ETHICAL LEADERS DOING UNETHICAL BUSINESS: INVESTIGATING THE MODERATING EFFECT OF ORGANIZATIONAL CLIMATE ON MORAL IDENTITY AND ETHICAL LEADERSHIP Master

ETHICAL LEADERS DOING UNETHICAL BUSINESS: INVESTIGATING THE MODERATING EFFECT OF ORGANIZATIONAL CLIMATE ON MORAL IDENTITY

AND ETHICAL LEADERSHIP

Master’s thesis

Msc Human Resource Management

University of Groningen, Faculty of Economics and Business June 3, 2016 Jacqueline Nijhof Student number: 1867393 Celebesstraat 59 9715 JC Groningen tel.: +31 (0)6 44581095 e-mail: j.nijhof.1@student.rug.nl Supervisor: S. Feenstra

1

ABSTRACT

The display of ethical leadership behaviors by organizational leaders provides beneficial outcomes for organizations. To date, however, relatively few scholars conducted empirical research to the antecedents of ethical leadership. In the present study, the author proposes a combined effect of leaders’ moral identity and unethical climate on the display of ethical leadership behaviors, such that moral identity will lead to ethical leadership, unless there is a strong unethical climate, then the effect of moral identity on ethical leadership will disappear. In a sample of 70 leader-subordinate dyads, the author finds a positive, yet non-significant, relationship of moral identity and ethical leadership. Furthermore, the interactional effect of moral identity and unethical climate for ethical leadership was not observed. The author discusses contributions, limitations and directions for future research.

2

INTRODUCTION

In the past years, many companies were negatively mentioned in the media because of ethical issues. These news reports ranged from relatively small ethical issues, such as CEO’s who failed to inform the board of directors correctly, to big ethical meltdowns. A recent example of such an ethical meltdown is the Volkswagen case where employees and managers committed fraud by developing and using illegal software to hide excessively high emissions. Between 2009 and 2015 Volkswagen sold about eleven million vehicles as energy efficient and environmentally friendly cars, while these vehicles emitted around 40 times the permitted amount of nitrogen oxide (Elson, Ferrere & Goossen, 2015). Almost one year after the fraud became publicly known, Volkswagen suffered from a worldwide damaged reputation and decreased market share (Lavell, 2016; Vizard, 2016).

The Volkswagen case illustrates the immense negative effects immoral actions can have on both society and the organization itself. The society suffers because the fraudulent cars emit an estimated 526 kilotonnes nitrogen oxides above the amount that is legally permitted (Oldenkamp, Zelm & Huijbregts, 2016). This extra nitrogen oxide pollutes the air and results into an estimation of 45 thousand disability-adjusted life years (DALY) of people in Europe and the United States. These DALYs include the quality of pre-mature life, health damages for living people and people dying earlier, resulting into extra healthcare costs of around 35 billion Euros (Oldenkamp et al., 2016).

Next to the negative effects for society, the organization itself suffers from its own unethical business too. An organization that commits immoral actions will lose legitimacy by both inside and outside stakeholders, which will result in lower stakeholder support, reduced access to resources, and a higher chance for organizational failure. It will take time, effort, and financial resources to restore stakeholders’ trust and organizational legitimacy (Pfarrer, Decelles, Smith & Tayler, 2008). In conclusion: for organizational continuity it is better to prevent immoral behavior than to restore it. Moreover, when an organization runs its business in an ethical way, stakeholders will legitimize and trust the organization, resulting in positive consequences such as access to resources and stakeholder support (Pfarrer et al., 2008).

3 leaders will avoid making immoral decisions. They are motivated to base their final decision both on moral reasoning and moral outcome. Besides that, ethical leadership will lead to supervisor effectiveness, which is associated with making extra effort by employees and employees’ willingness to report problems, which also affect organizations’ morality in a positive way (Brown et al., 2005). In short: ethical leaders will make organizations more ethical, and with that, will create more satisfied stakeholders, more legitimacy, and less organizational failures.

