Specifically, this study was interested in examining the influence of authentic leadership and ethical leadership on perceived ethical climate, subordinates’ organisational citizenship b
INTRODUCTION
I NTRODUCTION
Chapter one introduces the thesis by outlining the research problem, including key variables and the study's context It clearly states the research aim and objectives, providing a focused direction for the study The chapter also Justifies the importance of the research topic by discussing its relevance and necessity Finally, an overview of the thesis structure is presented, offering readers a clear understanding of the study's organization.
B ACKGROUND OF THE S TUDY
A significant emerging trend in today's business environment is the increasing emphasis on leader behavior characterized by authenticity, integrity, transparency, and ethical conduct This shift reflects a growing recognition that authentic and ethical leadership fosters trust, enhances organizational credibility, and promotes sustainable success (Cianci et al., 2014; Ciulla & Forsyth, 2011; Gardner et al., 2011; Trevino) As organizations prioritize ethical standards and transparent practices, leadership styles rooted in genuine values are becoming essential for fostering positive workplace culture and long-term stakeholder relationships.
Recent corporate scandals have spotlighted significant shortcomings in leadership, management, and governance, leading to widespread public concern Notable examples include the collapse of Lehman Brothers due to unethical subprime lending practices, which played a key role in the 2008/09 Global Financial Crisis These incidents reflect deep-rooted issues within corporate practices, often reported across mass media, and highlight that such problems are not limited to large corporations but can occur in organizations of all sizes and purposes.
Questionable practices reveal how perceived legal and governance loopholes can become highly attractive to certain leaders These individuals often manipulate their management systems solely to fulfill their egoistic ambitions, highlighting the dangerous influence of weak oversight and unchecked authority.
Unethical leadership driven by personal gain can undermine organizational integrity despite seeming to benefit the business in the short term Such behaviors often disguise themselves as proper conduct but ultimately weaken core management systems, jeopardizing the company's viability and increasing the risk of failure.
& Kaiser 2007; Rijsenbilt & Commandeur 2012; Sendjaya et al 2014)
Recent corporate malpractices have raised widespread concerns about the integrity and genuine intentions of leadership, leading society to question whether corporate decision-makers act ethically or merely conceal self-interest behind disguised improprieties (Hannah, Avolio & May 2011; Kish-Gephart, Harrison & Treviño 2010; Mathieu et al 2014) As a result, there is a growing societal demand for organizational leaders to demonstrate professionalism and align their behaviors with core values that are transparent, openly communicated, and endorsed by stakeholders (Avolio 2007; Gardner et al 2011; Yammarino et al 2008; Avolio & Gardner 2005; Avolio & Luthans 2006) These core values should serve the greater good by connecting with everyday people’s needs, ensuring leadership acts ethically and with purpose.
Authenticity and ethical conduct are now central to contemporary leadership theory, emphasizing the importance of leaders demonstrating these qualities to enhance organizational performance (Brown & Mitchell, 2010; Cianci et al., 2014; Gardner et al., 2011; Kalshoven, Den Hartog & De Hoogh, 2013) The emergence of authentic and ethical leadership concepts stems from increased focus on ethical versus unethical behavior in the business environment, highlighting the need for leaders who embody integrity and moral responsibility (Yukl, 2012; Walumbwa et al.).
Ethical leadership is defined as a pattern of leader behavior that promotes positive psychological capacities and an ethical climate, fostering self-awareness, moral perspectives, balanced information processing, and transparency with followers According to Brown, Trevino, and Harrison (2005), ethical leadership involves demonstrating normatively appropriate conduct through personal actions and relationships, while encouraging such behavior in followers through effective communication, reinforcement, and decision-making This approach not only enhances positive self-development in leaders but also cultivates a morally responsible organizational culture.
These two leadership constructs, representing two distinguishable leadership styles and behaviours Both constructs represent two leadership styles and behaviours that have been theoretically and empirically distinguished, yet have similarities that generally stress the importance of integrity, morality, and honesty Proponents of both leader behaviours and styles believe that authentic leadership (Avolio & Gardner 2005; Walumbwa et al 2008), as well as ethical leadership (Brown, Trevino & Harrison 2005; Trevino, Hartman & Brown
Effective leadership positively impacts organizational outcomes and performance, emphasizing the importance of ethical considerations Today’s business leaders must balance profitability with authentic, morally responsible decision-making According to Ciulla (1999), successful leadership is not just about what makes a good leader, but about morally good and effective leadership that ensures long-term organizational success.
Despite increased awareness of the importance of authentic and ethical decision-making among business leaders, these principles have often failed to translate into responsible leadership practices and have sometimes been actively ignored (Kish-Gephart, Harrison & Treviűo, 2010; Mathieu et al., 2014; Stein, 2013) Research suggests that authentic and ethical leadership styles can promote positive organizational outcomes by emphasizing core values, purposeful vision, and sensitivity to others' needs (Brown & Mitchell, 2010; Gardner et al., 2011; Walumbwa et al., 2008) However, the lack of studies integrating both leadership styles within a single framework leaves gaps in understanding their combined influence This study aims to explore whether authentic and ethical leadership foster an ethical climate, boost organizational citizenship behaviors, and enhance employees’ commitment and performance, while also examining if ethical climate alone has similar effects Importantly, it investigates whether ethical leadership complements authentic leadership in promoting a positive organizational environment and employee performance.
