Leadership has been a subject of interest for scholars and philosophers for centuries, and, as a result, there is a large body of literature available.

Chapter 1: Introduction to the Study

Leadership has been a subject of interest for scholars and philosophers for

centuries, and, as a result, there is a large body of literature available. Leadership scholars

have argued that various skills and traits are intrinsic and vital to effective leadership

(Harris, 2018; Mayer, Aquino, Greenbaum, & Kuenzi, 2012; Prieto, 2013). Other

researchers have explored facets of leadership, including the role of top executives in

establishing and advancing employee commitment (Jackson, Meyer, & Wang, 2013) or

examining the actions they take in directing their organization towards achieving their

vision and goals (Salleh & Grunewald, 2013). Works like these establish a foundation

and contribute meaningful insights into various features of leadership. However,

leadership ethics, the focus of this study, is not well understood and is inadequately

represented within the context of a rapidly changing global economy where organizations

are expanding into new international markets. In this study, I explored dimensions of

leadership ethics and their relationship to organizational financial performance.

There exists a growing concern regarding unethical leadership behaviors where

leaders of international organizations negatively impact the local or national economies

where they operate or effectively harm the people and society they serve (Gan, 2018).

Ethical issues facing global leaders are complex and are often difficult to navigate. On

one end of the spectrum, organizational leaders are responsible for maximizing

shareholder returns and delivering strong financial performance, yet if done in an

unethical manner, their results may be at the detriment of society or violate social and

cultural norms. For leaders in global markets, what is accepted in one region may be

considered unethical in another, making the prospects of leading successfully very

difficult (Sajfert, Nikolić, Vukonjanski, Terek, & Vulović, 2017). Conversely, when a

leader’s directives inadvertently advance a legalistic organizational culture, they may

unwittingly implant risk averting ideals that hamper innovation and avoidance of

opportunities that might enhance financial performance and not act in the best interests of

stakeholders. Ethical leadership is vital to organizational success, yet there is need for

greater conceptualization of its effects on organizational financial performance

supporting policy development and leadership practitioners. Ethical leadership represents

an important social priority that has the potential of shaping how leadership is practiced

in global settings.

In this chapter, I present the nature of the questions associated with (un)ethical

leadership and the impact on humanity. I describe the current leadership theories and the

gap in them that necessitates a greater academic emphasis examining ethical leadership,

its antecedents, and its outcomes on organizations. I also support the rationale for the

examination of ethical leadership and the relationship to organizational performance.

Ethical leadership theory was applied in this study that addressed the topic, seeking a

greater understanding of the impact of leadership behaviors on organizations and society.

Background

Issues of (un)ethical leadership behaviors are important to understand; however,

their multifaceted nature is challenging for researchers to study. Northouse (2016)

claimed, “In short, ethics is central to leadership because of the nature of the process of

influence, the need to engage followers in accomplishing mutual goals, and the impact

leaders have on the organization’s values” ( p. 337). The current literature examining

leadership ethics and its relationship to organizational performance, including financial

performance, is limited to a small number of reports relevant to the topic (Sajfert et al.,

2017).

The expanding global economy, changing geopolitical environments, and diverse

international markets where organizations operate make the issue of ethical leadership are

rising concerns. Mayer, Kuenzi, Greenbaum, Bardes, and Salvador (2009, p. 1) argued

that “ethical leadership differs from other leadership theories” where ethical leadership

components are encompassed within them. The dearth of empirical data found in the

literature reveals the need for more research and demonstrates its importance as a social

priority (Shin, Kim, Sung, & Choi, 2015; Wang, Feng, & Lawton, 2017).

Recent corporate scandals have highlighted an international crisis in leadership

ethics and have emphasized a need for expanded scholarly research dedicated to

addressing the concern. The collapse of multinational organizations like Enron, Tyco,

Lehman Brothers, and the telecommunications giant WorldCom brought on by scandals

of their respective leader’s unethical behavior is illustrative of the issue. Within the

pharmaceutical industry, the marketing tactics authorized by Purdue Pharm leaders for

the opioid OxyContin promoting it inappropriately for a broad pain application has

contributed to the national opioid crisis (Zee, 2009). In each case, leaders modeled

unprincipled behaviors to members directing them to act in corrupt and sometimes

unlawfully leading to their criminal conviction. Drawing on social learning theory

(Bandura, 1977), organizational leaders serve as role-models of ethical standards by

demonstrating appropriate behaviors and establishing what is expected of organizational

members (Brown, Treviño, & Harrison, 2005a). The different types of leadership

behaviors modeled by unethical leaders has signaled the alarm by regulatory agencies and

company stakeholders who call for increased understanding into ethical leadership.

Researchers have examined different leadership behaviors and organizational

performance metrics, often reporting confounding results. For example, in a study of

small and medium sized Thailand organizations, Suriyankietkaew and Avery (2016)

examined the relationship between 23 sustainable leadership practices, including leader

ethical behavior and organizational financial performance. They demonstrated a modest

nonsignificant relationship among ethical leadership practices and financial performance

(Suriyankietkaew & Avery, 2016).

Researchers have also proved mediating relationships between employees with

high organizational commitment behaviors, high internal organizational ethics, and the

firm’s legal ethical standards to its financial performance (Chun, Shin, Choi & Kim,

2013). In a related study, researchers demonstrated a link between a supervisor’s

perceived ethical leadership and the participation level of followers, also thought to result

in economic benefits for the organization (Žemgulienė, 2013). In a study of companies

located in Korea, researchers examined the relationship of top manager ethics and firm

financial performance (Shin et al., 2015). They illustrated a mediating relationship

between top leader ethics and firm level ethics, which results in procedural justice and

then to improved financial performance (Shin et al., 2015). Their findings are important;

however, they were derived from one county where cultural influences and regional

views on ethical leadership limit the generalizability of the outcomes.

Ethical leadership is argued to be multidimensional, influencing organizational

performance through diverse mechanisms. Top manager communications are one

dimension that has been shown to effect strategic practices and organizational outcomes.

In their analysis of chief executive officer (CEO) letters to shareholders from multiple

leaders employed in different industries, Patelli and Pedrini (2015) confirmed that the

CEO tone was positively associated with financial accounting aggressiveness but also

argued that negative financial accounting practices could be negatively influenced by the

top leader’s tone.

Other ethical leadership dimensions shown to be correlated to organizational

financial performance include leader humane orientation, identified as a leader who

establishes a caring and supportive environment; as well as leader responsibility and

sustainability orientation, where leaders encourage employee collective thinking; and a

culture of environmentalism, related to organizational financial performance (Wang et

al., 2017). The previous studies of ethical leadership reflect the complexity of leadership

ethics as a research topic and the variations of leadership themes that exist in the current

literature. Leadership scholars have opined that greater efforts are needed for examining

ethical leadership and its resulting effects on organization financial performance (Sajfert

et al., 2017). This research contributes to the limited empirical literature enhancing the

scientific knowledge of ethical leadership and relationships between top managers’ ethics

and organizational financial performance and helps to inform leadership practices and the

formulation of polices.

Problem Statement

There is a need for greater comprehension of the effects of leadership ethics on

organizations and relationships to different organizational outcomes. Over the past

decade, researchers have tested different leadership theories, which include broad notions

of ethics. These efforts failed, however, to capture the multifaceted dimensions of ethical

leadership. Brown et al. (2005a) were first to conceptualize ethical leadership theory.

Recent attention has been given to ethical leadership theory (Dion, 2012; Eisenbeiss,

2012; Hunt, 2017; Kim, Ko, & Kim, 2015), and there is a call for improved empirical

evidence by leadership scholars prompted by conflicting outcomes of ethical leadership

research and the effects on organizations.

Data that describe connections of top manager ethics and organizational financial

results are inadequate in their scope and volume. The extent literature reflects scholarly

work concerning outcomes that are related to organizational performance measures and

financial results but that are difficult to generalize, sometimes reflecting conflicting

results. For example, researchers have demonstrated that ethical leadership is positively

related to employee’s task performance (Ahn, Lee, & Yun, 2018; Walumbwa, et al.,

2011; Yang & Wei, 2017), employee empowerment and motivation leading to their in

role success (Dust, Resick, Margolis, Mawritz, & Greenbaum, 2018), employee

satisfaction (Celik, Dedeoglu, & Ynanyr, 2015), firm performance (Kim & Brymer,

2011; Shin et al., 2015; Walumbwa et al., 2011; Wang et al., 2017), and organizational

citizenship behaviors where employees performed at a higher than expected level as an

output of ethical leadership behaviors.

Associations have been found to exist between facets of ethical leadership,

including humane orientation, and the leader’s responsibility and sustainability

orientation with organizational financial performance (Wang et al., 2017). Other

researchers have concluded that top manager ethical leadership has an indirect effect on

organizational financial performance mediated by the procedural justice climate that

impacts organizational financial performance (Chin, Sung, Choi, & Kim, 2015). In their

study of Serbian organizations, Sajfert et al. (2017) found strong correlations between

ethical leadership and observed outcomes such as follower job satisfaction and weaker

relationships to organizational outcomes like financial performance. Suriyankietkaew and

Avery (2016) compared 23 sustainable leadership practices, including ethical leadership

behaviors and their effect on firm financial performance for companies Thailand, and

found that ethical leadership had less of an impact on organizational financial

performance than friendly labor relations, valuing employees, social responsibility, and

strong shared vision. Importantly, dimensions of each of these sustainable practices are

directly reflected in the definition of ethical leadership that were used for this research.

There is the potential for conflicting priorities for leaders when considering

ethical leadership behaviors and organizational financial performance. Top managers

(CEO, chief financial officer, president) are accountable for setting the course for their

organizations, and they are expected to act in the best interests of the company to

maximize financial results. Top managers must seek a balance between their fiduciary

responsibilities to various stakeholders while also setting the standard of acceptable

behavior. An emphasis on financial performance may present morally conflicting

priorities in a global context when ethics are in question. For example, how do top

managers behave when a morally conflicting decision to act unethically leads to

improved financial performance? Ciulla, Knights, Mabey, and Tomkins (2018) asserted,

“When the stakes are high, leaders do not have the luxury of following their own moral

convictions when they conflict with their moral obligations to constituents. They have to

make a choice when all other options are bad” (p. 4). The weight of these types of

leadership decisions are intensified when viewed from a global perspective and when

there is no precedence for leaders to follow.

Practitioners, global governments, and regulatory agencies have emphasized the

importance of ethical leadership, proclaiming its significance as an international priority.

Research efforts should be aimed at addressing the empirical need for scientific

knowledge supporting ethical leadership as an independent construct unique from other

leadership theories (Mayer et al., 2012; Mayer et al., 2009). The literature review reflects

a gap in the knowledge regarding the complex relationships that exist with ethical

leadership and the components of organizational financial performance. Scholars have

emphasized ethics as vital for effective organizations and society. In this dissertation, I

refined the position and proposed that ethical leadership is directly related to a firm’s

financial performance. Furthermore, unique to this study, ethical leadership theory served

as a basis to test the hypothesis.

Purpose of the Study

This quantitative correlational study was designed to address deficiencies in the

conceptualization of ethical leadership theory by examining relationships between top

manager’s ethical leadership levels and organizational financial performance. I also

tested whether mediation occurs with top manager practices, purposes, and virtues. The

results of study are intended to aid top managers with an improved understanding of the

impact of top manager ethics. This dissertation could contribute to the scientific

knowledge leading to positive organizational and social change.

Variables

A leader centric approach was taken to examine the correlation between top

manager ethical leadership levels, the independent variable, emphasizing top

management executives within global organizations in a single industry

(pharmaceuticals), and organizational financial performance, the dependent variable,

while mediating for effects of leadership purposes, virtues, and practices. Mayer et al.

(2012) argued in favor of a leader centric approach based in its theoretical and practical

utility. Social learning theory (Bandura, 1977) and social exchange theory (Blau, 1964)

served to frame the study. Organizational leaders serve as models for its members, and

social learning theory suggests that individuals learn from others through the role

modeling process of normative behaviors that are acceptable (Bandura, 1977; Brown et

al., 2005a). Top management leaders possess positional power, setting the cultural tone

for what is expected for ethical behaviors of employees. They also set acceptable ethical

standards through their vision for the organization. Top management leaders then steer

the organization through their leadership practices and communications. Through their

observable actions, communications, and expressed commitment, they establish the

importance of ethical standards. However, the relational distance of followers from top

management is not fully understood, and the processes and mechanisms by which top

managers influence organizational behavior are needed (Brown et al., 2005a).

Leadership practitioners have begun to identify meaningful distinctions in

leadership structures (Mayer et al., 2009; Shin et al., 2015). While there is still debate

among scholars as to how the different levels of leadership influence their organization, I

limited this study to top management. There is limited empirical data separating top

management ethical leadership from midlevel ethical leadership and which examines the

relationship to organizational financial performance in a global setting (Shin et al., 2015).

Additionally, empirical data on global ethical leadership are deficient, and the data

available present results from research conducted in single countries and disparate

industries, making it difficult to draw generalizable conclusions.

For the present study, top manager ethical leadership in the pharmaceutical

industry served as the independent variable, and their organizational financial

performance served as the dependent variable. Additionally, I examined whether

mediation exists with top manager practices, purposes and virtues. Figure 1 provides a

visual illustration of mediation model as applied in this research. The study also supports

the argument that contextual variables such industry type and cultural influences from the

leader’s country of origin are important to consider and are incorporated into the design.

In contrast to many other industries, the pharmaceutical industry is highly

regulated, with significant governmental oversite and reporting requirements placed on

manufacturers. Costs for pharmaceutical manufacturers to research, develop, and gain

regulatory approval, then produce and distribute approved medications has continued to

climb, and a recent estimate places the cost at $2.8 billion (DiMasi, Grabowski, &

Hansen, 2016). For companies that operate internationally, they must also meet the

individual requirements for each country they operate. In a highly controlled industry like

pharmaceuticals, where the cost of entry is significant and the benefits to society are

great, ethical leadership is critical. By examining the relationships between these

variables, I revealed important insights for leaders as they direct their organizations.

Mediating Variables: Practices, Purposes and Virtues

In agreement with the opinion that ethical leadership is a complex construct,

Lawton and Páez (2015) argued that it is comprised of leadership virtues that overlap

with leadership practices, and leadership purposes in a three-dimensional model. They

opined that leadership “virtues cannot be separated from the context within which they

are practiced” (Lawton & Páez, 2015, p. 645). Leadership practices such as ethical

decision making, moral judgement, and promoting a purpose and vison that inspires

honesty, integrity, and courage intersect with the virtues of an ethical leader. Lawton and

Páez (2015) argued that their three-dimensional model encompasses variables previously

identified in leadership literature. The variables that embody the three-dimensional model

were predicted to mediate the relationship between top manager ethical leadership and

the financial performance for global organizations.

Research Questions

In this study, I sought to identify whether a relationship exists between top

manager ethics level, the independent variable, and organizational financial performance,

the dependent variable. Furthermore, I examined whether top managers’ purposes,

practices, and virtue mediate the relationship between top managers’ ethics level and

organizational performance.

Primary research question: Is there a correlation between top manager’s ethical

level and organizational financial performance?

H10: There is no statistically significant correlation with top manager’s ethical

leadership level and organizational financial performance.

H1a: There is a statistically significant correlation with top manager’s ethical

leadership level and organizational financial performance.

Secondary research question: To what extent does top managers’ practices,

purpose, and virtue mediate the relationship between top managers’ ethics level and

organizational financial performance?

H20: Top managers’ practices, purpose, and virtues do not mediate the relationship

between top managers’ ethics level and organizational financial performance.

H2a: Top managers’ practices, purpose, and virtues do mediate the relationship

between top managers’ ethics level and organizational financial performance.

Figure 1. Mediated effects of leadership practices, purposes, and virtues (see Lawton &

Páez, 2015) on the correlation between top management ethical leadership (X) and

organizational financial performance (Y) (on the basis of Baron & Kenny, 1986). Idea

generated from “Introduction to Mediation, Moderation, and Conditional Process

Analysis” by A. Hayes, (2013), pp. 445.