To date, research has identified only a few antecedents for ethical leadership. One line of research focused on leaders’ individual characteristics. Leaders’ cognitive moral development is associated with increased ethical leadership behaviors, and these are maximized when cognitive moral development of the subordinate is somewhat lower than that of the leader (Jordan, Brown, Treviño & Finkelstein, 2013). Furthermore, Walumbwa and Schaubroeck (2009) found that two Big Five personality traits were positively associated with ethical leadership behaviors. These were agreeableness and conscientiousness, in that agreeable leaders are more willing to help others, and conscientious leaders feel more moral obligation, are careful, and dependable (Walumbwa & Schaubroeck, 2009). Finally, Mayer and colleagues (2012) and Zhu and colleagues (2016) found a positive relationship between leaders’ moral identity and ethical leadership, such that leaders who score high on moral identity feel more obligated to behave ethically appropriate.

To date, only one study has been conducted to environmental antecedents of ethical leadership. Brown and Treviño (2014) found a positive relation between the presence of ethical role models and ethical leadership. Leaders who had an ethical role model in their career such as mentors or supervisors, showed more ethical leadership behaviors. This relationship was stronger for older leaders, whereas younger leaders showed more ethical leadership behaviors when they had an ethical role model in their childhood. To date, other environmental characteristics such as ethical culture (Treviño et al., 1998) or moral climate (Victor & Cullen, 1988), which are positively associated with moral behavior, have not been researched for ethical leadership behaviors (Brown & Treviño, 2006).

4 ethical (Carroll, 1991), it is important to know how ethical leadership is influenced. Furthermore, research to the antecedents of ethical leadership contributes to our understanding of the relatively new leadership construct itself, which is necessary for advising organizations in selecting, developing and retaining ethical leaders (Brown & Treviño, 2006, 2014). Finally, when we understand where ethical leadership comes from, both society and organizations might be better able to profit from the beneficial outcomes of this leadership construct. The present research studies therefor antecedents of ethical leadership. This approach is consistent with a recent call from ethical leadership scholars for more research to antecedents of ethical leadership (Brown & Treviño, 2006, 2014).

The goal for this thesis is to find an answer to the question: what influences leaders, who are not immoral in their personal lives, to behave as immoral leaders in organizations? In order to find an answer to this question, I combine both individual and environmental factors in order to predict the absence of ethical leadership for leaders who are not unethical persons in their private lives. In doing so, I examine the combined influence of leaders’ moral identity and unethical organizational climate on ethical leadership behaviors. I build upon existing research on moral identity by Aquino and Reed (2002) and Mayer and colleagues (2012) to confirm the positive relationship between moral identity and ethical leadership. Furthermore, I build upon research done by Birtch and Chiang (2014) and Aquino and colleagues (Aquino, Freeman, Reed, Lim & Felps, 2009) on the interactive effect of moral identity and ethical climate on moral behavior. In short, I expect that leaders will show ethical leadership behaviors when they possess a high moral identity, however, when leaders work in an unethical climate, I expect this relationship to disappear (see Figure 1). With that, I attempt to show that both individual and environmental factors interact in predicting ethical leadership.

5 interests than other organizational members do (Ogawa & Bossert, 1995; Yukl, 2013). Because leaders have to deal with these extra factors, I expect them to behave morally different and for them to make other moral decisions, than when they would have been organizational members without these extra responsibilities. Finally, the present study contributes to former research by combining the two lines of research, namely individual and environmental factors, in order to give a more comprehensive explanation for predicting ethical leadership.

