Ethical leadership M6
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ETHICALMANAGERS.pdf
Ethical managers in ethical organisations? The
leadership-culture connection among Finnish managers
Mari Huhtala and Maiju Kangas Department of Psychology, University of Jyväskylä, Jyväskylä, Finland
Anna-Maija Lämsä School of Business and Economics, University of Jyväskylä,
Jyväskylä, Finland, and
Taru Feldt Department of Psychology, University of Jyväskylä, Jyväskylä, Finland
Abstract
Purpose – The main aim of the present study is to discover whether the managers’ self-evaluations of their ethical leadership style are associated with their assessments of the ethical organisational culture (measured with an eight-dimensional Corporate Ethical Virtues-model). It aims to hypothesise that the more ethical the managers evaluate their own leadership style to be, the higher evaluations they give on the ethical culture of their organisation. The underlying assumption is that ethical managers can enhance the ethical culture by behaving in accordance with their own values. Design/methodology/approach – This quantitative research was based on a questionnaire study with 902 respondents throughout Finland. A linear regression analysis was conducted to examine how ethical leadership was related to ethical organisational culture. Findings – Managers who appraised their own leadership style as ethical also evaluated the ethical culture of their organisations more positively. The result implies that an ethically behaving leader can develop the culture of his/her organisation towards more ethical practices. The results also showed that differences in evaluating both ethical leadership and culture emerged concerning background variables. Research limitations/implications – The data collected were based only on self-assessments from one data source, and therefore future studies, e.g. including employee ratings, are needed. Practical implications – Promoting ethical virtues in organisations can lead to a virtuous circle, which supports both ethical culture and ethical leadership. Originality/value – This empirical study contributes to the research on ethical leadership by examining it in relation to ethical organisational culture.
Keywords Ethical leadership style, Ethical organizational culture, Ethical virtues, Professional ethics, Leadership, Organizational culture, Finland
Paper type Research paper
1. Introduction Leadership should be a key source of ethical guidance for an organisation (Kanungo and Mendonca, 1996; Ciulla, 1998; Mendonca, 2001; Brown et al., 2005). However, the rapid changes of the working life, technological breakthroughs, and the pressures in business organisations to make profit can have significant effects on managers’ possibilities to implement ethicality in their leadership behaviour (Toffler, 1986; Jackall, 1988; Lämsä, 1999; Lämsä and Takala, 2000). Yet, to ensure long-term success in addition to solving traditional economic problems, managers need the ability to consider ethical issues in their behaviour.
The current issue and full text archive of this journal is available at www.emeraldinsight.com/0143-7739.htm
Received 20 June 2011 Revised 8 September 2011 Accepted 21 September 2011
Leadership & Organization Development Journal Vol. 34 No. 3, 2013 pp. 250-270 r Emerald Group Publishing Limited 0143-7739 DOI 10.1108/01437731311326684
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The goodness of leadership has been a topic of discussion for centuries, particularly among philosophers and political theorists. More recently and partly in response to increasing public awareness of the ethicality of leadership in business contexts, the issue of ethics has received growing interest among leadership and management researchers (e.g. Trevinõ et al., 2000; Aronson, 2001; Ciulla, 2005; Ghoshal, 2005; Eberlin and Tatum, 2008; Trevinõ et al., 2008; Howard, 2010; Kujala et al., 2011; Ciulla and Forsyth, 2011). However, as Toor and Ofori (2009) point out, ethical leadership is mostly discussed in theoretical and conceptual terms, and there is a lack of studies providing empirical evidence about ethical leadership. What is more, studies are often carried out using university students as respondents (Toor and Ofori, 2009). Some studies have also measured ethical leadership with subordinates’ assessments (Brown et al., 2005; Walumbwa and Schaubroeck, 2009), whereas few studies have looked at managers’ own perceptions of their ethicality.
Managers’ personal views of their leadership behaviour are important, because there is a large consensus that personal characteristics (e.g. dispositional traits, self-concept) have a significant role in directing individual’s behaviour (e.g. McCrae and Costa, 1996, p. 58; McAdams and Adler, 2006), also in the work context (Furnham, 1997, p. 143). In the present study we assume that an ethical person in a leadership position behaves ethically and thus promotes ethical organisational culture. This association was empirically tested by using a large sample of Finnish managers. In general, leadership can be seen as a culture-influencing activity, “the management of meaning”, as brought forth by Smircich and Morgan (1982). Furthermore, Kets de Vries (1994) argues that leaders can have a far-reaching effect on organisational culture through their personal characteristics and behaviour.
Ethical leadership Kanungo and Mendonca (1996) point out that ethicality is an essential dimension of leadership, because leadership is a process in which leaders influence their followers to achieve organisational goals (Yukl, 2010). The process is based on the exercise of power and on value decisions, and, therefore, an ethical dimension is an implicit or explicit part of all leadership theories and practices (Ciulla, 1998). Managers’ views and values are also argued to affect the whole organisation and its culture (Schein, 1985; Giberson et al., 2009). For example, Paine (1997) brings forth that since it is managers who make crucial decisions in organisations, act as role models and have a significant impact on the organisational culture, the greatest responsibility for these expectations rests with them. Perhaps a crucial factor in building and maintaining ethics in organisations is the example set by their leadership.
On the other hand, the importance of ethical leadership is emphasised in cases where the ethicality fails, as shown in public corporate scandals such as Enron (Sims and Brinkmann, 2003) and Whole Foods (Manz et al., 2008). So the significance of ethical leadership is twofold: first, ethical leaders are effective, fair and good leaders, who can improve the organisational success in an enduring manner. Second, unethical leaders can harm the whole organisation by striving for their personal advantage at the expense of their organisation and its employees (Toor and Ofori, 2009). For these reasons leadership should be studied from an ethical point of view – in the light of good and bad, right and wrong. According to Ciulla (2001), studying ethics and leadership is important, because in that way we can improve the fundamental understanding of leadership.
What makes ethicality in managerial work especially significant is that employees are susceptible to imitating the example given by their seniors (Leiter and Harvie, 1997;
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Brown and Trevinõ, 2006). Employees watch cues from the behaviours of managers – both consciously and unconsciously – about what is important and what kinds of behaviours are acceptable. An unethically behaving manager therefore sets an example, which communicates to the employees that unethical actions are allowed in the organisation. This, in turn, exposes the organisation to breaches of ethicality. An ethically behaving manager for her/his part sets an opposite example which enhances the ethicality of an organisation.
