Journal of Business Ethics (2009) 90:533–547
Springer 2009

DOI 10.1007/s10551-009-0059-3

Ethical Leadership: Examining

the Relationships with Full Range
Leadership Model, Employee Shamas-ur-Rehman Toor
Outcomes, and Organizational Culture George Ofori

ABSTRACT. Leadership which lacks ethical conduct decisions, and behaviors so that others in their
can be dangerous, destructive, and even toxic. Ethical organizations can follow suit. Philosophers, religious
leadership, though well discussed in the literature, has leaders, and thinkers from ancient times have
been tested empirically as a construct in very few studies. emphasized the importance of ethics for leaders, if
An empirical investigation of ethical leadership in they are to attain effective governance. Although
Singapore’s construction industry is reported. It is found
‘‘ethics’’ has been a subject of discussion for centu-
that ethical leadership is positively and significantly asso-
ciated with transformational leadership, transformational
ries, recent decades have observed the debate
culture of organization, contingent reward dimension of expanding across scientific disciplines and the busi-
transactional leadership, leader effectiveness, employee ness community. One probable reason for the
willingness to put in extra effort, and employee satisfac- increased interest in ethics is the ethical transgres-
tion with the leader. However, it is also found that ethical sions that have been revealed in the recent corporate
leadership bears no correlations with transactional lead- scandals (see Manz et al., 2008; Mehta, 2003;
ership. Also, it is negatively correlated with laissez-faire Revell, 2003; Treviño and Brown, 2004). The
leadership and transactional culture of the organization. world has seen that there are unethical and even
The findings also reveal that ethical leadership plays a toxic leaders, who exploit the loopholes in man-
mediating role in the relationship between employee agement systems and seek to fulfill their personal
outcomes and organizational culture. Practical implica- desires at the expense of their organizations and its
tions of these findings are discussed. Directions for future
employees (see Padilla et al., 2007; Schaubroeck
research are also suggested.
et al., 2007).
KEY WORDS: ethical leadership, Full Range Treviño and Brown (2004) argue that unethical
Leadership Model, employee outcomes, organizational behavior has existed ever since the existence of
culture humans and that people are not generally less ethical
today. ‘‘But the environment has become quite
Introduction complex and is rapidly changing, providing all sorts
of ethical challenges and opportunities to express
greed’’ (p. 77). There have also been ethical and
A vision relevant for us today will build on values
unethical leaders ever since the dawn of human
deeply embedded in human history and in our own
tradition… The materials out of which we build the
civilization. However, the impact of their [un]ethi-
vision will be the moral strivings of the species, today cal behavior is far more pronounced in today’s
and in the distant past. (John William Gardner 1993) organizations. The growing complexity of the
businesses, escalating amount and speed of infor-
Leadership ought to be ethical in order to be mation flow, and greater pressure for performance
effective and successful over the long term. Leaders have increased the probability of conscious – and
must demonstrate the highest moral standards and sometimes unconscious – ethical slipups in decisions,
ethical conduct in their everyday talk, actions, actions, and behaviors of leaders. Carroll (2004)
534 Shamas-ur-Rehman Toor and George Ofori

notes that ‘‘global business ethics will demand Literature review

cutting-edge thinking and practice as companies
strive to expand their products, services, sales, and Ethical leadership
operations throughout the world’’ (p. 114). Addi-
tionally, increasing awareness about one’s rights, In view of Ciulla (1995), when people ask ‘‘what is
mounting concern of people about fair treatment, leadership?’’, they are implicitly asking ‘‘what is
focus on social consciousness and procedural justice, good leadership?’’ or ‘‘What is ethical leadership.’’
and growing need of knowledge workers for self- Therefore, there needs to be more emphasis on
actualizations are the forces compelling the need for ‘‘ethical’’ dimension of leadership. For ‘‘good lead-
ethical conduct of organizational leaders. Questions ership’’, it is important that leaders are not only
on managerial and leadership ethics are being raised competent but also ethical in their everyday conduct
more than ever before (Veiga, 2004), and the debate (see Ciulla, 1995). Kodish (2006), while discussing
on ethical leadership has been revived in the recent Aristotle’s philosophy of leadership also argues that
years. ‘‘Leadership is more than a skill, more than the
Despite the surge in the volume of the discourse knowledge of theories, and more than analytical
on ethics, the discussion of ethics in organizational faculties. It is the ability to act purposively and
studies is mainly about executive leadership and ethically as the situation requires on the basis of the
most studies on the subject ‘‘have tended to con- knowledge of universals, experience, perception,
ceptualize ethical leadership in very broad and and intuition. It is about understanding the world in
simple terms’’ (Treviño et al., 2003, p. 30). Veiga a richer and broader sense, neither with cold
(2004) expresses the concern that ethics of leadership objectivity nor solipsistic subjectivity’’ (p. 464).
has not been sufficiently discussed in mainstream Bass and Steidlmeier (1999) take this discussion
research agendas. Empirical research on ethical further and argue that leaders may be authentic
leadership is scarce (see Brown et al., 2005; transformational and pseudo transformational. They
De Hoogh and Den Dartog, 2008; Treviño et al., argue that inauthenticity of leaders is what makes them
2003). Scholars have mostly discussed ethical lead- pseudo transformational. Pseudo transformational
ership in theoretical and conceptual terms, but there leaders are self-centered, unreliable, power-hungry,
are hardly any studies providing empirical evidence and manipulative. On the other hand, authentic
about ethical leadership. Brown et al. (2005) carried transformational leaders have a moral character, a
out field investigations to test and validate the strong concern for self and others, and ethical values,
‘‘construct’’ of ‘‘ethical leadership’’ within organi- which are deeply embedded in the vision. Ladkin
zations (see: and its impact on employee outcomes (2008) believes that ‘‘leading beautifully’’ has three
(see Walumbwa et al., 2008). However, the major dimensions: ‘‘mastery’’ – in understanding the
majority of the studies on ethical leadership used self and the context, ‘‘coherence’’ – congruence
university students as subjects. between various forms of self and with one’s purpose
The primary objective of this study is to examine and message, and ‘‘purpose’’ – attending to one’s goal.
how ethical leadership is associated with employee Ladkin (2008) argues that leading beautifully ‘‘brings
outcomes and organizational culture. This article is into play the ethical dimension of a leader’s endeavor’’
organized in four main sections. First, a review of and questions whether one’s purpose ‘‘serves the best
the literature on ethical leadership is presented, fol- interests of the human condition’’ (p. 33). On similar
lowed by the development of a hypothesis. Second, lines, Kanungo (2001) notes that ethical leaders
the research method – participants, procedures, and engage in acts and behaviors that benefit others and at
measures – is discussed in detail. Third, an analysis of the same time, they refrain from behaviors that can
the field study data is presented along with the dis- cause any harm to others.
cussion of the results in relation to the literature. Scholars of leadership usually outline attributes and
Finally, practical and research implications of characteristics that pertain to ‘‘good leadership.’’
‘‘ethical leadership’’ are discussed. These positive attributes of leadership include:
 Ethical Leadership, Employee Outcomes, and Organizational Culture 535