FIGURE 1 Conceptual Model

THEORY

For more than two thousand years philosophers such as Plato (380 BC) write about ethics and leadership, but for business scholars this topic is relatively new (Jordan et al., 2013). In philosophical sciences the approach to ethical behavior is normative; philosophers investigate how leaders should behave. In business sciences, on the other hand, the approach to ethical leadership is descriptive; business scholars describe how ethical leaders actually behave (Brown, et al, 2005). Descriptive research is important for being able to better understand ethical leadership and its antecedents (Brown & Treviño, 2006).

6 ethical leadership is “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to subordinates through two-way communication, reinforcement, and decision-making” (p. 120).

When a leader is an ethical leader, subordinates will consider him or her as normatively appropriate, because the leader exposes values as being honest, trusted, caring, and fair, and makes choices according to these values. Furthermore, an ethical leader gives a voice to his or her subordinates and expects those subordinates to comply with ethical norms (Brown et al., 2005). Ethical leaders are people-oriented in that they are honest with people around them, they respect their subordinates, and they are integer, caring and treat people right. Ethical leaders also expect moral behaviors from people around them in that they set ethical standards and held people accountable for crossing the moral line. They reward moral behavior and punish immoral behavior (Treviño, Brown & Hartman, 2003). Like other kinds of leaders, ethical leaders care about financial results and successful task completion, but they are also aware of how results are achieved (Treviño et al., 2003). In other words: they care about ends and means. When making decisions they consider not only the organization’s interests, but they look at other stakeholders’ interests too, such as society, employees, and the environment (Brown et al., 2005). In short: ethical leaders are caring and benevolent for people inside and outside the organization.

Moral Identity as an Antecedent of Ethical Leadership

Many types of identities can exist together in one person. Social role identities explain a person by his or her different roles in life, social group identities make people belong to different groups, and social person identities make individuals portray themselves as a specific type of person to other people (Hardy & Carlo, 2011). These various identities can exist next to each other in one person, although particular identities will be overall more significantly present than other identities for an individual’s sense of self (Hardy & Carlo, 2011). Moral identity can be considered as a social person identity, such that the individual would describe him- or herself in moral traits, and the moral identity would be more central to the self than other identities that exist in the same individual (Aquino & Reed, 2002; Aquino et al., 2009; Sets & Carter, 2011).

7 person, consisting of different moral traits. When someone’s sense of self is centered around moral traits, the person will consider him- or herself as a having a moral identity. The social cognitive approach builds on the trait approach. According to the social cognitive approach, moral identity will lead to ethical behavior because every person will try to maintain

consistency in individual moral traits and his or her actions (Hardy & Carlo, 2011; Shao et al., 2008). In the present research I build upon the social cognitive approach, because it considers moral identity as a dynamic system in an individual’s personality, which is continuously influenced by the social context (Aquino & Reed, 2005).

Moral identity is based on a moral schema, organized around a set of traits such as generosity, helpfulness, honesty, and kindness (Aquino & Reed, 2005). Schemas are structures in the mind that embody many aspects of ourselves, our experiences, and our relationships, and are used to assess environmental situations. The schemas that are most readily accessible and are seen as important for an individual’s sense of self, are used more often to process information. Moral identity involves well accessible moral schemas, which help individuals to be sensitive to moral issues and to make moral decisions in response (Aquino et al., 2009, Hardy & Carlo, 2011). An important moral schema is the individual’s idea of what it means to be a moral person (Aquino & Reed, 2002). When an individual’s moral identity is more central to the self than other identities, the larger the influence moral identity will be on the individual’s behaviors and commitments. Consequently, a person with moral identity close to the central self will express more moral behavior (Aquino & Reed, 2002; Hardy & Carlo, 2011; Stets & Carter, 2011).

8 motivated to correct and punish unethical behaviors practiced by others. Because the displaying of ethical behaviors and the avoidance of unethical behaviors is of such an importance to them, they will evaluate the work of others and themselves not only by the results, but also by the way these results have been obtained (Brown et al., 2005; Mayer et al., 2012; Treviño et al, 2003).