There are several definitions of ethical leadership (e.g. Burns, 1978; House and Howell, 1992; Bass and Steidlmeier, 1999; Aronson, 2001). As described in the previous section, we see role modelling as an important part of ethical leadership. Therefore, we follow the definition of ethical leadership by Brown et al. (2005, p. 120), which emphasises social learning: “Ethical leadership is the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making”. The concept “normatively appropriate” is deliberately vague, because what is understood as appropriate behaviour is somewhat context dependent (Brown et al., 2005). For example, in some cultures giving public critique about organisational members’ behaviour is acceptable, whereas in other cultures such behaviour is seen inappropriate.
The definition by Brown et al. (2005) is based on Bandura’s (1986) social learning theory, according to which nearly anything that can be learned through personal experience, can also be learned by observing the behaviours of others, and the consequences of these behaviours. Thus, leaders are influencing their followers by acting as role models of ethical conduct and being the object of identification and emulation to followers. Punishments and rewards can facilitate learning in an anticipatory manner and signal about the benefits and costs of selected (un)ethical behaviours. This social learning process has an important role regarding the ethical behaviours in an organisation, and therefore it can be also thought to have an impact on the ethical organisational culture.
Employees’ attitudes towards ethicality are susceptible to environmental effects (Trevinõ and Weaver, 2003). Therefore leadership behaviour can have an effect on the organisational culture and organisation’s members’ behaviour. Ethical leadership has been, accordingly, found to be positively associated with employees’ ethical decision making, prosocial behaviour, satisfaction, motivation and commitment to the organisation, and negatively associated with harmful behaviour (Podsakoff et al., 1990; Vitell and Davis, 1990; Brown and Trevinõ, 2006). Ethical leadership also predicts employee trust and satisfaction with the leader (Brown et al., 2005; McMurray et al., 2010; Sendjaya and Pekerti, 2010) and increases employee commitment (Treviño et al., 1998) and their willingness to report problems to management (Brown et al., 2005). Trevinõ and Weaver (2003) discovered that when employees were treated fairly, they were more committed to their organisation and unethical conduct in the organisation decreased. In addition, organisational justice, including fair treatment of employees, is related to a 13-48 per cent lower rate of sickness absences (Elovainio et al., 2002) and to higher work satisfaction (Eberlin and Tatum, 2008).
The literature covering different factors that influence (ethical) leadership is in its full extent beyond the scope of this study. Some essential findings are discussed next. When ethical leadership has been studied in relation to background variables, several studies have not found differences between men and women. However, those studies
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that have found gender differences, female managers have proven to be more ethical in decision-making processes (for reviews, see Ford and Richardson, 1994; O’Fallon and Butterfield, 2005). Results have also shown that cognitive moral development is positively correlated with age, education, and work experience (Treviño, 1992). Study results concerning the effects of moral development on ethical decision making are, however, mixed (O’Fallon and Butterfield, 2005). According to some studies, the line of business and size of the organisation are associated with ethical decision making, but the results are somewhat contradictory (reviews; Ford and Richardson, 1994; O’Fallon and Butterfield, 2005).
Some differences in ethical decision making have also been found between different managerial levels. Lower level managers are focusing more on internal relations and employee interactions, whereas higher level managers can affect organisational finance and implement ethical behaviours into the organisation (Brown and Trevinõ, 2006). In upper management the focus is also more on external stakeholders, contacts and strategic management. Middle level managers can face additional pressures in ethical decision making, as they are acting in between executives and employees, arbitrating their possibly conflicting expectations (Marshall and Cooper, 1979; Jackall, 1988). Some studies have shown that practitioners in later career stages display higher ethical judgement (Weeks et al., 1999), and that the ability to identify unethical behaviour increases with work experience (Larkin, 2000). It has also been found that higher level managers are less likely to detect ethical problems in their organisation (Chonko and Hunt, 1985; Trevinõ et al., 2008), and that lower level managers are more pessimistic about the ethicality of their organisation (Posner and Schmidt, 1987). Therefore, our first aim is to investigate managers’ self-evaluations of their ethical leadership. In sum, the following hypotheses were formulated:
H1. Managers self-evaluations of their ethical leadership vary according to different background variables. Specifically:
H1a. Managers from higher management levels give higher ratings of their own ethical leadership.
However, no specific hypotheses concerning the connection with other background variables (gender, age, size of the organisation, and line of business) could be defined, as there is a lack of consistent empirical evidence from previous studies.
Ethical culture of an organisation In general, ethical culture encompasses the experiences, presumptions, and expectations of how the organisation is preventing unethical behaviour and promoting ethicality (Trevinõ and Weaver, 2003). It is therefore a subset of organisational culture, with formal (e.g. codes of ethics, reward systems) and informal (e.g. peer behaviour, ethical norms) systems that can promote either ethical or unethical behaviour (Treviño, 1990). The research on the concept has progressed from defining ethical culture as a distinct phenomenon from ethical climate (Treviño et al., 1998) to operationalising it as a one-dimensional construct (Treviño et al., 1998), and more recently, specifying its different subdimensions (Kaptein, 2008). As yet, no other empirical study has offered a multidimensional model and a scale for measuring the ethical culture of organisations. Therefore, the model developed by Kaptein (2008; described more specifically in the following sections) is applied in the present study.
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Kaptein (2008) approaches the ethical organisational culture through ethical virtues. Virtue ethics is based on the ideas of Platon and Aristotle, and both Solomon (1999, 2000, 2004) and Kaptein (1998, 1999) have applied the virtue theory in an organisational context. According to the theory, both individuals and organisations should have certain features, virtues, which enable morally right behaviour. For an organisation to become ethical, these features need to be nurtured in organisational practices. Virtue ethics provides a normative theory for organisational culture by defining what kind of behaviour is morally right and worth pursuing. In this study, we draw specifically upon the corporate ethical virtues (CEV) model, which is a model for measuring the ethical culture of organisations (Kaptein, 1998, 1999, 2008; see also Huhtala et al., 2011). The scale has shown to be a reliable measure for ethical culture among different samples (Kaptein, 2008; Huhtala et al., 2011).
