Ethical Leadership

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Editorial http://econtent.hogrefe.com/doi/pdf/10.1027/1866-5888/a000059 - Friday, October 30, 2015 2:09:16 AM - IP Address:168.235.81.118

Ethical Leadership An Overview and Future Perspectives Jeroen Stouten,1 Marius van Dijke,2 and David De Cremer2,3 1

Katholieke Universiteit Leuven, Belgium, 2Rotterdam School of Management, Erasmus University, Rotterdam, The Netherlands, 3London Business School, London, UK

This special issue of the Journal of Personnel Psychology concerns a relatively new and empirically unexplored terrain of leadership, that is, ethical leadership. Contemporary organizations express a strong need for leaders who behave in an ethical manner and encourage employees to adopt this behavior in their daily work. It is surprising to see that, despite this urgent call, ethical transgressions are very much commonplace, as such emphasizing the need to increase our insight into the workings of ethical leadership. In this issue, we bring together research on the antecedents, processes, and consequences of ethical as well as unethical leadership and, to start off with, we describe the emerging field of ethical leadership and identify future directions in this introductory editorial. Leaders have been crucial for group survival from the early history of our species when people solely lived in small hunter-gatherer bands (Hogan & Kaiser, 2005). In these types of groups, leaders were usually modest, competent, and committed to the collective good, rather than focusing on their personal gains (Boehm, 1999). In fact, encouraging and stimulating a focus on collective interests has been argued to be an important basis for leadership, because this was validated by the entire group (De Waal, 1996). Yet, more recent corporate leadership practices have resulted in business leaders often diverting from the righteous path and engaging in immoral and selfish acts. Such immoral behaviors are clearly visible in the great crimes of our time. For example, Bayer CEO Fritz ter Meer was convicted for enslavement after the Second World War because of his involvement in performing medical experiments with Auschwitz prisoners. On a much lower scale, corporate leaders are frequently questioned about the ethicality of their conduct. A recent example can be found in the News of the World scandal (a national UK newspaper). This newspaper was accused of hacking phones of politicians as well as bribing police officers. These developments finally led the newspaper to cease operations. At the paper’s collapse, Colin Myler, former editor of this paper, clearly acknowledged that the paper’s actions constituted a breach of ethics. Ó 2012 Hogrefe Publishing

Even though ethical behavior is the shared responsibility of the complete collection of organizational stakeholders, it is clear that many initiatives rely heavily on management and hence are dependent on leaders’ concern for moral issues. In other words, at the root of many organizational processes stand leaders whose values and interests shape how and what kind of decisions are made and which role ethics plays in these decisions. The role of ethics in business is increasingly gaining importance now that institutions like governments and unions are becoming more sensitive to ethical issues. Business ethics is commonly defined as ‘‘behavior that is consistent with the principles, norms, and standards of business practice that have been agreed upon by society’’ (Trevino & Nelson, 2011, p. 19). The 2008 European Competitiveness Report (European Commission, 2009) found that business ethics is beneficial for organizations as it has a positive impact on six different determinants of competitiveness: cost structure, human resources, customers, innovation capacity, risk and reputation management, and financial performance. In terms of leadership, ethics has been identified as the single best predictor of trust in leaders, accounting for 62.5% of the variance in trust (Craig & Gustafson, 1998). And creating a trusting environment is essential for the leader-follower relationship as it gives legitimacy to the leader’s position and decisions.

Leadership and Ethical Behavior Gini (1998) defined ethical leaders as leaders who use their social power in their decisions, their own actions, and their influence on others in such a way that they act in the best interest of followers and not enact harm upon them by respecting the rights of all parties (see also Kanungo, 2001). Rather than focusing on the intent or motivation of ethical leaders Brown, Trevin˜o, and Harrison (2005) specified ethical leadership in terms of behavior as: ‘‘the demonstration of normatively appropriate conduct through Journal of Personnel Psychology 2012; Vol. 11(1):1–6 DOI: 10.1027/1866-5888/a000059

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personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making’’ (p. 120). Hence, ethical leaders model and encourage ethical behavior in subordinates by communicating their standards and using rewards as well as discipline to reinforce appropriate and less appropriate behavior. Moreover, implicitly enclosed in this definition is leader’s intent is to avoid harm onto followers and act in the best interest of others.