Hypothesis 1: Leaders’ moral identity is positively related to leaders’ ethical leadership, as perceived by subordinates.

The Moderating Role of Unethical Climate

Treviño, Brown and Hartman (2003) suggest that, because of pressures to meet targets and deliver results, ethical individuals can become unethical leaders when they are in their leader position. In the middle of a crisis these individuals forget what they actually stand for. Their moral identity has retreated from the working self-concept and is replaced with another identity caused by the current situation. Unfortunately Treviño and colleagues (2003) do not elaborate on the antecedents causing this behavior. Aquino and colleagues (2009), however, argue that people have multiple roles, and thus multiple identities in their lives. Because it is possible to hold only a few identities at the same time, these identities have to compete for the central place in the individual’s self-concept (Aquino et al., 2009). Recall that centrality in the self-concept, the presence of cognitive schemas, and the desire to maintain self-consistency together lead to moral behavior (Hardy & Carlo, 2011; Shao et al., 2008). When, however, a self-interested identity of the person is triggered by the situation, this identity could outperform moral identity in the working self-concept. When moral identity is at that moment not central to the self-concept, and therefore moral schemas are poorly accessible, the person will not behave consistent with his or her moral identity (Aquino et al., 2009). Instead, because a self-interested identity is at that moment central to the working self-concept, the person will behave in an egoistic manner.

9 if they lie, then they would lie, despite the fact that they normally possess a high moral identity (Aquino et al., 2009). Aquino and colleagues (2009) also showed that observing immoral behaviors from people surrounding an individual, will decrease moral behaviors of the individual who normally possesses a high moral identity.

Next to the influence of surrounding people and (im)moral priming on moral behavior, social norms influence behaviors of individuals too (Victor & Cullen, 1988). An ethical organizational climate with social norms will influence moral behavior of organizational members. Organizational climate can be described as the overall accepted perceptions by organizational members of formal as well as informal rules, procedures and practices of the organization (Victor & Cullen, 1988). Within an organization, people and groups perceive different organizational climates. Climate perceptions of organizational members, teams, and departments differ to a certain level, although generally the core norms and values are sufficiently well known among all organizational members (Victor & Cullen, 1988). Victor and Cullen (1988), who based their work on moral philosophy, cognitive moral development theory, and sociological theories, created a theory about ethical and unethical climates in organizations. According to Victor and Cullen (1988) “ethical climates identify the normative systems that guide organizational decision making and the systematic responses to ethical dilemmas” (p. 123).

The theory developed by Victor and Cullen (1988) characterizes ethical climates according to two dimensions: the ethical criterion dimension and the locus of analysis dimension. The ethical criterion dimension of unethical climates is egoism, which means that the egoistic atmosphere in the organization determines the way decisions are made on moral questions and dilemmas. Every choice an organizational member makes is made in the organizational context with its decision making procedures (Victor & Cullen, 1988). In other words, the decision making process of individuals is strongly influenced by the organizational climate: when the climate has an immoral dimension, individuals’ choices will have an immoral dimension too.

10 by professional associations who claim that organizations should do anything to reduce costs. The egoist ethical criterion and the loci of analysis together create an unethical organizational climate (Victor & Cullen, 1988).

I expect unethical climate will remove the effect of moral identity on ethical leadership. In neutral situations, moral identity of the leader is most central to the self, which means that moral schemas are easily accessible and that the leader has the intention to behave consistently with moral identity. However, since every leader has multiple roles, and thus multiple identities, there are always other identities in the self-concept which might contradict moral identity. When unethical climate activates a self-interested identity, this identity could supplant moral identity out of the working self-concept. This means that the accessibility of moral schemas will be made more difficult and the motivation to maintain self-consistency in moral identity and moral behavior will decrease. Thus, when moral identity has retreated and a self-interested identity took over the central place in the working self-concept, I expect the leader will be more motivated to behave in an egoistic manner, and with that, the leader will not show increased ethical leadership behaviors.