character, honesty, integrity, altruism, trustworthi- Based on these conceptualizations, Brown et al.
ness, collective motivation, encouragement, and (2005) empirically tested the construct of ethical
justice (see Bass and Steidlmeier, 1999; Den Hartog leadership. In their conceptualization of ethical
et al., 1999; Palanski and Yammarino, 2007; Resick leadership, Treviño and colleagues present a matrix
et al., 2006; Toor and Ogunlana, 2008). Brown et al. comprising unethical leadership (weak moral person,
(2005) suggest that the combination of integrity, weak moral manager), hypocritical leadership (weak
ethical standards, and fair treatment of employees ate moral person, strong moral manager), ethical leader
the cornerstones of ethical leadership. However, (strong moral person, strong moral manager), and
research studies have shown that there is more to ethically ‘‘silent’’ or ‘‘neutral’’ leadership (weak/
ethical leadership than simply possessing the attri- strong moral person, weak moral manager). Treviño
butes mentioned above (Treviño et al., 2000). Eth- et al. (2000) proposed ethically silent or neutral
ical leadership, in its true sense, promotes ethical leadership in their interviews with ethics officers and
conduct by practicing as well as consciously manag- organizational executives who agreed that there are
ing ethics and holding everyone within the organi- leaders who are neither clearly ethical nor clearly
zation accountable for it (Treviño and Brown, 2004). unethical. Ethically neutral/silent leaders, Treviño
In interviews with executives and ethics managers, and Brown (2004) note, may be ethical persons but
Treviño et al. (2000) found that ethical leadership has they fail to provide leadership in crucial areas where
two important dimensions: ‘‘moral persons’’ and ethics are vital. This usually puzzles the followers
‘‘moral managers’’. Brown et al. (2005) defined who are not able to decide whether the leader is
ethical leadership as ‘‘the demonstration of norma- ethical or otherwise. Ethically neutral/silent leaders
tively appropriate conduct through personal actions typically focus on the bottom-line gains without
and interpersonal relationships, and the promotion of explicitly setting ethical standards for followers.
such conduct to followers through two-way com- Ethically neutral/silent leaders are self-centered,
munication, reinforcement, and decision-making’’ focused on short-term gains, are either unaware of,
(pp. 120; also, see Brown and Treviño, 2002). The or less concerned about, improving the state of affairs
first part of this definition (‘‘demonstration of nor- in terms of ethics (see Treviño et al., 2000).
matively appropriate conduct’’) refers to the moral
person, whereas the second part (‘‘the promotion of
such conduct to followers’’) refers to the moral Previous research
manager aspect of ethical leadership.
Brown et al. (2005) explain that ‘‘moral persons’’ Some excellent reviews about the role of ethics in
are those who model ‘‘normatively appropriate’’ leadership have been contributed by Ciulla (1995),
conduct such that they appear honest, trustworthy, Bass and Steidlmeier (1999), Price (2003), and
and credible to others. Moral persons are perceived Brown and Treviño (2006). Most of the studies have
as fair and just decision makers, ethically principled, been directed toward understanding executive
caring, and altruistic (Treviño et al., 2000). ‘‘Moral ethical leadership in theoretical terms (see, for
person’’ is about how others perceive the leader’s example, Ciulla, 1995; Hollander, 1995; Lincoln
character, traits, attributes, and personal characteris- et al., 1982; Murphy and Enderle, 1995). There has
tics (Brown and Treviño, 2006). been a significant focus on ethical decision making
On the other hand, the ‘‘moral manager’’ dimension (Butterfield et al., 2000; Jones and Ryan, 1998;
of ethical leadership means that the leader openly and Treviño, 1986; Treviño and Weaver, 1996). Some
explicitly talks about ethics and also empowers studies have also focused on leadership ethics from a
employees to be just and seek justice (see Brown et al., religious point of view (see Abeng, 1997). Others
2005). This aspect characterizes the proactive efforts by have addressed the issue of moral development of
which the leader influences the followers’ actions and leaders and followers (see Graham, 1995; Harkness
beliefs about ethics. Moral managers talk strongly about et al., 1981; Tietjen and Walker 1985). Some others
ethics in their messages to their followers, use rein- have addressed the issue of ethics in relation to the
forcement mechanisms (reward and discipline), and organizational environment and its influence on
make them accountable for their actions and decisions. employee satisfaction, performance, commitment, or
536 Shamas-ur-Rehman Toor and George Ofori

