With the collapse of major corporations like Enron, Tyco International, WorldCom and the like, corporate corruption and mismanagement has been in the forefront of some of the major issues that corporate organizations have to overcome and manage. With this research paper, my aim is to review and present three scholarly journals that highlight the impact that leadership can play on the ethical performance of an organization. Firstly, in the “Cultural & Leadership Predictors of Corporate Social Responsibility Values of Top Management: A GLOBE Study of 15 Countries”, the study states, that with the spread of globalization, it has become imperative to understand managerial values that guide their actions.
The authors suggest that the three main dimensions of managerial values that are relevant to the study of CSR are: shareholder/owner values where the aim is to maximize profits, stakeholder relations which refers to ethical and positive relations towards employees, consumer groups and the like and thirdly, community/state welfare which is based on the principle of public responsibility. In a more in-depth analysis the study explores the correlation of societal culture factors such as institutional collectivism, in-group collectivism and power distance on the above three managerial values that impacts managerial decision making. Furthermore, the paper proposes that visionary leadership and integrity enhances corporate social responsibility (CSR) values on moral and ethical grounds.
Secondly,” The Association Between Ethical Leadership & Employee Outcomes – The Malaysian Case” will help understand the value in gaining employee commitment and trust through effective ethical leadership skills. This article studies the impact of ethical leadership on the employee outcomes in areas such as organizational commitment and trust. A micro study was done on the country of Malaysia which has experienced a tenfold increase in corporate crime over the last 15 years. From the study one gathers that the main reason for such an exponential increase in such crimes is due to fact of the failures on part of corporate leadership to act ethically in their decision making process.
Lastly, with “Leadership Styles & the Moral Choice of Internal Auditors” I will examine how an employee’s self interest and management leadership guides their ethical decision making. This study plays close attention to one set of an organization’s workers – the Internal Auditing professionals, in order to understand the how their choice in making ethical decisions are subjective to various factors , one of them being leadership. The primary viewpoint of this study indicated that an auditor’s decision making is enhanced by the leaders who adopt a standard achievement oriented leadership style and when they see clear benchmarking, fair performance assessment and growth opportunity. In conclusion, this can be held true for any employee within an organization.
According to the GLOBE study, there were three main hypotheses that the researches proposed. The first hypothesis testing was split in two parts wherein, they proposed that “societies stressing institutional collectivist values will have a positive relationship with stakeholder’s relations and community/state welfare CSR values while societies stressing in-group collectivist values will only have a positive relationship with shareholder relations CSR values (Waldman et al).”
The second theory states that cultures that have a high power distance tend to have low CSR values (Waldman et al). Lastly, visionary leadership and integrity on part of CEO’s, adds variance to the prediction of followers (stakeholders) CSR values that go beyond the effects of societal cultural values (Waldman et al).
With the Leadership and Employee Outcome – The Malaysian Case, the two main hypotheses of the study were based on the notion that “there was a significant relationship between ethical leadership behaviour and employee’s organizational commitment and, that ethical leadership behaviour was positively associated with employee’s trust in leaders (Ponnu, Tennakoon).” This study aimed to examine the empirical significance of ethical leadership on employee attitudinal outcomes.
The main hypothesis of the “Leadership Styles & the Moral Choice of Internal Auditors” study was to understand the motivational factors that influence internal auditors when faced with ethical dilemmas pertaining to “spilt loyalty, expectation gaps and conflict of interest (Woodbine , Liu).” The authors proposed that the dependent and independent variables such as “ personal needs strengths, leadership styles, the interaction between needs strength and leadership styles and situational factors impact an internal auditors moral choices when faced with an ethical issue (Woodbine , Liu).”
In the GLOBE research paper the selected firms were picked from diverse sectors such manufacturing, information systems and tourism, however government run and educational institutions were excluded from the sample. Each firm had an average of 500 employees with six or more respondents from each firm. The final analysis was based on the responses of 561 firms from over 15 countries from various regions and a total of 4656 individuals completed the survey. The respondents comprised of CEO’s and several of their subordinates i.e. top executives.