Research of Birtch and Chiang (2014) showed that a person’s moral identity and ethical organizational climate together influence moral behavior. They studied the ethical climate of a Chinese business school and moral identities and behaviors of its students. They found a negative effect of ethical climate on immoral behavior of students when these students scored high on moral identity. When the students scored low on moral identity, the effect was insignificant. This study shows the existence of an interaction effect of both moral identity and ethical climate on moral behavior. If I extend these results to business organizations and leaders, I suggest that moral identity and unethical climate interact to influence ethical leadership.

Hypothesis 2: Moral identity and unethical climate interact to influence ethical leadership, such that leaders’ moral identity is positively related to ethical leadership when unethical climate is low, and leaders’ moral identity is unrelated to ethical leadership when unethical climate is high.

METHOD

11 hierarchical height of 75.98 (SD = 18.30) on a 1 to 100 scale, of which 9% of the leaders indicated to be working at a level lower than the medium level (< 50 on a 1 to 100 scale), and 10% indicated to be working at the top level (100 on a 1 to 100 scale) of the organization. The participants came from a variety of industries: 14% of the leaders worked in the business services industry, 11% worked in trade, 11% in transport, 10% worked for the government, and the other 54% were divided over other industries such as healthcare, education, tourism and culture.

The surveys were distributed by e-mail and filled out online. Leaders and subordinates were asked to participate in a study about the predictors and consequences of leadership behaviors. The surveys started with some information about the goal of the research, the participants’ right to quit the study at every time, and participants were assured of their anonymity. Leaders’ questionnaires consisted of questions about their moral identity and the organizational climate they worked in. Subordinates’ questionnaires consisted of questions about ethical leadership behaviors of their leaders. Both survey types ended with general questions about participants’ demographics such as age, level of education, and organizational tenure.

In total I received completed questionnaires of 80 leaders and 159 subordinates, a response rate of 72.7% of the leaders and 73.3% of the subordinates. Because data will only be of value when both the leader and at least one of the related subordinates completed the questionnaire, I used the data that met this requirement. In 52 cases both the leader and the two subordinates completed the survey (65.0%), and in 18 cases the leader and one of the subordinates completed the questionnaire (22.5%). Sometimes only one party filled out the survey, such that nor the leader nor both subordinates filled out the questionnaire, which resulted into incomplete information about the leader. In these 10 cases I did not use the data (12.5%). All in all I have collected usable data from 70 leaders and 122 subordinates.

12 Measures

All scales were originally developed in English, however, since this study has been conducted with Dutch speaking respondents, I used Dutch translations of these scales. All items were measured on a seven-point Likert-type scale, ranging from 1 “strongly disagree” to 7 “strongly agree”.

Ethical leadership was measured in the subordinate questionnaire using the ethical leadership scale, developed by Brown, Treviño and Harrison (2005). This measure consists of ten items, examples of items are: “My leader conducts his or her life in an ethical manner”, “My leader defines success not just by results but also the way they are obtained”, and “My leader listens to what employees have to say” (α = .932).

Moral identity was measured in the leader questionnaire using the sub measure moral identity internalization developed by Aquino and Reed (2002). This measurement instrument consists of five items. Respondents were shown nine characteristics (i.e. caring, compassionate, fair, friendly, generous, helpful, hardworking, honest and kind) and were asked to imagine a person who possesses these characteristics. Examples of items are: “It would make me feel good to be a person who has these characteristics”, ”Being someone who has these characteristics is an important part of who I am”, and “I would be ashamed to be a person who has these characteristics” (α = .817).

Unethical climate was measured in the leader questionnaire using the instrumental subscale of the ethical climate questionnaire developed by Victor and Cullen (1988). This subscale consists of seven items, examples of items are: “What is best for everyone in the company is the major consideration here”, “People are expected to comply with the law and professional standards over and above other considerations”, and “In this company people protect their own interests above all else (α = .658).