Theoretical and Conceptual Framework

Ethical leadership as a construct has proven challenging for scholars to study due

to its varied influences, and the empirical research on the topic is still emerging. In this

dissertation, I drew on the ethical leadership theory. Many scholars have proposed new

ideas for research, and there are examples of different theoretical framing that have been

applied and are presented in this manuscript (see Zhu, Zheng, Riggio, & Zhang, 2015).

Ethical leadership theory has demonstrated to be useful for investigators in several

research settings. Examples of related studies described in literature review have

addressed correlations between leadership ethics and employee engagement and

organizational member output. However, it is still not fully understanding how the ethical

c’

Indirect Mediated Pathway

leadership level of top organizational managers influences business results with an

emphasis on financial performance, along with the possible mechanisms involved.

Top manager ethical leadership is an international concern as well and is not

limited to any single industry. There are signs of trouble in many countries and in a

variety of enterprises. In a 2016 Global Business Ethics Survey of employees working at

private and public organizations, the Ethics and Compliance Initiative group found that

employees described being pressured by leaders to compromise standards or observed

leader misconduct (as cited in Harned et al., 2016). The survey also highlighted

significant variances in survey responses based on the employee’s country of origin, and

in many countries, reported misconduct was significantly higher (as cited in Harned et al.,

2016). Ethical leadership studies have often limited sample selection to regional

participants, and they call attention to the importance of context, such as national and

regional influences that affect antecedents of ethical leadership and outcomes.

Nature of the Study

The design applied for this dissertation was methods that have been used in

similar ethical leadership research, allowing for the positioning of the results of this

research within the existing body of literature. As discussed, top manager ethical

leadership levels served as the independent variable, and quantitative correlational

statistical methods were used to measure its association with the dependent variable of

financial performance. Regression analysis was then employed to measure the mediating

relationships of top manager practices, purposes, and virtues with financial performance

(Baron & Kenny, 1986).

Definitions

Definitions are presented in this section for core concepts that were used for this

dissertation. A discussion for each is also provided to expand on terms that were found in

different leadership reports referenced in this study.

Ethics: Principled moral conduct dictating a person’s behavior. Lewis (1985)

suggested that it encompassed the “rules, standards, principles, or codes giving guidelines

for morally sound behavior” (as cited in Kaptein, 2008, p. 980). While this

characterization provided a useful starting point for the examination of ethical leadership,

it failed to adequately distinguish the unique influences that top managers have on middle

managers and organizational members.

Ethical leadership: Is the practice of being a moral manager. It encompasses

notions of honesty, virtuosity, and leading by setting a good example. A common

definition found in the extent literature was “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”. This definition served as a constitutive foundation by many ethical

leadership scholars in their research (Avey, Palanski, & Walumbwa, 2011; Bauman,

2013; Brown & Treviño, 2006; Hanson, Loose, Reveles, & Hanshaw, 2017; Lawton &

Páez, 2015; Mayer et al., 2012, 2009; Mayer, Kuenzi, & Greenbaum, 2010; Mihelic,

Lipicnik, & Tekavcic, 2010; Shin et al., 2015; Walumbwa et al., 2011; Wang et al., 2017;

Zhu, Zheng, He, Wang, & Zhang, 2017). Mihelic et al. (2010) and Zhu et al. (2015)

suggested that the definition suggests that ethical leaders role-model normatively

acceptable traits and behaviors, exemplifying the moral person, and leaders establish

ethical standards and values through their communications, rewarding appropriate

behaviors and punishing inappropriate behaviors representing the moral manager.

Ethical leadership has been demonstrated to affect the ethical climate of the

organization and the ethical practices of its members (Kul, 2017). Ethical leadership

practices include how the leader communicates codes of conduct (Kul, 2017), rewarding

ethical performance and punishing unethical behaviors, setting strategic plans,

prioritizing performance standards, and handling disputes. It was based upon this

definition that I examined the ethical leadership.

Financial performance: Reflects the company’s fiscal results compared to its

stated goals reported on the company’s balance sheets, statement of cash flows, and profit

and loss statements. In a global context, financial performance was found difficult to

measure reliably or consistently as organizations operating in different countries applied

unique accounting practices based on local standards. Many differences in local and

international laws were observed in their requirements for organizations reporting of their

financial results. Also differences in measure of reporting times were found. Li and

Zhang (2007) measured organizational performance over a 3-year time frame looking at

“return on investment, return on sales, profit growth, return on assets, overall efficiency

of operations, sales growth, market share growth, and cash flow from operations” (p.

797). Other researchers have evaluated financial performance over a 6-month time frame

(Shin et al., 2015) and limited the analysis to operating profit divided by total assets

(Chun et al., 2013). Further complicating financial analysis was the challenge of

uniformity of reporting between generally accepted accounting principles, International

Financial Reporting Standards, and other local regulatory standards on financial

disclosures found in the United States. For this research, consistent with Avery and

Bergsteiner (2010), financial performance was defined as net profits, sales revenues, and

controllable costs reported by top managers. I limited the time of reporting financial

results to 2-years allowing for the top managers’ ethics levels to have had an impact on

organizational financial results.

Pharmaceutical industry: Global industry discovering, developing,

manufacturing, and marketing medicines for human and animal consumption, and

treating a variety of diseases and ailments. Leadership ethics within the context of the

pharmaceutical industry are essential and I argued it was important to distinguish top

manager influences on organizational performance. Within the global pharmaceutical

industry, I found examples of organizational corruption and criminal activities that have

led to the harming of patients, financial penalties, tarnished industry and organizational

reputations, the loss of patient trust, and a greater societal burden (Kieke, 2013). As

described previously, the unethical leadership actions involved in the marketing of

OxyContin were an example described in the literature. Promotional tactics, approved

and employed by Purdue Pharma and its leaders, illustrated how financial results

influenced subordinates and resulted in costly harm to society. The direction by Purdue

Pharma company officials played a significant role in the opioid epidemic in the United

States and ultimately led to the company’s bankruptcy and payment of millions in

damages. As the pharmaceutical and health related industries continue to move towards

globalization to expand their markets, it is necessary that leaders understand the impact of

their decisions and the consequences of their actions on the patients they serve. It is vital

that they are aided with improved understandings of ethical leadership.

Top manager practices: Practices denote the idea of what one does, their

decisions, and daily activities that create and reinforce the ethical canons for the

organization as they interact with followers. Ethical decisions made by top managers may

be complex and nontraditional, requiring their judgement when the impact of their

decisions potentially affects the outcomes of the organization (Lawton & Páez, 2015).

I argued that top manager practices are distinct from lower manager levels. Their

practices set the example for others to follow, and their impact can influence follower

perceptions of trust, equitable distribution of opportunities, and motivating behaviors.

Top manager purposes: The operational role of the top managers seen in their

goal setting and how they maximize profits. Purpose deals with why a top manager

behaves or acts in a certain way to achieve a desired organizational outcome. For their

purpose to be effective, it must be congruent with the organizational vision. For example,

the top manager who communicates and demonstrates the importance of transparency

and accurate record keeping may also have trust as their purpose. In this example,

purpose is consistent with the organizational vision of trust as seen in the top manager’s

ethical practices.

Top manager virtues: A leader who is moral, principled, promoting characteristics

of collective and individual greatness. A virtuous and authentic leader was often applied

synonymously to ethical leadership within the existing literature. Authenticity was

another leadership attribute frequently found in the literature. Its use in this context

referred to one’s internal self-cognizance, or their clear personal awareness, and their

controlled actions such that they aligned with their personal value system (Avolio &

Gardner, 2005; May, Chan, Hodges, & Avolio, 2003). Walumbwa, Avolio, Gardner,

Wernsing, and Peterson (2008) provided that leader authenticity was a “pattern of leader

behaviors” that “promotes a positive ethical climate, to foster greater self-awareness, an

internalized moral perspective…and relational transparency on the part of leaders

working with followers” (p. 94). Authentic leaders who act with integrity provide a basis

for the virtuous leader.

Integrity and authenticity were also often related and frequently found describing

the virtuous leader (Lawton & Páez, 2015). A leader who behaves morally, making

consistent decisions that are aligned with espoused beliefs and who acts within the laws

and codes that govern their industry was said to have integrity. It was recognized cross

culturally as a fundamental feature of ethical leadership (Resick, Hanges, Dickson, &

Mitchelson, 2006).

References to the practices, purposes, and virtues variables were commonly used

by researchers who have also argued that they collectively demonstrate important

contributions to study of ethical leadership. For the present work, these terms were

groups and examined individually as mediating variables that impact the relationship

between top managers’ ethics levels and financial outcomes of the organization.

Top managers: Executive level leaders, including the chief executive, president,

and vice president or similar organizational title. They are individuals responsible for

setting the vision for their organization or division, and they are responsible for creating

expected standards and developing a culture that supports it. They are responsible for

their organization or division performance and the successful achievement of its stated

mission.

Top managers of global pharmaceutical companies were responsible for directing

a major segment of the world’s economy with a projected value of $1.12 trillion in 2023

(Evaluate Pharma, 2018). The international pharmaceutical industry is vital to global

health as it develops, manufactures, and distributes lifesaving medicines to individuals in

countries around the world. The pharmaceutical industry’s growth in new product

development has helped to eradicate epidemics and effectively treat diseases previously

untreatable, extending lives and improving the quality of life promoting the health of

society.

Assumptions

As the ethics of leadership has become a bigger public concern, it has also been a

priority for the pharmaceutical industry both in the United States and globally. Many

international pharmaceutical organizations are instituting programs to introduce and

inspire a culture of ethics, however, many compliance executive’s express dissatisfaction

with the results (Vamvoukaki, 2019). Activities including training programs, placement

of internal ethics committees, employing leaders to embed a culture of ethical behaviors

as a standard, and hiring consultants specializing in ethics are some examples of how the

industry is responding. These measures are taken for the purpose of building and

improving the ethical behaviors of members of the organization, and they are assumed to

result in a positive impact on the bottom line. Recent literature has supported the position

demonstrating a positive correlation to ethical leadership and financial performance (Shin

et al., 2015). These results, however, are limited and not globally represented. Company

leaders have expressed their desires to understand the types of ethics and compliance

programs that result in improvements in their financial outcomes (Vamvoukaki, 2019).

In the global pharmaceutical industry, drug research and development are critical

for the sustainability of many organizations. The process requires top managers to accept

a significant level of risk in bringing new products to market. Where there are risks in

drug development, there are often high returns for investors. This possibly contradicts the

goal for top managers of mitigating risks while maximizing shareholder return on

investment. It is implicit that highly ethical top managers leading ethical organizations

will result in higher financial profits. However, in organizations where top managers

emphasize ethics over financial performance, the results could lead to diminished

financial performance, resulting in a confounding outcome. This may be particularly

important in the pharmaceutical industry, where the regulatory oversight required of

pharmaceutical manufacturers emphasizes compliance and levies heavy punishments on

top managers whose organization is implicated in wrongdoing. Organizations that

express the importance of ethics as a part of their corporate culture may inadvertently

create an unresponsive and risk averse climate where new product development is

impeded. Top managers must develop an expectation of ethical responsibility while

encouraging and assuming risks that maximize stakeholder value.

An antagonistic view is depicted in the literature when pharmaceutical companies

are accused of profiteering at the expense of patients, and their leaders are often

suspected of mismanagement. Compounding this concern is seen when these same

leaders are celebrated for their organizational performance and are encouraged to drive

up profits and the company’s stock price and then receive a large performance bonus

when they accomplish the task. One must question the associations to the (un)ethical

behavior of the leader and what this reveals about the effect on leaders when

organizations emphasize financial performance to the detriment of ethical behavior. This

demonstrates that ethical leadership may sometimes lead to underperformance, and

unethical leadership behavior may lead to improved financial results.

Scope and Delimitations

Levels in leadership ethics are a central concern when examining relationships

that impact an organization’s financial results. By distinguishing the levels of leadership

influence, researchers observe that the top manager instills their vision for the

organization, including their ethical expectations and demonstrating ethical leadership

behaviors that form the norms and accepted behaviors. The argument presented in the

literature assumes that top managers establish and reinforce the ethical expectations and

that their influence permeates and trickles down through the organization (Byun, Karau,

Dai, & Lee, 2018; Wang, Xu, & Liu, 2018; ). In this research, I underscored the

importance of the relational influence of the ethical leadership of top managers on their

organization and its performance.

The mid or lower tier manager’s leadership impact is unique from that of the top

manager, and for this reason was excluded from consideration. I rationalized that a lower

tier leader’s actions are based on the direction and demonstrated behaviors of the top

manager. The influence of lower tier managers on followers is limited to a smaller unit of

individuals within the larger organization. Their ethical leadership behaviors are observed

and perceived by their followers; however, this reflects the top manager’s ethical

leadership. Additionally, the functional role of mid or lower level managers is focused on

the daily operations of the organization. They are responsible for supervising their team’s

production activities, delivery schedules, staffing requirements, and sales and marketing.

Their impact on the organization’s financial performance is limited to their locus of

control.

Limitations

The examination of leadership ethics of top managers in a global setting presents

different challenges for researchers. As described previously, pharmaceutical companies

of various sizes with the potential for operating in multiple countries, and their top

managers were the target study population for this dissertation. Access to study

participants and company information was a concern, and in many instances, was

difficult to obtain. Ethics may have been a sensitive topic for some leaders and

organizations where companies have been fined or publicly criticized for violations.

Additionally, due to the highly technical and sensitive nature of research and

development and trade secrets within the industry, providing access to information to

outside parties was restricted. Working to engage top managers in this setting required an

adequate explanation of the research and transparency when responding to questions to

allay subjects’ concerns. Restricted access to top managers whose contribution to the

topic or controls put in place to protect company data due to trade secrets may have had

an impact on the conclusions of the research, leading to inconclusive or erroneous results.

Some countries laws may also hamper information sharing. In instances where

industry leaders are based in countries where data are guarded or not available to the

public, attracting top managers to participate was unlikely. Other leaders may have been

concerned that openly discussing ethics puts them or their organization at risk of public

criticism or penalties from regulatory bodies to whom they are held accountable. The

relative size of the organization may also have limited access to leaders or data. Smaller

companies with fewer personnel who serve multiple functions may have found it difficult

to participate in this type of research project that they perceived to be a distraction from

their responsibilities. Alternatively, larger organizations may have filtered

communications reaching top managers, making a request for participating difficult. In

each scenario, the possible pool of participants was made smaller and further added to the

challenges recruiting top managers. As described, access to top manager participants and

the limitations of target subjects willing to respond to the research questions was a

concern as each possible limitation may have biased the results of my research.

Significance

An evaluation of the literature regarding the ethical leadership construct and

research presented in reports based on various models helped to inform the research

design in this study. Specifically, the study design allowed for an improved examination

of ethical leadership that was distinguished between leadership levels for organizations in

a global setting. In past studies, researchers have often employed strategies that viewed

ethical leadership from a collective perspective, overlapping different organizational

leadership tiers including midtier managers, directors, and senior executives into one

measurement. For example, in a study of American companies, researchers found that

56% of U.S. employees had observed misconduct at work including lying to constituents,

abusive behaviors, stealing, misrepresentation of vital reporting activities, and sexual

harassment (Mayer et al., 2010). By investigating ethical leadership based on

organizational leadership levels and the relation to organizational financial performance,

new insights were revealed. The previously described, the 2016 Global Business Ethics

Survey demonstrated the value of this strategy when examining ethical leadership by

differentiating leader misconduct from followers based on the nature or the type of

offense. Isolating top manager’s leadership ethics, I anticipated that distinct perceptions

would be identified.

Scientific literature reflecting contrasts between the ethical behaviors of various

levels of leadership was limited. Researchers have begun to classify top manager ethical

behaviors that are positively linked to organizational financial performance (Shin et al.,

2015). Top management executives’ influences are “trickled down” indirectly through

midlevel leaders who then demonstrate expected behaviors (Mayer et al., 2009), applying

rewards and punishment as tools for directing the desired behaviors (Mayer et al., 2012).