citizenship behavior (see Graham, 1995; Jones and Multi-Culture Leader Behavior Questionnaire
Ryan, 1998; Treviño et al., 1998; also see Treviño (MCLQ) (see Hanges and Dickson, 2004; House
et al., 2000; Weaver and Treviño, 2001). Some and Aditya, 1997). The investigation of De Hoogh
recent works have also focused on the strategic and Den Dartog (2008) showed that ethical leader-
dimension of ethical leadership in business (see ship is negatively associated with despotic leadership,
Thomas et al., 2004). but positively and significantly related to both top
Treviño et al. (2000, 2003) undertook some of management team effectiveness and subordinates’
the most prominent empirical works on ethical optimism about their future. They also found that
leadership. They interviewed 20 chief ethics officers leaders scoring high on social responsibility were
and 20 executives. Treviño et al. (2000) found many rated higher on ethical leadership but lower on
striking similarities in perceptions of ethics managers despotic leadership.
and executives about ethical leadership. Their
investigation showed that ethical leadership is not all
about traits such as honesty and integrity, but it is Is ethical leadership distinct?
also about transactional behavior of executives in
which they use reward systems to make their fol- Ethical leadership, authentic leadership, servant
lowers accountable for ethics. These works opened leadership, transformational leadership, and spiritual
the avenues for formal development and validation leadership are all forms of leadership, which have
of ‘‘ethical leadership’’ construct. As a result, Brown been shown in the research for their positive out-
and Treviño (2002) introduced their Ethical Lead- comes for leaders, followers, and organizations.
ership Scale (ELS) and produced its construct and Scholars have attempted to draw parallels as well as
predictive validity through empirical studies (see lines of distinctions across various positive forms of
Brown et al., 2005). Brown et al. (2005) found that leadership (see Avolio and Gardner, 2005; Brown
ethical leadership is associated with consideration and Treviño, 2006; Luthans and Avolio, 2003;
behavior, honesty, trust in the leader, interactional Walumbwa et al., 2008). A key distinction of ethical
fairness, and socialized charismatic leadership. These leadership is its emphasis on internalized moral
investigations also showed that ethical leadership perspective, moral person, moral manager, and ide-
predicts outcomes such as perceived effectiveness of alized influence (see Brown and Treviño, 2006;
leaders, employees’ satisfaction with the job, and Walumbwa et al., 2008). Authentic leadership is
their willingness to extra effort into the work and to more concerned with self-awareness, relational
report problems to management. Walumbwa et al. transparency, internalized moral perspective, and
(2008) ascertained that ethical leadership is positively balanced processing (see Gardner et al., 2005;
associated with all four dimensions of authentic Walumbwa et al., 2008).
leadership (self-awareness, relational transparency, Servant leadership draws on the leader’s self-
internalized moral perspective, and balanced pro- awareness, authentic behavior, positive modeling,
cessing), organizational citizenship behavior (OCB), conceptual skills, empowering, behaving ethically,
organizational commitment (OC), and satisfaction creating value for the community, helping subordi-
with the supervisor. nates to grow and succeed, putting subordinates’
De Hoogh and Den Dartog (2008) propose needs first, and emotional healing (Avolio and
another measure of ethical leadership comprising Gardner, 2005; Liden et al., 2007). Spiritual lead-
three dimensions – morality and fairness, role clari- ership is built around concern for others, integrity,
fication, and power sharing. De Hoogh and Den role modeling, altruism, and hope/faith (see Fry,
Dartog (2008) also note that their conceptualization 2003). Finally, transformational leadership comprises
of ethical leadership is not much different from idealized influence, intellectual stimulation, inspira-
that of Brown et al. (2005). However, to establish tional motivation, and individualized consideration
their measure of ethical leadership, De Hoogh (Avolio and Bass, 2004). Other dimensions of
and Den Dartog (2008) use three scales (morality transformational leadership include leader’s self-
and fairness: 6 items, role clarification: 5 items, and awareness, internalized moral perspective, and moral
power sharing: 6 items) that are adapted from the person (Walumbwa et al., 2008).
 Ethical Leadership, Employee Outcomes, and Organizational Culture 537