An ethical climate within an organization significantly influences employees’ outlook towards work involvement and behaviors that enhance organizational performance (Simha & Cullen, 2012) It encompasses employees’ perceptions of policies and procedures that promote ethical conduct, leading to improved attitudes and workplace behaviors (Elői & Alpkan, 2009; Victor & Cullen, 1988; Wimbush, Shepard & Markham, 1997) Research shows that a positive ethical climate boosts organizational citizenship behavior, enhances organizational commitment, and improves job performance (Leung, 2008; Cullen, Parboteeah & Victor, 2003; Mulki, Jaramillo & Locander, 2009) Furthermore, an ethical climate influences ethical decision-making processes by shaping the moral criteria individuals use to interpret and resolve ethical issues, fostering positive attitudes and behaviors across the organization.
Organisational citizenship behaviour (OCB) plays a vital role in enhancing long-term organisational effectiveness by fostering a supportive social system, even though it is not always task-focused or driven by reward systems (Brief & Motowidlo, 1986; LePine, Erez & Johnson, 2002; Luthans & Youssef, 2007) These behaviours promote a positive ethical climate within organizations, encouraging employees to go beyond their formal job roles and engage in pro-social actions that benefit teamwork and collaboration (Podsakoff et al., 2009) Examples of OCB include helping colleagues and contributing to a cooperative work environment, which are considered extra-role or pro-social behaviours that strengthen organisational culture and effectiveness (Podsakoff et al., 2000; Van Dyne, Cummings & McLean Parks).
1995) Without a doubt, the willingness to put extra effort into the job demonstrates a certain degree of organisational commitment and how attached employees are towards the organisation they work for
Organizational commitment is a crucial concept in management, extensively studied within organizational psychology and behavior fields (Johnson, Chang & Yang, 2010; Lavelle et al., 2009; Meyer, Becker & Vandenberghe, 2004; Meyer et al., 2002) Research indicates strong positive correlations between organizational commitment and key factors such as employee job satisfaction, reduced turnover intentions, improved attendance, and enhanced performance effectiveness (Johnson, Chang & Yang, 2010; Kinnie & Swart, 2012; Panaccio & Vandenberghe, 2009; Riketta, 2002) Additionally, organizational commitment fosters healthier leader-subordinate relationships, enabling employees to understand organizational norms and expectations better (Kinnie & Swart, 2012; Meyer & Herscovitch, 2001; Meyer et al., 2002; Neubert et al., 2009).
Employee engagement and organizational commitment are crucial for positive workplace outcomes, but employees must also fulfill their designated tasks to ensure organizational success (Katz & Kahn, 1978) Organizational processes depend on the successful completion of tasks assigned to different roles, emphasizing the importance of role-specific performance (Earley, 1997; Hatch & Cunliffe, 2012; Williams & Anderson, 1991) In-role performance, which involves behaviors aligned with formal role expectations, is essential for maintaining efficient organizational functioning (Motowildo, Borman & Schmit).
1997) Thus, in-role performance is an important indicator for specific standards that an organisation requires in order to achieve effectiveness in its operations.
P ROBLEM S TATEMENT
Ethics has become a core component of modern business practices, driven by society’s increasing demand for leaders to act authentically in alignment with their core values and demonstrate genuine concern for people's needs Effective leadership today is closely tied to ethical conduct, transparency, and integrity, which foster positive organizational outcomes beyond mere financial performance Leaders are expected to create a work environment that not only boosts economic success but also enhances employee attitudes and behaviors Despite extensive leadership theories and practices aimed at organizational effectiveness, questionable corporate practices still persist, highlighting the need to better understand how authentic and ethical leadership influence ethical climate, organizational citizenship behaviors, and employees' commitment and performance.
Authentic and ethical leadership theories are recognized as positive leadership styles that promote ethical behavior within organizations and help prevent questionable corporate actions Extensive research indicates that authentic leadership has a significant positive impact on organizational outcomes, emphasizing the importance of leaders' ethics and morality Key studies by Avolio & Gardner (2005), Cianci et al (2014), Clapp-Smith et al (2009), Ilies et al (2005), Leroy et al (2012), and Wang et al (2014) support the notion that authentic leadership contributes to ethical organizational culture Additionally, scholars such as Avolio et al (2004), Avolio & Luthans (2006), and Luthans & Avolio highlight that authentic leadership inherently focuses on the leader's ethics and morality, reinforcing its role in fostering integrity and transparency in organizational settings.