The CEV model by Kaptein (2008) distinguishes eight normative virtues that can promote the ethical culture of an organisation. First, clarity refers to the concrete and understandable expectations regarding the conduct of employees. Second, congruency of supervisors and third, congruency of senior management mean the extent to which supervisors and senior management show a good example in terms of ethics and behave in accordance with ethical expectations. The virtue of congruency is especially important, as employees often emulate managers’ behaviour and search for clues to what are appropriate actions in the organisation (Brown et al., 2005; Schminke et al., 2005), and the example set by supervisors is held meaningful (Schein, 1985; Ciulla, 1998; Trevinõ et al., 2000). Fourth, feasibility refers to the conditions created by the organisation to enable employees to comply with normative expectations, such as adequate amount of time, money, knowledge, and possibilities to carry out their duties. Fifth, supportability is the extent to which the organisation supports ethical conduct among the management and employees. Sixth, transparency means the degree to which managerial and employee conduct and its consequences are perceptible. In highly transparent organisations managers and employees give feedback to each other and own behaviours as well as the behaviours of colleagues, supervisors and subordinates are corrected towards a more ethical direction. Seventh, discussability refers to the opportunities to discuss ethical issues, such as ethical dilemmas or alleged unethical behaviour, in the workplace. A good conversational culture helps employees to learn from their mistakes, whereas a closed culture with a low level of discussability can lead to moral stress and reinforce unethical culture (Bird and Waters, 1989; Kaptein, 2008). Eighth, sanctionability is the final virtue, meaning the extent of the enforcement of ethical behaviour through punishment for behaving unethically and rewards for behaving ethically. Kaptein (1998) discovered that approving or encouraging unethical actions led employees to think that the management accepts or even values unethical behaviour. In sum, according to the CEV approach, the stronger the presence of these eight virtues, the more ethical the organisational culture is (Kaptein, 2010).
There is some empirical evidence on the differences in evaluating ethical culture based on background variables. Huhtala et al. (2011) found that upper management reported consistently better evaluations of their organisation’s ethical culture than middle management and that women gave lower evaluations on ethical culture than men. On the other hand, in his own studies, Kaptein (2008, 2009, 2010) has either not included results concerning individual differences in CEV evaluations, or the correlations between management level, gender, age, and ethical culture have been close to zero. Hence, there is a need for more empirical results on the differences in
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evaluating the ethical culture. Therefore, the present study investigates managers’ self- evaluations of their organisations’ ethical culture. Based on the previous findings, the next hypotheses read as follows:
H2. Managers self-evaluations of the ethical culture of their organisation vary according to different background variables. Specifically:
H2a. Managers from higher management levels give higher ratings of the ethical culture.
H2b. Male managers give higher evaluations on ethical culture than female managers.
Research on ethical leadership and ethical organisational culture In spite of the obvious connection between leadership and organisational culture, the leadership literature on the whole has not addressed organisational culture more than marginally (Block, 2003; Alvesson, 2011, p. 153). According to Block (2003), there exists a large body of research that has studied leadership and organisational culture separately, but the relationship between these phenomena often remains more as an implicit theory than an empirical finding. Because of the lack of empirical studies, there has not been any foundation to give guidelines or practical recommendations to managers how to improve their organisations ethical culture. Therefore, the third and major aim of this study is to contribute to the research on the leadership-culture connection by exploring the relationship between ethical leadership and the ethical culture of an organisation. The research on the ethical organisational culture is growing (e.g. Sims and Brinkmann, 2003; Kaptein, 2008), but there is still need for more theoretical knowledge and empirical findings, which enhance the understanding of this phenomenon and can be applied in organisational practices to make them sustainable and appropriate.
There is evidence suggesting that leaders’ ethical development is connected to organisational culture and socialisation processes (Brown and Trevinõ, 2006). A strong ethical culture promotes structures and decision-making processes, which can support ethical choices in difficult leadership situations. A recent study (Mayer et al., 2010) showed that ethical leadership was positively related to ethical climate, and that ethical climate mediated the relationship between ethical leadership and employee misconduct. Another study (Block, 2003) demonstrated that if supervisors were rated high in transformational leadership by their subordinates, the employees were also more likely to view their organisation’s culture in positive terms.
Trevinõ and Weaver (2003) discovered that from different organisational factors ethical rules, punishing for unethical behaviour and ethical organisational culture were positively related with ethical decision making and also with ethical leadership. Although some studies show that unethical working environments can lower the level of moral reasoning (Treviño, 1992), managers with high moral reasoning level are less susceptible to the effects of culture (Trevinõ, 1986). Organisations often choose to employ people with values that are in line with the organisational values. Also employees themselves choose to work in organisations that have matching values (Brown and Trevinõ, 2006). Corporate ethical values have been shown to have a positive impact on person-organisation fit (Andrews et al., 2011), suggesting that “individuals can feel more compatible with organisations that share their values when these values are ethical” (p. 13).
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Managers, especially from higher managerial levels, have multiple ways to affect their organisations’ ethical programs, climate, and even culture (Davis, 1984; Schein, 1985; Weaver et al., 1999; Trevinõ and Weaver, 2003). According to Schein (1985) one of the most important managerial tasks is to create and lead the organisational culture – even though it is not entirely clear, whether or not it is possible to “manage” a culture. Especially ethical values, pronounced or tacit, of the company owners and upper management are in an important position in regard to the formation of organisational culture (Takala, 1993). This is particularly emphasised in small companies. It has been considered that the upper management sets down the ethical policies of the organisation (Posner and Schmidt, 1992).
Managers can develop their organisations’ ethical culture by creating reward systems, ethical codes and norms (Weaver et al., 1999; Trevinõ and Weaver, 2003). Whereas the upper management can decide about the formal company policies, the importance of human resources management is highlighted when it comes to creating discussional culture and organisational trust (Puč
. etait
. e et al., 2010), which is an
important part of organisational support. A strong leader with a high level of cognitive moral development and who can influence employees is, therefore, able to act towards promoting an ethical organisational culture (Trevinõ and Weaver, 2003). The influence can also be unethical: an owner-entrepreneur’s personal values can extend inside the organisation so that the unethical values have an impact on employee and customer values (Sims and Brinkmann, 2003; Higgins and Currie, 2004).