Leaders Being Ethical What does it take to be ethical as a leader? Recently, Mayer, Aquino, Kuenzi, and Greenbaum (in press) showed that an ethical leader’s personal values are an integral part of their social identity and help them to be a moral person. Furthermore, De Hoogh and Den Hartog (2008) showed that a leader’s social responsibility in terms of feeling obligated to moral and legal rules, being concerned about followers, being aware about the consequences of one’s behavior, as well as self-judgment predicted ethical leadership (conceptualized as fairness, role clarification, and power sharing). Finally, Riggio, Zhu, Reina, and Maroosis (2010) focused on ‘‘cardinal virtues’’ to describe the motivations behind leaders’ ethical behavior. They focused on the virtues of prudence, courage, temperance, and justice. Prudence is defined as the leader’s balancing decisions in a moral dilemma. Specifically, the leader has to carefully consider each decision in terms of both consequences resulting from a decision and personal moral values. Important to realize is that prudence in itself does not result in being more ethical than others, but it can be seen as a necessary albeit not sufficient condition for ethical conduct. For example, imagine that a murderer knocks on your door and asks if your friend – who he wants to kill – is hiding in your house. From an ethical value perspective to lie would be wrong, but this would lead to the death of your friend. Prudence then kicks in to carefully consider the situation and weigh the consequences of your decision. Such a balance would eventually lead to your decision to lie to the murderer (and hence, save your friend’s life). In ethical leadership research, these leaders indeed have been shown to take responsibility for their actions and show concern for the consequences of their actions (Trevin˜o, Hartman, & Brown, 2000). Courage is concerned with the strength and persistence it takes to be ethical. Often, it takes courage to act ethically in the face of resistance. Nevertheless, courage in itself is not by definition ethical. One can be courageous even though one perseveres in evil behavior. Yet, it is quite probable that ethical leaders need courage to sustain resistance in pressing times. For example, higher management might wish to hide critical information for the government tax department, even though this would be clearly unethical. As such, the leader needs courage to stand by the ethical decision not to lie or deceive to avoid taxation. The third cardinal virtue, temperance, concerns the leader’s restraints in terms of self-interested or self-indulgent behavior. Leaders who embrace this virtue focus on values Journal of Personnel Psychology 2012; Vol. 11(1):1–6

of humility and restrain themselves from materialistic but also grandiose excesses. Finally, justice is the virtue which has received probably most of the attention (both in philosophical as well as in psychological research). Leaders who are respectful and do not seek benefits on the expense of others can be considered just which makes this aspect an integral part of ethical leadership (Trevin˜o, Brown, & Hartman, 2003). Moreover, ethical leaders being fair also includes being honest, open, and respectful to followers (Brown & Trevin˜o, 2006; Howell & Avolio, 1992). Yet, the research described above remains silent on the exact processes with regard to the emergence of ethics. That is, how is morality triggered in leaders? It has been argued that ethical behavior can act as a largely automatic process that can be triggered by even very subtle environmental cues. For example, Bargh, Chen, and Burrows (1996) showed that people are more likely to act disrespectfully when primed with rudeness. Moreover, moral and ethical behavior is embedded in fundamental intuitions as illustrated by the gut emotions or affective reactions that emerge as people come across morally-relevant situations (Haidt, 2007; Haidt, Koller, & Dias, 1993). For example, people might react with anger and contempt when witnessing a supervisor slapping a subordinate in the face. As another illustration of the intuitive nature of ethical behavior, ethical behavior has even been described as a compensation or equilibrium principle in which people determine their ethical balance between their perceived self and their ideal self (Zhong & Liljenquist, 2006). Thus, if a person engages in an unethical act, this person may be more motivated to undo the wrong by donating for charity or helping others to equal the balance. It can be clear that such approaches rely on a less rational perspective on the development of moral behavior.