In response to global concerns over leadership responsibility, integrity, and transparency amid business scandals and unethical practices, research has increasingly focused on ethical leadership's role in promoting positive organizational outcomes (Avolio & Gardner, 2005; Bass & Steidlmeier, 1999; Ladkin & Taylor, 2010; Brown & Mitchell, 2010) Economic events and ethically questionable business practices have heightened interest in understanding how ethical leadership can influence organizational success and foster a culture of trust and accountability.
Research indicates that authentic leadership significantly influences perceived ethical climate, promotes organizational citizenship behaviors, enhances subordinates’ organizational commitment, and improves subordinate performance (Avolio & Luthans, 2006; Gardner et al., 2005; Walumbwa et al., 2008; Leroy, Palanski & Simons, 2012; Wang et al., 2014) Similarly, ethical leadership has a substantial impact on perceived ethical climate, fostering organizational citizenship, strengthening commitment, and boosting performance among employees (Lu & Lin, 2013; Mayer, Kuenzi & Greenbaum, 2010; Neubert et al., 2009; Kim & Brymer, 2011; Brown & Trevino, 2013) These findings support the vital role of both authentic and ethical leadership in shaping organizational outcomes and ethical environments.
& Harrison 2005; De Hoogh & Den Hartog 2008)
Recent empirical studies highlight a growing critique of the assumed positive moral intent behind authentic leadership, emphasizing that authentic leaders’ alignment with core beliefs and personal values does not automatically equate to moral integrity The presence or absence of moral integrity in authentic leaders can significantly influence employees’ perceptions of the ethical climate, organizational citizenship behaviors, commitment, and performance Since authentic leadership is a mutual influence between leaders and followers, the impact of personal values determines whether it embodies genuinely ethical leadership or falls short Additionally, questions arise regarding authentic leadership’s ability to cultivate an ethical organizational climate, which in turn explains its effectiveness on employees’ behaviors, commitment, and performance.
The research questions to be answered are as follows:
1 In what way, if any, does authentic leadership foster an ethical climate, stimulate subordinates organisational citizenship behaviours, affective organisational commitment and in-role performance?
2 In what way if any, does an ethical climate enhance the effectiveness of authentic leadership towards subordinates’ organisational citizenship behaviours, affective organisational commitment and in-role performance?
3 In what way, if any, does ethical leadership complement the effectiveness of authentic leadership when impacting ethical climate, stimulate subordinates organisational citizenship behaviours, affective organisational commitment and in- role performance?
R ESEARCH AIM AND OBJECTIVE
This research explores whether authentic and ethical leadership are key factors driving positive organizational outcomes such as ethical climate, organizational citizenship behavior, affective commitment, and in-role performance It investigates the direct influence of both authentic and ethical leadership on these outcomes, highlighting that an ethical climate can enhance authentic leadership effectiveness and serve as a mediator Additionally, the study emphasizes the importance of ethical leadership behavior, demonstrating that ethical leadership complements authentic leadership and acts as a moderator to strengthen their combined impact on organizational success.
This study employed a quantitative research design to examine how leadership processes influence organizational outcomes among subordinates Key focus areas included analyzing the direct impacts of authentic leadership, ethical leadership, ethical climate, organizational citizenship behaviors, affective commitment, and in-role performance Additionally, the research explored the mediating role of ethical climate in the relationship between authentic leadership and organizational outcomes The study also assessed how ethical leadership moderates the connection between authentic leadership and organizational results, providing comprehensive insights into leadership dynamics and their effects on organizational performance.
This thesis aimed to empirically examine whether authentic leadership and ethical leadership serve as effective predictors of organizational outcomes A comprehensive conceptual framework was developed to address three key research questions inspired by existing literature To investigate the causality between these leadership styles and organizational results, a validated questionnaire incorporating established measurement scales was used This approach ensured a rigorous analysis of the impact of authentic and ethical leadership on organizational performance.
The main predictor variable authentic leadership was theorised in accordance with the definitions presented by Avolio and Gardner (2005), Ilies, Morgeson and Nahrgang
This study assesses key organizational behaviors and leadership qualities using validated measurement tools Authentic leadership was measured with the Authentic Leadership Questionnaire (ALQ), based on principles outlined by Walumbwa et al (2008) Ethical leadership, defined in accordance with Brown, Trevino, and Harrison (2005), was evaluated using the Ethical Leadership Scale (ELS) The ethical climate was examined following Victor and Cullen’s (1988) Ethical Climate Theory, utilizing the Ethical Climate Questionnaire (ECQ) Organisational citizenship behavior was assessed based on definitions by Organ (1988) and subsequent researchers like Podsakoff et al (2000), through the Organisational Citizenship Behavior Scale Affective organizational commitment was measured according to Meyer, Allen, and Smith’s (1993) framework using the Affective Organizational Commitment Scale In-role performance was evaluated following Williams and Anderson's (1991) model with the In-role Performance Scale.
R ATIONALE FOR THE RESEARCH
Authentic and ethical leadership significantly influence key organizational outcomes, including employees' perceptions of ethical climate, organizational citizenship behaviors, affective commitment, and in-role performance, which collectively enhance workplace attitudes and overall performance These leadership styles foster a positive ethical environment and pro-social behavior, strengthening employees' identification with organizational values and improving task performance Recognizing the importance of these outcomes helps address ethical awareness within organizations and underscores the need to investigate the factors that predict and drive these beneficial organizational behaviors and performance metrics.