As a conclusion, the main aim of the present study was to test, whether the managers’ self-evaluations of their ethical leadership behaviour are associated with their assessments of the ethical organisational culture, as stated:
H3. The more ethical the managers evaluate their own leadership behaviour to be, the higher evaluations they give on the ethical culture of their organisation.
The underlying assumption is that ethical managers can enhance the ethical culture by behaving in accordance with their own ethical values. For example, acting as a good role model to the employees, establishing ethical codes and setting norms on what is appropriate behaviour in the organisation.
2. Method Participants and procedure The participants consisted of managers who had completed either technical or business education degree in university. They responded to a postal questionnaire study in the autumn of 2009. The sample (n¼3,000) was randomly selected from among the members of two Finnish national labour unions (The Finnish Association of Business School Graduates and The Finnish Association of Graduate Engineers). In Finland, the majority of professional managers as well as employees (69 per cent) belong to a labour union organised on the basis of industry (Ahtiainen, 2006) and, therefore, this sample is relatively representative of the target group. The surveys, including a postage-paid envelope and covering letter, were sent to home addresses. A reminder letter was sent to the recipients who did not respond to the questionnaire after the first contact. Those recipients who did not belong to the target group (e.g. unemployed, not in managerial position, retirees) were asked to send the blank form back with an annotation. These responses (n¼369) were removed from the original sample. Altogether 902 managers returned completed questionnaires, yielding
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a response rate of 34.3 per cent. The attrition analysis showed that the participants differed only slightly in terms of gender (w(1)
2 ¼6.07, po0.05) and age (t(1,751)¼2.69, po0.01) from the non-respondents (n¼1,739); That is, there were slightly more women among the respondents and they were, on average, one year younger than the non-respondents.
As seen in Table I, over two-thirds of the respondents (n¼629) were men. The average age of the respondents was 46 years, ranging from 25 to 68 years of age (SD¼9.3), 51-60-year-olds representing the largest age group. Management and upper middle management were the most common managerial levels among the respondents. The respondents represented different lines of business, industry (40 per cent) being the most prevalent. The organisations were classified into small, medium-sized, and large, based on the criteria by the European Union. Almost two-thirds of the respondents worked in large organisations.
The management level shared significant associations with gender (w(3) 2 ¼10.2,
po0.05), age (w(12) 2 ¼48.1, po0.001), line of business (w(21)2 ¼73.7, po0.001), and the
size of the organisation (w(6) 2 ¼178.6, po0.001). Men were overrepresented in the upper
management level, and managers from the age groups under 30 and 31-40 were underrepresented in the upper management. Managers from the age group 41-50 were overrepresented in the upper management level. In small organisations the upper management was highly overrepresented.
n %
Gender Male 629 70 Female 273 30 Age group -30 37 4 31-40 222 25 41-50 295 33 51-60 302 33 61- 46 5 Management level Upper management 123 14 Management 302 33 Upper middle management 327 36 Lower middle management 150 17 Line of business Industry 363 40 Service and trade 65 7 Financing and insurance 68 7 Real estate and rentals 105 12 Information processing 131 15 Education 20 2 Public administration 71 8 Others, e.g. health care, public transport 79 9 Size of the organisation Small (o50 employees) 166 19 Medium-sized (50-250 employees) 195 22 Large (4250 employees) 526 59
Table I. Background variables
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Measures Ethical leadership style was evaluated with the ethical leadership scale (ELS; Brown et al., 2005). In the present study we modified the scale to self-evaluation form by rephrasing the ELS items, and used a shortened version, which consisted of six items: I discipline employees who violate ethical standards; I can be trusted; I discuss business ethics or values with employees; I set an example of how to do things the right way in terms of ethics; When making decisions, I ask “what is the right thing to do?”; and I define success not just by results but also the way that they are obtained. Participants rated these items on a Likert scale from 1 (strongly disagree) to 5 (strongly agree). The internal consistency of the scale (Cronbach’s a) was 0.80.
The managers’ evaluations of the ethical organisational culture were measured using the 58-item CEV questionnaire (Kaptein, 2008). The scale was first translated from Dutch to Finnish and later back translated to Dutch by two independent authorised translators. The back translation was revised with minor changes and approved by the original author (see Huhtala et al., 2011). The scale includes eight dimensions: clarity (e.g. “The organisation makes it sufficiently clear to me how I should obtain proper authorisations”); congruency of supervisors (e.g. “My supervisor sets a good example in terms of ethical behaviour”); congruency of senior management (e.g. “The conduct of the Board and (senior) management reflects a shared set of norms and values”); feasibility (e.g. “I have insufficient time at my disposal to carry out my tasks responsibly”); supportability (e.g. “In my immediate working environment, an atmosphere of mutual trust prevails”); transparency (e.g. “If a colleague does something which is not permitted, my manager will find out about it”); discussability (e.g. “In my immediate working environment, there is adequate scope to discuss unethical conduct”); and sanctionability (e.g. “In my immediate working environment, ethical conduct is rewarded”). Participants rated these items on a Likert scale from 1 (strongly disagree) to 6 (strongly agree). The reliabilities, means, and standard deviations of these sum scores are presented in Table II. Except for the reversely scored items of the feasibility dimension, a higher score (from a range of 1-6) refers to a higher level of ethicality in each dimension. In addition, a total score reflecting the CEV was formed by summing up all dimensions as one. The factorial validity of the scale has been found to be reliable both for Dutch employees (Kaptein, 2008) and Finnish managers (Huhtala et al., 2011).
Statistical analyses The data were analysed with SPSS for Windows 15.0 and PASW Statistics 18.0 programmes. Associations between background variables and evaluations of ethical
Items Range Mean SD a
CEV (total score) 58 1-6 4.37 0.71 0.96 Clarity 10 1-6 4.68 0.80 0.93 Congruency of supervisors 6 1-6 4.46 1.10 0.94 Congruency of senior management 4 1-6 4.34 1.10 0.92 Feasibility 6 1-6 4.48 0.93 0.83 Supportability 6 1-6 3.92 0.94 0.91 Transparency 7 1-6 4.03 0.78 0.86 Discussability 10 1-6 4.57 0.87 0.95 Sanctionability 9 1-6 4.25 0.81 0.89
Table II. Means, standard deviations and reliabilities of the CEV dimensions
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leadership and of the ethical organisational culture were analysed with two-way analysis of variance. We used correlations and linear regression analysis to examine how ethical leadership was related to ethical organisational culture.
