers in China about the importance of displaying ethical leadership behaviors.

Theoretical Background and Hypotheses Development

Ethical Leaders as Moral Agents of the Organization

Managers or supervisors are often regarded as core agents of the organization (Konovsky and Pugh 1994), and their actions are usually interpreted by their subordinates as providing information about organization’s commitment and intentions (Eisenberger et al. 2002; Loi et al. 2009). Nevertheless, Coyle-Shapiro and Shore (2007) have cautioned researchers that managers’ own personal interests may not align with the interests of the organization, and more research is needed to explicate why and when managers can appropriately represent the intentions of the organization. We argue that the distinctive characteristics of ethical leadership can make employees readily attribute their managers’ actions and decisions as originated from their employing organization. Ethical leaders have been described by Trevin ˜o et al. (2000) as both ‘‘moral persons’’ and ‘‘moral managers’’. The ‘‘moral person’’ dimension identiﬁes the motivations and personal attributes of ethical leaders, characterized as caring, honest, trustworthy, principled, persuasive, and fair (Brown et al. 2005). In both their personal and professional lives, ethical leaders are committed to doing things based upon ethical decision rules. The ‘‘moral manager’’ dimension indicates these leaders set and communicate ethical standards and expectations, not only pattern their own behaviors and organizational processes to meet the moral standards, but also proactively use rewards and discipline to hold followers accountable for ethical conduct (Brown and Mitchell 2010).

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Since ethical leaders behave ethically and consistently in both their personal and professional lives, they ‘‘talk the walk’’ and ‘‘walk the talk’’, and are engaged in behaviors that are seen as normatively appropriate and motivated by altruism rather than self-interest (Brown et al. 2005). They are viewed by employees as altruists who genuinely demonstrate care and concern for employees and the organization, and take the interests and requirements of the organization into account when making decisions (Kalshoven et al. 2011). Moreover, ethical leaders will stop and punish any unethical behaviors (e.g., unfair practice and biased actions) within the organization, and proactively communicate with employees about conduct which is normatively appropriate for the organization. As a result, employees would naturally count on ethical leaders to make sense of organizational policies, procedures, and distributive outcomes. Our argument of taking ethical leaders as unique moral agents embodying the interests and standing of the organization can also be inferred from the empirical evidence that links ethical leadership with various organizational outcomes. For example, Neubert and his colleagues (2013) found ethical leadership behavior predicts employees’ organizational commitment. Both Walumbwa et al. (2011) and Yang and Liu (2014) reported a positive relationship between ethical leadership and followers’ organizational identiﬁcation. Besides, Mayer et al. (2009) identiﬁed a trickle-down effect of top management ethical leadership on supervisory ethical leadership, and employees tend to see what the organization values through the lens of their immediate supervisors. Thus, it is logical to expect that ethical leadership behavior at the supervisory level would engender employees’ trust in their organization, and subsequently promote their justice perceptions regarding organization’s practices and outcome allocations, which we are going to explain below in details.

Trust in Organization

According to Robinson (1996, p. 576), trust refers to ‘‘one’s expectations, assumptions, or beliefs about the likelihood that another’s future actions will be beneﬁcial, favorable, or at least not detrimental to one’s interests’’. Employees’ trust in organization is an essential ingredient for a stable employee-organization relationship (Cook and Wall 1980). Such view is consistent with the social exchange theory (Blau 1964), which highlights the role of trust in the emergence and maintenance of a long-term employment relationship. When employees have more trust in their organization, they would believe that a social exchange relationship with the organization has been developed, and they are inclined to have positive expectations about the words, actions, motives, and decisions of the organization