This thesis was inspired by the call for an integrated approach of related leadership constructs to the construct of authentic leadership (Peus et al 2012; Walumbwa et al 2008)
Numerous studies highlight that ethical leadership plays a crucial role in promoting ethical standards within organizations by emphasizing integrity, morality, and honesty among leaders and employees (Schaubroeck et al., 2012; Toor & Ofori, 2009) Both authentic leadership and ethical leadership emphasize these core values, serving as vital factors in fostering ethical practices and organizational integrity (Brown & Mitchell, 2010; Gardner et al., 2011) Integrating these leadership constructs into a single conceptual model can deepen our understanding of their combined effects, including whether ethical leadership acts as a moderator for authentic leadership, thereby enhancing ethical behavior Exploring both theories together can provide valuable insights into their effectiveness in establishing an ethical climate, which in turn promotes positive organizational behaviors such as citizenship, commitment, and in-role performance.
Effective business leadership requires critical moral reflection to shape an ethical climate within organizations (Foster, 2003; Grojean et al., 2004; Neubert et al., 2009) Research shows that strong ethical climates positively influence employees’ organizational citizenship behaviors, commitment, and performance (Arnaud, 2010; Cullen, Parboteeah & Victor, 2003; Simha & Cullen, 2012) Leaders who cultivate a robust value system and uphold high ethical standards can create supportive environments that reduce unethical practices, with ethical climate serving as a potential mediator between authentic leadership and organizational success Despite limited empirical research on how authentic leadership fosters ethical climates (Gardner et al., 2011), recent studies highlight the importance of transparent communication and alignment with core values in promoting an ethical, supportive work environment.
Considering the above, there is a clear rationale to investigate under which
This thesis highlights the crucial role of leadership behaviours focused on integrity and fostering an ethical work climate Such leadership practices can significantly enhance cooperative behaviors among employees, strengthen their commitment to the organization, and improve overall task performance Implementing ethical leadership not only promotes a positive workplace culture but also contributes to sustained organizational success.
T HE C ONTEXT OF THE S TUDY
This thesis explores leadership processes within Australian for-profit organizations, focusing on companies recognized as the best places to work in Australia These top-tier companies are selected based on annual surveys conducted by Business Review Weekly (BRW), a reputable Australian business magazine The study aims to understand how effective leadership influences organizational success and employee satisfaction in these premier workplaces.
BRW's Weekly Review (2014) provides analyses of Australia's economy, business strategies, investments, and entrepreneurialism, alongside rankings of top corporations For this study, companies were evaluated based on leadership quality, workplace culture, and employee valuation The result is a curated list of the twenty-five best workplaces in Australia, highlighting businesses that excel in fostering positive organizational environments.
Most companies featured on this list are small and medium-sized enterprises (SMEs), with small businesses (19 employees or less) accounting for nearly 95.6% of all Australian businesses, according to Roy Morgan’s State of the Nation Report 2012 Medium-sized businesses (20 to 199 employees) make up only 4%, while large companies (200 or more employees) represent a mere 0.4% The report also highlights that the majority of SMEs operate within the Construction, Professional, Rental and Real Estate, and Agriculture industries However, this thesis primarily focuses on private sector companies overall, emphasizing organizations that are considered desirable workplaces Studying this segment—where company decisions mainly aim to maximize profits—can provide valuable insights into leadership practices that positively influence employee attitudes and performance in the workplace.
S IGNIFICANCE OF THE STUDY
This thesis advances authentic leadership theory by exploring its impact on organizational outcomes such as perceived ethical climate, subordinates’ organizational citizenship behaviors, commitment, and in-role performance While prior research has examined these relationships, limited evidence from the Australian for-profit sector highlights the importance of assessing the theory's generalizability Ultimately, this study provides valuable insights into how authentic leadership influences key organizational metrics within this specific context.
This thesis responds to calls for further research on the link between authentic leadership and ethical climate, aiming to empirically demonstrate that authentic leadership promotes an ethical environment It explores how ethical climate mediates the relationship between authentic leadership and key organizational outcomes such as citizenship behaviors, commitment, and in-role performance By examining these relationships, the study sheds light on whether the effectiveness of authentic leadership is driven by its influence on ethical climate Ultimately, this research advances understanding of the conditions under which authentic leadership fosters positive attitudes and behaviors among employees, contributing valuable insights to the field.
This thesis responds to Walumbwa et al.'s (2008) call for future research by exploring the integration of related leadership theories, including ethical, transformational, and servant leadership Specifically, it investigates how ethical leadership moderates the relationship between authentic leadership and subordinate behavior outcomes The findings aim to clarify whether these leadership styles complement each other and whether ethical leadership enhances the effects of authentic leadership through moderation.