However, past designs have addressed ethical leadership as a collective and that these

strategies overlook that the leader’s level of influence is related to their proximity to

followers. A concentrated investigation of ethical leadership, its antecedents and

outcomes, specific to the top manager, or high-ranking organizational leaders (e.g. CEO,

chief financial officer, president) in global organizations provides fresh perspectives on

ethical leadership. Supporting this argument, Shin et al. (2015) emphasized the top

manager strategy and contended that there is a gap in the data regarding ethical leadership

from the view of top managers and their relationship to organizational performance:

“Previous research on the topic rarely examines the relationship and linking mechanisms

between top management ethical leadership and organizational performance” (p 43).

Combining levels of organizational leadership, Walumbwa et al. (2011) studied

organizations in China and demonstrated that ethical leaders who have positive leader

member exchanges with employees enhanced organizational performance. Their findings

have been challenged by more recent research, which argued that the measure of ethical

leadership employed was confounded by other measures, making it difficult to interpret

and generalize results (Yukl, Mahsud, Hassan, & Prussia, 2013). Shin et al. (2015)

researched ethical leadership in a variety of industries in Korea and found that

statistically significant predictive relationships exist between organizational ethical

climate established by leaders and organizational outcomes.

Scholars have recently argued that the complex nature of ethical leadership

requires a more holistic approach. Additionally, as ethical leadership research expands,

emphasis must also be placed on research designs that address the topic from the lens of

different countries and cultures. In line with the study purpose, I examined global ethical

leadership dimensions of top managers within the pharmaceutical industry and the

relationship to organizational financial performance. This study contributes to the

empirical data by limiting the research subjects to top managers and their organization’s

financial performance, adding an international context that illuminates differences based

on the top managers leadership practices, purpose, and virtues.

Where past researchers studied ethical leadership as a unidimensional construct

and within the framework of existing leadership theories, current researchers have argued

for the necessity to explore it as independent construct with multiple dimensions (Mayer

et al., 2012). Dominant theories on the topic have progressed from the singular

examination of ethical leadership behaviors and the impact on follower outcomes to

include ethical leadership as a distinct conceptualization (Mayer et al., 2012; Shin et al.,

2015; Wang et al., 2017). Kalshoven, Den Hartog, and De Hoogh (2011b) contended that

ethical leadership is a multidimensional construct, and this position was supported by

Wang et al. (2017), who argued that unidimensional models were inadequate for

examining the subject. The researchers’ views support the argument favoring the

identification of important dimensions of ethical leadership as well as examining

mediating influences that effect follower behavior and organizational financial outcomes

and that lead to unethical leadership behaviors. Lawton and Páez (2015) proposed a

three-dimensional model connecting leadership practices, purposes, and virtues often

found in extent ethical leadership literature. Their model shifts the emphasis from

leadership traits, which were thought to be inherent to the leader and were often the focus

of early leadership research, to leadership behaviors and actions (Lawton & Páez, 2015).

The strategy allows for consideration of influences on leaders, such as cultural, political,

social, and organizational norms (Hanson et al., 2017). In this study, variables that

comprised the three-dimensions were examined as mediating effects impacting the

relationships between ethical leadership of top leaders and organizational performance.

The social implications for this study are significant. In the context of recent

national outrage brought on by the unprincipled behaviors of leaders in governments and

in different industries, it brings center stage the negative effects that unethical leadership

can have on organizations, their employees, and society. Compounding the concern is

globalization where companies are moving into international markets. In such instances,

ethical leadership may be perceived differently, requiring greater support for leaders of

global enterprises. Understanding complex relationships between ethical leadership to

organizational performance is vital for leaders. By expanding the scientific knowledge,

one might expect improved organizational performance, amended policies leading to

enhanced leadership standards, and greater trust and approval by the society.

Summary

In the following chapters of the dissertation, I review the relevant ethical

leadership literature that provides support for the argument that a gap in the literature

exists, leading to an important need for further development of scholarly research and

new insights. I anticipated to advance the understanding of the relationship between

ethical leadership and organizational financial performance, isolating the effect of top

managers in a global industry. I present a rationale for social learning and social

exchange theories as framing for the research design. Future chapters provide the

argument as to why this study was needed and a research plan that outlines the

quantitative methods that were employed. Finally, I also present the different instruments

that were applied for testing the hypotheses and the unique results followed by

conclusions developed through the empirical designs.

Chapter 2: Literature Review

Introduction

Leadership theorists throughout the 20th century have described leadership

attributes that involve ethical dimensions. Where there is a wealth of philosophical

writings on leadership and business ethics, there are few present-day philosophers who

have written about leadership ethics (Ciulla et al., 2018). Researchers exploring the role

of ethics in leadership provide useful definitions and nomenclature (Lawton and Páez,

2015); however, it is argued that the extent research has been “anecdotal and

…normative” (Mihelic et al., 2010) and that social sciences lack empirical evidence

regarding ethical leadership dimensions (Brown et al., 2005a). In the literature, several

theoretical perspectives and models have been emphasized by researchers, including

transformational leadership (Bass, 1985), authentic leadership, situational leadership

(Tannenbaum & Schmidt, 1986), servant leadership (Greenleaf, 1977), and leader-

member exchange (Dansereau, Graen, & Haga, 1975). Many have served as frameworks

in leadership inquiry, where researchers have identified traits including honesty, trust,

respect, and principled leadership, and these traits were thought to encompass ethics.

Leadership scholars have argued, however, while these theories incorporate ethical

features, they fail to adequately deal with the complex multivariate nature of the ethical

leadership construct (Mayer et al., 2012). Contemporary philosophers have argued that a

more intricate and more distinct comprehension of ethical leadership is needed (Ciulla et

al., 2018). Reflected in the review of the literature is a necessity to examine ethical

leadership as an independent construct to better classify relationships between its relevant

antecedents and outcomes such that organizations can affect change through enhanced

training, hiring of leaders, and policies.

I begin this chapter by discussing existing themes found in the literature where

researchers have examined ethical leadership. I review applications of the various

theories used by scholars to research the subject, identifying their arguments and gaps

supporting the purpose of this dissertation. I also describe the holes in the extent literature

in addressing the multivariate dimensions of ethical leadership. I then discuss the social

learning and social exchange theories as superior framing for the examination of ethical

leadership research. These theories are presented as uniquely relevant from those found

in the literature discussing ethical leadership, positioning them as more suitable for

examining the question presented.

Literature Search Strategy

My strategy for conducting the literature searches for this chapter involved

multiple approaches. I began by exploring the Walden Library to conduct much of my

research using the search tools and resources available. These included examining peer

reviewed journals, along with books and articles on the topic. Several other dissertations

were also found to be useful. To expand my search, topics were selected from general

and commonly used terms with the Google Scholar search engine to identify relevant

peer reviewed literature. Finally, examining the journal references for more relevant

literature, I was able to expand my search into the foundational works that were

frequently referenced in multiple journals and used to formulate the ethical leadership

theory. The literature was then catalogued using the Zotero reference management tool.

Relevant search terms were identified and narrowed based on the productivity of the

searches and relevance to the topic.

The Walden University and Alpharetta County libraries were the primary sources

of literature. Thoreau Multi-Database, Business Source Complete, SAGE Journalism,

SocINDEX, Academic Search Complete, Education Source, and Complementary Indexes

were the databases used for conducting the literature review search. These databases

provided a significant number of journals and relevant books. The database search was

limited to current journals between 2013 to 2019. I also restricted the literature search to

peer-reviewed journals. Some of the articles and seminal works, which provided

important historical context, are also reflected in the literature review.

Search terms included leadership, ethics, global ethics, pharmaceutical

leadership ethics, ethical leadership theory, leadership theories, authentic leadership,

transformational leadership, servant leadership, situational leadership, social learning,

social exchange, and leadership behaviors and traits. As described in Chapter 1, ethical

leadership theory is underdeveloped, and only a small number of resources discussing the

topic were found supporting the argument put forth in this paper, showing that additional

scholarly empirical research was warranted.

Theoretical Foundations

Ethical leadership theory is distinguishable from other leadership theories. This

position is supported by leadership scholars who have noted that such theories as

transformational, authentic, and transactional leadership identify ethical leadership

dimensions included within the broader ethical leadership construct (Brown & Treviño,

2006; Mayer et al., 2009; Zhu et al., 2015). Brown et al. (2005a) claimed, “Little has

been done to systematically develop an ethical leadership construct necessary for testing

theory about its origins and outcomes” ( p. 118). To effectively examine dimensions of

ethical leadership, the strategy employed in this research followed Wang et al.’s (2017)

recommendation to treat ethical leadership as an independent construct and distinct from

generalized business ethics.

To begin, I review the current theoretical models that have been applied by

researchers when examining ethical leadership. I describe the rationale for their

application and then illustrate some of the advantages and disadvantages for each. The

various instruments that have been applied by scholars are discussed in the following

outline. Many of the research strategies used in past earlier research provided significant

insights aiding in shaping the investigation of ethical leadership in this study. However,

interest in ethical leadership by psychologists and scholars is relatively new, and many

have argued that there are significant gaps on the understanding (Zhu et al., 2015).

Finally, I explain the choice of social learning theory (Bandura, 1977) and social

exchange theory (Blau, 1964) as the framing for this investigation.

Conceptual Framework - Ethical Leadership Paradigm

In 2000, Treviño, Hartman and Brown conducted controlled qualitative interviews

with executive leaders and corporate ethics officers. From their research, they developed

a two-pillar model of ethical leadership including the “moral person” and the “moral

manager” (Treviño et al., 2000, p. 128). The moral personal traits include honesty,

integrity, and trustworthiness; principled fair decisions; and a social concern. The moral

manager models appropriate behaviors, and they communicate regularly regarding ethics

and values, holding followers accountable using rewards and discipline to reinforce

appropriate ethical behavior (Zhu et al., 2015). Treviño et al. (2000) revealed that a

leader’s individual traits (integrity, trustworthiness, honesty), observable behaviors

(doing the right thing), and decision making (emphasis on values, fair, social concern)

serve to shape follower perceptions and that being a moral manager involved

organizational member perceptions that the manager was an ethical role model,

communicating consistently about what ethics means to the broader organization, setting

the expectations regarding ethical behavior, and treating everyone equally and

accountable.

The examination of antecedents to ethical leadership has also proven important

for developing a deeper understanding of the influences affecting a leader’s ethical

behaviors. A leader’s moral identity symbolization and moral identity internalization

were demonstrated to have a positive relationship to ethical leadership (Mayer et al.,

2012). Mayer et al.’s (2012) findings supported previous research by Aquino and Reed

(2012), and they concluded that a leader’s moral identity is a predictor of ethical

behavior. Furthermore, their findings demonstrate where a leader’s moral identity and

ethical behavior serve as important predictors of ethical organizational outcomes (Mayer

et al., 2012).

Theories in the contemporary literature surrounding the subject continue to

emerge and shift the focus from examining ethical leadership traits and how ethical

leaders should behave and act to leadership in practice and the examination of

antecedents and outcomes (Grandy & Sliwa, 2017; Kalshoven, Den Hartog, & De Hoogh,

2011a). Leadership scholars interested in ethics have traditionally taken a “prescriptive

approach” (Mayer et al., 2009), identifying ethical leadership traits and presenting

systems or programs that may serve as designs to advance organizational ethical

leadership practices. This strategy, however, fails to recognize precursors of ethical

leadership and highlights a gap in the literature. A leader’s behaviors are present

throughout the organization, and the standards set by their leadership are crucial for

creating the ethical culture (Mihelic et al., 2010). Virtuous leader behaviors that are

embodied in the daily practices and espoused purposes of their actions are thought to

relate to ethical leadership; however, in the present study, I sought to examine these

variables as mediators affecting organizational financial performance. The following

discussion outlines the various frameworks that have been applied by researchers

examining ethical leadership and the rationale for selecting social learning theory and

social exchange theory as the framing for this dissertation.

Literature Review Related to Key Variables and Concepts

Ethical leadership has been examined through many theoretical lenses, and

several of them provide compelling foundations for their application as framework for

studying ethical leadership. Transformational and transactional (Kalshoven, Den Hartog,

& De Hoogh, 2011c) charismatic (Bass & Avolio, 1997) leadership theories have often

served as the basis for many of the historical studies; however, there is debate among

scholars as to the ideal framing. Kalshoven et al. (2011a) demonstrated the lack of

correlation between ethical leadership and transformational leadership. Burns (1978)

argued that moral leadership encompasses transformational and charismatic leadership

principles, while other scholars have identified spiritual and authentic leadership as

principle theories (Brown & Treviño, 2006). Lawton et al. (2015) argued that there are

three over lapping leadership dimensions, including leader practices, purposes, and

practices that serve as a model for an integrative approach to research ethical leadership.

The debate among scholars regarding the subject illustrates a lack of consistency in the

results and therefore supports the need for additional research.

A critical aspect of the examination of ethical leadership is the optimal theoretical

framing. Past researchers have applied several leadership theories in their examination of

ethical leadership. I present a discussion of the dominant theories for framing the present

ethical leadership research. I present common themes and overlapping concepts among

the theories and their limitations. Many of the instruments used for measuring ethical

leadership, which are encompassed in research, are described. Finally, I discuss

arguments concerning the various instruments adding important considerations regarding

their use and outcomes.

Transformational Leadership

A dominant theory applied in ethical leadership research is the transformational

leadership theory (Burns, 1978). The ethical leader is central to transformational

leadership, although it is a broad concept where leaders consider the emotions, values,

ethics, and aspirations of followers, and where the leader attempts to make connections

with followers observing their needs, desires and ambitions, and acts as a change agent

motivating them to accomplish their aspirations and dreams (Northouse, 2016). Brown et

al. (2005a) also supported the argument that ethical leadership dimensions are rooted in

transformational as well as charismatic leadership domains. The transformational leader

can be morally inspiring for followers and to their organization, moving them to achieve

greatness placing emphasis on morals and values (Bass, 1985; Burns, 1978).

Later scholars argued that an alternate transformational model exists and that

leaders can be pseudo-transformational by motivating followers to act unethically or

immorally (Bass & Steidlmeier, 1999). Proponents of the transformational model

emphasized the moral aspects of leadership in addressing followers needs, arguing that

transformational leaders motivate followers by role modeling, and articulating a clear

vision helping them achieve more than expected, going beyond self-interests, and

encouraging followers to pursue higher level needs and social priorities (Bass, 1985).

Within the transformational leadership theory, Bass described pseudo

transformational leadership as the “dark side of leadership” which is “destructive” and

“unethical” leadership practices (as cited in Northouse, 2016, p. 339). Northouse (2016)

argued that scholars have emphasized the positive attributes of the transformational

leader, and that it is vital to understand the negative behaviors of the pseudo

transformational leader. Ciulla (2005) opined that leadership is far reaching and that the

immoral actions of an unethical leader have negative implications on numerous people.

Unethical leadership behaviors included dishonesty, self-serving, egotism, unquenchable

determination, irresponsible regard for their actions (Ciulla, 2005). In their research,

Schyns and Schilling's (2013) argued that the body of existing scientific evidence is

limited related to leader ethics, however, they demonstrated a positive correlation exits

between unethical leadership and counterproductive follower behaviors. To expand the

scholarly understanding of ethical leadership, I argue in favor of the view that one must

also consider the behaviors of the unethical leader and the relationship on organizational

performance.

There are criticisms regarding the transformational leadership model. While there

is much in the leadership existing literature that involved the transformational framework,

a lack of its application was found specific to top manager ethics. Opponents have argued

that transformational leadership lacks “conceptual clarity” considering multiple activities

and characteristics making it difficult to define parameters and measurements

(Northouse, 2016, p. 178). Kalshoven et al. (2011a) argue that different leadership

dispositions and attributes are important and affect leadership methods and core

leadership traits, emphasizing differences in transformational and ethical leadership.

Additionally, the theory handles leadership as a personality trait that leaders have rather

than leadership behaviors that are learned. Significant overlap with dimensions of ethical

leadership and transformational leadership exists (Zhu et al., 2015), yet the model

inadequately addresses the complex dimensions of ethical leadership.