The leadership (two variables- vision and integrity) and societal cultural dimensions (three variables – institutional collectivism, in-group collectivism and power distance) were measured using reliability and confirmatory factor analyses. Cronback’s alpha for the above measures ranged from 0.70 to 0.90 for a five factor model. A two factor model was also used however it was not considered to be a good enough of fit. Control Variables such per capita gross domestic product, firms performance, average of age of respondents, average education and average gender, were used to enhance precision of the model (Waldman et al).
Mean, standard deviations and correlations amongst the variables were interpreted and a hierarchical regression analysis was used to test the three main hypotheses. All survey items were standardized by country using Z – scores, so as to control potential differences in items scores and rating processes between countries (Waldman et al). Lastly various data collection strategies were put in to play in order to avoid single source bias issues.
The Malaysian cross sectional case study was based on the primary data collected from 172 intermediate managerial employees from a wide variety of industries within the corporate sector in Klang Valley, Malaysia. The sample included 77 males and 97 females, age range from 20 to 53 and with 84% of the respondents holding bachelors or post graduate degrees. The data was collected through self administered questionnaires and “convenience sampling was used in drawing samples ((Ponnu, Tennakoon).” SPSS Version 14.0 was used to analyze the data and test the studies hypothesis. Correlation matrix and reliability analysis was done all variables to determine relationships among constructs and lastly in order to allow for correlation amongst factors,” exploratory factor analysis using principle components with oblique rotations was conducted (Ponnu, Tennakoon).”
With the Internal Auditors case study, the sample population description comprised of full time internal auditing jobs with respondents that had at least one year experience with their respective organizations. The study was conducted in Australia and comprised of mailed out questionnaires. The total sample size was 128. The demographics were as follows: 84 males and 44 females, average male age 44 years and average female age of 36 years. Out of the 128 respondents, 48 of them were audit managers of equivalent. Organizations involved in the sampling were government departments, private sector and accounting firms.
Statistical methods that were employed included correlation analysis for the dependent variables using a two tailed test and significant relationship amongst the three variables was found to exist and Q-Q plots and detrended normal plots were used to validate normality and reliability. For the independent variables such as leadership styles, growth needs and the like principal component analysis was used. Reverser measurement and regression analysis using stepwise method was used to explore relationships between the variables and in certain instances to test validity of model.
Major Results & Findings
From the two GLOBE tables listed below the hypothesis that in-group collectivist values results in positive shareholder/owner is unconfirmed. The statistical analysis has confirmed and supported the authors proposal in that institutional collectivism positively predicts stakeholder CSR values, with a positive β coefficient of 0.13 (P ≤ 0.01); power distance is negatively predictive of stakeholder CSR values, with a β coefficient of -0.20; and that the leadership variables of vision and integrity enhanced CSR values, with β coefficients of 0.23 and 0.13 respectively and variance of 9% (P ≤ 0.01) (Waldman et al).
With GLOBE table 2, total variance amongst the three main managerial values are: shareholder/owner dimension equals 22%, stakeholder values is 45% and community/state welfare is 28% with a 5% significance level. Hence the model best suits stakeholder CSR values.
The main findings with the GLOBE study are as follows:
1.The authors multidimensional of managerial values with the dimensions of shareholder/owners, stakeholders and community/state welfare values were appropriately construed. 2.The research indicates that manager from wealthier countries are more inclined to favor shareholder/owners values and less likely to consider the welfare of the state or community at large. In comparison, managers from poorer countries feel a greater personal responsibility towards society. 3.Managers from institutional collectivist societies tend to have greater value for the three managerial values while there has been no significant relationship between the two variables for in-group collectivism.