Assessing the relationships between key variables offers valuable managerial insights to enhance organizational effectiveness, efficiency, and employee performance This study incorporates various leadership theories that explore critical dynamics influencing leadership success Practical implications include providing actionable advice for leadership development and selection processes Ensuring the right individuals occupy leadership roles is essential, as mismatched leaders driven by incorrect motivational factors can lead to significant issues such as financial loss, environmental harm, or organizational crises.
S TRUCTURE OF THE THESIS
This thesis is organized into six chapters, beginning with an introduction that outlines the research aims and rationale The second chapter reviews existing literature on key variables such as authentic leadership, ethical leadership, ethical climate, organizational citizenship behavior, organizational commitment, and in-role performance, creating a foundation for the conceptual framework and hypothesis development Chapter three details the research methodology, including research design, sampling, data collection, and analysis procedures essential for executing the study In Chapter four, empirical data analysis is presented, providing insights into the research findings Chapter five discusses these findings within theoretical and practical contexts, highlighting study limitations and offering recommendations for future research Finally, Chapter six concludes with summarizing remarks and overall conclusions of the thesis.
S UMMARY
This chapter provides the background of the study and highlights the research problem that warrants further investigation, emphasizing the need for additional research in this area It clearly states the research aim and objectives, which are designed to address three key research questions guiding the study's direction The rationale for this research is explained, underscoring its importance and potential contribution to existing theoretical knowledge An outline of the thesis chapters is included to inform readers about its structure and organization.
LITERATURE REVIEW
I NTRODUCTION
This chapter offers a comprehensive review of the theoretical background related to the key variables of the study, including authentic leadership, ethical leadership, ethical climate, organisational citizenship behaviour, organisational commitment, and in-role performance It summarizes existing research findings on these variables, presents a theoretical framework based on their interrelationships, and highlights gaps in the current literature that this study aims to address to advance knowledge on authentic leadership The development of hypotheses regarding the relationships among these variables is discussed, along with the consideration of control variables A conceptual framework is proposed for empirical testing, and the chapter concludes with a summary of key insights to set the foundation for the research.
T HEORETICAL B ACKGROUND
2.2.1 The relevance of Organisational Leadership
The way people culturally organise together as a society has continually morphed and grown in complexity, which, in turn, shaped the way a social order has been structured and managed (Bass 2008; Yukl 2012) Likewise, the theory of leadership has evolved significantly over time in response to growing and changing understandings of people, societies, workplaces and organisations (Grint 2011) This multifacetedness of leadership theory and practice is evidenced by the breadth of leadership concepts contained within this field (Hernandez et al 2011) This, in turn, has revealed vast differences in definitions of leadership that have also demonstrated little consensus on how leadership is defined (Northouse 2009; Rost 1991; Yukl 2012) Part of the reason why there is little consensus on a single definition of leadership is that definitions vary according to the focus of the studied phenomenon While this is the case, Rost (1991) found in a review of leadership definitions over a period of more than 15 years that the majority of published articles and textbooks in the field of leadership written by practitioners and academics did not work from a definition of leadership that was common or accepted as a core definition amongst the authors studied However, Rost (1991) did find common components of leadership such as authority, authenticity, communication skills, courage, trust-building, collaborative interaction, focus on results and setting direction, in the various definitions used by authors within his review
Effective leadership is widely understood as a relational process between a leader and followers, encompassing mutual influence, communication, and shared obligations (Bass, 2008; Dinh et al., 2014) This reciprocal influence drives the achievement of common goals through ongoing engagement between leaders and followers However, researchers continue to explore what makes a leader effective and how that translates into organizational success, due to the inherent complexity and variability in leadership theories and practices Factors such as character traits, interpersonal relationships, and contextual elements significantly influence leadership effectiveness and organizational outcomes.
Modern leadership in business encompasses essential attributes, skills, and processes that drive organizational success (Avolio, Walumbwa & Weber, 2009; Dinh et al., 2014) Effective leadership provides guidance to organizational sub-units, ensuring members perform their tasks and achieve shared goals (Bass, 2008; Gardner et al., 2010) Critical elements of strong leadership include contextual role definition, linking organizational purpose with business processes, being adaptable to organizational needs, and possessing both affective and cognitive capabilities (Zaccaro & Klimoski, 2002) Leaders should articulate clear mission and goals, provide strategic direction, establish structures to attain objectives, resolve issues, and evaluate team contributions (Bass, 2008) Additionally, maintaining a clear organizational vision and mission fosters commitment among members, enabling a holistic understanding of organizational purpose and sustained engagement (Yukl, 2012).
Effective leadership involves multiple elements and can be analyzed from various perspectives According to Yammarino, Dansereau, and Kennedy (2001), organizational leadership is examined across four conceptual levels: intra-individual, dyadic, group, and organizational processes Recognizing these different analytical levels is essential for a comprehensive understanding of leadership dynamics within organizations.