A widely applied measurement instrument used for testing transformational

leadership is the Multifactor Leadership Questionnaire (MLQ). The instrument was

designed to measure dimensions of transformational leadership based on interview

responses from junior and senior leaders regarding their perceptions of leadership

behaviors (Bass, 1985). The MLQ was advanced by Bass and Avolio (1997) and the

instrument has gone through multiple iterations, refining its measures and improving its

validity (Northouse, 2016). Zhu et al. (2015) argues that the MLQ contains only one

question that measures the ethics of the leader. As such, the MLQ instrument is limited in

its capacity to measure the complex multivariate influences of leadership ethics and was

decided to be inadequate in the present study.

Authentic Leadership

Authentic leadership is a relatively new theory, and one which is likely to

continue to evolve and be enhanced with several variations in how scholars understand it

(Gardner, Avolio, & Walumbwa, 2005; Northouse, 2016; Walumbwa et al., 2008).

Dimensions of the authentic leader construct, as conceptualized by Gardner, Avolio,

Luthans, May, and Walumbwa (2005), and Ilies, Morgeson, and Nahrgang (2005)

emphasized the leader’s intrapersonal self-concept, self-knowledge, self-awareness, and

the leaders behaviors. They also stressed the leader’s interpersonal perspectives, and the

relational viewpoint between a leader and their followers. Morgeson and Nahrgang

described the developmental concerns of the leader who nurtured their relationships with

followers. While I found different references fir authentic leadership in the extant

literature, Walumbwa et al. (2008, p 94) provided a consolidated definition used for this

dissertation.

A pattern of leader behavior that draws upon and promotes both positive

psychological capacities and a positive ethical climate, to foster greater self-

awareness, and internalized moral perspective, balanced processing of

information, and relational transparency on the part of leaders working with

followers, fostering positive self-development.

The authentic leader is self-aware with personal insights of their impact on others,

and they can self-regulate their influences in a way that is beneficial to the development

of others and the organization. Authentic leaders possess an advanced, highly developed

internal moral compass built from personal experiences and standards which guide them.

Authentic leaders actively seek input from others and are able to analyze information in a

balanced and objective manner before making decisions (Northouse, 2016). Proponents

of the model have suggested that internalized moral dimension influences how the leader

behaves and that they act consistently regardless of societal or organizational pressures

(Zhu et al., 2015). Inclusion of the authentic leadership construct was relevant for

consideration in ethical leadership as it incorporates moral dimensions of individuals in

leadership roles and their effect on follower’s performance (Gardner, Avolio, &

Walumbwa, 2005). However, Northouse (2016) argued that the moral dimensions of

authentic leadership are not well developed and do not offer a complete explanation of

how they affect other leadership dimensions.

The Authentic Leadership Questionnaire (ALQ) (Avolio, Gardner, & Walumbwa,

2007), developed and advanced by Walumbwa et al. (2008), has been often applied by

researchers measuring authentic leadership. The instrument was validated cross-culturally

surveying participants sampled from the United States, Kenya and China adding to its

utility in providing generalizable results. The ALQ is comprised of 16 items measuring

the four factors of authentic leadership (Northouse, 2016). By design, the ALQ separates

the authentic leadership construct from other leadership theories including,

transformational, servant, leader-member exchange, and importantly, ethical leadership

(Walumbwa et al., 2008). I found significant overlap in the ALQ measures relevant to the

present study, however, important limitations concerning its application were observed.

Of the leadership dimensions tested, only four items measuring internalized moral

perspectives related to ethical leadership, and it is inadequate to account for the many

dimensions that encompass ethical leadership (Zhu et al., 2015). Additionally, the ALQ is

a self-assessment tool designed to help the subject identify their own level of authentic

leadership and it is not intended as a research instrument (Northouse, 2016). Because of

the limits in the authentic leadership construct and constraints in the ALQ, they are

unacceptable for the present research.

Servant Leadership

The servant leadership construct is the third framework frequently referenced in

ethics related research on leadership (Zhu et al., 2015). Servant leadership was first

conceptualized by Greenleaf (1970) who also continued to expand on his ideas by

defining it and providing context for his ideas found in source literature (Greenleaf,

1977). The theory’s relevance to the topic was founded in the viewpoint that servant

leaders are first and foremost ethical, leading in ways that serve their organization, the

community, society, and others (Northouse, 2016). Additional scholarly contributions

have been made by researchers who improved the theory identifying major characteristics

of the servant leader (Barbuto & Wheeler, 2006; Dennis & Bocarnea, 2005; Laub, 1999;

Sendjaya, Sarros, & Santora, 2008; Spears, 1998, 2002; van Dierendonck & Nuijten,

2011; Wong & Davey, 2007). Personal traits of integrity and honesty reflected

dimensions of the moral person, and modeling behaviors aligned with moral manager

dimensions of ethical leadership (Zhu et al., 2017, 2015). There were opposing views

among scholars found, some of whom maintained that the servant leadership attributes

were still theoretical, requiring more empirical evidence validating the theory (Northouse,

2016; Zhu et al., 2015).

Following Greenleaf’s introduction of servant leadership, various efforts were

made by researchers to develop suitable scales for measuring servant leadership attributes

and characteristics. In their work to construct an instrument useful for measuring servant

leadership, Barbuto and Wheeler (2006) provided a scale that measured five factors of

servant leadership. However, only one (altruistic calling) was associated with dimensions

of ethical leadership (Zhu et al., 2015). The Servant Leadership Questionnaire (SLQ)

(Liden, Wayne, Zhao, & Henderson, 2008) was a validated multi-dimensional instrument

that measured seven factors aligned with servant leadership. The instrument proved

useful in measuring servant leadership and drawing contrasts between transformational

and leader-member exchange models of leadership (Barbuto & Wheeler, 2006). The SLQ

is a 28-question survey testing seven factors comprising servant leadership. Relevant to

the present study, however, only one factor (behaving ethically) reflected in four

questions, aligned with ethical leadership, limiting its capacity to measure the multiple

dimensions of ethical leadership (Zhu et al., 2015). It is for this reason, the SLQ was

deemed not an appropriate survey instrument to answer the research question which were

posed in this dissertation.

Situational Leadership

Situational leadership (SL) is not a leadership theory, rather it is a popular

prescriptive design program which was found discussed widespread in current leadership

literature and applied in many corporate settings. In the program, models of leadership

behaviors that were trained in courses designed to advance positive organizational

outcomes were discussed. Many of the leadership behaviors I found in the model were

consistent and overlapped with the ethical leadership construct. The SL model, originally

developed by Hersey and Blanchard (1969), has gone through multiple iterations

(Blanchard, Zigarmi, & Nelson, 1993; Hersey & Blanchard, 1977, 1988, 1993), and has

been implanted in leadership training at major organizations including pharmaceutical

manufacturers pertinent for the present study.

The SL model was developed as a contingency leadership model that considered

the developmental maturity level of followers, aligning the optimal leadership style best

suited to support the individual follower. Required of the leader was their ability to adjust

their leadership style that they applied with each individual team member considering

their development level. The SL model entailed the identification of the follower’s

developmental maturity level based on their competencies and commitment. Leaders then

adjusted their approach in an aligned manner based on the needs of the follower. The SL

model emphasized the leader’s ability to control the style of leadership they applied in

different situations (Northouse, 2016).

Several instruments have been developed to support the SL model and were often

used to appraise the needs of teams and individuals. The Situational Leadership

Questionnaire (SLQ) was found to be a popular instrument by researchers. Participants

were asked to reflect on different situations from their work environment, and then

selected their favored leadership style from various options (Northouse, 2016). The SL

model’s popularity was due to its clarity, ease of use, and the prescriptive guidance given

to leaders based on their assessment of followers needs. Many organizations have

implemented the SL model program as part of their leadership training.

There were several important criticisms of the SL model identified. For example,

leadership scholars argued that the model did not explain the theoretical connections

between the commitment of followers and their level of development within the model’s

four developmental quadrants (Graeff, 1997). Additionally, even though the SL approach

improved performance (Northouse, 2016), subsequent studies failed to replicate the

results or support the leadership assumptions proposed by the authors (Fernandez &

Vecchio, 1997; Vecchio, Bullis, & Brazil, 2006). Furthermore, there was a lack of

published scholarly research supporting the model’s proposals (Northouse, 2016) and

scholars argued against the validity of the SL design (Fernandez & Vecchio, 1997;

Vecchio et al., 2006) suggesting little practicality of the model’s methods (Vecchio et al.,

2006). Because of the criticisms and gaps in scholarly support of the SL model, it was

judged unsuitable for the examination of ethical leadership in the present study.

Social Learning Theory

Brown et al., (2005b) were first to examine ethical leadership through the lens of

social learning theory. Advocates for social learning theory argue that within the leader-

follower relationship, followers learn from leaders who role model “activities which

serve as guides for appropriate performances” (Bandura, 1977, p. 24). Mayer (2009)

provided that where there are role models, members strove to emulate their behaviors.

Individuals who command attention, such as top organizational leaders, are attractive to

followers, and set acceptable codes of conduct. Organizational members observe the

leader’s behaviors and practices and are influenced to behave in a similar manner. The

leader employs methods that increase awareness and understanding of the acceptable

conduct, along with communications such as written and visual references designed to

enhance recall, and rewards appropriate behavior and punishes deviant behaviors to

motivate organizational compliance. Drawing on social learning theory (Bandura, 1977),

researchers have demonstrated positive relationships between ethical leaders and their

influence on followers who exceeded expectations to achieve organizational goals

(Podsakoff, Ahearne, & MacKenzie, 1997; Podsakoff, MacKenzie, Paine, & Bachrach,

2000). Their results demonstrated that follower and organizational behavior is positively

related to ethical leadership, thereby leading to improved organizational outcomes.

Three processes have been demonstrated to be involved in modeling behaviors

(Bandura, 1977). Within any social group, certain individuals are perceived as attractive

to followers, more influential, and capture the attention of others identified as the

attentional process. Brown et al. (2005b) argued that leaders became attractive through

engaging behaviors and actions, and through demonstrated expected ethical behaviors.

Leaders must first establish an ethical cultural climate through virtuous examples. They

then reinforced modeled ethical behaviors through symbols designed to stimulate recall

of expected behaviors referred to as the retention process (Bandura, 1977). Through

repeated exposure to the symbols, followers recall expected behaviors and then begin to

emulate the leader’s modeled behaviors. The third process, motor reproduction, involves

leader-follower feedback which reinforces and motivates followers to align their

behaviors. The present study proposed that each of the processes overlap and are

represented by the mediating variables identified within the proposed model.

The ethical leadership scale (ELS), an instrument created and validated by Brown,

et al. (2005b) has been used by scholars as they examine ethical leadership. Applying the

ELS, the researchers found instrument reliability measuring many of the broad

dimensions of the ethical leadership construct with leadership behaviors including

integrity, fair treatment of followers, and holding employees accountable for ethical

behavior (Brown et al., 2005a). For many scholars, the ELS has been useful when

measuring ethical leadership from the perspective of the follower. However, the aim of

this project was to examine ethical leadership from a multi-dimensional perspective and

in the context of a global organization. The ELS is a unidimensional scale that is limited

in its capacity to measure the different antecedent’s multiple factors involved in ethical

leadership. It fails to capture the multidimensional aspects of ethical leadership

adequately for purposes of the present study.

Social Exchange Theory

Another theory used for the examination of ethical leadership is the social

exchange (SE) theory. The SE theory, conceptualized by Homans (1958) was advanced

by other researchers including Blau (1964). The theory emphasized the social interactions

and the exchanges of value that take place between people. In an organizational setting,

the leader-member exchange represents a dyadic relationship between the leader and

follower. Exchanges also occur in groups and are more accurately represented in the SE

theory. Aligning with Kohlberg's (1984) moral development model, the social exchange

and social learning theories overlapped with key aspects of the model. Kohlberg argued

that there are three dominant stages of moral development including the (a)

preconventional morality level where people develop morally by being obedient for fear

of punishment, and they make moral decisions based on exchanging value in self-

interests mirroring concepts found in the social exchange theory. Level two, called

conventional morality, identified social learning, arguing that individuals make moral

decisions based on conforming to social expectations because it is what is expected of

them. The postconventional morality level, the third level, claimed that people are moral

because it is what is best for everyone. Many concepts found in Kohlberg’s model were

consistent with the SE theory. For example, people sought rewards and avoided

punishment, and relationships between leaders and followers were interdependent.

Organizational leaders are dependent upon the commitment of followers to

accomplish the operational mission, while followers apply their labors to earn an income

forming a symbiotic relationship. Leaders leverage rewards that encourage ethical

behaviors and apply penalties for inappropriate behaviors. The SE theory held that people

anticipated and acted on potential future rewards received through their exchanges (Blau,

1964). Finally, (Walumbwa et al., 2011) argued the social learning and social exchange

theories have been widely used and highly useful theories. Based on the previous

descriptions of social learning and social exchange theories, the present study applied

these theories as framing and sought to add to the understanding of ethical leadership and

its influence on organizational financial performance.

Ethical Leadership Traits

Global Cultural Influences

Important considerations involving cultural influences and their related impact on

leaders have been demonstrated as important considerations for researchers studying

ethical leadership in global organizations (Kalshoven et al., 2011c). Societal and cultural

norms, and the organizational climate were proven as significant dimensions having

influenced leadership ethics (Kalshoven et al., 2011a). Resick et al. (2006) argued that a

society’s culture reflects unique differences in values and feelings regarding ethical

leadership issues. Cultural variances have presented challenges for researchers interested

in different global perceptions of leadership ethics and in developing empirical strategies

for studying the subject.

The Global Leadership and Organizational Behavior Effectiveness (GLOBE)

project examined cultural influences on leaders (House, Javidan, Hanges, & Dorfman,

2002). In the GLOBE project, House et al. (2002) conducted a multinational survey of

middle managers representing 825 different organizations. Their results supported the

argument of regional and organizational cultural clusters that influenced how leaders

acted and behaved, and how their perceptions of effectiveness by followers were formed.

The data from the GLOBE project has had a significant influence on leadership research,

however, there was no direct examination of ethical leadership in the GLOBE project.

Mihelic et al. (2010) supported the argument that leaders demonstrate different practices

that are connected to their organizational or societal culture. The current cultural

literature on leadership reflects gaps in the understanding of global differences in the

relationships present in ethical leadership and organizational financial performance.

Variables Influencing Perceptions of Ethical Leadership

Examination of ethical leadership and the relationship to organizational

performance is central to the present study. It is not enough to be a good leader in the

moral sense, leaders must also be effective tactically. After all, leaders are put into place

for the very purpose of directing the organization towards achieving the mission. A body

of scholarly literature exists that have identified different ethical leadership traits and

behaviors that have been consistently demonstrated as positively correlated to

organizational performance. The overlapping of many common ethical leadership traits

and characteristics, verify that specific dimensions exist (Lawton & Páez, 2015). It is

vital in advancing our understanding of the role of ethical leadership to the relationship of

organizational financial performance by distinguishing differences in variables identified

as most relevant to the topic.

Over the past decade, researchers have studied a variety of concepts aligned with

ethical leadership. Scholars have debated over a variety of leadership traits and behaviors,

and many were found in the literature and are presented. Kalshoven et al. (2011a)

examined Goldberg's (1990) big five leadership personality traits (extroversion,

conscientiousness or dependability, agreeableness, emotional stability, and culture or

intellect), and found that only two, conscientiousness and agreeableness, were statically

correlated to ethical leadership.

Relative to this study, I argued that ethical leadership is complex and involves

overlapping ideas and concepts. For example, virtuous leadership, including integrity

and authenticity, were found in past research and often described ethical leadership.

Lawton and Páez (2015) recommended that researchers should examine leader virtues

including integrity and authenticity, along with leader practices and purposes when

examining ethical leadership. Lawton and Páez proposed a three-dimensional model for

examining ethical leadership which incorporated leader virtues along with leader

practices, and purposes. Their three-dimensional model intersects with five principles of

ethical leadership presented by Badaracco and Ellsworth (1991) which encompassed

leadership practices including respect for others, serving others, and building community,

as well as, leader virtues. Burns (as cited in Northouse, 2016) argued that leaders

demonstrate ethical practices in several ways. Leaders establish respect for followers by

listening and perceiving them as individuals with unique values and personal goals,

treating them with empathy, confirming their beliefs, demonstrating fairness in how they

allocate resources, provide opportunities, and administer rewards and discipline.