At the conceptual level, these perspectives show their organizations, who were also perceived to be
that being ethical is a key attribute of positive authentic and successful leaders within the organi-
leaders. Therefore, positive leaders – whether they zation. A simple definition of ‘‘authentic leader’’ was
are authentic, transformational, spiritual, servant, or presented to the executives for this purpose. It stated
ethical – are trustworthy, honest, reliable, and that authentic leaders understand their purpose,
credible. In other words, they are strong on the practice solid values, lead with heart, and establish
‘‘moral person’’ dimension of ethical leadership, connected relationships (see George, 2003; George
which is more commonly shared across other forms et al., 2007). After nominations were made by the
of positive leadership as well. However, the ‘‘moral executives, short briefing sessions were organized
manager’’ is what makes ethical leadership stand out, with these managers during which the objectives of
as Treviño et al. (2000, 2003) also highlight. the study, expected outcomes, and structure of sur-
vey were explained. After obtaining their consent to
participate in the study, each manager was asked to
Hypothesis
nominate one peer and two subordinate raters, who
would be willing to complete a rating form for the
From the above literature review and discussion on
nominated manager. Rating forms were distributed
ethical leadership, the following hypotheses are set to
among the nominated peers and subordinates who
be tested in the current article:
rated their managers on various scales that will be
1. Ethical leadership is positively associated with discussed later. Despite follow-up e-mail messages
transformational leadership and its compo- and telephone calls that were made in an attempt to
nents. enhance the response rate, a total of 62 fully com-
2. Ethical leadership is negatively associated pleted rating forms were returned. Raters who could
with transactional leadership and laissez-faire not return the survey packages, mostly mentioned
leadership. their busy schedule – due to the prevailing massive
3. Ethical leadership is positively associated with boom in construction activity in Singapore – as a
contingent reward dimension of transactional principal reason.
leadership.
4. Ethical leadership is positively associated with
employees’ outcomes (satisfaction with the Measures
leader, leader effectiveness, and willingness to
give extra effort). In the rating form, a number of measurements were
5. Ethical leadership is positively associated with completed by the peers and subordinates of the
transformational culture, but negatively asso- managers. In order to seek ratings of managers on
ciated with transactional culture. ethical leadership, Brown et al.’s (2005) ELS was
6. Ethical leadership mediates the relationship used. This scale comprises 10 items and has been
between employee outcomes and organiza- validated in various studies (Brown and Treviño,
tional culture. 2002; Brown et al., 2005; Walumbwa et al., 2008).
Sample items are: ‘‘has the best interests of
employees in mind’’ and ‘‘sets an example of how to
do things the right way in terms of ethics’’.
Method Responses were obtained on a 5-point Likert type
scale from 1 (‘‘Strongly Agree’’) to 5 (‘‘Strongly
Participants and procedures Disagree’’). Analysis generated a satisfactory value
(0.92) of Cronbach alpha.
This study reports on part of a larger project on The 45-item Multi-factor Leadership Question-
leadership that was conducted in Singapore. Senior naire (MLQ) Rater Form (59-Short) (Avolio and
executives – who were reputed as authentic leaders Bass, 2004) was used to measure peers’ and subordi-
and were interviewed in part one of the project – nates’ perceptions of Full Range Leadership Model
were asked to nominate senior level managers from (transformational leadership, transactional leadership,
538 Shamas-ur-Rehman Toor and George Ofori

laissez-faire or passive-avoidant leadership), and Proctor-Thomson, 2001, 2003). Sample items for
employee outcomes (effectiveness, extra effort, and transactional culture are: ‘‘we negotiate with each
satisfaction). MLQ is probably the most widely used other for resources’’ and ‘‘there is strong resistance
scale to measure leadership, and has produced reliable to changing the old ways of doing things.’’ Sample
results across various cultures. Sample items are: ‘‘I talk items for transformational culture are: ‘‘We trust
about my most important values and beliefs’’ (trans- each other to do what’s right’’ and ‘‘We encourage
formational leadership: idealized behaviors); ‘‘I pro- a strong feeling of belonging.’’ Estimated inter-
vide others with assistance in exchange for their nal reliability coefficients for transactional and
efforts’’ (transactional leadership: contingent reward); transformational cultures were 0.76 and 0.78,
‘‘I am absent when needed’’ (laissez-faire); and, respectively.
‘‘I heighten others’ desire to succeed’’ (extra effort).
Self-rated responses were on a 5-point scale from 0
(‘‘Not At All’’) to 4 (‘‘Frequently, If Not Always’’). Analyses and results
The estimated internal reliability coefficients for var-
ious sub-scales under MLQ are: transformational In order to address the hypotheses stated above,
leadership (TFL = IA + IB + IM + IS + IC) (20 correlation analysis was performed. Results of zero-
items, a = 0.92), idealized behaviors (IB) (4 items, order correlation analysis are shown in Tables I, II,
a = 0.72), idealized attributes (IA) (4 items, and III. Table I shows that ethical leadership is
a = 0.72), idealized influence (II = IA + IB) significantly and positively associated with transfor-
(8 items, a = 0.83), inspirational motivation (IM) (4 mational leadership (r = 0.58, p < 0.01), idealized
items, a = 0.76), intellectual stimulation (IS) (4 items, behaviors (r = 0.52, p < 0.01), idealized attributes
a = 0.74), individualized consideration (IC) (4 items, (r = 0.46, p < 0.01), idealized influence (r = 0.53,
a = 0.67), transactional leadership (TSL = CR + p < 0.01), inspirational motivation (r = 0.53, p <
MBE-A + MBE-P) (12 items, a = 0.65), contingent 0.01), intellectual stimulation (r = 0.37, p < 0.01),
reward (CR) (4 items, a = 0.67), management- and individualized consideration (r = 0.44, p <
by-exception/active (MBE-A) (4 items, a = 0.66), 0.01). These results provide support for hypothesis 1.
management-by-exception/passive (4 items, a = Similarly, Table II shows that ethical leadership is
0.66), laissez-faire leadership (LF) (4 terms, a = 0.65), not associated with transactional leadership (r =
effectiveness (4 items, a = 0.79), extra effort (3 items, 0.23, p > 0.05), but negatively associated with lais-
a = 0.71), and satisfaction (2 items, a = 0.79). sez-faire leadership (r = -0.27, p < 0.05). How-
Organizational culture was measured by Organi- ever, as predicted in hypothesis 3, contingent reward
zational Description Questionnaire (ODQ), a 28-item dimension of transactional leadership is significantly
measure developed by Bass and Avolio (1993). The and positively associated with ethical leadership
scale measures each of the transactional and trans- (r = 0.42, p < 0.01). Ethical leadership is positively
formational cultures on 14 items. It seeks categorical correlated with management-by-exception (active),
responses (True, False; an option of ‘‘Undecided’’ is but this relationship is not significant (r = 0.22,
also provided) on each item. A ‘‘True’’ gives +1 to p > 0.05). However, the relationship of ethical
the respective item, whereas a ‘‘False’’ results in a leadership with management-by-exception (passive)
score of ‘‘-1.’’ Final respective scores for transac- is negative but not significant (-0.16). These results
tional or transformational cultures are computed by provide partial support for hypothesis 2, but full
subtracting the count of ‘‘False’’ items from the support for hypothesis 3.
count of ‘‘True’’ items. Therefore, total scores for Table III shows the zero-order correlations of
each of the transactional or transformational cultures ethical leadership with employee outcomes and
may vary from -14 to +14. A higher negative organizational culture. As predicted in hypothesis 4,
score indicates the absence of a particular culture ethical leadership is significantly and positively
type within an organization, whereas a higher po- associated with effectiveness (r = 0.57, p < 0.01),
sitive score indicates the presence of that culture. extra effort (r = 0.55, p < 0.01), and satisfaction
This scale has been validated in many studies (see (r = 0.56, p < 0.01). Support for hypothesis 5 is also
Bass and Avolio, 1993; Elliott, 2004; Parry and clear from the negative relationship of ethical
 Ethical Leadership, Employee Outcomes, and Organizational Culture 539