13 reasoned at a slightly lower moral level than their leaders. Lastly I controlled for age, since age affected sensitivity to moral issues positively (Aquino et al., 2009; Treviño, 1992).

RESULTS

In this report I study the interaction effect of moral identity and unethical climate on ethical leadership behaviors as perceived by subordinates. Prior to testing the hypotheses, I checked the data on missing values and normality, and I did not remove any outliers. The distributions of moral identity and unethical climate were normal. Only the ethical leadership distribution was skewed to the left. When the situation occurred that participants did not answer the items of any of the key variables, I deleted the data provided by these participants. When participants failed to provide their responses at the demographical items, I filled in these open spots by using the series mean.

A correlation analysis was conducted in order to show possible relations between the relevant variables and to reveal possible correlations with demographic factors as potential controllers. I controlled for leaders’ gender, educational level of both leaders and subordinates, and leaders’ age. Table 1 provides the means, standard deviations and correlations for ethical leadership, moral identity, unethical climate, leaders’ age, leaders’ gender (coded: 0 = male and 1 = female), and educational level of the leader and subordinates. The correlation analysis shows an approached significant correlation between moral identity and ethical leadership (R = .185, p = .125), and between gender and ethical leadership (R = .219, p = .068). These relations are positive, showing that increased moral identity is related to increased ethical leadership, and that being female is related to increased ethical leadership, although both relations are not significant. Furthermore, there is a significant correlation for age and ethical leadership (R = .238, p = .047), which means that leaders’ maturity is related to ethical leadership. I found an expected significant negative correlation for educational level of the subordinate and ethical leadership R = -.275, p = .021), which could be interpreted as ethical leadership perceptions increase when subordinates’ received education decrease.

TABLE 1

Descriptive Statistics and Correlations

Variables Mean SD 1. 2. 3. 4. 5. 6.

14 2. Unethical climate 2.827 .808 -.153 3. Ethical leadership 5.741 .765 .185 -.118 4. Age leader 43.200 11.02 .092 -.173 .238* 5. Gender leader .41 .496 .126 -.030 .219† -.030 6. Education level leader 5.030 1.129 .104 -.058 .139 .211 -.099 7. Education level subordinate 4.460 1.009 .036 .036 -.275* .175 -.214 .350** Note 1. N = 70. †p < .1, *p < .05, **_{p < .01,} ***_{p < .001 (two tailed significance)}

Hypotheses Testing

I used SPSS version 22 with the Process tool developed by Hayes (2013) for conducting a regression analysis. The independent variable (moral identity), moderator (unethical climate) and control variables (age, gender, and educational level of both leader and subordinate) have been standardized. Table 2 summarizes the results of the regression analysis. The first hypothesis was a replication of former research, I assumed moral identity positively influences ethical leadership. The correlation analysis revealed a positive, yet non-significant, relation between moral identity and ethical leadership. The regression test also showed a positive, non-significant relation (b = .110, p = .227).

15 TABLE 2

Regression Results of Predictors of Ethical Leadership

b se b t p

Constant 5.753 .0863 66.691 .000

Unethical climate (standardized) -.022 .089 -.246 .807

Moral identity (standardized) .110 .090 1.219 .227

Interaction -.014 .095 -.149 .882

Age (standardized) .190 .087 2.185* .033

Gender (standardized) .118 .088 1.351 .182

Education leader (standardized) .1740 .102 1.712† .092 Education subordinate (standardized) -.287 .098 -2.938** .005 R2 _{= .249, F(7.000, 62.000) = 2.934*, p = .010}

Conditional effect of moral identity on ethical leadership at different values of unethical climate

95% Confidence Interval LLCI ULCI - 1SD -.130 .375 M -.071 .288 + 1SD -.171 .360 Note. N = 70. †p < .1, *_{p < .05,} **_{p < .01,} ***_{p < .001}