4.In societal cultures that have great power distance, managers tend to devalue CSR values, thus leading to a more manipulative use of power with little consideration given to stakeholders such as employees, customers, environmentalist. This could pose a definite risk for multinational firms in today’s global economy. 5.Organization variables such as CEO leadership in terms of vision and integrity are very likely to account for variance in managerial attitudes and decision making.
One of the major recommendations of the GLOBE study is the need for multinational firms to pay close attention to cultural and leadership factors that have a critical impact on management CSR values. For example CSR values and policies of a multinational firm could be strong and this may be due to the home country’s high institutional collectivism and low power distance however managers in a subsidiary country may have weaker stakeholder CSR values as a result of weak institutional collectivism and high power distance (Waldman et al). The resulting scenario could lead to conflicting policies and business practices that can have an adverse effect on multinational firms. This further reiterates the authors’ proposal that in cases such as this, it’s the firm’s leadership values of integrity and vision that help managers look beyond the economic and cultural limitations.
In the Malaysian case as mentioned earlier, correlation analysis was preformed to test strength and linear relationship amongst the variables. With the first hypothesis there was a medium positive correlation between ethical leadership behaviour and organizational commitment. The Malaysian Table 1 below shows correlations r = .46 and p < .0 5 and, co-efficient of distribution is 21% of the variance, which can be explained.
Hence with the supporting empirical data the research shows that “high levels of perceived ethical leadership behaviour are associated with higher levels of employee’s organizational commitment (Ponnu, Tennakoon).”
As for the second hypothesis, there was a strong positive correlation between ethical leadership behaviour and employee trust. The Malaysian Table 2 below shows correlations r = .634 and p < .0 5 and, co-efficient of distribution is 40% of the variance, which can be explained.
Hence with the above results supporting hypothesis 2, it can be safely concluded that “high levels of perceived ethical leadership associated with higher levels of employee’s trust in leaders (Ponnu, Tennakoon).” Some of the main antecedents to the Malaysian case findings are as follows: 1.If leaders make ethics a cornerstone of all business practices they gain internal organizational fellowship and employees tend to value a more social exchange with the organization rather than an economic exchange.
Employees reciprocate these sentiments through organizational behavioral commitment and are “willing to exert considerable effort in terms of job dedication and job commitment, on behalf of the organization (Ponnu, Tennakoon).” 2.When an organizational leader priortizes the group’s interest first, who does not wish to seek personal gain at the expense of others, who respects the rights of others and treats them fairly; tends to harness employees trust. 3.When leaders empower employees and involve them in decision making processes they not only facilitate employee well being and growth but increases their trust in them as well.
With the Internal Auditors case the major findings of the study support Path goal and ERG theories (Woodbine, Liu). As per the table below, internal auditors are motivated to make ethical decisions based on their personal growth needs. Leadership styles play a significant role as well especially Standard achievement oriented approach that encourages individual performance and achievement (Woodbine, Liu). Lastly gender, age and experienced was an important predictor, as female respondents that were younger and less experienced showed less motivation towards making moral ethical choices.
The GLOBE study has been extremely informative and clearly structured to provide an in-depth understanding of how societal cultural factors and leadership guide managerial values when it comes to decision making within an organization.
Some of the key limitations to the study were that the analyses were limited to 15 countries and the surveyed firms did not represent a wide range of industries (Waldman et al). Actual CSR performance was not measured and lastly, due to multiple levels of data to be collected, additional insight could not be gained. The study indicates that even though leadership integrity is a significant and unique predictor of managerial CSR values, it remains to be an under researched variable. This may be due to the fact that leadership integrity is associated with more tangible organizational outcomes such as reductions of business of costs.
However, the authors still believe that it a significant factor that enhances managerial decision making and is worth future examination and research. My personal opinion would also include a more directed research towards in-group collectivism in order to find a relationship between individualistic societies and importance of CSR values towards society at large. The study concluded that, organizations that have strong corporate social responsibility values gain the trust of both internal and external stakeholder which in turn solidifies the foundations for an ethical culture. It also states that Neo – charismatic leadership that is guided by the principles of visionary leadership and integrity have a strong impact on an organization’s ethical performance.