The Influence of Ethical Leaders Even though the ethical leadership field is relatively young, it is quite clear that ethical leadership provides many positive aspects for followers. This is especially illustrated by the fact that ethical leaders receive positive evaluations from followers (Brown et al., 2005), they also treat employees in a fair and respectful way, and create a trusting environment that positively influences employees’ satisfaction and dedication (De Hoogh & Den Hartog, 2008; Weaver, Trevin˜o, & Agle, 2005). Hence, ethical leadership also entails aspects of fairness such as procedural (i.e., perceived fairness of the procedures that are used to make decisions), distributive (i.e., perceived fairness of the outcomes one receives), and interpersonal fairness (i.e., the respect and recognition one receives from one’s supervisor). In creating a fair and trustful environment, ethical leaders stimulate ethical, and prosocial-employee behaviors (Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009; Walumbwa & Schaubroeck, 2009). Some research has disentangled the processes which affect why ethical leaders have these positive influences on followers. Stouten et al. (2011) revealed that ethical leaders are able to discourage deviant behavior (i.e., bullying) Ó 2012 Hogrefe Publishing

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through balancing workload and improving job design. These results highlight ethical leaders’ concern for the circumstances under which employees perform their job. Piccolo, Greenbaum, Den Hartog, and Folger (2010) showed that ethical leadership increased employees’ task significance, which resulted in improved performance. Walumbwa et al. (2011) also highlighted several additional underlying processes through which ethical leadership affects employee performance. That is, employee performance was (partially) explained by the quality of the exchange between leader and employees (Leader-Member Exchange, LMX), employees’ self-efficacy, and their social identity. In addition to these beneficial outcomes for followers, focusing on ethics also reveals positive consequences on a larger organizational scale. For example, unethical conduct has been shown to result in severe consequences. Firms that are ‘‘caught’’ having engaged in unethical conduct suffer from substantial costs up to 41% of their market value, largely as a result of a damaged reputation (Karpoff, Lee, & Martin, 2008). Furthermore, such reputations also matter for business partners as organizations who have been accused of misconduct find it more difficult to maintain the business networks they need (Sullivan, Haunschild, & Page, 2007).

The Contents of This Special Issue The present special issue gathers together contributions focusing on the antecedents of leader ethical behavior, the processes that help explain antecedents-ethical leadership relationships, and the outcomes of leaders’ ethical behavior with regard to followers. First, Eisenbeiß and Giessner (2012) describe a theoretical model of the emergence of ethical leadership by focusing on contextual aspects. They argue that several contextual factors such as societal influences, characteristics of the industry as well as intra-organizational aspects contribute to the development of ethical leadership. Their model shows a more inclusive rationale for ethical leadership emergence by taking into account environmental and circumstantial factors. Seppa¨la¨, Lipponen, Pirttila¨-Backman, and Lipsanen (2012) present a theoretical paper (which includes some preliminary empirical evidence) that addresses the question what motivates leaders toward ethical behavior and more specifically, acting fairly. They develop a trust-focused model for understanding leader’s fairness enactment. This model posits that leaders are motivated to act fairly to gain subordinates’ trust, to show trust in their subordinates, to show that they are worth their subordinates’ trust, and because they are willing to be vulnerable to the actions of cooperative subordinates. Cornelis, Van Hiel, and De Cremer (2012) argue that an important aspect of ethical leaders is how they treat followers in a fair way. In two studies they show that leaders can be sensitive to follower’s needs and specifically their need to belong. Followers with a strong need to belong signal that they are willing to be part of the whole, which leads leader’s to reciprocate in behaviors promoting ethics. Specifically, leaders were found to be more inclined to act procedurally Ó 2012 Hogrefe Publishing

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fair toward those followers with a high need to belong. This research thus shows that development of ethical leadership is dependent on followers’ needs. Wisse and Rus (2012) focus on antecedents of unethical leader behavior. In two studies, they show that particularly when leaders’ personal self is emphasized, they will display unethical behavior. These findings thus suggest that when leaders’ personal interests and goals are made salient, they are more likely to act on these interests (relative to when the personal self is not emphasized). The authors as such argue that encouraging the collective identity in leaders should therefore be considered a useful psychological tool to promote leader’s willingness to act in an ethical manner. Camps, Decoster, and Stouten (2012) examine how employees respond to leaders who act ethically but at times also self-interestedly. They argue that leaders can be ethical but sometimes still act self-servingly or vice versa. In three studies, they show that if employees perceive their own outcomes as fair (i.e., distributive justice) they perceived less harm in the self-interested behavior of their leader and reacted less strongly. Hence, leaders who at times act selfservingly but see to it that followers’ direct outcomes are positive may be excused for their behavior. They conclude by arguing that self-interested leaders may use ethical behavior (through enhancing distributive justice) instrumentally to persuade followers to be silent. Finally, Kalshoven and Boon (2012) argue that ethical leadership should be embedded in HR processes that can support employees. In an empirical study they show that ethical leadership has a positive impact on employees’ well-being and extra-role behavior. Yet, the role of ethical leadership is specifically pronounced if HR support is insufficient. As such, ethical leadership could be shown to play a significant role in the encouragement of helping behavior in employees if HR offers little support for employees.