(Lewicki and Bunker 1995). As a consequence, they are likely to develop a higher level of organizational commitment (Cook and Wall 1980), stay longer with the organization (Konovsky and Cropanzano 1991), work harder (Dirks and Ferrin 2001), and perform more organizational citizenship behavior in the workplace (Wong et al. 2006). In the process of trust building, employees constantly monitor the organizational environment when they decide whether to trust their organization or not (Carnevale 1988). In particular, leaders along with their behaviors are expected to have considerable impact on initiating employees’ trust (e.g., Dirks and Ferrin 2002; Newman et al. 2014). Tan and Tan (2000) argued that an employee might make judgments regarding whether or not to trust the organization by making inferences from his or her interaction with the supervisor, who is directly responsible for communicating organizational policies and goals to subordinates. Moreover, Wayne et al. (1997) pointed out that employees often generalize their experiences with their supervisors to the organization. For that reason, employees’ trust in organization has been found to be associated with their trust in supervisors (Wong et al. 2003). As discussed above, ethical leaders stand out as the moral agents representing the organization in managing employment relationships with employees. Therefore, it is natural for employees to interpret the way ethical leaders behave and treat others as originating from the organization. Building on this logic, we contend that ethical leadership behavior, perceived by employees as acting on behalf of the organization, will foster employees’ trust in organization. Speciﬁcally, ethical leaders promote organizational goals and interests among employees consistently over time and across situations. Besides, they develop and demonstrate genuine concern for the welfare of employees (Trevin ˜o et al. 2003) in the name of the organization. They also involve employees in organizational decision-making processes (Kalshoven et al. 2012), and proactively and openly communicate organizational (ethical) expectations (Brown and Mitchell 2010). Arguably, all these are the building blocks for generating employees’ trust in organization (Robinson and Rousseau 1994). Furthermore, compatibility of ethical leader’s words and actions, and credible communications from others in the organization about honorable actions by ethical leaders are especially important to initiate employees’ trust in the early relationship between employer and employee (Mayer et al. 1995; Schoorman et al. 2007). Empirical ﬁndings have demonstrated that perceived ethical leadership behavior has a strong positive relationship with employees’ trust in management (Avolio et al. 2004) as well as a trusting organizational atmosphere (Den Hartog and De Hoogh 2009). In view of the above reasons, it is logical to expect that ethical leadership behavior is conducive to the

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development of employees’ trust in organization. We thus propose the following hypothesis:

Hypothesis 1 Ethical leadership behavior is positively related to trust in organization.

Ethical Leadership, Trust in Organization, and Justice Perceptions

In distinguishing different types of organizational justice, justice researchers (e.g., Colquitt 2001) generally refer distributive justice to the perceived fairness in the allocation of organizational outcomes, and refer procedural justice to the perceived fairness of process by which organizational resources and outcomes are allocated. As suggested by multi-foci justice research (e.g., Cropanzano et al. 2002; Loi et al. 2009), the above two types of justice perceptions are regarded as organization-focused, since the resource allocation decisions and guidelines for procedures are established and controlled by the organization. In contrast, interpersonal justice, referring to the fairness of interpersonal treatment when implementing procedures, and informational justice, referring to the accuracy and timeliness of explanations individuals receive, are more supervisor-focused, since supervisors are most likely to inﬂuence employees through daily interpersonal treatment (Olkkonen and Lipponen 2006). Some researchers (e.g., Kirkman et al. 2009; Pillai et al. 1999) have argued that leaders should have some crucial inﬂuences on employees’ perceptions of organization-focused justice (i.e., procedural and distributive justice). As ethical leaders act as organization’s moral agents who maintain and promote the compliance of ethical standard of the organization such as fairness, one may expect that their behaviors have an important role to play in affecting employees’ fairness judgment regarding organizational procedures and outcomes (Demirtas 2013; Li et al. 2012, 2014). In this study, we examine these relationships by proposing trust in organization as a key mediating mechanism. Procedural justice is fostered when employee’s inputs are taken into consideration during the decision-making processes and when procedures are implemented with consistency, bias suppression, accuracy, correctability, representativeness, and ethicality (Leventhal 1980). Ethical leaders convey their ethical expectations to employees through an open two-way communication, listening to what employees say, and asking ‘‘what is the right thing to do?’’ when making decisions (Brown et al. 2005). Their emphasis on the adherence to organizational policies and practices draw employees’ attention to the organization’s fair procedures (Loi et al. 2012). In their study conducted in China, Li et al. (2012) found that subordinates under ethical leaders perceive greater procedural justice.