Serving others is a fundamental trait described by many leadership scholars. A

vital task of leaders is to serve others through their vision and how their vision shapes the

organization (Northouse, 2016). Senge (as cited in Northouse, 2016), maintained that

ethical leaders serve followers by establishing and stewarding an ethical vision for the

organization that is greater than themselves and that followers embrace.

Leader purposes are addressed by how leaders build up their followers and the

community they serve. An ethical leader reveals their purpose through their concern for

others and the social issues that they emphasize and support. Purposeful ethical leaders

do not impose their will, rather they seek a common goal that is agreed upon by the

leader and their followers. For the ethical leader, a common purpose is larger than the

individuals involved. A common ethical leader purpose includes a concern for

community, and it benefits all parties. Ethical leadership demands that the leader’s

purpose includes consideration of commonly agreed upon goals with a higher moral

purpose (Northouse, 2016).

This study followed the Lawton and Páez 's (2015) assertion of the utility of a

three-dimension model for studying ethical leadership. I examined the relationship of

leadership virtues, practices, and purposes as mediating variables and their effect on the

relationship between top managers’ ethics levels and organizational financial

performance.

Ethical Leadership Descendant

Financial Outcomes

There is a dearth of relevant evidence that describes relationships with top

managers ethics and the organization’s financial performance. A common challenge

researchers face as they examine the effects of ethical leadership is identifying how to

consistently measure financial performance (Suriyankietkaew & Avery, 2016).

Suriyankietkaew et al. (2016) argue that a reliable measure of financial performance is

needed to consistently examine the relationship of ethical leadership to organizational

financial outcomes achieving generalizable results. Scholarly interest regarding

(un)ethical leadership at a global level continues to encourage researchers to test different

theories, however, few have examined its effect on organizational financial performance.

Supporting the argument, Wang et al. (2017) posit that “there is relatively little

exploration of how ethical leadership at CEO level influence firm-level performance” (p.

96). In a study of firms based in China, researchers examined the relationships of various

orientations of ethical leadership including leader humane, leader responsibility, and

leader sustainability orientations and found a positive correlation to the firm-level

financial performance (Wang et al., 2017).

Global differences in ethical leadership based on cultural perspectives, regional

variations where organizations are owned by governments, and different accounting

practices challenge researchers examining relationships seeking to identify results that

can be generalized. As noted earlier, many organizations have placed, sometimes at great

costs, programs and training designed to emphasize a desired culture of ethics.

Additionally, many top managers within organizations, are held accountable for meeting

both, the ethical goals and financial goals. It has been noted that a leader’s accountability

to these goals, may be in conflict, and pose significant challenges. Inappropriate

organizational priorities may be responsible for driving problematic outcomes. Executive

leaders who successfully deliver on financial performance goals that satisfy stakeholders,

may leave their organizations morally bankrupt if their sole measure of success is

financial results. Their ability to balance financial results with an ethical leadership

principle is critical.

An organizational leader’s emphasis on technical competence often conflicts with

the perspective of followers who prioritize integrity as important for their superior

(Hogan, Curphy, & Hogan, 1994). The conflict is supported by researchers who found

that executives must proactively establish their reputation as an ethical leader or risk

follower misperceptions of them as an ethically neutral or unethical leader whose only

priority was on organizational profits ( Treviño et al., 2000). Executive leaders set the

ethical climate for the organization and proactive and consistent communications should

be a part of an ethical leadership strategy. Shin et al. (2015) found a positive relationship

between top management leadership ethics and the culture of ethics in Korean

organizations. In the absence of visible leadership actions that align with the

organization’s priorities, followers develop their own behaviors and often assume the

bottom line takes precedence.

A variety of approaches have been taken by scholars to measure financial

performance with diverse results for each. Suriyankietkaew and Avery (2016) examined

organizational sustainability through the lens of leadership practices including ethical

leadership and the impact on increased profitable growth among other outcomes. The

authors examination, consisting of surveys taken by middle and front-line managers of

small and medium size enterprises (SME) in Thailand, found a positive correlation

between ethical leadership, as one of 23 sustainable leadership practices, and

organizational financial performance. The authors suggested, however, that because the

study was limited to Thailand, which they identify as a small developing country, and

with SME organizations, generalizing their results to more developed countries was

difficult (Suriyankietkaew & Avery, 2016).

For this study, identifying commonly accepted measures of financial performance

was important. Within the literature surrounding the global pharmaceutical industry, a

consistent and reliable financial measure was difficult to identify. As described earlier.

generally accepted accounting principles are accounting standards applied for corporate

accounting practices used to report financial outcomes in the United States and in many

countries. Other countries may be less stringent or apply different standards for

accounting practices or be motivated to present strong performance results to encourage

investors. Frequently applied financial performance measures of publicly listed

companies include sales revenues, capital expenditure, cash flow, net income, and profits

(Suriyankietkaew & Avery, 2016). These financial measures were often found in similar

research and served as the financial measures used, however, their continuity and

replicability in a global setting were often different and difficult to generalize. To address

this challenge, data gathered regarding top managers’ self-assessment of organizational

financial performance included questions regarding organizational net profits, sales

revenues, and controllable costs.

Pharmaceutical Industry

Exploring the literature surrounding leadership ethics in the pharmaceutical

industry reveals scholarly works that embody many of the leadership ethics elements.

However, they do not address the complexity of the ethical leadership, nor do they

provide adequate empirical conclusions that can be generalized. Many articles were

found that described (un)ethical behavior involving industry or corporate ethics (Shaw &

Whitney, 2016), marketing and promotional strategies (Mulki, Jaramillo, & Locander,

2009; Sismondo, 2013; Skandrani & Sghaier, 2016), industry sponsorship of clinical

trials (Steiner, 2008), and concerns over patient protection in underdeveloped countries

through contracted medical research (Adobor, 2012). Data found on top manager ethics

within the pharmaceutical industry was less prominent in the literature and not suitable

for this study. The scholarly works, regarding leadership ethics within the industry,

provided few useful comparative discussions. In an older case study presented by Bowen

(2004) involving one organization, antecedents to ethical leadership decision making

were examined and found to involve an organizational culture of ethics, collaborative

leadership, a global view towards innovation, a reward system for ethical behavior, and

an organizational commitment to the analysis of ethics. Kieke (2013) argued that a

pharmaceutical organization’s ethical culture is established by its board of directors, and

its practices and behaviors are then communicated from the board of directors to its

leaders, who must provide clear direction and alignment of rewards. Questions remain

about leadership ethics within the industry, and the broader application of results gleaned

from scholarly works.

There is an essential level of trust expected among pharmaceutical manufacturers

who invest in the research and development of medicines. Successful drug development

enables companies to marketing new compounds to health care providers who prescribe

them, and ultimately to patients who consume them. While a history of broken trust

exists, the industry has made efforts through the guidance of organizations like the

International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) to

self-regulate and to rebuild and uphold the trust (Shaw & Whitney, 2016). Along with

IFPMA Codes of Practice (IFPMA, 2012), new national codes including the

Pharmaceutical Research and Manufacturers of America healthcare provider interactions

code (PhRMA, 2008), and new rules regulating the global industry, reinforce the goal of

rebuilding trust. Codes and laws regulating the industry are thought to be appropriate and

serve as an important step, however, do not replace the need for ethical leaders.

Trends towards the globalization of the pharmaceutical industry demands

reflection for this research which are vital. The literature surrounding the topic provides

inadequate understandings and warrant additional investigation. For the industry,

globalization provides market growth opportunities, the potential for improving financial

results, and an improved capacity to invest in product development. It also brings about

important societal benefits including access to quality effective medicines to patients in

countries around the world. Pharmaceutical companies have grown market shares for

their brands by building a global presence over the past decade. With this effort many

new treatments have been made available to patients in countries where there are no

resources or capacity to develop and produce them locally.

Organizational leaders who press for global market sales must do so while

respecting the local laws and cultural ethos of the countries within which they operate. As

with other industries, pharmaceutical leaders of global organizations establish the culture

and ethical standards expected for operating internationally. In a United States based

study, researchers demonstrated a positive relationship between organizational leaders

and the ethical climate of members of the sales teams (Mulki et al., 2009). These results

offer some confirmatory insights which are relevant for the present study, however, not

specific to the target leadership level of top manager ethics supporting the argument that

new research is needed.

Summary

In Chapter 2, I described the ethical leadership theory and presented it as a unique

and developing construct with distinct dimensions from other leadership theories. I

identified a common definition found in the literature for ethical leadership and framing

useful for this study. I also discussed the variety of research designs and constructs

previously applied by investigators over the past decade which are considered relevant

for this research. Drawn from the literature were descriptions of the independent,

dependent, and mediating variables thought to be related to ethical leadership. Finally, I

discussed research related to the topic of ethical leadership within the context of the

global pharmaceutical industry and limitations found therein.

Seeking relevant literature addressing relationships between ethical leadership and

organizational financial performance reveal a deficiency in our understanding and an

opportunity to add to the scientific knowledge. Within the social sciences, there have

been several landmark studies that have established the ethical leadership theory as an

important and useful model for researchers. Researchers have recently used the theory to

explain antecedents to leadership behaviors, follower perceptions of leadership, and

organizational performance. While results from research discussing ethical leadership

continues to add empirical evidence, much of it is limited and challenging to generalize

more globally. The conclusion, based on this examination of the literature, supported the

argument favoring greater scientific efforts revealing new insights supporting policy

development, organizational leaders, and the described purpose.

Chapter 3: Research Method

Applied Techniques and Practices

Leadership scholars, practitioners, policy officials, and industry leaders voice

their interests in empirical ethical leadership research, which can provide fresh insights

into the topic. Reports on the subject are broadly available and recognized for their

important contributions. However, many practitioners argue that there is need for more

work to be done to expand the limited body of scientific knowledge. In this dissertation, I

sought to add to the existing body of literature and applied quantitative statistical

methods to examine the relationships between ethical leadership, the independent

variable, and organizational financial performance, the predictor variable. I expanded my

research by examining mediating effects of top manager purpose, virtues, and practices to

determine if outcomes can be predicted.

I begin this chapter with a review of the research design and approach that were

applied to examine the question and provide a justification for each. I describe the sample

population and size, the methodology used for sample selection, and a description of the

characteristics of the selected sample participants. An explanation of the survey

instruments used to collect data is provided, along with the data collection steps and the

type of data collected and how the instruments and the data relate to each of the variables.

A description of the data collection analysis and statistical methodologies and a

discussion of the rationale for the selections of the statistical methods is then presented.

Finally, descriptive and inferential data related to the hypothesis is discussed.

Methodology

Research Design and Inquiry Approach

I considered a postpositivist view in this nonexperimental study examining

relationships between the independent and dependent variables. Questionnaires were used

to collect data that measured the perceived ethical behaviors of top managers, and

regression analysis was used to test the different hypotheses, allowing for predictive

interpretations of the outcomes that could then be generalized (see Creswell, 2009, 2014).

The questionnaire methods of data collection were necessary for the selected

participant population for several reasons. Selecting a sample from the target population

and then surveying them using a validated testing instrument provided for a numeric

quantifiable description of the trends in behaviors that are reflective of the population

(see Creswell, 2014). Additionally, administering a web-based strategy surveying a

sample group was simpler and more efficient and cost effective than surveying the target

population.

The statistical methods for correlational analysis of samples are also widely

applied in the social sciences, accepted in the scholarly peer-reviewed literature on the

subject, and provided meaningful insights and generalizable results. An objective of this

dissertation was to identify behavioral trends in global ethical leadership from the sample

that adds new insights to the scientific body of literature and that are generalizable to a

global population. Finally, this was cross-sectional study, with questionnaires being

administered at one point in time. The strategy aligned with the research plan and

provided for organized data collection allowing for an efficient interpretation of the

results.

Setting and Sample

The global pharmaceutical industry is broadly comprised of numerous types of

organizations of different sizes working in a variety of healthcare related activities

surrounding research, development, marketing, and sales of medicines. To narrow the

relevant industries where top organizational leaders were sampled, I adopted the North

American Industry Classification System and the Standard Industrial Classification

definitions for pharmaceuticals. The definition provided that the pharmaceutical industry

includes “establishments primarily engaged in manufacturing in-vivo diagnostic

substances and pharmaceutical preparations … intended for internal and external

consumption in dose forms, such as ampoules, tablets, capsules, vials, ointments,

powders, solutions, and suspensions” (Pharmaceutical Preparation Manufacturing

Industry, 2018, p. 6) and Standard Industrial Classification, 2834 (United States

Department of Labor, n.d.). Industry sample populations also included biotechnology

companies involved in research and drug development.

The global pharmaceutical and biopharmaceutical industry organizations were the

total population selected for this study. Based on the North American Industry

Classification System 2018 report, estimates of global pharmaceutical companies exceed

18,000 organizations worldwide meeting the pharmaceutical definition. The target

population was top managers leading these organizations. As the outcome variable of

interest was organizational financial performance and some of the organizations are

owned by governments where financial performance data are not publicly available, I

excluded these organizations for consideration. Participant selection was limited to those

organizations whose financial performance records could be documented by the top

manager during the questionnaire.

A multistage cluster sample framing strategy was applied to access to top

managers. I used an on-line electronic survey method for capturing participant responses.

In the first stage, global pharmaceutical organizational top managers were recruited

applying a nonprobabilistic convenience web-based and direct e-mail strategy by

requesting top manager participation. Additionally, my recruitment strategies included

web-based announcements of the research.

I anticipated prohibitive challenges with targeted recruitment and access to study

participants, making the sample design optimal. Expanding on the first stage, a second

web-based request was employed, targeted for organizations and their top managers as

study participants who met selection criteria, specifically top managers of global

pharmaceutical and biopharmaceutical organizations with more than 2 years of

experience in their role. I screened the candidates to deselect individuals and

organizations not meeting the study target population criteria. An organizational letter of

cooperation was secured from participants’ organizations.

Organizational or department financial performance was used to determine the top

leader’s impact over 2 years. Financial constraints for this research effort limited the

questionnaire instruments for the study to the English language, and as such, restricted

participation to only those top managers and their subordinates who were proficient in

English. Other elimination criteria used for screening applicants were individuals serving

as middle and lower level managers and subjects leading organizations where

organizational financial reports were not available.

I identified organizational clusters in the second stage. Associated organizational

subordinate members were asked to complete the electronic ELQ instrument. The top

manager was also asked to complete the SLQ. The questionnaires were coded for cross

referencing the top manager and their team members using methods for blinding all

participants. The nonprobabilistic design permitted potential bias in recruitment;

however, the recruitment by a nonparticipating organizational member allowed for all

members of their organization to participate. To ensure anonymity, I provided all subjects

with an electronic cover letter describing the goal of the study, a process outline

including instructions that could be used to recruit participants from organizational

members, and informed consent disclosures. Willing member participants were then

directed to access the questionnaire electronically with instructions on completing the

process and submitting their responses. All company information and participant

responses were held confidential, and only available to me. Additionally, the results and

interpretations are only presented in aggregate form with no identifiable information.

As this was a global study, web-based and e-mail recruitment of participants

provided for expanded access as well as cost and time efficiencies. Anticipated

limitations such as governmental regulations restricting access in some countries,

organizational rules that do not allow participation by leaders, and Internet access

presented anticipated challenges to the method of sample recruitment. Additionally,

organizational overlap exists in international companies where there may be multiple top

managers within the same organization and multiple top managers in various countries

that lead the organization within a country. For this reason, the questionnaire asked the

top manager to only report on the financial performance of their organization or division.

Determining the sample size needed from an unknown population posed

difficulties. Furthermore, several studies have demonstrated challenges of successfully

recruiting participants. As many as two-thirds of the targets recruited in many of the

studies were nonresponders or chose not to participate. Additionally, as many as 10%of

the participants dropped out. I reviewed the sample sizes taken from reference materials

to determine the sample population needed to power this study to meet statistical

significance. I examined 25 previously published peer reviewed reports of similar

research regarding ethical leadership theories as references, a range of sample sizes was

determined with a median sample size of 184 subjects. Considering these past

experiences, a goal of 571 participants was needed to achieve the 184-sample subject

goal needed for the study. Stratification of top managers based on gender, country of

origin, size of the organization, and country where the leader was positioned within the

organization was used. The research plan called for a request inviting top managers of

global pharmaceutical companies to participate in the survey. Following the initial

request and allowing for a 2-week response period, I sent a second request to additional

organizations meeting the target population criteria. A third request was then sent in the

same manner following a 2-week period, and a review of the progress was conducted. I

anticipated that the three requests would allow for an adequate number of participants to

be achieved.