DISCUSSION

16 Theoretical Implications

In this study I tried to find antecedents for ethical leadership by identifying the combined influence of individual and environmental characteristics. This was important for several reasons. First, there has been conducted only few empirical research to the antecedents of ethical leadership, while a lot more attention has been paid to the outcomes (Brown & Treviño, 2006). Furthermore, former research to the antecedents of ethical leadership paid attention solely to individual characteristics of the leader (Brown & Treviño, 2006) or solely to the effects of environmental circumstances on this leadership style (Treviño, 1986). Until now, research has not combined these two types of antecedents (Brown & Treviño, 2006).

Second, I strengthened former research on moral identity as an antecedent of ethical leadership (Mayer et al., 2012; Zhu et al., 2016) in that I found a positive relationship between the two factors. A leader with a moral identity central to the self-concept stresses the importance of having moral values and bringing them into practice through ethical leadership (Aquino & Reed, 2002; Aquino et al., 2009, Mayer et al., 2012).

Third, the findings show that subordinates’ educational level is negatively associated with leaders’ ethical leadership. This result suggests that subordinates are more receptive to ethical leadership behaviors when they are lower educated. This finding is in line with former research on ethical leadership. Jordan and colleagues (2013) found that perceptions of ethical leadership were greatest when subordinates’ cognitive moral development was lower than that of the leaders’. Recall that educational level is related to cognitive moral development (Treviño, 1992) and cognitive moral development is related to ethical leadership (Jordan et al., 2013). This suggests that lower educated subordinates are lower on cognitive moral development, and may therefor sooner define leader behaviors as ethical leadership behaviors than higher educated subordinates.

Fourth, this study shows a positive relationship of leaders’ educational level and ethical leadership. As with the former contribution, I relate this finding to cognitive moral development (Jordan et al., 2013). Jordan and colleagues (2013) found a positive relationship between leaders’ cognitive moral development level and ethical leadership. Since higher educational level is related to higher moral reasoning level (Treviño, 1992), and higher moral reasoning leads to more ethical leadership behaviors, my finding of a positive relationship between leaders’ educational level and ethical leadership is supported by former research.

17 individuals. One of these predictors was maturity; when an individual matures, his or her moral reasoning level increases (Treviño, 1992). The finding that leaders’ age predicts ethical leadership is supported by former research by Jordan et al. (2013), which showed that leaders’ level of moral reasoning predicts ethical leadership, and research by Treviño (1992) explained age as a predictor for moral reasoning. Thus, age could predict ethical leadership through cognitive moral development.

Practical Implications

In the past years, attention for ethical leadership has grown excessively among researchers and practitioners. In many cases this attention was due to corporate scandals of multinationals and smaller organizations, and the role leaders had in these situations (Lawton & Páez, 2015). For the survival and success of organizations it is important that organizational members, and leaders in particular (Brown & Treviño, 2006), behave ethically and make their decisions in an ethical way. If they do not, the organization suffers financially because it loses legitimacy of its stakeholders (Pfarrer et al., 2008). Ethical leadership is an important construct because it prevents unethical conduct and it stimulates ethical behavior, not only by the leader, but also among other organizational members (Brown et al., 2005). Therefor it is important to identify antecedents of this leadership construct.

In this study I tried to find antecedents of ethical leadership in a combination of individual and environmental characteristics. I looked at the interactional influence of moral identity and unethical climate on ethical leadership. With this study I could not provide evidence for an interactional effect of the two antecedents. However, I did find a positive, yet weak, effect of moral identity on ethical leadership. Furthermore, in this study I found positive effects of leaders’ age and educational level on ethical leadership. I imply these findings as that organizations should pay more attention to leader characteristics in increasing ethical leadership behaviors, rather than in reducing unethical climate. Thus, when organizations have the philosophy to do business in a moral way, than these organizations should look at leaders’ age, educational level, and moral identity when selecting and retaining individuals for leader positions.