As highlighted by Bal et al. (2011), trust in organization plays a central role in procedural justice evaluation in the workplace. When employees develop their trust in organization based on ethical leadership behavior, they would hold positive feeling regarding the motives and intentions of the organization (Tyler 1994). Additionally, they may have a strong belief that they would not be taken advantage of (Pillai et al. 1999), and hence they tend to evaluate the organization policy and practices in a positive manner (Wong et al. 2012). Extant literature has consistently shown that trust was a signiﬁcant predictor of procedural justice (e.g., Hoy and Tarter 2004; Lind et al. 1997). Accordingly, we develop the following hypothesis:

Hypothesis 2 Trust in organization mediates the positive relationship between ethical leadership behavior and procedural justice.

Distributive justice is fostered when appropriate norms are employed in the allocation of resources or rewards (Leventhal 1976). Ethical leaders set examples of how to do things in the right way in terms of fair outcome distribution, and they reward ethical behaviors and discipline unethical behaviors in the organization (Gini 1998; Trevin ˜o et al. 2003). The way of using contingent rewards to support ethical conduct is consistent with followers’ perceptions of distributive justice. Trust in organization is critical for generating distributive fairness because it can reinforce the perceptions of equity for employees (Tan and Tan 2000). When people develop trust in organization based on ethical leadership behavior, they will display positive attitudes and perceptionstowardtheorganization(DirksandFerrin2001). As long as employees trust their employing organization, they are likely to have a strong feeling that it would serve their best interests. Consequently, they tend to believe that the organization will balance out the resources or rewards based on their contributions over time (Konovsky and Pugh 1994). Previous research has provided evidence that trust signiﬁcantly shaped distributive justice perception of employees (Mansour-Cole and Scott 1998; Tyler 1989, 1994). Consistent with these arguments and empirical ﬁndings, we put forward the following hypothesis:

Hypothesis 3 Trust in organization mediates the positive relationship between ethical leadership behavior and distributive justice.

Method

Sample and Procedures

We examined our hypotheses using a set of two-phase survey data collected from employees working in one main

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branch of a Chinese-based bank in Macau. A total of 280 employees participated in the survey. In May 2010 (Time1), we distributed the ﬁrst questionnaire to the participants for rating their perceptions of immediate supervisors’ ethical leadership behavior, and their own procedural justice and distributive justice. Each questionnaire was attached with a cover letter, which explains the purpose and voluntary nature of our survey. Anonymity and conﬁdentiality have been assured to the participants. Of the 280 questionnaires distributed, 186 completed questionnaires were obtained, yielding a response rate of 66 percent. Three months later (Time-2), we distributed the second questionnaire to these 186 respondents who have completed the ﬁrst questionnaire and asked them to assess their trust in organization, procedural justice, and distributive justice. A unique ID was assigned to each questionnaire to match the responses of two phases. A total of 182 were ﬁnally returned. After removing 6 cases which carried a lot of missing data, the effective sample size for data analysis was 176. Among the respondents, 50 percent were male, and 29 percentagedbetween33and37.Theiraverage tenurewas 5.83 years (SD = 3.84 years). Besides, 51 percent of them had a bachelor degree or above. These respondents worked in various departments of this branch, including personal banking, electronic banking, risk management, clearing, treasury, executive ofﬁce, general affair, and operations.

Measures

We adopted all the measurement items from established scales with sufﬁcient validity and reliability. We also conducted a back-translation process such that the measurement scales were translated into Chinese and then translated back into English (Brislin 1970). Except for the demographic variables, all study variables were measured on a six-point Likert-type scale with anchors ranging from 1 (‘‘strongly disagree’’) to 6 (‘‘strongly agree’’).

Ethical Leadership Behavior

We used the 10-item scale developed by Brown et al. (2005) to assess employees’ perceptions of ethical leadership behavior. This scale has also been adopted by previous major studies on ethical leadership conducted in China (e.g., Liao et al. 2014; Liu et al. 2013b; Loi et al. 2012; Newman et al. 2014; Wu et al. 2013; Yang and Liu 2014). Respondents were asked to rate the extent to which they agree with the statements describing their immediate supervisor’s behavior. Sample items are ‘‘Disciplines employees who violate ethical standards’’, and ‘‘Conducts his/her personal life in an ethical manner’’. Cronbach’s alpha for this scale was 0.85.