TABLE I
Means, standard deviations, and correlations coefficient for transformational leadership and ethical leadership

Variables M SD 1 2 3 4 5 6 7 8

(1) Transformational leadership (TFL) 2.97 0.52 1

(2) Idealized behaviors (IB) 3.06 0.65 0.82** 1
(3) Idealized attributes (IA) 3.14 0.55 0.81** 0.68** 1
(4) Idealized influence (II = IB + IA) 3.10 0.55 0.89** 0.93** 0.90** 1
(5) Inspirational motivation (IM) 3.04 0.64 0.71** 0.59** 0.52** 0.60** 1
(6) Intellectual stimulation (IS) 2.91 0.72 0.84** 0.59** 0.59** 0.65** 0.37** 1
(7) Individualized consideration (IC) 2.73 0.68 0.81** 0.52** 0.57** 0.59** 0.41** 0.73** 1
(8) Ethical leadership (EL) 3.92 0.64 0.58** 0.52** 0.46** 0.53** 0.53** 0.37** 0.44** 1

*Correlation is significant at the 0.05 level (2-tailed); **Correlation is significant at the 0.01 level (2-tailed).
M = Mean, SD = standard deviation.

TABLE II
Means, standard deviations, and correlations coefficient for transactional leadership and ethical leadership

Variables M SD 1 2 3 4 5 6

(1) Transactional leadership (TSL) 2.08 0.49 1

(2) Contingent reward (CR) 2.83 0.71 0.60** 1
(3) Management-by-exception (active) (MBE-A) 2.45 0.83 0.76** 0.43** 1
(4) Management-by-exception (passive) (MBE-P) 0.96 0.82 0.46** -0.21 -0.01 1
(5) Laissez-faire leadership (LF) 0.68 0.70 0.26* -0.33** 0.01 0.69** 1
(6) Ethical leadership (EL) 3.92 0.64 0.23 0.42** 0.22 -0.16 -0.27* 1

*Correlation is significant at the 0.05 level (2-tailed); **Correlation is significant at the 0.01 level (2-tailed).
M = Mean, SD = standard deviation.

TABLE III
Means, standard deviations, and correlations coefficient for ethical leadership, employee outcomes, and organizational
culture

Variables M SD 1 2 3 4 5 6

Ethical leadership (EL) 3.92 0.64 1

Effectiveness (E) 3.10 0.58 0.57** 1
Extra effort (EE) 2.90 0.68 0.55** 0.80** 1
Satisfaction (S) 3.21 0.60 0.56** 0.72** 0.56** 1
Transactional culture (TSC) 2.15 5.12 -0.30* -0.34** -0.25 -0.14 1
Transformational culture (TFC) 8.66 5.33 0.29* 0.38** 0.20 0.31* -0.26* 1

*Correlation is significant at the 0.05 level (2-tailed); **Correlation is significant at the 0.01 level (2-tailed).
M = Mean, SD = standard deviation.

leadership with transactional culture (r = -0.30, In order to address hypothesis 6, regression

p < 0.05), but positive relationship with transfor- analysis techniques proposed by Kenny et al. (1998)
mational culture (r = -0.29, p < 0.05). were employed in three steps. In step 1, each of the
540 Shamas-ur-Rehman Toor and George Ofori