Intra-individual processes focus on personal traits within an individual that influence their leadership approach, while dyadic processes examine the unique relationship between a leader and a follower Group processes analyze how leaders interact with and influence groups within the organization, and organizational processes take a holistic view of the entire organization, including its subgroups and hierarchical structures These various levels of processes are fundamental for effective leadership to occur (Chun et al., 2009; DeChurch et al., 2010; Zaccaro & Klimoski, 2002).
Organisational leadership is a critical factor for achieving positive organizational outcomes, directly impacting performance at individual, team, and collective levels (Avolio, Walumbwa & Weber, 2009; Bass, 2008; Clark, Murphy & Singer, 2014) Leaders influence organizational success through strategic decisions, behaviors, and their ability to guide others (Bass, 2008; Kaiser, Hogan & Craig, 2008) Additionally, leadership plays a key role in shaping and developing organizational culture, which transmits values, attitudes, and expectations across all employee levels, ultimately driving desired workplace behaviors (Schein, 2010; Mayer et al., 2009) Effective leadership may be considered a vital virtue or innate ability that enables leaders to make strategic decisions and inspire others toward achieving organizational goals.
Leadership is a multidimensional, interpersonal, and relational process centered around social influence among individuals working toward shared goals Today’s effective leaders are expected to demonstrate transparency, integrity, and ethical conduct, acting as moral architects who establish a strong moral foundation within their organizations Authentic leadership, characterized by personal strength, moral fortitude, and accountability, fosters trust and positive relationships with employees and stakeholders Key leadership traits include open, meaningful communication, building trust, and consistently demonstrating integrity—ensuring honesty in decision-making and interactions—which positively impacts employee attitudes and organizational performance.
This thesis focuses on two key leadership theories: authentic leadership and ethical leadership, both rooted in core personal characteristics Authentic leadership emphasizes leaders' awareness and alignment with their core values and beliefs, fostering follower development, relational transparency, and a positive organizational climate based on mutual trust (Avolio & Gardner, 2005; Gardner et al., 2011; Luthans & Avolio, 2003; Walumbwa et al., 2008) Ethical leadership, on the other hand, involves demonstrating ethical principles through consistent ethical behaviors that promote integrity and moral conduct within organizations (Brown & Mitchell, 2010; Brown, Trevino & Harrison, 2005; Stouten, van Dijke) Both leadership styles contribute to creating trust-based, ethically sound organizational environments.
Recent leadership theories, including authentic and ethical leadership, have emerged from increasing concerns about ethical and unethical conduct in the business environment (De Cremer, 2012; Trevino, Hartman & Brown, 2000) Both constructs emphasize core values such as integrity, morality, and honesty, although they are distinguished theoretically and empirically (Brown & Mitchell, 2010; Gardner et al., 2011) Proponents suggest that authentic leadership (Avolio & Gardner, 2005; Wang et al., 2014) and ethical leadership (Brown & Mitchell, 2010; Schaubroeck et al., 2012) positively influence organizational outcomes by enhancing ethical climate, fostering organizational citizenship behaviors, strengthening organizational commitment, and improving subordinates' in-role performance Understanding these leadership styles is crucial for promoting ethical practices and improving overall organizational effectiveness.
2.2.2 Authentic Leadership and its construct development
The concept of authentic leadership has emerged in response to society’s increasing demand for transparency and integrity across all levels of business operations Authentic leadership emphasizes the importance of corporate behaviors being genuine, honest, and free from misleading intentions or actions In contemporary leadership theory, authentic behavior rooted in strong ethical principles is vital, with organizational performance closely linked to demonstrating authentic leadership.
Over the past two decades, significant research has been conducted on the development of authentic leadership and its positive impact on organizational performance outcomes (Avolio et al., 2004; Avolio, Walumbwa & Weber, 2009; Gardner et al., 2005, 2011; Ilies, Morgeson & Nahrgang, 2005; Luthans & Avolio, 2003; Peus et al., 2012; Sendjaya et al., 2014; Walumbwa et al., 2008; Wang et al., 2014) Gardner et al (2011) noted that authentic leadership, as a concept, was only applied in organizational contexts starting in the 1960s and primarily remained theoretical, despite growing interest from both practitioners and scholars It has been argued that authentic leadership is a ‘root construct in leadership theory,’ complementing other positive leadership styles like charismatic, transformational, and ethical leadership (Avolio & Gardner, 2005; Gardner et al., 2011) Over the years, various definitions of authentic leadership have evolved, reflecting its foundational role and broad applicability across leadership theories (Table 2.1).
Henderson and Hoy (1983) aimed to theoretically define the construct of authentic leadership and develop a reliable measurement scale to assess a leader’s authenticity Their research was inspired by Seeman’s (1966) work on inauthenticity, which provided valuable insights into authentic behavior in leadership This foundational study contributed to a deeper understanding of what constitutes authentic leadership and how it can be accurately measured.
Inauthenticity, as discussed by 1966, reflects an individual's distorted perception of reality driven by perceived role demands and personal expectations An inauthentic person often holds flawed beliefs about how others perceive them, acting based on mistaken self-image perceptions Furthermore, they have skewed views of their belief systems and role status, leading to actions rooted in inconsistencies within their self-image Ultimately, inauthenticity arises from these internal discrepancies that influence their behavior and self-perception.