Trust in Organization

We measured employees’ trust in organization with the 7-item scale used by Robinson (1996). A sample item is ‘‘In general, I believe my employer’s motives and intentions are good’’. Cronbach’s alpha for this scale recorded at 0.71.

Procedural Justice

We used the 7-item measure developed by Moorman (1991) to assess employee procedural justice at both Time1 and Time-2. A sample item reads ‘‘In my organization, procedures are designed to collect accurate information necessary for making performance appraisal’’. Cronbach’s alpha for this scale was 0.84 at Time-1 and 0.72 at Time-2, respectively.

Distributive Justice

We used the six items developed by Price and Mueller (1986) to measure employee distributive justice at both Time-1 and Time-2. One sample item is ‘‘I am fairly rewarded for the amount of effort I put forth’’. Cronbach’s alpha for this scale was 0.78 at Time-1 and 0.70 at Time-2, respectively.

Analytical Strategy

Structural equation modeling (SEM) via LISREL 8.70 was employed to test the hypotheses. All model tests were based on the covariance matrix and used maximum likelihood estimation. We ﬁrst estimated the ﬁt of the measurement model using conﬁrmatory factor analysis (CFA) and then evaluated the ﬁt of the structural models. Overall model ﬁt was examined by various ﬁt indices, including root mean square error of approximation (RMSEA), incremental ﬁt index (IFI), Tucker-Lewis index (TLI), and comparative ﬁt index (CFI). The requirements of a reasonable model ﬁt are metifRMSEAisbelow0.08(BrowneandCudeck1993)and IFI, TLI, and CFI are above 0.90 (Bentler and Bonett 1980; Byrne 1998; Tucker and Lewis 1973). To examine the mediating effects as hypothesized, we simultaneously tested the signiﬁcance of both the path from the independent variable (i.e., ethical leadership behavior) to the mediator (i.e., trust in organization), and the paths from the mediator to the two outcomes (i.e., procedural and distributive justice) (James et al. 2006). Speciﬁcally, we estimated two nested structural models: a fully mediated model and a partially mediated model derived from the fully mediated model by adding two additional direct effect paths from the independent variable to the two outcome variables. In order to partial out the effect of Time-1

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procedural justice on Time-2 procedural justice and the effect of Time-1 distributive justice on Time-2 distributive justice, both procedural and distributive justice measured at Time-1 were controlled in the two models. We further adopted bootstrapping (Preacher and Hayes 2008) to examine the statistical signiﬁcance of the indirect effect of ethical leadership behavior on these two forms of justice via trust in organization.

Results

Descriptive Statistics

Table 1 provides the means, standard deviations, and correlations among all the variables at Time-1 and Time-2. As expected, ethical leadership behavior was positively correlated with employees’ trust in organization (r = 0.33, p\0.01), procedural justice (r = 0.26, p\0.01), and distributive justice (r = 0.30, p\0.01). In addition, trust in organization also had signiﬁcant positive correlations with both procedural justice (r = 0.35, p\0.01) and distributive justice (r = 0.33, p\0.01).

Measurement Model Analysis

The results of the CFAs on the measurement model are presented in Table 2. Our baseline measurement model is a four-factor model, including ethical leadership behavior, trust in organization, procedural justice (Time-2), and distributive justice (Time-2). We compared this baseline model with several alternative models. As shown, among all the measurement models, the four-factor baseline model achieved a better model ﬁt in terms of all the ﬁt indices, with v2(399) = 610.58; RMSEA = 0.052; CFI = 0.92; IFI = 0.92; and TLI = 0.91. The signiﬁcant chi-square change between each alternative model and the baseline model indicated that the respondents in our study could distinguish the four constructs well. The standardized factor loadings are all acceptable and signiﬁcant on the respective constructs (Hou et al. 2004). In addition, we also conducted Anderson and Gerbing’s (1988) paired construct test (Table 3) and followed Fornell and Larcker’s (1981) approach to compare the average variance extracted of each construct with the corresponding squared inter-construct correlation estimates. Results of these analyses lend further support for our constructs’ discriminant validity.