leadership outcome variables (effectiveness, extra the final step, ethical leadership significantly con-
effort, and satisfaction) was regressed on organiza- tributed to the regression equation when leadership
tional culture (separately for Transactional and outcomes were regressed on both Transformational
Transformational). In step 2, ethical leadership was culture and ethical leadership (effectiveness: b =
regressed on organizational culture. In step 3, each 0.51, p < 0.01; extra effort: b = 0.52, p < 0.01; and
leadership outcome was regressed on both organi- satisfaction: b = 0.57, p < 0.01). Regression coef-
zational culture and ethical leadership. In this ficients were positive and significant when effec-
regression analysis, leadership outcomes were con- tiveness and satisfaction were regressed on trans-
sidered as dependent variables, organizational culture formational culture, but not so in the case of extra
was taken as an independent variable, and ethical effort (effectiveness: b = 0.38, p < 0.01; extra effort:
leadership was treated as a mediating variable. For b = 0.2, p = 0.053; and satisfaction: b = 0.31,
full mediation of ethical leadership, as Kenny et al. p < 0.01). In the second step, when ethical leader-
(1998) suggest, the independent variable (Transfor- ship was regressed on Transformational culture, the
mational or Transactional culture) should relate to regression coefficient was positive and significant
the mediating variable (ethical leadership) in the (b = 0.29, p < 0.01). In the final step, when both
second step, and the mediating variable (ethical Transformational culture and ethical leadership were
leadership) should relate to the dependent variable regressed on leadership outcomes, ethical leadership
(employee outcome/s) in the third step or regres- significantly contributed to the regression equation
sion. Also, in the third step, the relationship of the (effectiveness: b = 0.50, p < 0.01; extra effort:
independent variable (Transformational or Trans- b = 0.53, p < 0.01; and satisfaction: b = 0.51,
actional culture) with the dependent variable p < 0.01). Nevertheless, the contribution of trans-
(employee outcome/s) should be significantly lower formational culture remains significant for effec-
in magnitude than that in the second step. Fur- tiveness (b = 0.24, p < 0.01), but only marginal in
thermore, for full mediation, the independent vari- the case of extra effort (b = 0.05, p < 0.01) and
able must not relate to the dependent variable when satisfaction (b = 0.17, p < 0.01).
the mediating variable is added to the equation (in These results show that ethical leadership medi-
the third step). ates the relationship between employee outcomes
Results obtained from following these steps are and organizational culture. Ethical leadership fully
shown in Table IV. Regression coefficient for mediates the relationship between organizational
Transactional culture were negative when leadership culture and extra effort and satisfaction. The medi-
outcomes were regressed on Transactional culture ating role is partial for the relationship between
(effectiveness: b = -0.34, p < 0.01; extra effort: organizational culture and effectiveness. Another
b = -0.25, p = 0.053; and satisfaction: b = -0.14, notable finding in Table IV is that the contribution
p = 0.26). When ethical leadership was regressed on of Transactional culture is mostly negative, but that
Transactional culture, the regression coefficient was of transformational culture is always positive when
significant and negative (b = -0.30, p < 0.05). In employee outcomes are regressed on both ethical

TABLE IV
Regression results for the mediating role of ethical leadership

Variable Effectiveness b Extra effort b Satisfaction b

Step 1 Step 2 Step 1 Step 2 Step 1 Step 2

Transactional culture -0.34** -0.2* -0.25 -0.10 -0.14 0.02

Ethical leadership 0.51** 0.52** 0.57**
Transformational culture 0.38** 0.24* 0.20 0.05 0.31* 0.17
Ethical leadership 0.50** 0.53** 0.51**

*p < 0.05; **p < 0.01.

 Ethical Leadership, Employee Outcomes, and Organizational Culture 541

leadership and organizational culture. At the same leadership (see Brown et al., 2005). In order to con-
time, the values of ethical leadership coefficients are firm this, ethical leadership was regressed on IB.
not very different from each other (typically close to Results in Table V show that ethical leadership is
0.5) in predicting leadership outcomes. This implies significantly related to IB (b = 0.52, p < 0.01).
that ethical leadership consistently predicts employee However, this relationship was weakened when
outcomes, but the overall value of prediction is more idealized attributes (IA) component was included in
when organizational culture is Transformational as the equation (IB: b = 0.39, p < 0.05; IA: b = 0.19,
compared to Transactional. p = 0.21). Table V also shows that idealized influ-
In the final stage of analysis, ethical leadership was ence (II) components significantly predicts ethical
regressed on various components of ‘‘Full Range leadership alone (b = 0.53, p < 0.01). However,
Leadership Model’’. Previous research has shown when all four components of transformational lead-
that ethical leadership is significantly related to ide- ership are predictors, only inspirational motivation
alized behaviors (IB) component of transformational contributes to the equation significantly (II: b = 0.28,

TABLE V
‘‘Full Range Leadership Model’’ explaining ethical leadership

Variable Ethical leadership

R2 Adj. R2 DR2 F b

Step 1 0.27 0.25 0.27** 22

Idealized behaviors (IB) 0.52**
Step 2 0.29 0.26 0.29**
Idealized behaviors (IB) 0.39*
Idealized attributes (IA) 0.19
Step 1 0.28 0.27 0.28** 23.48
Idealized influence (II = IB + IA) 0.53**
Step 2 0.37 0.33 0.37** 8.45
Idealized influence (II) 0.28
Inspiration motivation (IM) 0.30*
Intellectual stimulation (IS) -0.09
Individualized consideration (IC) 0.23
Step 1 0.18 0.16 0.18** 13.0 0.42**
Contingent reward (CR)
Step 2 0.19 0.14 0.19** 4.37
Contingent reward (CR) 0.38**
Management-by-exception (active) (MBE-A) 0.06
Management-by-exception (passive) (MBE-P) -0.07
Step 1 0.34 0.33 0.34** 30.17
Transformational leadership (TFL) 0.58**
Step 2 0.35 0.32 0.35** 10.32
Transformational leadership (TFL) 0.52**
Transactional leadership (TSL) 0.06
Laissez-faire leadership (LF) -0.14
Step 1
Transformational culture (TFC) 0.29 0.08 0.08 5.50* 0.29*
Step 2 0.40 0.16 0.16
Transformational culture (TFC) 0.22
Transactional culture (TSC) 0.25

*p < 0.05; **p < 0.01.