Seeman (1966) created the Ambivalence Toward Leadership Ideology (Inauthenticity) Scale, the first measurement tool aimed at assessing leadership authenticity Building on Seeman’s work, Henderson and Hoy (1983) developed the Leader Authenticity Scale (LAS), which introduced a comprehensive view of authentic leadership Their model identifies three key components: an individual's acceptance of personal and organizational responsibilities for their actions, outcomes, and mistakes; an absence of manipulative behavior towards subordinates; and self-awareness of personal values that align with role requirements.
Table 2.1: Summary of authentic leadership definitions
Leader authenticity is characterized by subordinates perceiving their leader as genuinely accepting organizational and personal responsibility for actions, outcomes, and mistakes, while avoiding manipulation and emphasizing authentic self-expression over role-driven behavior In contrast, leadership inauthenticity occurs when subordinates see their leader as shifting blame to others and circumstances, engaging in manipulation, and prioritizing role over genuine self-awareness Emphasizing authentic leadership fosters trust and accountability, whereas inauthenticity can undermine team cohesion and trust.
I DENTIFYING OVERSIGHTS IN THE LITERATURE
Persistent corporate scandals and management malfeasance continue to mar the current organizational landscape, often linked to ethical lapses by leaders with significant influence Executive behavior frequently displays inconsistency between words and actions, highlighting stakeholders' intolerance for such dissonance Incorporating Authentic Leadership can foster positive change, as true effectiveness depends on genuine and ethical leadership practices According to Seeman (1966), individuals often have distorted perceptions of reality and inauthentic self-views, which influence their decision-making and lead to inauthentic actions These perceptual biases result in leadership that is disconnected from rationality and lived realities, preventing true effectiveness and ethical accountability.
Authentic leadership is inherently centered on ethics and morality, emphasizing integrity, honesty, and moral principles (Luthans & Avolio, 2003) While it differs theoretically and empirically from ethical leadership, both share a focus on ethical conduct and moral values (Brown & Mitchell, 2010; Gardner et al., 2011) Ethical leadership contributes to positive change in corporate environments by promoting ethical decision-making and frameworks that prevent misconduct, which often results from leaders disregarding ethical considerations and driven by egoistic motivations (Padilla, Hogan & Kaiser, 2007; Schaubroeck et al., 2007; Toor & Ofori, 2009) Leaders with a strong moral framework are motivated by ethical principles, guiding their thinking and actions, and these characteristics align closely with authentic leadership qualities (Trevino, Hartman & Brown, 2000).
This thesis explores how business leadership, specifically authentic and ethical leadership, can positively influence the ethical climate of a workplace and enhance employees' attitudes and performance It aims to fill gaps in existing research by examining the combined effect of authentic and ethical leadership on organizational outcomes, addressing the early stage of this field Additionally, the study investigates the relationship between authentic leadership and perceived ethical climate, extending previous calls for research by Gardner et al (2011) Furthermore, it explores how ethical climate mediates the relationship between authentic leadership and employees’ organizational citizenship behaviors, commitment, and performance.
This thesis advances the understanding of authentic leadership theory by examining how authentic and ethical leadership jointly influence organizational outcomes and follower performance It is anticipated that both authentic and ethical leadership directly impact these outcomes, contributing to improved organizational effectiveness Additionally, the study explores the mediating role of ethical climate in the relationship between authentic leadership and organizational success Furthermore, the research investigates whether ethical leadership moderates the connection between authentic leadership and organizational outcomes, offering a comprehensive view of leadership dynamics in organizations.
H YPOTHESIS DEVELOPMENT
2.4.1 Linking Authentic Leadership to Ethical Climate
Research indicates that organizational leadership plays a crucial role in shaping an organization's ethical climate by fostering shared values and a harmonious culture (Grojean et al., 2004; Schein, 2010; Yukl, 2012) Authentic leadership, in particular, is recognized as a significant factor that can positively influence the ethical environment within organizations (Gardner et al., 2005; Nelson et al., 2014; Walumbwa et al., 2008).
Authentic leadership can foster an ethical climate within organizations by promoting transparency, integrity, trust, and high moral standards, which in turn support the development of authentic leadership (Gardner et al., 2005) An ethical climate rooted in these values creates a healthy organizational environment and is closely linked to the core aspects of authenticity, as outlined by Kernis & Goldman (2006) Furthermore, authentic leadership is both an ideal and sustainable approach that benefits all organizational members, reinforcing ethical behavior and organizational health (Avolio et al., 2004; Gardner et al., 2005; Ilies, Morgeson & Nahrgang, 2005; Luthans & Avolio, 2003; Walumbwa et al., 2008).