Limitations

18 behavior, I conclude that their amount of participants was considerably larger (Aquino et al., 2009; Barnett & Vaicys, 2000; Birtch & Chiang, 2013 & Mayer et al., 2012). In general, statistical research with low sample sizes have lower chances for finding main effects and moderation effects. With that, it is less likely that research findings based on low sample sizes result into reliable predictions for the real world (Button, Ioannidis, Mokrysz, Nosek, Flint, Robinson, & Munafò, 2013). Thus, scholars and I need to be careful when drawing conclusions based on this study.

A second limitation is that I recruited two subordinates per leader to rate the leader’s amount of ethical leadership behaviors. I used the data of leader-subordinate dyads of which at least the leader and one subordinate filled out the questionnaire. In former research on ethical leadership it is more common to recruit five or more subordinates per leader, and only use the data when at least three subordinates and the leader filled out the survey (Jordan et al., 2013, Mayer et al., 2012). Stable results for the rating of ethical leadership are obtained when the data is aggregated by at least three, and preferably more, subordinates (Mayer et al., 2012). A related limitation is that I have not checked the variety in subordinates’ answers before aggregating the data. By not checking this, I took away the opportunity to consider what it means if one subordinate rates the leader high on the ethical leadership scale, and another rates the same leader low. This means that the aggregated data could be less reliable than it seems to be (Brown & Mitchell, 2010).

A third limitation is that this study ignored the dynamics of the ethical leadership construct. Ethical leadership is a dynamic construct which needs to be studied at different points in time for measuring it adequately. Ethical leadership is evolving continuously, because leaders, subordinates, and situations change continuously. Leadership perceptions held by subordinates change accordingly, which means that ethical leadership is a dynamic construct (Brown et al., 2005). However, in this study I measured ethical leadership at only one point in time, and with that, I did not take into account the dynamic aspect of this leadership construct.

19 and with that it questions the reliability of the data, since I did not took the subjectivity of the ethical leadership construct into account.

Future Research Directions

Because this study could not provide statistical evidence for the predicted interaction effect of individual and environmental characteristics on ethical leadership, I encourage scholars to further research this combination of antecedents. Since, to my knowledge, no other research has been conducted to this combined effect, future research could start with combining individual and environmental antecedents which already have been separately identified as antecedents of ethical leadership by former research. As mentioned in the introduction section, individual leader characteristics such as cognitive moral development (Jordan et al., 2013), Big Five personality traits (Walumbwa and Schaubroeck, 2009) and moral identity (Mayer et al., 2012; Zhu et al., 2016) have already been identified as antecedents of ethical leadership. These individual characteristics could be combined with the environmental antecedent of ethical leadership, ethical role models (Brown & Treviño, 2014). It would be interesting to research how these already identified antecedents would interact with each other in predicting ethical leadership.

Another direction for future research is to study the effect of moral identity on ethical leadership from different levels. The present research considered moral identity from an individual level, although it would also be valuable to consider moral social identities as antecedents for ethical leadership, such as moral group identity or moral organizational identity (Brown & Mitchell, 2010). Because these social identities are related to the organizational environment, there is a chance that these will be triggered and find a place in the leader’s working self-concept.

20 leadership identified in Western research, will have a different impact in other national cultures of the world.

CONCLUSION

The goal for this thesis was to find an answer to the question: what influences leaders, who are not immoral in their personal lives, to behave as immoral leaders in organizations? In this thesis I tried to find an answer to this question in the combination of individual and environmental characteristics of the leader. I observed a positive, yet non-significant, relationship between leaders’ moral identity and ethical leadership, which is supported by former research (Mayer et al., 2012; Zhu et al., 2016). However, I did not find the predicted interactional effect of moral identity and unethical organizational climate on ethical leadership behaviors, in that the relationship of moral identity and ethical leadership did not change when unethical climate was high.

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