542 Shamas-ur-Rehman Toor and George Ofori

p = 0.09; IM: b = 0.30, p < 0.05; IS: b = -0.09, that ethical leadership is significantly and positively
p = 0.58; and IC: b = 0.23, p = 0.16). For compo- associated with all components of transformational
nents of transactional leadership, the contingent leadership. Although idealized influence component
reward (CR) dimension significantly predicted ethi- successfully predicts ethical leadership, inspirational
cal leadership when alone (b = 0.42, p < 0.01) as motivation is more capable of predicting ethical
well as when management-by-exception (active) leadership in the presence of all four components of
(MBE-A) and management-by-exception (passive) transformational leadership. These findings echo
(MBE-P) were included as predictors (CR: b = 0.38, Burns’ (1978) conceptualization of transforming
p < 0.01; MBE-A: b = 0.06, p = 0.66; and MBE-P: leadership (or what was later termed as transforma-
b = -0.07, p = 0.56). tional leadership) in which he believed that such
Ethical leadership was regressed on composite leadership is moral in the sense that it raises the
scales of transformational leadership (TFL), transac- ethical aspirations of leaders and followers. There-
tional leadership (TSL), and laissez-faire leadership fore, transformational leaders are more likely to
(LF). When alone, TFL significantly predicted eth- model ethical behaviors and actions for their fol-
ical leadership (b = 0.58, p < 0.01). This relation- lowers to imitate.
ship grew slightly weaker when TSL and LF were Brown et al. (2005) found that ELS items were
included as predictors (TFL: b = 0.52, p < 0.01; rated significantly more likely to represent ethical
TSL: 0.06, p = 0.66; and LF: b = -0.1419, leadership than passive avoidant (laissez-faire) lead-
p = 0.27). Finally, transformational culture signifi- ership. This study has further shown that ethical
cantly predicted ethical leadership when alone leadership is negatively associated with laissez-faire
(b = 0.29, p < 0.05). When transactional culture leadership. Findings in this study also provide sup-
was included as a predictor, it negatively contributed port for several statements and propositions pre-
to the regression equation and also reduced the sented in Brown and Treviño (2006). For example,
predictive power of transformational culture (TFC: it is shown that ethical leadership is positively related
b = 0.22, p = 0.07; TSC: b = -0.25, p = 0.05). to transformational culture – which is likely to
These results provide additional evidence that IB promote supportive context for ethical practices
component of TFL does predict ethical leadership within the organizations – and negatively related to
more as compared to IA component. However, transactional culture – which is likely to promote
when all components are put together, the predic- bottom-line gains and less healthy organizational
tive capability of IM is more than any other com- context.
ponent. On the other hand, CR component of TSL Additional findings show that ethical leadership is
also shows its importance by predicting ethical positively related to the contingent reward compo-
leadership. It can be seen that TFL possesses more nent of transactional leadership. This was also pre-
capability to predict ethical leadership as compared dicted earlier by Brown and Treviño (2006) (that
to TSL or LF. Finally, for ethical leadership, trans- ethical leaders use reward systems as part of the
formational culture seems to be a viable context as moral manager dimension of ethical leadership).
compared to transactional culture. Therefore, validation of hypothesis 3 – positive
relationship between ethical leadership and contin-
gent reward dimension of transactional leadership –
Discussion is also a notable empirical result. It strengthens the
argument about the ‘‘moral manager’’ dimension of
The results of the analyses provide support for ethical leadership which employs explicit rewards
hypotheses stated earlier. Findings in this study are and punishment to make the followers accountable
in line with earlier studies which show that eth- for their actions and decisions (Treviño et al., 2000).
ical leadership is positively associated with idealized However, an important finding in this study is
influence, individualized consideration, leader effec- that ethical leadership may play a mediating role in
tiveness, willingness of employees to put in extra the relationship between organizational culture and
effort, and satisfaction with the leader (Brown et al., employee outcomes. This finding shows that a
2005). Findings in the current study further show positive organizational culture/context in concert
 Ethical Leadership, Employee Outcomes, and Organizational Culture 543

with ethical leadership is more likely to engender and validation of the construct and its measures
leader effectiveness, willingness of employees to put across various cultures would be beneficial. Much
in extra effort, and satisfaction of employees with the work is required to develop a scale that can be
leader. Therefore, it is likely that a supportive cli- accepted widely across the cultures. In some recent
mate for ethical practices provides a better stage for work, different scales from ELS have been used to
ethical leadership to flourish, leading to employee’s measure leadership. For example, De Hoogh and
commitment, ethical behaviors, and attitudes Den Dartog (2008) used already existing measures in
(Treviño et al., 1998, 1999). Lastly, the analysis MCLQ to examine ethical leadership. A globally
shows that transformational leadership and transfor- accepted measure of ethical leadership could be
mational culture predict ethical leadership. These established by with the help of existing data from the
findings imply a strong connection between ethical GLOBE project (see Den Hartog et al., 1999).
leadership and transformational leadership. Since the Future research can also seek to develop a global
nominated managers were also perceived as measure of leadership that includes ethical leadership
‘‘authentic leaders,’’ the findings in this study echo as one of its dimensions.
what Bass and Steidlmeier (1999) term as ‘‘authentic Recent efforts of Liden et al. (2007) in develop-
transformational leaders’’ who are not only moral ing a measure for servant leadership and that of
agents and pursue noble ends through legitimate Walumbwa et al. (2008) in developing a measure for
means, but also engage in the moral uplifting of their authentic leadership illustrate interest in developing
followers and empower others to help realize the scales for measuring positive forms of leadership.
mutually beneficial and rewarding vision (see However, as Avolio (2007) makes many useful
p. 211). suggestions for ‘‘integrative examination of leader-
ship theory-building and research,’’ a further step
could be the development and examination of a scale
Research implications that can measure best and worst forms of leadership
across the cultures. As various forms of positive
The corporate scandals in the recent years have leadership (such as authentic, servant, spiritual, eth-
stirred up discussion and research on the ethics of ical, and transformational) have individual scales of
leadership and positive organizational scholar- measurement, a meta-measurement tool can be a
ship (Cameron et al., 2003), positive organizational likely goal for future research on leadership.
behavior (Luthans, 2002, 2003), positive psycho-
logical capital (Luthans et al., 2007), authentic
leadership (Luthans and Avolio, 2003; Gardner Practical implications
et al., 2005, spiritual leadership (Fry, 2003; Fry
et al., 2005), and servant leadership (Liden et al., Treviño et al. (2003) argue that ethical behavior of
2007). All these organizational concepts stress ethics, organizational executives has the potential to influ-
positive attributes, and virtues for the betterment of ence their followers and organizations. Everyday
the humans within organizations and enhancement decisions and actions of executives can engender
of their performance. Many of these concepts are significant social consequences for employees, orga-
inspired by positive psychology (Seligman, 1999; nizations, customers, and the community (Treviño,
Seligman and Csikszentmihalyi, 2000) which 1986). Therefore, business executives must recog-
primarily focuses on building positive qualities in nize the importance of ethics and take steps to send
humans. out clear and consistent messages daily about
Under each of the above organizational concepts, adherence to ethics in organizational functions
ethics and morality are formally treated as parts to (Thomas et al., 2004). Brown et al. (2005) make a
organizational constructs. Given this, the role of number of recommendations for attracting and fur-
ethical leadership as a construct in relation with ther developing ethical leaders. By carefully selecting
other organizational construct would be more professionals who demonstrate more ethical behav-
important for organizational studies in the future. iors, organizations can take further steps to create an
However, more empirical research on the subject organizational culture where ethics are observed.
544 Shamas-ur-Rehman Toor and George Ofori