3. Results Ethical leadership and managers’ background factors As shown in Table III, women evaluated their leadership behaviour to be more ethical than men. As for age groups, 41-50-year-olds differed from 31-40-year-olds and under 30-year-olds, so that managers aged 41-50 years evaluated their leadership behaviours as more ethical than younger managers, whereas managers over 50 years old did not differ from other age groups. The association between management level and the evaluations of ethical leadership was linear, so that the higher the managerial level, the more positive the evaluations. Organisational size had a significant main effect on ethical leadership evaluations, but no significant differences were found in pairwise comparisons. That is, whether managers worked in small, medium-sized, or large organisations had no effect on the evaluations of ethical leadership.
Managers’ evaluations of the ethical culture of their organisation Also the evaluations of ethical culture differed in regard to the background variables (Table IV). Men gave more positive evaluations of the ethical culture than did women, and managers from the age group 41-50 though the organisational culture to be more ethical than did younger managers (age under 30 or 31-40). From the management levels upper management gave the most positive evaluations, and management rated the ethical culture better than lower middle management. From the different lines of business, managers working in financing and insurance evaluated the organisational culture as most ethical.
Ethical leadership Background variables Mean SE F df p Z2 Pairwise comparisonsa
Gender 7.95 1 0.005 0.009 2o1 Male 4.04 0.04 Female 4.16 0.04 Age group 3.78 4 0.005 0.017 -30 3.97 0.09 1, 2o3 31-40 4.05 0.04 41-50 4.22 0.04 51-60 4.12 0.04 61- 4.15 0.08 Management level 10.64 3 0.000 0.035 Upper management 4.28 0.06 3, 4o1, 2 Management 4.18 0.04 Upper middle management 4.04 0.04 Lower middle management 3.91 0.06 Size of the organisation 4.60 2 0.010 0.011 ns Small (o 50 employees) 4.00 0.05 Medium-sized (50-250 employees) 4.13 0.05 Large (4 250 employees) 4.17 0.04
Note: a Bonferroni comparisons
Table III. Analyses of variance
(ANOVA) between ethical leadership and
background variables
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Ethical leadership and ethical organisational culture: empirical associations The managers’ self-evaluations of their ethical leadership style were highly correlated with their evaluations of ethical organisational culture (Table V): managers who evaluated their leadership behaviour as more ethical also gave more positive ratings of their ethical culture. Correlations between CEV and gender, age, and management level showed similar associations as in the results of analyses of variance (Table VI). In addition, in small organisations congruency of supervisors, feasibility, supportability, and sanctionability were perceived more positively than in larger organisations.
As seen in Table VI (linear regression analysis), if the leadership behaviour was evaluated as ethical, it explained significantly the higher ratings of ethical culture (CEV), after the effects from the covariates were removed from the model. That is, ethical leadership had an independent, statistically significant effect on how ethical the organisational culture was experienced. The background variables explained 8 per cent, and ethical leadership behaviour 9 per cent of the variance of ethical organisational culture (Table VI). Ethical leadership shared most significant associations with feasibility, discussability, transparency, and clarity, although connections to all CEV factors reached statistically significant level. That is, the more ethical the managers experienced their own leadership behaviour, the more they evaluated their organisation to have clear values, norms, and expectations towards the employees. They also reported
CEV Background variables Mean SE F df p Z2 Pairwise comparisonsa
Gender 5.39 1 0.020 0.006 Male 4.35 0.71 2o1 Female 4.23 0.71 Age group 2.60 4 0.035 0.012 -30 4.17 0.76 31-40 4.34 0.67 41-50 4.44 0.73 1, 2o3 51-60 4.35 0.73 61- 4.15 0.66 Management level 11.87 3 0.000 0.040 Upper management 4.61 0.67 2, 3, 4o1 Management 4.30 0.75 4o2 Upper middle management 4.19 0.68 Lower middle management 4.07 0.67 Line of business 3.79 7 0.000 0.030 Industry 4.21 0.70 Service and trade 4.34 0.64 Financing and insurance 4.63 0.70 1, 4, 5, 7, 8o3 Real estate and rentals 4.27 0.73 Information processing 4.34 0.74 Education 4.15 0.92 Public administration 4.13 0.60 Others, e.g. health care 4.26 0.76 Size of the organisation 2.61 2 0.074 0.006 ns Small (o 50 employees) 4.21 0.82 Medium-sized (50-250 employees) 4.29 0.73 Large (4 250 employees) 4.37 0.68
Note: aBonferroni comparisons
Table IV. Analyses of variance (ANOVA) between ethical organisational culture (CEV) and background variables
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6 * * *
0 .5
1 * * *
C o n
g ru
en cy
o f
se n
io r
m a n
a g
em en
t �
0 .1
0 * *
0 .0
3 �
0 .2
3 * * * �
0 .0
8 *
0 .2
4 * * *
0 .8
0 * * *
0 .5
6 * * *
0 .6
3 * * *
F ea
si b
il it
y �
0 .0
9 *
0 .1
6 * * * �
0 .1
7 * * * �
0 .1
0 * *
0 .2
0 * * *
0 .6
2 * * *
0 .3
9 * * *
0 .4
2 * * *
0 .4
7 * * *
S u
p p
o rt
a b
il it
y �
0 .0
8 *
0 .0
5 �
0 .1
7 * * * �
0 .0
8 *
0 .2
0 * * *
0 .7
9 * * *
0 .5
6 * * *
0 .5
1 * * *
0 .6
2 * * *
0 .4
5 * * *
T ra
n sp
a re
n cy
� 0 .1
1 * *
0 .0
1 �
0 .2
1 * * * �
0 .0
6 0 .2
9 * * *
0 .7
4 * * *
0 .5
4 * * *
0 .4
6 * * *
0 .5
0 * * *
0 .3
4 * * *
0 .5
8 * * *
D is
cu ss
ab il
it y
� 0 .0
8 * �
0 .1
0 �
0 .1
9 * * �
0 .0
1 0 .3
0 * * *
0 .9
0 * * *
0 .6
7 * * *
0 .6
1 * * *
0 .6
7 * * *
0 .4
7 * * *
0 .6
8 * * *
0 .6
5 * * *
S a n
ct io
n ab
il it
y �
0 .0
9 * * �
0 .0
2 �
0 .2
3 * * * �
0 .0
9 * *
0 .3
3 * * *
0 .9
0 * * *
0 .6
4 * * *
0 .6
3 * * *
0 .7
3 * * *
0 .4
6 * * *
0 .6
7 * * *
0 .6
6 * * *
0 .8
3 * * *
N o te
s :
a B
a ck
g ro
u n
d v
a ri
ab le
s: g
en d
er (1 ¼
m a le
, 2 ¼
fe m
a le
); a g
e a s
a co
n ti
n u
o u
s v
a ri
ab le
; m
a n
a g
em en
t le
v el
(1 ¼
u p
p er
m a n
a g
em en
t, 2 ¼
m a n
a g
em en
t, 3 ¼
u p
p er
m id
d le
m a n
a g
em en
t, 4 ¼
lo w
er m
id d
le m
a n
a g
em en
t) ;
si ze
o f
th e
o rg
a n
is a ti
o n
(1 ¼
sm a ll
, 2 ¼
m ed
iu m
-s iz
ed ,
3 ¼
la rg
e) .