Structural Model Analysis

The results of the fully mediated model (as shown in Fig. 1) show a good model ﬁt: v2 (852) = 1206.87; RMSEA = 0.042; CFI = 0.93; IFI = 0.93; and TLI = 0.92. Although

theﬁtindicesforthepartiallymediatedmodelalsoachieveda similar model ﬁt (v2 (850) = 1,204.81; RMSEA = 0.042; CFI = 0.93; IFI = 0.93; and TLI = 0.93), adding the two direct paths from ethical leadership behavior to the two types of justice did not signiﬁcantly reduce the chi-square value (Dv2 (2) = 2.06, ns). Therefore, the fully mediated model was accepted based on the principle of parsimony.

Hypotheses Testing

As depicted in Fig. 1, all the path coefﬁcients estimated in the fully mediated model were signiﬁcant and in the predicted direction. In support of hypothesis 1, ethical leadership behavior was positively related to employees’ trust in organization (c = 0.43, p\0.01). In addition, employees’ trust in organization had signiﬁcant and positive relationships with both procedural justice (b = 0.35, p\0.01) and distributive justice (b = 0.40, p\0.01), even when Time-1 justice levels had been controlled. We further employed bootstrapping(Hayes2009)totestthestatisticalsigniﬁcance of these indirect effects. Based on our sample, we conducted thebootstrappingprocedure(PreacherandHayes2008)with 20,000 random samples using a 95 % conﬁdence level. The point estimate for the indirect effect of ethical leadership behavior on procedural justice via trust in organization was 0.06 (95 % conﬁdence interval: 0.02, 0.12), whereas the point estimate for the indirect effect of ethical leadership behavior on distributive justice through trust in organization was 0.08 (95 % conﬁdence interval: 0.03, 0.15). Since the 95 % conﬁdence intervals of both indirect effects did not contain zero (Preacher and Hayes 2008), we conclude that trust in organization acts as a mediator between ethical leadership behavior and the two justice perceptions. Considering the above results together, hypotheses 2 and 3 have gained support.

Discussion

The present study investigates how ethical leadership behavior inﬂuences employees’ justice perceptions toward their organization as well as evaluates the role played by trust in organization. Speciﬁcally, our results indicate that trust in organization acts as a mediator in the relationships between perceived ethical leadership behavior and the two types of organization-focused justice (i.e., procedural and distributive justice). The ﬁndings provide several important theoretical and practical implications.

Theoretical Implications

First, this study sheds new light on the investigation of ethical leadership and organizational justice. While most

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previousstudies(e.g.,Brownetal.2005;Neubertetal.2009) linkedethicalleadershiptotheinteractionalformsofjustice, we go one step forward to examine why and how ethical leadership could affect employees’ organization-focused justice perception. The results of our study are important

because organization-focused justice, as compared to supervisor-focused interactional justice, can better predict organization-oriented outcomes (Akremi et al. 2010; OlkkonenandLipponen2006).Ourstudyalsoempiricallytests the proposition suggested by some researchers that ethical leaders are the major sources of organizational fair procedures and outcomes (Cropanzano and Rupp 2002). Speciﬁcally, we found that perceived ethical leadership behavior signiﬁcantly affect employees’ procedural justice through generating their trust in organization. Neubert et al. (2009) contended that listening to subordinates and executing fair decision making are the two important behaviors of ethical leaders in fostering and maintaining procedural justice. Our ﬁndings show that subordinates working under ethical leadership develop more trust in their organization, and in turn they evaluate the organizational procedures and processes in a more favorable manner. Second, it has been pointed out that people in organization often pay close attention to the fairness of resource allocation (Trevin ˜o 1992). Our results reveal that employees under ethical leadership display more trust in

Table 1 Means, standard deviations, and correlations among the variables

Variables Mean SD 1 2 3 4 5 6

Time-1 1 Ethical leadership behavior 3.45 0.78 (0.85) 2 Procedural justice 3.88 0.77 0.14 (0.84) 3 Distributive justice 3.83 0.77 0.33** 0.32** (0.78) Time-2 4 Trust in organization 3.16 0.66 0.33** 0.24** 0.17* (0.71) 5 Procedural justice 3.34 0.66 0.26** 0.48** 0.28** 0.35** (0.72) 6 Distributive justice 3.35 0.72 0.30** 0.09 0.32** 0.33** 0.23** (0.70)