Instrumentation and Materials

Ethical leadership measure. As described in Chapter 2, various instruments

developed by researchers have been applied to the examination ethical leadership. Many

of them have been used for empirical research and have established a sense of ethical

leadership. However, when looking to generalize their results to a global population, they

have been less useful. Ethical leadership measurement instruments include the ELS

(Brown et al., 2005b), Perceived Leader Integrity Scale (Craig & Gustafson, 1998),

Ethical Leadership Work Questionnaire (Kalshoven et al., 2011b), SLQ (Barbuto &

Wheeler, 2006), and ALQ (Walumbwa et al., 2008). These instruments have limitations

or reflect nonrelevant answers that lead to confusing and confounding results as well as

overlap with other leadership constructs (Yukl et al., 2013).

The Ethical Leadership Questionnaire (ELQ) (Hassan, Mahsud, Yukl, & Prussia,

2013; Yukl, 2010; Yukl et al., 2013) was the questionnaire instrument used to measure

the independent variable of top manager ethical leadership. Permission to use the revised

ELQ 10 item survey was provided (Appendix E). The ELQ was originally developed as a

15-item survey then later revised to a 10-item survey eliminating other types of

leadership behaviors that are not directly related to measuring ethics including being

supportive, fair and unbiased when assigning tasks, sets the example of dedication and

sacrifice, acknowledges mistakes and takes responsibility for them, and regards honesty

and integrity as important personal values (Yukl, 2010). Questions found in the revised

ELQ are designed to capture participant perceptions regarding their leader’s integrity,

honesty, ethical behavior, and resulting in an ethical score. The revised ELQ 10 item

survey was applied for this dissertation and a copy of both questionnaires are found in

Appendix A and B.

The revised ELQ results in a mean score for the ethical leadership of top

managers as perceived by subordinates and organizational team members. The original

ELQ reflected key commonly identified dimensions of ethical leadership found in the

literature including, (a) honesty and integrity, (b) consistent ethical behaviors and

communications that speak to ethical behaviors, (c) fairness in decisions and dispersing

of rewards, and (d) leader behaviors that demonstrate kindness and consideration for

organizational members (Yukl et al., 2013). The revised ELQ limits the focus to only

those behaviors indicating leadership ethics and many of the removed non-specific

question are reflected in mediating leader practices. Also, by underscoring the importance

of key ethical dimensions, the confusion and challenges brought about by the limitations

described in other survey instruments are addressed.

Participants using the ELQ are asked to respond to 10 questions based on a 6-

point Likert-style format where 1=strongly disagree, 2=moderately disagree, 3=slightly

disagree, 4=slightly agree, 5, moderately agree, and 6=strongly agree. The survey was

administered to subordinates who rated their leader on the key ethical attributes including

honesty, integrity, consistency of ethical behaviors, communications of ethical values,

altruism and ethical guidance (Yukl, 2010) and provides a mean score for the leader.

Yukl and colleagues developed the ELQ to capture ethical leadership attributes gleaned

from previously applied ethical leadership surveys excluding possible confounding

variables. Exploratory and confirmatory factor analysis were used to assess the

discriminant validity of the ELQ. Principal component analysis and oblique rotation

resulted in four distinct factors including ethical leadership, relationship, change and task

behaviors. The factor loadings for ethical leadership demonstrated distinctions among the

items and only three items had minor cross-loadings (>.30) with relational behaviors

(Yukl et al., 2013).

The 10 questions of the ELQ were designed to study the significance of ethical

leadership to leadership effectiveness. The responses measure subordinate’s perceptions

of their leader’s ethicality based on their observations of the leader. For this dissertation I

used participant’s responses to the ELQ to measure the ethical leadership which served as

the independent variable. The data was captured electronically. The database of

participant responses was kept on file in a secure location and can be made available

upon request.

Organizational financial performance measure. For measurement of the

financial performance, the dependent variable, the Sustainable Leadership Questionnaire

(SL) (Avery & Bergsteiner, 2010, 2011) was used. Organizational performance was

found to be a broad and often used dependent variable, however, many researchers have

examined performance using different measures ranging from multiple disciplines. A

review of the extent literature demonstrated several approaches have been applied by

scholars in their research regarding organizational financial performance. Researchers

often applied multiple metrics when examining organizational financial performance, yet

paid little attention to their measurement construct relative to their focus of interest

(Richard, Devinney, Yip, & Johnson, 2009). Richard et al. (2009) offered that as

researchers explore organizational financial performance from the contextual discipline

that they approach their research question, it is important that their financial performance

construct establishes appropriate procedures for measures that can be combined, and the

provides a method for combining the results. For purposes of this dissertation, three

common financial performance measures including net profits, sales revenue, and

controlling costs were used as measurements of financial performance.

Mediating variable measurement. The mediating variables involved in top

manager practices, purposes and virtues encompass multiple dimensions of leadership

behaviors. The SL questionnaire also embodies broad concepts identified as honeybee

leadership practices that converge with the leadership practices, purpose and virtues

mediating concepts and attributes of interest. “SL proposes 23 leadership. . . practices

that cover multi-faceted management systems, principles, processes, and values”

(Suriyankietkaew & Avery, 2016, pp. 2-3). A copy of the SL questionnaire used for this

project is available as appendix (Appendix C). The 23 SL honeybee practices that served

as the foundation of this research and their descriptions are listed in Table 1. Authors of

the SL questionnaire recommends that organizations, in order to be financially

successful, must strike a “balance between economic, social, and ecological objectives

while attaining high performance, resilience and sustainability” (Avery et al., 2016, p. 2),

and the SL practices are operationalized by how closely the top manager perceives their

organizational alignment with the honeybee practices (Avery et al., 2016).

For this study, I argued that the 23 SL practices characterized in the survey

questions embody and are represented in the mediating variables. This study grouped the

23 SL practices into one of the three mediating variables using definitions found in

related ethical leadership literature and presented in Table 2. For this process, SL

questions that refer to and ask about what the leader does as part of their daily habits that

exemplifies moral excellence, as well as, their actions and direction towards their

followers (Lawton & Páez, 2015; Suriyankietkaew & Avery, 2016) were grouped as

leadership practices. SL questions which focused on the leader’s perceptions of honesty,

integrity, morality, and a leader’s vision for the organization promoting the common

good (Lawton & Páez, 2015) were categorized as leader virtues. These are also

represented by the organizations mission and vision statements and how they are

communicated. SL questions were grouped in the purpose category based upon their

focus towards perceptions regarding principled objectives, leader relationship with

organizational members which are often described as trusting and loyal, social and

community concerns, and their concern about how their relationships effect desired

outcomes. Of note, leader ethics is included in the SL model; however, for this study it

was measured using the ELQ, and it is the independent variable of interest. The SL model

places leader ethics as a practice; however, this inadequately represents the complexity of

leadership ethics and the remaining SL questions are reflected in the top leader practices,

purposes and virtues. It was, therefore, important to examine the leadership ethics

independently seeking greater clarity as the independent variable.

Table 1

Sustainable Leadership (SL) Practices and Descriptors

Sustainable leadership

practice

Description of the

sustainable

leadership practice

Developing people

Develops everyone continuously

Labor relations

Seeks cooperation

Retaining staff

Values long tenure at all levels

Succession planning

Promotes from within when possible

Valuing staff

Is concerned about employee welfare

CEO and top team

CEO works as top team member or speaker

Ethical behavior

Doing the right thing as an explicit core value

Long term perspective

Prefers the long-term over short-term profits

and growth

Organizational change

Change is an evolving and considered process

Financial independence

Seeks maximum independence from others

Environmental responsibility

Protects the environment

Social responsibility

Values people and the community

Stakeholder consideration

Everyone matters

Strong, shared vision

Shared view of the future is essential strategic

tool

Decision making

Is consensual and devolved

Self-management

Staff are mostly self-managing

Team orientation

Teams are extensive and empowered

Culture

Fosters and enabling, widely shared culture

Knowledge sharing and retention

Spreads throughout the organization

Trust

High trust through relationships and goodwill

Innovation

Strong, systematic, strategic innovation at all

levels

Staff engagement

Values emotionally committed staff and the

resulting commitment

Quality

Is embedded in the culture

Note. The sustainable leadership model contains 23 practices including ethical

behavior as a leader practice. The SL model was adapted from Avery and

Bergsteiner (2010).

Supporting the SL “honeybee” model, research has provided confirming

evidence of the relationship between the sustainable leadership practices and

organizational performance. Researches working in Thailand with small to medium

sized organizations demonstrated correlations with sustainable leadership practices

that were positively associated with organizational financial performance (Avery et

al., 2016). It has also been proposed that sustainable leadership practices relate to

employee satisfaction which leads to organizational financial performance

(Suriyankietkaew & Avery, 2014). Kantabutra and Avery (2013) argued that the

sustainable leadership practices contrasted with the traditional short-term view of

profit maximization and emphasized longer term goals. The 23 SL practices have not

been consistently demonstrated to correlate to organizational financial performance.

Unique to this dissertation, I argue that the 23 SL practices are captured in the

mediating variables that were hypothesized to influence the relationship between top

manager ethics levels and organizational financial results. Regression analysis was

used with each of the three groups to test for mediated correlations that influence the

independent and dependent variables.

An adaptation of Avery and Bergsteiner’s Sustainable Leadership

Questionnaire was used to measure the sustainable leadership practices. The 57-item

SL questionnaire was tested for robustness using Cronbach’s alpha and most items

exceeded the threshold of .70 (Hair, Black , Babin, Anderson & Tatham, 2010; as

cited by Suriyankietkaew & Avery, 2016), and is a reliable and valid instrument for

the empirical application in the present study (Suriyankietkaew & Avery, 2016).

Table 2

Sustainable Leadership (SL) Practices and Their Associated Groupings

Sustainable leadership

practice

Designated grouping

Developing people

Leader practice

Labor relations

Leader practice

Retaining staff

Leader practice

Succession planning

Leader practice

Valuing staff

Leader virtue

CEO and top team

Leader practice

Ethical behavior

Leader virtue

Long term perspective

Leader purpose

Organizational change

Leader purpose

Financial independence

Leader virtue

Environmental responsibility

Leader virtue

Social responsibility

Leader purpose

Stakeholder consideration

Leader purpose

Strong, shared vision

Leader purpose

Decision making

Leader practice

Self-management

Leader practice

Team orientation

Leader purpose

Culture

Leader purpose

Knowledge sharing and retention

Leader practice

Trust

Leader purpose

Innovation

Leader purpose

Staff engagement

Quality

Leader purpose

Leader virtue

Note. The SL practices were designated to one of three hypothesized mediators.

Assignments were cross matched based on terms and descriptions found in the

literature.

The ELQ and the SLQ were administered electronically through

SurveyMonkey®. Upon receipt of a signed Letter of Cooperation from an authorized

company agent, an introductory letter was sent to the agent that described the

research project and their role in distributing electronic invitations to top managers

and their team member participants. The letter provided the necessary disclosure

information, and an invitation to access the appropriate questionnaire. The letter

included a unique code used for cross matching top manager responses with their

team members responses. A hyperlink to the online questionnaire was also included

in the invitation. Informed consent documents were provided electronically to

participants prior to them being able to access their questionnaire. Subjects were

required to review and check a box indicating their understanding of the research and

potential risks and their approval before participating. Participants names and

identifications were blinded using a coding methodology to protect anonymity.

The raw data was received through electronic responses and were collected

through the SurveyMonkey website. The data was saved for future reference on a

secure hard drive. The data collected were stored in accordance with University IRB

protocols for five years upon completion of the project for reference and future

interest. No other applications of the data collected for this study were expected.

Physical hard copies of the survey responses were also stored in compliance with

University IRB protocols, protected for five years in a secure location for reference

and future interests. Aggregated results were used for interpretation.

Data Collection and Analysis

Data type collected was both descriptive and inferential for analysis and

interpretation. Examples of descriptive data in this study includes gender of the

participant, age range, education level, and years in position. The data was examined

for extreme outliers or erroneous data points and then cleaned, eliminating it from

the analysis and interpretation. Types of data collected were nominal, ordinal and

interval/ratio. Ordinal data was collected with the ELQ and was used for identifying

a top manager ethical score providing a mean average across the ten items in the

survey. The ELQ is based on a 6-point Likert type response (1 = strongly disagree, 2

= moderately disagree, 3 = slightly disagree, 4 = slightly agree, 5 = moderately

agree, 6 = strongly agree).

Items found on the SL questionnaire capture mixed types of data which were

used for examining the mediating relationships between the independent and

dependent variables. Non-parametric statistics were used in this study as the data met

commonly accepted principles as described by (Warner, 2013). The commonly

observed rules suggest that non-parametric dependent variables may be either

nominal or ordinal, scores on the outcomes need not be normally distributed, the

variance across groups are not required to be equal, and outliers do not present a

problem for non-parametric studies (Warner, 2013).

This study examined the relationship between the ethical leadership levels of

top executives and their organization’s financial performance. It also examined

whether mediating effects of the top manager’s practices, purposes and virtues exist.

A positive correlation was predicted among top leader ethics and the financial

performance of the organization. Confounding this prediction was data found in the

current literature suggesting that there was an impact of top leaders on the entire

organization and the relationship was complex. The study examined the hypothesis

that top manager practices, purposes and virtues mediate and have a positive impact

on organizational financial performance.

Regression analysis was used to test relationships between the dependent and

independent variables and the predictive relationship between top manager ethical

level and organizational financial performance. It was also useful when more than

one predictor variable was considered. This study distinguished among multiple

variables involved in ethical leadership that impacts an organization’s financial

performance, and regression analysis methods are designed to help researchers

identify the variables most influential in importance and others that are less

impactful. SPSS statistical tools were used to test for fit among the X and Y

variables.

Baron and Kenny (1986) mediation model used to examine the relationships

among several causal hypothesis was used. Warner (2013) argued that mediation was

present when the result on the dependent variable (Y) from the independent variable

(X) was transmitted by another variable. In the present study, I hypothesized that the

effect of top managers’ ethics levels on organizational financial performance was

mediated through top manager practices, purposes and virtues. Indirect path

mediation as represented previously in Chapter 1, Figure 1 illustrated the

hypothesized correlations. The first step in testing for mediation was to establish

path coefficients through a series of regression analysis which tested the strength of

the associations between the variables. A test for evaluating statistical significance of

the mediated paths was also necessary. SPSS was used to conduct each of these

statistical analyses.

Steps for protecting participants. Protecting individuals who participated

in the study was of vital importance and steps were taken to ensure anonymity. All

steps available for the protection of the individual participant’s data and

identification followed the Walden University IRB Guidelines. The Walden

University Institutional Review Board approval number for this study was 07-01-19-

0030993.

A letter which outlined the research protocol and the research questions was

presented to all stakeholders. Individuals who expressed interest were instructed

regarding how the research was to be conducted and they were asked to consent

electronically on the informed consent form provided through the SurveyMonkey

website. The consent form provided specific instructions on participation and

communicated that their participation was voluntary and that they may discontinue at

any time without penalty. Additionally, subjects were asked to verify their ability to

participate based on their organization’s policies.

During the data collection process, survey responses were coded such that

only I as the primary researcher had access to the responses. All data captured was

put into a data file that was conducive to SPSS, and as the data was analyzed, the

participant identifiers were kept separate and independent of their responses. At the

completion of the data analysis, electronic files were kept in a secure location. Future

access to the data would be limited to formal requests and based on Walden

University IRB requirements. No additional use of the data was anticipated.

Threats to validity. As discussed, it was anticipated that the target sample

group, top managers, may present a difficult population to engage as participants in

the research. Additionally, using a convenience sampling strategy, represented

threats to the external validity. This study captured responses from top managers

who lead global pharmaceutical enterprises, and who represented the types of

responses that were needed to address the research questions. To manage this threat,

a precisely crafted letter was used to invite members of the target population to

participate. As part of their responses, the subject’s role was identified for eligibility

and used only after confirming that they met the criteria specified.