b S
p ea
rm a n
co rr
el a ti
o n
. c P
ea rs
o n
co rr
el a ti
o n
. * p o
0 .0
5 ;
* * p o
0 .0
1 ;
* * * p o
0 .0
0 1
Table V. Correlations
261
Ethical managers
C E
V C
la ri
ty
C o n
g ru
en cy
o f
su p
er v
is o rs
C o n
g ru
en cy
o f
se n
io r
m a n
a g
em en
t F
ea si
b il
it y
S u
p p
o rt
a b
il it
y T
ra n
sp a re
n cy
D is
cu ss
ab il
it y
S a n
ct io
n a b
il it
y
b b
b b
b b
b b
b
S te
p 1 . B
a ck
g ro
u n d
D R
2 ¼
0 .0
8 * * *
D R
2 ¼
0 .0
7 * * *
D R
2 ¼
0 .0
4 * * *
D R
2 ¼
0 .0
7 * * *
D R
2 ¼
0 .0
7 * * *
D R
2 ¼
0 .0
6 * * *
D R
2 ¼
0 .1
0 * * *
D R
2 ¼
0 .0
7 * * *
D R
2 ¼
0 .1
0 * * *
v a ri
a b le
s R
2 ¼
0 .0
8 * * *
R 2 ¼
0 .0
7 * * *
R 2 ¼
0 .0
4 * * *
R 2 ¼
0 .0
7 * * *
R 2 ¼
0 .0
7 * * *
R 2 ¼
0 .0
6 * * *
R 2 ¼
0 .1
0 * * *
R 2 ¼
0 .0
7 * * *
R 2 ¼
0 .1
0 * * *
G en
d er
� 0 .1
0 * *
� 0 .0
3 �
0 .0
9 * *
� 0 .1
0 * *
� 0 .0
9 * *
� 0 .0
7 *
� 0 .1
1 * * *
� 0 .1
0 * *
� 0 .1
0 * *
A g
e �
0 .0
2 0 .0
3 �
0 .0
1 �
0 .0
1 0 .1
4 * * *
0 .0
2 �
0 .0
6 �
0 .1
0 * *
� 0 .0
8 *
M a n
a g
em en
t le
v el
� 0 .1
5 * * *
� 0 .1
4 * * *
0 .0
1 �
0 .1
5 * * *
� 0 .0
7 �
0 .1
3 * *
� 0 .1
4 * * *
� 0 .1
5 * * *
� 0 .1
7 * * *
L in
e o f
b u si
n es
s
S er
v ic
e a n
d tr
a d
e 0 .0
4 0 .0
3 0 .0
4 0 .0
6 �
0 .0
1 0 .0
3 0 .0
7 *
0 .0
4 0 .0
1
F in
a n
ci n
g a n
d in
su ra
n ce
0 .1
4 * * *
0 .1
2 * * *
0 .1
1 * *
0 .1
0 * *
0 .0
2 0 .1
1 * *
0 .1
7 * * *
0 .1
0 * *
0 .1
5 * * *
R ea
l es
ta te
a n
d re
n ta
ls 0 .0
2 �
0 .0
1 0 .0
3 0 .0
4 �
0 .0
4 0 .0
1 0 .0
8 *
0 .0
5 0 .0
5
In fo
rm a ti
o n
p ro
ce ss
in g
0 .0
5 0 .0
3 0 .0
4 0 .0
2 0 .0
1 0 .0
4 0 .0
6 0 .0
7 0 .0
6
E d
u ca
ti o n
� 0 .0
3 �
0 .0
6 0 .0
3 �
0 .0
0 4
0 .0
3 �
0 .0
6 �
0 .0
5 �
0 .0
2 �
0 .0
6
P u
b li
c a d
m in
is tr
a ti
o n
� 0 .0
5 0 .0
2 �
0 .0
4 �
0 .0
6 �
0 .0
8 *
� 0 .0
5 �
0 .0
3 �
0 .0
2 �
0 .0
6
O th
er s,
e. g
. h
ea lt
h ca
re 0 .0
2 �
0 .0
4 �
0 .0
1 0 .0
3 0 .0
2 0 .0
1 0 .0
4 0 .0
1 0 .0
2
S iz
e o f
th e
o rg
a n
is a ti
o n
0 .0
4 0 .1
2 * *
0 .0
8 *
0 .0
1 �
0 .0
8 *
� 0 .0
3 �
0 .0
1 0 .0
7 *
0 .0
0
S te
p 2 . E
th ic
a l le
a d er
sh ip
D R
2 ¼
0 .0
9 * * *
D R
2 ¼
0 .0
6 * * *
D R
2 ¼
0 .0
3 * * *
D R
2 ¼
0 .0
4 * * *
D R
2 ¼
0 .0
3 * * *
D R
2 ¼
0 .0
3 * * *
D R
2 ¼
0 .0
7 * * *
D R
2 ¼
0 .0
8 * * *
D R
2 ¼
0 .1
0 * * *
R 2 ¼
0 .1
6 * * *
R 2 ¼
0 .1
3 * * *
R 2 ¼
0 .0
7 * * *
R 2 ¼
0 .1
2 * * *
R 2 ¼
0 .0
9 * * *
R 2 ¼
0 .0
9 * * *
R 2 ¼
0 .1
7 * * *
R 2 ¼
0 .1
5 * * *
R 2 ¼
0 .2
0 * * *
0 .3
0 * * *
0 .2
5 * * *
0 .1
9 * * *
0 .2
2 * * *
0 .1
7 * * *
0 .1
9 * * *
0 .2
7 * * *
0 .2
9 * * *
0 .3
2 * * *
N o te
s :
B a ck
g ro
u n
d v
a ri
ab le
s: g
en d
er (1 ¼
m a le
, 2 ¼
fe m
a le
); a g
e a s
a co
n ti
n u
o u
s v
a ri
ab le
; m
a n
a g
em en
t le
v el
(1 ¼
u p
p er
m a n
a g
em en
t, 2 ¼
m a n
a g
em en
t, 3 ¼
u p
p er
m id
d le
m a n
a g
em en
t, 4 ¼
lo w
er m
id d
le m
a n
a g
em en
t) ;f
ro m
th e
li n
es o f
b u
si n
es s
in d
u st
ry w
a s
u se
d a s
a re
fe re
n ce
ca te
g o ry
;s iz
e o f
th e
o rg
a n
is a ti
o n
(1 ¼
sm a ll
,2 ¼
m ed
iu m
-s iz
ed ,3 ¼
la rg
e) .