Notes: Correlations based on two-tailed tests Values shown in parentheses are reliability coefﬁcients n = 176 ** p\0.01; * p\0.05

Table 2 Results of conﬁrmatory factor analysis of the measurement models Models v2 (df) Dv2 (Ddf) RMSEA CFI IFI TLI

1-Factor modela 918.08 (405)** 307.50 (6)** 0.100 0.81 0.81 0.79 2-Factor modelb 721.57 (404)** 110.99 (5)** 0.073 0.88 0.88 0.87 3-Factor model 1c 644.24 (402)** 33.66 (3)** 0.061 0.91 0.91 0.90 3-Factor model 2d 663.63 (402)** 53.05 (3)** 0.068 0.90 0.90 0.89 4-Factor model (baseline) 610.58 (399)** – 0.052 0.92 0.92 0.91

Notes: ** p\0.01; Chi-square difference tests were conducted between the baseline model and each alternative model a In the 1-factor model, all items were loaded on one factor b In the 2-factor model, items of trust in organization, procedural justice, and distributive justice were loaded on one factor c In the 3-factor Model 1, items of trust in organization and procedural justice were loaded on one factor d In the 3-factor Model 2, items of procedural justice and distributive justice were loaded on one factor

Table 3 Results of paired construct test

v2(df) (unconstrained model)

v2(df) (constrained model)

Dv2(Ddf)

ELtrust

235.54 (118) 423.52 (119) 187.98 (1)**

EL-PJ 176.80 (118) 380.35 (119) 203.55 (1)** EL-DJ 188.79 (103) 358.29 (104) 169.50 (1)** PJ-DJ 78.11 (64) 226.83 (65) 148.72 (1)** TrustPJ 186.34 (76) 377.37(77) 191.03 (1)** TrustDJ 122.05 (64) 347.00(65) 224.95 (1)**

Notes: EL = ethical leadership, Trust = trust in organization, PJ = procedural justice, and DJ = distributive justice ** p\0.01

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their organization and feel more conﬁdent that organization’s rewards are allocated equitably. This ﬁnding is aligned with Lewicki et al.’s (2005) argument that, when employees decide to trust the organization based on the standard of what is ‘‘right’’ and ‘‘appropriate’’ for them, they would perceive a higher level of distributive justice. Moreover, Yukl and Van Fleet (1992) suggested that leadership behavior of using contingent rewards would promote favorable perception of distributive justice. Our study provides empirical evidence that ethical leadership behavior enhances distributive justice perception through engendering employees’ trust in organization. Third, our study highlights the importance of the trusting relationship between employees and their employing organization. Trust in organization acts as a vital mechanism through which ethical leadership behavior transmits into employees’ organization-focused justice. Our results indicate that ethical leadership behavior is a signiﬁcant catalyst of employees’ trust in organization, which empirically echoes Whitener et al.’s (1998) contention that leaders’ behavior provides the foundation for trust. When followers perceive their leaders as ethical, they are likely to develop more trust in their organization, and hence evaluate the organization’s procedures and outcomes more favorably. Finally, the present study also responds to the call of Coyle-Shapiro and Shore (2007) for addressing the alignment of interests between managers and the organization. Our ﬁndings show that ethical leader is the type of leader who could help employees to make sense of their relationships with the organization. Employees will attribute the good treatment of ethical leaders as originating from the organization, thereby reacting positively (i.e., in terms of trust and justice perception) toward it. In this regard, our results are consistent with some emerging evidence that

ethical leadership could nurture employees’ positive attitudes toward the organization, such as organizational commitment and organizational identiﬁcation (e.g., Demirtas and Akdogan 2014; Yang and Liu 2014).