The Association Between Ethical Leadership & Employee Outcomes – The Malaysian Case” study showed me a direct link between leadership ethical behavior on employee commitment and trust. It empirically proved that unethical leadership can adversely impact employee outcomes that in turn affect organizational
performance. I noted related some factors such supervision, leadership honesty, trustworthiness, fairness and care, have an impact on employee perception and outcomes. The key limitations of the Malaysian study as noted by the researchers due to time and budget constraints, was that, convenient sampling may not be representative of the entire population due to insufficient representation of the entire corporate sector of the country and could be subject to self-selection bias; secondly the study could not measure if distance with top/senior management has an effect on employee perception of ethical leadership. Hence lower level employees who have very minimal contact with upper level management may rely more on information based on public opinion then direct leadership experience (Ponnu , Tennakoon).
Both authors found that their study although valid and reliable, needed to be border in terms of sample size and area of study in order to fully understand and demonstrate the importance of ethical leadership. It was also suggested that since the research focused on” superior direct relationships “(Ponnu, Tennakoon) it would be recommended to gather relevant data from lower level employees within the organizational hierarchy. Finally they suggested further research on the relationship between “employee psychological empowerment and authenticity of ethical leader behavior (Ponnu, Tennakoon)”.
As per my personal suggestion further research can be geared towards relating individual organizational commitment and performance. In conclusion to the Malaysian study, the authors state that corporate crime is still rising as a large number of top executives do not see the importance of ethical leadership values in their business operations. Corporate leaders should set an example of strong ethical and moral values in order to earn loyalty and trust of all major internal and external stakeholders. Organizations that have strong ethical leaders and principles are held in high esteem and enable the organization to employ and retain the best human capital available in the market.
The case study on the internal audit profession, provided for a keen micro analysis on the personal motivations that guide employees to make moral decisions especially in professions that require a high level of ethical decision making. The limitations of this study as mentioned by the authors included variable identification and measurement, sample size and the use of a far too simple three vignette based model (Woodbine, Liu). Further research in to gender differences and issues that affect one’s ethical and moral decision making ability. Lastly a broader analysis that analysis the organization as whole as opposed to a particular profession would help enhance understanding of the internal motivations that guide moral decisions when faced with ethical dilemmas.
The authors also recommend a new variable for research i.e. “employee religious affiliation” as a possible predictor to moral choices. Even though the authors conclude that codes of conduct and governance systems provide for an internal control mechanism, whistle blowing channels and develop cultures of honesty and accountability, the study strongly suggests that employee’s moral choices are still subject to their motivation needs. Finally, employee’s motivation to making moral decisions can be difficult to predict however they can be encouraged with proper leadership (Woodbine , Liu).
All three scholarly articles empirically supported the main objective of this study, which was to reiterate the sound business principle that, ethical leadership lead to the responsible management of business processes and decision making that will in turn help an organization manage its risk of failure as a result of unethical business practices.
Ponnu, Cyril H., Tennakoon , Girindra. “The Association Between Ethical Leadership & Employee Outcomes – The Malaysian Case.” Electronic Journal of Business Ethics & Organizational Studies 14:1 (2009). Web. Sept 19th, 2010.
Walman, De Luque, Washburn et al. “Cultural & Leadership Predictors of Corporate Social Responsibility Values of Top Management: A GLOBE Study of 15 Countries.” Journal of International Business Studies 37:6 (2006). Palgrave Macmillan Journals. Web. Sept 19th, 2010.
Woodbine, Gordon F., Liu, Joanne. “Leadership Styles & The Moral Choice of
Internal Auditors.” Electronic Journal of Business Ethics & Organizational Studies 15:1 (2010). Web. Sept 19th, 2010.
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