* p o
0 .0
5 ;
* * p o
0 .0
1 ;
* * * p o
0 .0
0 1
Table VI. Results of the regression analysis
262
LODJ 34,3
that in their organisations unethical behaviour is punished and ethical behaviour is rewarded, ethical issues can be brought into discussion, organisational members give each other feedback, and their own actions as well as the behaviours of others are corrected towards more ethical.
Regarding some of the CEV factors, the background variables had an especially significant association with the managers’ evaluations (Table VI). Sometimes the background variables explained more of the variance in evaluating ethical culture than did ethical leadership. For example, gender, managerial level, and line of business together explained more of the ratings of transparency than did ethical leadership. Background variables also explained more significantly the evaluations of congruency of supervisors (age and managerial level) and feasibility (age and gender) than did ethical leadership.
4. Discussion The results showed that the more ethical the managers evaluated their own leadership behaviour, the better ratings they gave on ethical organisational culture, and thus supported our main hypothesis (H3). The finding also supports previous arguments concerning the connection between leadership and organisational culture (Smircich and Morgan, 1982; Schein, 1985; Kets de Vries, 1994; Block, 2003; Giberson et al., 2009), specifically the connection between ethical leadership and ethical culture of an organisation (Trevinõ and Weaver, 2003). From the practical point of view, this result implies that an ethically behaving leader can develop the ethical culture of his/her organisation through such leadership behaviours as paying attention not only to results but also the means how the results are achieved, acting in a trustworthy manner, supporting open discussions about values among organisation members, rewarding ethically appropriate actions, and creating ethical codes and norms (Weaver et al., 1999; Trevinõ and Weaver, 2003; Brown et al., 2005). Especially upper management has been considered to set the ethical guidelines of the organisation (Posner and Schmidt, 1992), but also the importance of human resource management practises has been highlighted in creating trust and increasing ethical behaviours in organisations (Puč
. etait
. e et al., 2010). Although we assumed in this
paper that an ethical person in a leadership position behaves ethically and promotes ethical organisational culture, it is also possible that the ethical organisational culture socialises managers into behaving ethically, or that managers already valuing ethicality seek their way to matching organisations, as the value congruence theory suggests (Brown and Trevinõ, 2006). For example, Biggart and Hamilton (1987) bring forth that all actors must embody the norms of their positions and convince others in ways coherent with their normative obligations (p. 435). Therefore, it can be the organisational culture which sets limits for the kind of leadership behaviour.
Managers’ self-evaluations of their ethical leadership style were connected to all eight dimensions of the ethical culture of an organisation, that is, the organisational ethical virtues. The strongest association was found between ethical leadership and sanctionability: The managers who evaluated themselves as ethical leaders also saw that in their organisation (un)ethical actions have consequences. This result is logical, as managers have the possibilities to influence the virtue of sanctionability through rewards and punishments. For example, the sanctionability items (such as “In my immediate working environment, only people with integrity are considered for promotion”) refer to decisions under the manager’s authority.
263
Ethical managers
The more ethical the managers evaluated their leadership style, the higher ratings they gave on transparency and discussability in their organisations. Thus, ethical leadership can encourage transparent behaviour and culture: in transparent organisations there is adequate awareness of potential violations and incidents, which are intervened in. In transparent organisations also the behaviours of managers are under observation, which can motivate into ethical leadership. What is more, an ethical leader encourages discussions about ethical issues and handles reports of unethical conduct with caution. Discussionability is an important dimension of organisational culture, as many conflicts can be solved through talking. Managers are in a key position in supporting discussionability, and they can contribute to it by being available to employees and providing resources and initiatives to discussions.
As for the descriptive results, also H1 got support from our results. The results showed that on average managers evaluated themselves as quite ethical leaders. Leaders from upper management level evaluated themselves as more ethical than did middle managers, supporting the sub-hypothesis H1a. It might be that because upper managers have more job control (Feldt et al., 2009) they therefore also have more possibilities to implement ethical values in their work. Moreover, it has been suggested that when individuals gain power, their self-evaluations grow more favourable (see Ciulla and Forsyth, 2011, p. 236), which can account for the detected positive evaluations of the upper management. One explanation to the differences can be the various demands directed at middle-level managers. They often face conflicting expectations from both upper management and lower organisational levels (Marshall and Cooper, 1979; Jackall, 1988), which can make it difficult to carry out ethical values at work. Also executing organisational changes and new strategies, which are often responsibilities of the lower level managers, can create additional pressures to them.