Implications for Practice

The ﬁndings of our study obviously reinforce the practical value in promoting ethical leadership behavior across the organizations. Employers may ﬁnd it fruitful to select and cultivate more ethical leaders, who are able to initiate employees’ trust and subsequently enhance fair perceptions toward the organization. To do so, organizations should ﬁrmly hold their ethics codes and hire leaders with high moral intensity (Brown and Trevin ˜o 2006). In addition, employers should also train the managers about the importance of maintaining ethical standards and behaviors. Leaders are encouraged to proactively provide ethical guidance and demonstrate genuine concern for their subordinates. For example, to promote procedural justice perception, the content of leadership training may emphasize how to encourage or listen to employees’ opinions and engage them in organizational decision-making processes. The training content should also underscore the proactive use of reward systems and disciplinary measures to enhance distributive justice perception. Moreover, our results also suggest leaders’ ethical (and unethical) conduct observed by employees will trigger their thinking of whether or not to trust the organization. To generate employees’ trust in organization, not only should leaders be ‘‘moral managers’’ (e.g., infuse the organization with ethical principles and hold employees account for that), but they should also be ‘‘moral persons’’ (e.g., be honest and caring) who cope with ethical dilemmas with

Fig. 1 LISREL results for the fully mediated model.Notes: Standardized path estimates were reported; **p\0.01

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normatively appropriate behaviors. With a reputation of ethical leadership, managers can establish trusting relationships with employees and foster their favorable justice perceptions toward the organization.

Limitations and Avenues for Future Research

Several limitations of our study should be acknowledged. First,althoughweusedatwo-wavestudydesign,wehavenot measured trust in organization at Time-1 and hence we are not able to control for its possible effect on trust in organization at Time-2. Besides, we did not assess ethical leadershipbehavioratTime-2,andthusreversecausalitycannotbe completely ruled out. Future research may re-afﬁrm our ﬁndings by controlling the effect of trust in organization at Time-1 and using cross-lagged modeling design. Second, even though we attempted to separately measure the independent and dependent variables, the threat of common method bias could not be totally eliminated, because trust in organization and the two justice perceptions were measured at the same time. To deal with this issue, we used positive affectivity as a marker variable to assess whether or not the coefﬁcients obtained from the hypothesized model have been biased (Podsakoff et al. 2003). The results show that the overall pattern of our hypothesized relationships was not much affected and the new model with the marker variable achieved a similar model ﬁt with our hypothesized model. Nevertheless, it is desirable to collect data of the mediator and the dependent variables at different time points. Additionally, information about ethical leadership behavior should be gathered from ethical leaders’ supervisors or peers, rather than from the subordinates, so as to avoid self-report bias. Third, we have not obtained information from the company regarding employees’ reporting channel and organizational hierarchy, as well as whether or not the respondents have changed their supervisors at Time-2. Future studies should investigate the possible multi-level relationships among study variables. In particular, with more information collected at different levels, researchers could explore whether executive ethical leadership and supervisory ethical leadership inﬂuence organizationfocused outcomes at a varying degree. Fourth, we collected the data only in one industry and in one Asian city, which may limit the generalizability of our ﬁndings to other settings. Future research could explore whether the relationships identiﬁed in the present study can alsobefoundinotherindustrialandculturalcontexts.Resick et al. (2011) identiﬁed six dominant ethical leadership themes (i.e., accountability, consideration and respect for others, fairness, character, collective orientation and openness)acrosssixsocieties,andtheirstudysuggestedthatsome of these themes may be more dominant in one particular

culturethantheother.Inviewofthis,itwouldbemeaningful for future research to validate our ﬁndings across countries with different foci on ethical leadership behavior. Furthermore, the role played by cultural variables in affecting how employees react to their leaders’ ethical behavior is worth further investigation. For example, Liu et al. (2013a) found that Chinese employees holding high traditional values reacted more favorably to leaders’ ethical behaviors in terms of job performance and organizational citizenship behavior. It follows that traditional Chinese employees may be more sensitive to leaders’ ethical conduct, and have more positive evaluation of organizationfocused justice.

Conclusion

Ethical leaders are unique moral agents representing the interests of the organization. By addressing the question of why and how ethical leadership affects employees’ perceptions of procedural and distributive justice, this study has advanced our understanding of the crucial role of ethical leadership in fostering employees’ organizationfocused justice through generating their trust in organization. It also points to the importance of nurturing ethical leaders to create a trusting and fair workplace. Given our new ﬁndings, we hope to inspire more research to evaluate the impacts of ethical leadership on other organizationreferenced outcomes, as well as to explore the possible mechanisms underlying the relationships.

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