They argue based on social learning theory of Ban- temporality can be examined in longitudinal studies.
dura (1986) that employees can learn the behaviors Also, this study focused on a limited number of
which are desirable, expected, rewarded, or pun- outcomes (leader effectiveness, employee willingness
ished. Howard Gardner, a psychologist, also observes to exert extra effort, and satisfaction with the leader).
that ‘‘leaders who model ethical behavior, especially Future works can focus on how ethical leadership is
in spite of the temptations of the market, inspire associated with OCB, OC, employees’ ethical con-
employees to do likewise and thus win for their duct at work, leader performance, ethical context of
firms in the long run’’ (Kannair, 2007, p. 54). the organization, and psychological capital (hope,
Leaders must comprehend the existing state of optimism, self-efficacy, and resiliency) of employees.
their organizations so that they can take appropriate Another limitation of this study is the disparate
steps to communicate the importance of ethical number of respondents for the nominated managers.
practices, establish reward systems for accountability, Due to this, the analyses had to be on 62 cases that
and promote ethical leadership at all levels of the were treated independently. Future studies can seek
organization (Treviño and Brown, 2004). Through followers’ ratings for target managers to ascertain the
positive role modeling and sending out strong relationship of ethical leadership with the leader’s
messages about ethical conduct, leaders can develop attributes and behaviors. Another limitation of this
a positive organizational culture and hence ethical study is the sample size. Despite efforts, only 62
context/climate that can facilitate the development raters returned the completed questionnaires. In this
of ethical and authentic leaders and followers study, analyses considered the mediating role of
(Gardner et al., 2005). Thomas et al., (2004) share ethical leadership in the relationship between
the perspective that organizational executives can employee outcomes and organizational culture. In
use their power to establish ethical contexts for future studies, the mediating role of ethical leader-
positive self-regulation of ethical behaviors on the ship can also be investigated for the relationship
part of employees such that ethical practices become between organizational efforts to support ethical
a norm and a routine in the organization. In addition practices and employees’ perceptions of those efforts.
to crafting the documents about ethical conduct for Future studies can also examine how ethical lead-
organizations, the top management must exert a ership mediates the relationship between organiza-
moral force such that everyone strictly observes the tional culture and despotic leadership. Finally, this
laws, common morality, ethical conduct, and values study was carried out on construction-related orga-
of the society (Gellerman, 1986). nizations in Singapore. Future works on ethical
Veiga et al. (2004) suggest that managers should leadership in Singapore can include other industries
be taught about how they can resolve ethical to further validate the outcomes of ethical leader-
dilemmas in everyday functioning. Bagley’s (2003) ship.
‘‘ethical leader’s decision tree’’ can help leaders to
navigate through the ethical dilemmas and questions
they face every day. Another approach to overcome Conclusions
dilemmas or conflicting demands of stakeholders is
to train the managers and leaders to work in col- Leaders can take actions to establish ethical practices
laboration with everyone who is likely to be affected within organizations. Apart from developing the
by their decisions. Ethical dilemmas and challenges formal documents on ethical conduct, leaders need
can be overcome by exercising ethical leadership to demonstrate ethical leadership in their daily
that always follows a moral purpose and ethical end behaviors, decisions, and actions. By sending out
values (Broussine and Miller, 2005). strong messages about ethics and establishing clear
reward and sanction systems to hold the employees
accountable for their actions, leaders can do a lot to
Limitations and future research create an ethical organizational context. The results
in this study further strengthen the argument about
The first limitation of this study is that the research positive outcomes that ethical leadership results in.
design was cross sectional in nature. The effect of Given that the construction sector has been rated as
 Ethical Leadership, Employee Outcomes, and Organizational Culture 545

the most corrupt sector in a report of Transparency Construct Development and Testing’, Organizational
International (Transparency International (TI), Behavior and Human Decision Processes 97, 117–134.
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