Women gave more positive evaluations of their ethical leadership than did men. There are some possible explanations to this result. First, previous studies have shown that men detect less ethical problems (Chonko and Hunt, 1985), and that women make more ethical decisions (Glover et al., 1997). Second, social desirability can explain the gender differences. Women might face more pressures to act ethically as leaders. However, it is important to recognise that the mean differences between men and women in our study were quite small, although they reached statistical significance due to the large sample size.
From the different age groups 41-50-year-old managers evaluated themselves as most ethical leaders. A reason for this finding can be found from self-confidence and cumulated (work) experiences, which increase along with age, and also with managerial level (Weeks et al., 1999): In the present study upper management levels were overrepresented in the older age groups. In addition, self-knowledge and leadership competences, alongside other expertise learned at work, develop with age and experience. This can lead to better evaluations of one’s own leadership when compared to younger managers. It is also possible, that older managers pay more attention to ethical issues.
Also the ratings of ethical culture shared some significant differences with the background factors, supporting our H2. First, upper managers gave the most positive evaluations of ethical culture compared with lower management levels. This result gave support to our sub-hypothesis H2a, and is also in line with Trevinõ et al. (2008). Senior managers act as representatives of the entire organisation, and therefore identify themselves strongly with the organisation and its image. A more positive perception of organisational ethics can reflect the managers’ need to protect the organisation’s image as well as their own identity.
264
LODJ 34,3
Second, gender and age differences also appeared in the ratings of ethical culture. As assumed in the sub-hypothesis H2b, men gave better evaluations of the ethical culture than did women, which can relate to management level: men were overrepresented among upper managers, who, as described above, had more positive views about ethical culture. On the other hand, women can be more critical towards ethical culture than men, as discussed previously concerning the ethical leadership evaluations. From the age groups, over 60-year-olds gave the most negative evaluations of the ethical culture. Perhaps older managers are already directed towards retirement, and therefore being “on the way out” of an organisation may result in a personal detachment from the organisation. This can lead to being more critical concerning the existing culture and its ethicality compared to younger age groups.
From the different lines of business, financing, and insurance gave highest ratings of ethical culture. In general, it can be said that the financial and insurance sector is at its inmost nature about trust, which is also an element of the ethical organisational culture. A regulative environment and acting in a trustworthy manner have traditionally been important conditions for the companies in this business branch. Therefore, the importance of ethics may have been implemented as a salient part of the organisational culture. However, since the recent economic crises and problems have largely their roots in the unethical behaviour of the finance sector companies, it may be that Finnish managers in banking and insurance have a tendency to overemphasise the high ethical culture of their organisations. In Finland the finance and insurance companies wanted to highlight their ethical actions despite the economic crises, and draw a distinction between the banking failures in other countries. The data gathered in this study was done in the autumn 2009, when the regulative environment of the finance sector was increasing due to the global economic collapse. As the finance sector has been and increasingly is a business branch with strong regulations, it can be that managers in the sector understand that following official regulations is the same as being ethical. In general, this result is interesting and worth investigating more in the future.
Limitations and avenues for future research There are some limitations that should be considered when applying the study results. First, our sample consisted exclusively of Finnish managers who have completed either technical or business education degree. Thus, these results cannot be generalised directly across all managers in Finland. However, as reported by Hartikainen and Tikkanen (2010), the majority of managers in big companies in Finland have either technical or business educational background, supporting the applicability of our data. All in all, we think that in future it would be important to study managers from different countries and including, for example, managers with other educational backgrounds than in the present study.
Second, the response rate in our study reached only 34.3 per cent, which raises questions concerning selectiveness and representativeness. However, the declining response rates of questionnaire studies have been a common phenomenon during the last decades, especially in studies targeting top managers (Baruch and Holtom, 2008). In their meta-analysis, Baruch and Holtom (2008) recommend an adequate benchmark of approximately 35-40 per cent. From this perspective, our response rate was satisfactory.
Third, the cross-sectional study design only gives information about the measured time point. Although we hypothesised that the more ethical the managers evaluate
265
Ethical managers
their own leadership behaviour to be, the higher evaluations they give on the ethical culture of their organisation, the connection can also be reversed (ethical culture supports ethical leadership) or reciprocal. Therefore, our study gave primarily descriptive information about the connection between ethical leadership and culture. In future, longitudinal research, e.g. cross-lagged panel design, could test the causality between these phenomena.
Fourth, the data were collected through self-report measures, which raises questions about common method biases. Although it has been suggested that managers have a tendency to provide somewhat different ratings of their behaviour compared to those of their subordinates (Hogan et al., 1994), Brown and Trevinõ (2006) argue also for using managers’ self-reports while studying ethical leadership. Managers’ own ratings are important as such and provide interesting insights to their work. Moreover, employees may not always be aware of all aspects of leadership responsibilities and tasks, which is likely to have an effect on their ratings. We suggest that in future studies ratings from both employees and managers should be examined simultaneously.
Conclusions To conclude, based on the empirical findings we argue that there is an association between ethical leadership and ethical organisational culture. As ethical leadership has been shown to predict many positive outcomes, such as work satisfaction, commitment, prosocial behaviours, and decreased sickness absences (Podsakoff et al., 1990; Vitell and Davis, 1990; Elovainio et al., 2002; Brown et al., 2005; Brown and Trevinõ, 2006), and ethical organisational culture is found to associate with occupational well-being at least among managers (Huhtala et al., 2011), it is therefore important in organisational life to develop both ethical leadership and the ethical culture of an organisation. It benefits individuals as well as the whole organisation, probably also its profitability via aforementioned positive outcomes among organisation members.
Organisations and managers themselves can change and develop the existing culture, for example by establishing ethical codes, providing training to recognise ethical dilemmas and informing clearly, what kind of behaviour is seen as ethical and acceptable in the organisation. When both managers and employees know, what is expected from them, and ethical actions are supported with rewards and punishments, it strengthens the ethical culture. This can lead into a virtuous circle, where the organisation socialises the managers into more ethical leaders, and managers develop the organisational culture towards more ethical.
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Further reading
Ciulla, J.B. (1999), “The importance of leadership in shaping business values”, Long Range Planning, Vol. 32 No. 2, pp. 166-172.
Deal, T.E. and Kennedy, A.A. (1982), Corporate Cultures, Addison-Wesley, Reading, MA.
Corresponding author Mari Huhtala can be contacted at: [email protected]
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