Where to Go Next? Future Directions for the Ethical Leadership Field Ethical leadership is still a young and thriving research area. In this paragraph, we will outline several opportunities for ethical leadership research we feel can develop the field even further. We will focus on what motivates leaders to value ethics and/or to act ethically, how leader’s ethical values and behavior are developed, and the issue of conflicting leader and follower values.

The Emergence of Ethical Leadership What Motivates Leaders to Be Ethical, and Does It Matter? Although research has illuminated some of the antecedents and consequences of ethical leadership, the specific constitutes of ethical leadership are not particularly clear at this point. At least two issues are relevant here. First, research Journal of Personnel Psychology 2012; Vol. 11(1):1–6

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may focus on how leaders may behave in an ethical fashion. That is, by supporting followers in their ethical behavior as well as communicating and discussing relevant ethical issues ethical leaders show their concern for ethics. Yet, it can be argued that behaving ethically in itself does not tell us very much about what motivates leaders to being ethical. That is, leaders may feel ethics is important to be persuasive and therefore use it in an instrumental fashion. On the other hand, leaders may behave ethically because this directly flows from their personal values. This distinction resembles the classification of leaders as moral managers (i.e., role modeling and encouraging ethical behavior in subordinates) and/or moral persons (i.e., ethical leaders being personally committed to moral values, i.e., being a moral person; Trevin˜o et al., 2000, 2003). Fry and Kriger (2009) similarly argued that leaders can be ethical by behaving ethically or by being ethical as part of their own moral value system. Leaders embracing the moral person perspective value integrity and are trusting, honest, and fair. Leaders who only adopt the role of a moral manager but are not seen by subordinates as moral persons may be identified as hypocrites (Trevin˜o et al., 2000). Hence, second, the leader’s exact motivation to be ethical might be relevant in understanding the role of ethical leadership for followers. For example, does the leader’s motivation for ethical behavior substantially affect the sincerity and trustworthiness of the leader? Followers whose leader acts ethically primarily out of an instrumental motivation might be seen as less trustworthy. Yet, the question remains whether followers truly care about the leader’s motive to be ethical. Future research is needed to spell out whether moral persons and moral managers are truly perceived as such by followers and whether they will respond differently as a result of this. The Role of Moral and Social Norms for Ethical Leaders Research by Mayer et al. (in press) and Riggio et al. (2010) shows that leader’s ethical behavior flows, at least partly, from the leader’ own personal moral values and norms. Yet, in addition to these intrinsic moral processes, ethical leadership may also develop through social learning processes (even though these processes may shape personal norms and values as well). That is, ethical behavior in leaders is also learned through modeling credible and legitimate leaders, such as higher-management’s ethical leadership (Bandura, 1986). Indeed, higher management encourages lower-management’s ethical behavior and assists in the development of ethical leadership (Mayer et al., 2009). The premise that ethical leadership has the ability to develop depending on the social circumstances is consistent with the theory of planned behavior (TPB; Ajzen, 1991). TPB argues that people adopt behavior that is evaluated as the sum of the positive and negative consequences for this specific behavior. Depending on this summation of perceived consequences the ethical moral (personal) norm can be established, which affects the intention to act ethically as well as the behavior itself. Hence, leaders who have a clear moral norm are more likely to behave ethically (see Mayer et al., Journal of Personnel Psychology 2012; Vol. 11(1):1–6