The possibility of an additional threat to internal validity was identified as the

participants expressed concerns over the sensitive nature of ethics related questions.

Again, as part of the invitation process, the letter of invitation included a

comprehensive outline of the study design, with the steps taken to protect

participants identities. Also, reassurances to participants that their responses were

blinded and only available to me, and that results were only presented in aggregate

form with no names of organizations or participants included provided additional

support addressing participants concerns.

Summary

Chapter three discussed the research methods which were employed to

examine the relationships which were thought to exist among top managers’ ethics

levels and organizational financial performance and other mediating variables. In it, I

identified top managers within the pharmaceutical industry as the study population,

the sample selection criteria, and the strategies used for recruiting participants. I also

reviewed survey instruments that were used, including the SLQ and the ELQ. A

discussion of their validity for researching questions was also presented in this

chapter, along with the benefits and the measures they provided. Measures of the

ELQ included the top managers’ ethics levels as perceived by their followers. The

survey questions contained in the SLQ enabled me to distinguish differences in the

leadership practices, purposes, and virtues as mediating variables and their

relationship to financial performance. Finally, within the SLQ were questions that

captured the financial results as perceived by the top manager.

Chapter 4 shifts to the presentation of the data analysis and interpretation of

data taken from the surveyed participants. Each of the hypothesis are discussed and

descriptions of the results and their impact on the research questions. The data is

presented where relational comparisons among the variables are made for greater

understanding of results. These results provide important insights and contribute to

the growing knowledge regarding ethical leadership.

Chapter 4: Results

Introduction

Ethical leadership is thought to be essential for organizational performance

across multiple industries, and interest in the subject has grown as evidenced by

recent scholarly articles. Many authors have argued in favor of additional empirical

research to aid policies regarding ethical leadership. Current literature that addresses

the effects of ethical leadership on organizations reflect inconsistent outcomes.

Research offering new and reliable insights promises to aid leaders as they direct

their organizations and benefit the societies they serve.

Determining the effect that top managers’ ethic levels have on organizations

is crucial in setting policies. The purpose of this study was to examine relationships

of top managers’ ethics levels and organizational financial performance while testing

whether mediation exists with top manager practices, purposes, and virtues. I

examined the various facets that are thought to involve ethical leadership and are

critical for improving financial performance. To date, limited evidence is available

correlating these two variables, yet many companies commit important limited

resources annually on recruiting, hiring, and training to support the advancement of

an ethical culture. Ethical leadership theory was used to frame the study as a new

theoretical construct, adding to the body of scientific evidence.

The primary research question for this dissertation was whether there is a

correlation between top manager ethics levels to organizational financial

performance. Additionally, whether top manager perceptions of their practices (how

they perceive what they do), purposes (their insights of why they do what they do),

and virtues (perceptions regarding honesty, truthfulness, and integrity) mediates the

relationship between top managers’ ethics levels and organizational financial

performance. The hypothesis was that there is a statistically significant correlation

between the variables and that mediation provides an explanation of the relationship.

A sample population of senior leaders within the (bio)pharmaceutical

industry served as the target research population for the study. Because of strict

regulatory oversite, distinctive industry product patent life cycle, and the need for

acquisition, development, and marketing of new medicines to maintain profits and

sustainability, there was significant homogeneity among top managers and their

companies. Top manager leaders with senior titles including CEO, president, and

vice president leading organizations within the (bio)pharmaceutical industry were

identified for the study and were recruited and screened as research subjects.

In this chapter, I describe the data collection and findings of the research. A

description of the time frame and response rates for the data collection as well as,

discrepancies in the data collection from the plan are included. Baseline sample

descriptions, sample demographics, and a comparison of the sample population to

the desired study population is presented providing for external validity. I also

discuss descriptive statistics that characterize the sample population and an

evaluation of the statistical assumptions appropriate to the study. The results of the

statistical analysis of the data representing each hypothesis question, along with the

statistical probability values, confidence intervals, and effect size are reported.

Finally, a summary of the results concludes the chapter where each of the research

questions are addressed, considering the new findings based on the research

conducted in the study.

Data Collection

Following Institutional Review Board approval, recruitment of participants

occurred over 12 weeks. Recruitment invitations were sent out to 338 pharmaceutical

organizational top managers leaders using the social media site LinkedIn or emailed

directly. LinkedIn was selected as it permitted for the superior recruitment of

targeted top managers by title within the desired study population. As part of the

recruitment process, a signed letter of cooperation (LOC) was required by an

authorized nonparticipating agent of the organization permitting leaders to

participate. Five LOCs from separate organizations were received. Top manager

participant response rates were less than 1% and lower than expected. Once

approved, separate email invitations were provided to the company agent to

distribute to potential leaders and their direct report team members.

Corporate financial performance scores using indirect measures based on top

manager perceptions in sales growth and net profits and the organization’s ability to

control costs over the past 3 years were calculated using responses from five top

managers from five separate (bio)pharmaceutical companies using data captured

with the SLQ. Top manager ethical leadership scores were also calculated from team

member responses to the ELQ. Team member participants were identified by

organizational agents who recruited subordinates of the top managers who were then

invited through emailed letters. Invitations were coded for purposes of cross

referencing the responses from the top manager and their team members without

disclosing their identities.

Of the 338 top managers invited to participate in the project, 30% were

female and 70% male; however, of the five organizational leaders, 100% of the

participants were male. Most of the respondents (80%) were between the ages of 45

to 54 years old with 20% aged 55 to 60. Eighty percent of the participants had

master’s degrees, and 20% had a medical doctoral degree. The top managers were

leading (bio)pharmaceutical companies ranging in financial worth from $500 million

to $25 billion. Finally, 60% of the companies had been in operation less than 20

years, and 20% more than 100 years.

Several contributing factors were identified which contributed to the low

response rate, including the sensitive nature of the research subject regarding leader

ethics, multiple levels of approval that were often required, limited organizational

leaders who were willing to take part, and the perceived risks for disclosing of

propriety financial data. Also, restrictions in LinkedIn’s tool functionality made it

difficult to provide candidates with adequate information describing the research and

the process to participate. This limitation required a response by subjects to an

invitation to connect before being able to provide them with the complete study

invitation and the process overview. Additionally, the organizational review process

often required an approval by legal counsel, human resources, and other senior

officials before the top manager could participate. These steps were not anticipated

and often eliminated candidates who might have otherwise been willing to contribute

their responses.

The IRB requirement of organizational approval prior to participating that

was confirmed through a LOC added steps that involved the identification of an

authorized nonparticipating agent of the organization who could review and sign the

LOC before research candidates could participate. This necessitated an explanation

to the agent of the process and considerable follow up activities by the agent as they

assumed the role of distributing the materials to the top manager and their team

members while maintaining participant confidentiality. These additional measures,

not incorporated in the original recruitment plan, made the procedure cumbersome

and more time consuming than expected. Three waves of invitations to participate

were also described in the research plan and extended the time required. While a

second and third wave of invitations were sent, the response rates were only

minimally improved.

The sample population was representative of (bio)pharmaceutical leaders and

their teams successfully targeted for this study. All the participants held senior level

leadership positions including vice president, president, and CEOs of their respective

organizations. Additionally, team members were limited to direct reports of the top

managers who were able to provide responses that were reflective of their top

manager ethics level.

Results

In response to the research questions investigating correlations between top

manager ethics levels and organizational financial performance, and whether

mediation occurs between top manager practices, purposes, and virtues thought to

affect the relationship, I applied the steps for the Baron and Kenny (1986) model to

test for mediation. Step 1 of the model called for conducting regression analysis to

test for a correlation between the predictor and outcome variables. In Step 2, I used

regression analysis to test for relationships between the predictor variable and the

mediating variables. Finally, in Step 3, I used regression analysis to look for

correlations between the mediating variables and the outcome variable.

Researchers have previously concluded that if any of Steps 1 through 3 are

found to be nonsignificant, mediation is not possible or likely (Kenny, 2018).

However, statistical significance may provide less useful insights as the coefficients

are stated in zero and nonzero terms and not statistical significance (Kenny, 2018).

Kenny (2018) asserted, “Contemporary analysts believe that the essential steps in

establishing mediation are steps 2 and 3” (para. 4), which may also provide

meaningful results.

The independent variable top manager ethical leadership score was calculated

using the 10 questions that comprise the ELQ (see Yukl, 2010). Each question was

coded so that strongly disagree = 1, moderately disagree = 2, slightly disagree = 3,

slightly agree = 4, moderately agree = 5, and strongly agree = 6. The top manager

perceptions for the 23 sustainable principles incorporated in the SLQ were coded,

and a score for each variable was calculated (see Avery & Bergsteiner, 2010). These

scores were used to calculate the dependent variable organizational financial

performance and the mediating variables. The coding involved applying a numerical

value to the range of possible responses so that strongly disagree = 1, disagree = 2,

neutral = 3, agree = 4, strongly agree = 5, and don’t know = 0. The organizational

financial performance was calculated by the coding of the responses and was

calculated from top managers’ perceptions of organizational 3-year sales and

revenues, capital expenditures, cash flow, and net income.

Preparation of the data for statistical analysis included assessing missing data

from the survey responses. Due to the small number of participant responses, I

decided not to exclude participant’s data where they responded with “don’t know”.

The SLQ design is separated into different sections. Where participants provided a

“don’t know” response to questions, these data were skipped, and the remainder of

their answers were included in the data set for analysis. By examining the company

and demographic data, this allowed for additional interpretation and provided some

explanation for participant’s responses.

For Step 1, a bivariate linear regression was conducted with X predicting Y.

The predictor was top manager ethical leadership scores and the outcome was

organizational financial performance. The regression analysis indicated that the

ethical leadership score explained a non-statistically significant 3% of the variance,

R2 = .03, F (1,10) = .26, p >.05. The top manager ethical level scores were found to

be a non-statistically significant predictor of organizational performance, β = -.13, t

= -.51, p >.05. The results of step one indicated that the null hypothesis for research

question one was accepted, and the alternative hypothesis was rejected. The results

of step one analysis also suggest that leadership practices, leadership purposes, and

leadership virtues was not a mediator of the relationship to top manager ethical

scores and organizational performance. Therefore, for research question two, the null

hypothesis was accepted, and the alternative was rejected.

Steps two and three were also conducted and are presented in the results.

Following the argument that step one results might not prove statistically significant

with the small sample size presented in this research, the goals of steps two and three

analysis were anticipated to expose additional insights regarding correlations with

the mediating variables and the outcome variable notwithstanding their relative

statistical significance. For step two, simple regression analysis was conducted with

the predictor variable top manager ethical leadership scores, while the outcome

variables were each of the three proposed mediating variables, leadership practices,

principles, or virtues and were tested independently.

The results for step two regression analysis testing for a relationship with

leadership practices was found to be non-statistically significant. The results

indicated that ethical leadership explained a non-statistically significant 2% of the

variance in leadership practices, R2 = .02, F (1,14) = .32, p >.05. Top manager

ethical leadership was found to be a non-statistically significant predictor of leader

practice, β = -.18, t = -.56, p >.05.

Regression analysis was then used to test for a relationship with leadership

purposes. Top manager ethics was found to explain a nonsignificant <1% of the

variance in leadership purposes, R2 = .04, F (1,14) = .6, p >.05. Ethical leadership

was found to be a non-statistically significant predictor of leader purpose, β = -.11, t

= -.25, p=.81.

Regression analysis was also used to test for a correlation with leadership

virtues. The results of the regression test indicated that the top manager ethical

leadership explained a non-statistically significant <1% of the variance in leadership

virtues, R2 = .01, F (1,14) = .17, p >.05. Top manager ethical level score was found

to be a non-statistically significant predictor of leader virtues, β = -.08, t = -.41,

p >.05. Step two analysis results were that top manager ethics score was not a

statically significant predictor of leadership practices, leadership purposes, or

leadership virtue scores.

Step three involved conducting simple regression analysis using the three

mediating variables, leadership practices, leadership purposes, and leadership virtue

scores as the predictor variable, and organizational performance as the outcome

variable. The results for step three regression analysis tests for correlations between

top manager practices and organizational financial performance was found to be

statistically significant. The results indicated that the leadership practice score

explained a statistically significant 9% of the variance in organizational financial

performance, R2 = .90, F (1,10) = 93.263, p <.05. Leader practices was found to be a

statistically significant predictor of organizational financial outcomes, β = .61, t =

9.66, p <.05.

Regression analysis using the leadership purpose score as the predictor

explained a statistically significant 8% of the variance in organizational financial

performance, R2 = .85, F (1,10) = 59.167, p <.05. Leader purpose was found to be a

statistically significant predictor of organizational financial outcomes, β = .50, t =

7.69, p <.05. Finally, regression analysis with leadership virtues score as the

predictor explained a statistically significant 9% of the variance in organizational

financial performance, R2 = .93, F (1,10) = 139.075, p <.05. Leader virtue was found

to be a statistically significant predictor of organizational financial outcomes, β =

1.042, t = 11.79, p <.05. These results indicated a direct correlation between

leadership practices, leadership purposes, and leadership virtues to organizational

financial performance.

Summary

The results of the research presented in this report provide possible answers

to the question as to whether a relationship exists between top manager ethical

leadership and organizational financial performance, and whether mediation was

responsible for the relationship. No direct correlations were found between top

manager ethical scores and organizational financial performance. Additionally, no

mediation was present. The conclusions were that top manager ethics level is a poor

predictor of organizational financial performance in the pharmaceutical industry.

This led to the conclusion related to research question one that no correlation existed

between ethical leadership levels and organizational financial performance and the

acceptance of the null hypothesis, rejecting the alternative hypothesis.

Question two which asked whether mediation between leadership practices,

leadership purposes, and leadership virtue scores explained the correlation between

top managers’ ethics levels and organizational financial performance. The results of

this study indicated that there was no statistically significant mediation present.

Therefore, the conclusion of this research regarding question two resulted in the

acceptance of the null hypothesis, rejecting the alternative hypothesis.

Finally, beyond the scope of the research questions posed in this essay, there

were found to be statistically significant positive correlations existing between top

manager practices, purposes, and virtues with organizational financial performance.

The results align with existing research and provide important insights and

opportunities for organizations to examine these related leadership behaviors within

the context of different organizations and industries. Figure 2 illustrates the results I

found where top manager practices, or their observed behaviors and daily activities,

and the virtues which describe their values explained 9% of the change in

organizational performance respectively. Top manager purposes which defined why

they behave as they do, was responsible for 8% of the organizational changes in

financial performance. These findings were beyond the scope of the research

questions posed, however, but warrant attention by organizations prioritizing ethics

in their leadership hiring and training practices.

Figure 2. Correlations between top manager (leader) practices, purposes, and virtues

with organizational financial performance (based on Baron & Kenny, 1986).

Leader Practices

Leader Purposes

Leader Virtues

Financial

Performance

.90

.85

.93

Chapter 5: Discussion, Conclusions, and Recommendations

Introduction

Leadership ethics theory is a complex, multifaceted, and expanding construct. As

a recently described theory, promulgated by leadership scholars, ethical leadership has

been shown to influence different aspects of organizational performance. An examination

of current literature regarding ethical leadership provides researchers with useful

definitions, characteristics, and descriptions of ethical behaviors exhibited by leaders,

which were used to frame the present study. However, in the context of growing concern

over global organizational scandals, scholars, organizational leaders, and policy officials

have argued that expanded research addressing the need for greater understanding of the

impact of ethics on organizations is required.

This empirical study expanded on ethical leadership theory by providing new data

beneficial for informing organizational policies. It added fresh evidence advancing

ethical leadership as a new and useful theory and positioned itself with new insights. The

global pharmaceutical industry was selected as the research population because of its

important responsibility in developing innovative new medicines that have a significant

impact or in benefitting the health of society. In this study, I applied quantitative research

methods surveying top managers of pharmaceutical companies and their teams. Their

responses to the SLQ and the ELQ were used for data collection, and correlational

analysis was conducted to test for relationships between variables.