in press). This moral norm in turn can be predicted from the social norm that is present, which is consistent with social learning theory that through modeling ethical behavior can be encouraged. Moreover, the development of the moral norm also depends on the extent to which people are aware of the ethical situation as well as anticipated guilt and personal responsibility (i.e., internal attribution; Bamberg & Moser, 2007; see also De Hoogh & Den Hartog, 2008). Equally predictive of ethical intention – next to moral or social norm – is the perceived control one has over the situation as well as the attitude related to the decision (Bamberg & Moser, 2007). Future research therefore may explore whether the emergence of ethical leadership is dependent not only on the moral or social norm (cf. higher-management’s ethical leadership) but also on the perception of ethical awareness, responsibility, and guilt as well as perceived control and personal attitudes. Conflicting Values: Who Is Ethical? Ethical leadership is often examined from the viewpoint of followers. That is, researchers measure whether followers perceive their leader’s behavior as being ethical (i.e., whether followers perceive their leader to act in a valued manner, communicate ethical responsibilities, and discuss moral dilemmas or critical situations). Because it is the leader’s ethics that is being evaluated here, and the leader often is an important source of follower well-being, the leader’s values have implications for follower outcomes, such as dedication or own moral behavior. Yet, values often are personally important and relevant but are not necessarily consistent or shared with others’ values. Consider a service worker whose personal ethics relates merely to his own personal interests, by primarily aiming to sell products to customers (regardless of customer’s needs or wishes). His supervisor, in contrast, values good service to customers, by being respectful to the customer’s wishes and needs, above hard selling products. He communicates to subordinates to be respectful and considerate for the customer’s needs. As such the leader’s and the service worker’s values seem inconsistent and even contradictory. Often it is assumed that the leader’s values are the ‘‘norm’’ and that employees will share these values. Yet, employees have their own set of interests and values which may or may not correspond with the leader’s ethics. As such, ethical leadership research should consider examining the match or mismatch between leader and employee values in order to determine follower outcomes. In case there is a mismatch between leader and follower values of what is ethically relevant this will likely result in conflict or resistant behavior (Schminke, Ambrose, & Neubaum, 2005). Moreover, the question also emerges whether leader and/or follower values are consistent with ethics (as defined in terms of societal accepted norms) or are only perceived to be ethical even though they are inconsistent with what society would attribute as appropriate and ethical. That is, even though people may attribute certain values to be ethical, the content of the box labeled ethics might be entirely different. Another option is that people do know what is ethical and Ó 2012 Hogrefe Publishing

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appropriate but that they choose to neglect the ‘‘right’’ choice for their immediate interest. For example, a team might value to buy their products from suppliers at the lowest cost possible, even if this would imply that the supplier neglects humane working conditions in plants overseas. Employees who attribute their self-interested behavior as ethical might not only create a mismatch with the (genuinely) ethical leader but are also likely to create a personal conflict. Future research is needed to explore how follower and leader ethics tie to each other with respect to converging or divergent values and its outcomes in terms of conflict or performance. Moreover, research is needed to examine how leader-follower values may or may not correspond to societal values.

Conclusion This issue wishes to address a prominent and important topic in leadership research: integrity and ethical behavior. Even though ethics and leadership have been discussed extensively, it is only recently that ethical leadership research is reviving. Yet, even from times that human society was organized as hunter-gatherer communities ethical behavior functioned as a means to organize behavior and assure a peaceful environment. It is only until communities grew and leaders surrounded themselves with dedicated followers (to create a cultural elite) that ethics in leadership became less important (Padilla, Hogan, & Kaiser, 2007). One reason for this might be that followers found it difficult to resist exploitative leaders as they could not easily move away from their reign (Van Vugt, Hogan, & Kaiser, 2008). In the current complexity of society, in which wealth and individualism are on the rise social cohesion often suffers, allowing for variations in ethical behavior (Haidt, 2008). Consistent with this view, Durkheim (1897/1951) described that these conditions give way to feelings of emptiness and misery. Ethical leadership thus is a means to sustain order and encourage followers’ ethical conduct. The different contributions in this issue speak to encourage research in the domain of leadership and ethics; to revitalize the importance of leaders embracing integrity and helping followers develop to grow in their jobs. Acknowledgment This work was supported by STRT1/10/013TBA from the Research Fund of the Katholieke Universiteit Leuven.

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Jeroen Stouten Department of Psychology Katholieke Universiteit Leuven Tiensestraat 102 P.O. Box 3725 3000 Leuven Belgium E-mail [email protected]

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