Questions examined in this study were meant to test top managers’ ethics levels’

effects on organizational financial performance. I hypothesized that there is a positive

relationship between highly ethical top managers and their organization’s financial

performance. The topic is an important one in that leadership ethics and the impact on

performance has been examined in the context of different industries and unique

performance measures; however, financial performance has only been recently explored.

I also investigated a series of secondary hypothesized assumptions that top manager

practices, purposes, and virtues commonly highlighted in leadership journals act as

mediators, affecting the relationship between top manager ethics and organizational

financial performance.

Unexpected low participant responses for the study led to the nonstatistical

significance in the results, negatively impacting the interpretation of the data. However,

the conclusions are worth noting as they provide possible trends that suggest possible

new areas and strategies for future exploration. Based on the described limitation in

responses, the conclusions for Research Question 1 revealed that there is no statistically

significant correlation between the top managers’ ethics level as perceived by their team,

and how their business unit or organization performs financially. These results were

noteworthy considering the international emphasis placed on leaders in establishing and

mandating a culture of ethics. Additionally, I used the Baron and Kenny (1986) model to

test for mediation among the variables. According to the model, after testing and finding

no correlations between the independent and dependent variables, I then tested and found

no correlations between the independent and mediating variables. The results for Step 2

indicated that mediation between top manager practices, purposes, and virtues do not

explain a hypothesized relationship between top manager ethics and organizational

financial performance.

Proceeding to Step 3 of the Baron and Kenny model, I tested for correlations

between the top manager practices, purpose, and virtues, which demonstrated a

statistically significant relationship exists with organizational financial performance.

These exceptional results are relevant considering their importance in the deeper

understanding of their impact on organizational financial performance. Each of the

variables was shown to be positively related to the organization’s financial performance.

The outcomes were beyond the influence of ethical leadership, and the result recognizes

useful insights for organizations as they consider policies and training designed to

positively impact their results.

Interpretations and Findings

Leadership ethics, described in this report as a multidimensional concept,

represents an important international priority for businesses, organizations, and

governments. Leadership ethics has often been referenced and studied as a

unidimensional construct; however, many researchers believe that to examine leadership

ethics more effectively, multiple dimensions should be considered (Karim & Nadeem,

2019; Sharma, Agrawal & Khandelwal, 2019). I followed this assertion and examined the

subject through a lens that included leader practices, purposes, and virtues as first

described by Lawton and Páez (2015) in order to incorporate its multiple complex

dimensions.

The existing empirical data regarding ethical leadership are incomplete in how

past researchers have depicted them, and researchers have proposed and leveraged

diverse theories for their investigations on the subject. For examining the relationship

between top manager ethics and organizational performance, past studies were narrow in

their scope, focusing their efforts to a single industry, country, or region, or overlapping

definitions of leadership, making their findings problematic to generalize. In this study, I

disagreed with the use of transformational, authentic, servant, and situational leadership

theories to frame ethical leader research as seen in many studies. I determined that these

theories were less appropriate as each of these theories was often too broad in its scope,

weaving ethics into larger leadership designs, or too vague and unfocused relative to the

treatment of leadership ethics. For example, many of the dominant leadership reports

found in the literature incorporated behaviors or traits of leader ethics including trust,

honesty, and integrity, which were considered and incorporated into this dissertation;

however, these data were inadequate for answering the research questions presented here.

Ethical leadership as an independent variable and its relationship to organizational

performance is important and is a pertinent new construct available to scholars. Evidence

of its increased popularity is seen by a growing number of studies as more research on the

topic is published and its relevance as an independent construct is seen in contemporary

studies. An example of this is seen in a recent study conducted in Maharashtra, India

where researchers found a positive relationship between the leadership ethics levels and

organizational sales performance mediated by the trust in the leader (Miland, Radha,

Neel, & Pratik, 2019). While the results of the present study failed in confirming that a

relationship exists between top manager’s ethics levels and financial performance due to

low participant response rates, the results are uniquely positioned among the current body

of research as the analysis was focused on financial performance. My conclusions align

with other more current research findings that involved other variables described as

leader characteristics and behaviors, which were statistically correlated directly and

indirectly to organizational financial performance. Results of an investigation performed

by researchers in the Vietnamese textile industry served to illustrate this point where a

company CEO’s ethics style was shown to have a positive association to corporate social

responsibility, which in turn resulted in improved financial performance for the

organization (Nguyen, Doan, & Tran, 2019). Their findings and the results of this

dissertation concur with the position held by scholars that ethical leadership is a complex

and multidimensional construct that requires new research approaches to better

understand its impact on organizations.

An interpretation of the results for each of the hypothesized mediating variables is

worthy of mention as I found them to have a significant influence on organizational

financial outcomes within the context of the pharmaceutical companies represented.

Specifically, I demonstrated a positive association with top manager virtues and how well

the organization performed financially. Virtues depicted in this study were manifested in

how the top manager perceived the value of their staff, their orientation and response to

financial influences, their concerns surrounding their impact on the environment, their

commitment to operational excellence, and their recognition and direction towards ethical

codes expected from organizational members.

Top manager practices were also noteworthy and were a statistically significant

predictor of financial performance. I referenced practices as the top manager assessment

of the handling of member disputes and how discipline is administered, the nature of the

decision making process and the involvement of team members, actions reflected in

hiring and retention, and setting and monitoring of work expectations.

Finally, top manager purposes were also demonstrated to relate to organizational

financial performance. Purposes were characterized by how top managers perceived

organizational planning strategies, change management patterns, the importance of

organizational contributions to the community, the vision for the business, the team

culture, trust, and tolerance of risk for the organization. Each of the mediating variables

was shown to be accountable for part of the financial success of an organization,

providing new empirical data and a deeper understanding of ethical leadership useful for

organizational leaders, leadership scholars, and policy makers.

Limitations of the Study

The main aim of this study was to assess whether there was an identifiable

relationship between top managers’ ethics levels and organizational financial

performance associated with global pharmaceutical companies. It also examined whether

mediation exits with top manager practices, purposes, and virtues which might explain

the hypothesized correlational relationship influencing the variables. Although this study

performed a thorough survey, there were certain limitations while investigating the

questions posed by this study. A grasp of the limitations will aid interested researchers as

they endeavor to examine the topic in the future.

Plans for this study called for a minimum goal of 184 top managers and their team

members who were employed at global pharmaceutical companies to participate.

However, after the final collection and compilation of data, there were only five top

managers and 17 team members who participated completing valid questionnaires. As

previously discussed, the low response rates may have been the result of a lack of interest

by top managers, the number of steps required to be completed by participants before

they could take part, or by the concern over the potential risk associated with the topic.

Since the topic was related with participant’s perceptions of organizational ethics, there

may have been apprehension by participants of exposing their organization to regulatory

or organizational inspection following their involvement.

A target of this study was to capture responses from participants employed with

firms within the larger global biopharmaceutical industry. While there were top managers

representing global companies, the relatively small number of participants meant that the

research findings failed to achieve the desired statistical power and results could reflect a

bias, challenging the validity of the findings. The lack of statistical significance could

have resulted in erroneous conclusions increasing the likelihood of type II error. There

could in-fact be a significant correlation between top managers’ ethics levels and

organizational financial performance.

The use of convenience sampling methodology means that generalizing the results

may also be problematical. I selected convenience sampling in order to increase the

possible number of participants and to conduct the research affordably. However,

convenience sampling has been often criticized due to the possibility of sampling errors

and the potential for biased results. Additionally, the sampled participants may not

accurately reflect the target population presenting challenges when generalizing the

findings. Therefore, researchers who attempt to conduct similar studies, may be well

served in considering different methodologies for enlisting subjects.

The participation of top managers of large global pharmaceutical companies

presented several recruiting challenges and was more difficult than predicted. The

planned enlistment called for three invitation attempts directed at targeted individuals.

Adhering to this protocol, I observed that many invitees did not respond to the invitations

or declined to participate due to time constraints. In some cases, there were

organizational policies in place that limited their ability to participate. Also, some

organizations required formal submission of the research plan and all relevant documents

for review by the organization’s legal, human resources and compliance departments. In

situations where organizational approval was necessary, I found that the added steps

limited the willingness to participate by some candidates.

Furthermore, questions about the financial performance of organizations

described in chapter one was also anticipated to present a challenge for data collection.

Steps taken to remedy the challenge were to limit the number of survey questions, and to

apply previously used questions that were found suitable in similar research. Expressed

concerns of the types of questions regarding organizational financial performance by

participants was identified as a reason by some for not participating in the research. Many

organizations controlled the types of financial information that was shared or publicly

disclosed and declined to participate. Allowance for a longer recruitment and response

timeframe should be considered to increase participation for future studies. The steps

required for this study allowing for the company approval were also thought to contribute

to the lackluster participation.

Finally, following the Baron and Kenny (1986) steps, testing for mediation,

revealed a statistically significant relationship between the hypothesized mediating

variables and the dependent variable. Notwithstanding the low participation rates, this

finding is significant as it supports the view by many of there being a causal relationship

between top manager practices, purposes, and virtues that overlap and can be useful

predictors of organizational financial performance. More emphasis by organizational

leaders on the importance of these variables in the recruitment, hiring and training of top

managers should be considered as part of a holistic view for organizational leadership.

Recommendations

For many organizations, establishing a culture of ethics is a priority and ethical

leadership is believed to set the standard expected of team members. Recognizing that

there is a process for fostering an ethical culture and understanding the necessary actions,

while still ensuring a strong financial result is essential for successful leaders. This study

adds to the scientific knowledge of the topic by contributing new insights which may

prove useful to organizations, leadership scholars, and other concerned stakeholders,

however, there remains a need for further empirical research.

I this study, I examined leadership ethics within the context of the global

pharmaceutical industry as a study population due to its uniform and consistent

regulatory environment. Other industries have emphasized organizational ethics as it is

100

believed that a strong financial performance will follow. Nevertheless, the literature

offers limited data that consistently confirms this assertion. The pharmaceutical industry

is also unique from other industries because of its constant development of innovative

proprietary products for sustainability. Other industries and governmental agencies may

be suitable alternatives to consider for future research. Additional data is needed from

scholarly studies that examine the impact of ethical leadership in multiple settings in

order to develop more generalizable results.

This study, I also hypothesized that if the top manager of an organization scores

high on how their team perceives their ethical leadership, then their organization or

business unit will perform well financially. The result was a non-statistically significant

correlation; however, this finding is thought to be in large part due to the small number of

willing participants sampled from the target population of the pharmaceutical industry.

As a result, a recommendation to more thoroughly examine the question presented in this

study is to test the hypothesis in different industry settings. As previously described,

many pharmaceutical leaders were either unwilling or unable to participate in a research

project of this nature either because of company policies which prohibited them, or from

the industry proprietary and highly controlled environment. Therefore, this response from

unwilling candidates would suggest that, to more effectively examine the question, future

research may draw from top leaders in a variety of industries where participation rates

may be better, and where results might achieve statistical significance.

Discussed in Chapter 4, the results of this study further confirmed that a

correlation exists between top manager practices, purposes, virtues, and organizational

101

financial performance. These findings are particularly useful for organizations. Literature

describing ethics often references observed ethical leader behaviors and actions, which

appear to advance an organizational culture of ethics. However, the data also

demonstrates inconsistent recommendations regarding the multifaceted nature of leader

ethics and how it supports organizational financial results. This study adds support to the

argument that emphasizes this notion. Organizations desiring to promote ethics within

their culture should consider how each of the three aspects of leader practices, purposes,

and virtues are integrated into their recruiting, hiring, and training related activities.

Furthermore, the alignment of the performance evaluation processes and rewards should

be considered.

Implications

Organizational ethical leadership has been demonstrated important in multiple

settings, and within the global pharmaceutical industry, it is essential. For pharmaceutical

companies creating and marketing vital health sustaining medicines and related goods,

establishing and maintaining a solid reputation is critical. Executives leading these

companies are responsible for building a strong ethical standing and protecting it, while

also maximizing company profits. However, ethics and financial profits are not mutually

exclusive, and neither should be a singular focus for leaders. Unethical leadership can

produce financial performance for a company, but at the cost of the organization’s

reputation. Alternatively, where leaders emphasize a culture of ethics as their dominant

concern, organizational members may experience inconsistent direction to maximize

performance results, while being punished for behaving in a way that is inconsistent with

102

ethical standards. The issue is particularly relevant for global companies with different

regional ethical standards. In many cases where leaders are faced with unique regional

standards, top manager actions may lead to negative implications for the organization’s

reputation.

The escalating public outcry regarding the consequences of unethical companies

and the impact they have on society, underscores the concern for ethical leaders.

Governments, communities, and consumers exert significant pressure on companies

demanding they address violations in ethical standards. In many cases, industry

corruption has shown to damage societal trust in institutions and people, hindering

innovation, and it leads to social inequities (Peralta, 2013). An enhanced awareness and

understanding of the complex nature and impact of ethical leadership on organizations

and countries holds great promise, and ethical leadership theory signifies an effective

construct for future research.

Conflicting outcomes by different researchers mean that continued efforts are

needed to better understand the context in which ethical leadership creates organizational

value and improves financial results. Recent research has shown that highly ethical

businesses attracted investors, and resulted in enhanced company value (Mili, Gharbi, &

Teulon, 2019). Conversely, Mili, et al. (2019) found no relationship in investor interest in

a company and the organization’s ethical performance. Their study reflects similar

challenges of recruiting top managers, and the complex nature of the topic relative to the

pharmaceutical industry. Important questions remain. For future research, different

103

methods for recruiting participants, and the examination of alternate industries may prove

more effective in recruiting participants.

For pharmaceutical companies who are committing more resources towards

addressing regulatory and societal concerns regarding ethics, empirical data providing

consistent solutions to questions supporting the hiring, training, and directing of top

leaders will prove useful. The results of this study added emphasis to the contention of

many scholars that additional research examining the different facets of ethical leadership

should incorporate leader practices, purposes, and virtues when testing for relationships

with organizational performance measures. Furthermore, companies may benefit from

evaluating results from current top manager hiring and training practices and the impact

on organizational financial measures.

Conclusions

Ethical leadership theory is a relatively new construct and there is a need for

advancing the theory considering today’s global economy. Researchers have taken

different methodological approaches to empirically test different aspects of ethical

leadership and its influences on organizations. In this study, I examined one aspect, top

manager ethical leadership, and analyzed its relationship to financial results for

pharmaceutical organizations. Following accepted empirical methods from prior research,

and focusing on variables which have been inadequately addressed, I hypothesized that

where top managers are perceived as being highly ethical, they may be more successful

developing an organizational culture of ethics that provides for improved economic

outcomes for their company. While results from this research were not statistically

104

significant, other important insights were introduced and are worthy of further

examination.

The relationship between the top managers’ ethics levels and organizational

financial performance were tested, along with what role top manager practices, purposes,

and, virtues might have in mediating possible correlations. Results of this investigation

revealed that there was no meaningful connection between the independent and

dependent variables. However, this result was not surprising due to the low number of top

leader participants responding to the questionnaire. Generalizing these findings from the

data presented is therefore difficult, and further investigation is warranted.

This study, nevertheless, provides another interesting and important outcome that

is remarkable. Applying the Baron and Kenny (1986) model of testing for mediation,

there was a statistically significant relationship shown to exist between the top manager

practices, purposes, and virtues with organizational financial performance in the global

pharmaceutical industry. This outcome comports with the argument that ethics research

examining leadership influences on organizational performance measures should include

these variables and their related effects. Furthermore, it substantiates their effects on

pharmaceutical organizations financial outcomes.

Ethical leadership from the perspective of the pharmaceutical industry is unique

from previous research. In a highly innovative industry where there is significant

governmental oversight, and recent criticisms of leadership abuses in public trust,

understanding the impact of ethical leadership is essential. The potential benefits of

expanding the scientific knowledge regarding the topic are important to consider.

105

Possible benefits include, greater efficiency in the use of limited resources applied

towards developing new pharmaceutical compounds, improved equity in access to new

treatments at lower costs, less potential harm to patients leading to reduced societal costs,

and improved reputation for industry leaders and their companies.

106

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Leadership has been a subject of interest for scholars and philosophers for centuries, and, as a result, there is a large body of literature available.

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