Authentic leaders actively support their subordinates' needs for growth and achievement by creating development opportunities, fostering trust and engagement (Avolio & Gardner, 2005; Gardner et al., 2011; Yammarino et al., 2008) According to Walumbwa et al (2008), authentic leadership is rooted in positive psychological capacities and a strong ethical climate, which together form its core Research by Walumbwa et al (2008) supports Gardner et al (2005), indicating that authentic leadership promotes an ethical climate that enhances organizational citizenship behavior, increases organizational commitment, improves supervisor satisfaction, boosts job satisfaction, and elevates job performance among subordinates These insights align with empirical studies highlighting that an ethical climate fosters a cooperative environment where leaders and employees work collaboratively to achieve organizational goals (Martin & Cullen, 2006; Simha & Cullen).
Research by Hannah, Avolio, and Walumbwa (2011) demonstrates that authentic leadership—with key traits like relational transparency, leading by example, and role modeling—positively influences subordinates by enhancing their moral courage and moral action, while reducing potential unethical behavior Cianci et al (2014) further support that authentic leadership not only curbs unethical tendencies but also diminishes temptations to think or act unethically These studies highlight that authentic leadership fosters an ethical climate and enhances psychological capital (Walumbwa et al., 2008), yet empirical evidence on how authentic leadership influences ethical climate remains limited Therefore, it is hypothesized that perceived authentic leadership significantly impacts subordinates’ perceptions of the ethical climate within organizations.
Hypothesis 1: Authentic leadership positively and significantly predicts perceptions of ethical climate among subordinates
2.4.2 Linking Authentic Leadership to Organisational Citizenship Behaviour
Research indicates that leadership significantly and positively influences subordinates’ organizational citizenship behaviors (Podsakoff et al., 2000) Authentic leadership, in particular, encourages these behaviors by fostering relational transparency and open communication, which helps subordinates understand their role in organizational success (Walumbwa et al., 2008; Avolio et al., 2004; Yammarino et al., 2008) Such transparent interactions build trust and promote self-development opportunities, leading to higher levels of mutual support and commitment within the organization (Organ, Podsakoff & MacKenzie, 2006; Walumbwa et al., 2008) Overall, an authentic leadership style creates a relationship based on openness, trust, and honesty, which enhances organizational citizenship behaviors among employees.
Authentic leadership, by leading through example and serving as a role model, fosters a strong sense of personal and social identification among subordinates with both the leader and the organization (Avolio et al., 2004; Billig & Tajfel, 1973) This identification enhances trust and optimism, leading to increased job satisfaction and commitment toward the leader and organization (Gardner et al., 2005; Gardner et al., 2011; Ilies, Morgeson, & Nahrgang, 2005) As a result, this trust and commitment positively influence subordinates’ willingness to engage in organizational citizenship behaviors (Wong & Cummings, 2009) However, existing research on authentic leadership and organizational citizenship behaviors has primarily focused on the overall construct of organizational citizenship behaviors without examining specific dimensions.
Authentic leadership is known to promote organisational citizenship behavior among subordinates, yet limited research explores its specific impact on individual-level organizational citizenship behaviors (OCBIs) These behaviors differ based on their target, either benefiting individuals (OCBIs) or the organization (OCBOs) It is plausible that authentic leadership positively influences OCBIs, leading to the hypothesis that authentic leadership has a constructive effect on individual-level organizational citizenship behaviors.
Hypothesis 2: Authentic Leadership positively and significantly influences individual-level organisational citizenship behaviours (OCBIs)
2.4.3 Linking Authentic Leadership and Affective Organisational Commitment
Affective committed employees choose to stay with their organization voluntarily due to their strong emotional attachment This form of commitment is characterized by a deep sense of identification and involvement in the organization, driven by alignment between employees' personal values and goals and those of the organization (Allen & Meyer, 1990; Meyer & Herscovitch, 2001) When employees perceive a congruence between their individual aspirations and the organizational culture, they are more likely to develop a genuine emotional bond, fostering loyalty and retention (van Knippenberg & Sleebos, 2006).
Research indicates that various leadership styles significantly influence subordinates' organizational commitment (Dale & Fox, 2008; Podsakoff, MacKenzie & Bommer, 1996; Yiing & Ahmad, 2009) Leaders who demonstrate consideration and foster a supportive work environment built on trust and psychological safety can enhance employee commitment to the organization (Dale & Fox, 2008) Authentic leadership, characterized by relational transparency—open and honest communication of values and beliefs—creates reciprocal trust with subordinates, fostering a deeper understanding of leadership roles and organizational goals (Walumbwa et al., 2008; Ilies, Morgeson & Nahrgang, 2005) This trust and transparency lead to emotional bonds, motivating subordinates to identify with and actively engage in the organization, which positively impacts their affective commitment (Allen & Meyer, 1990; Avolio et al., 2004; Porter et al., 1974).
Research by Walumbwa et al (2008) demonstrates that authentic leadership — characterized by self-awareness, relational transparency, balanced processing, and an internalized moral perspective — significantly enhances subordinates’ organizational commitment Supporting this, Peus et al (2012) identify self-knowledge and self-consistency as key antecedents of authentic leadership, emphasizing that leaders who understand their values and beliefs and act consistently positively influence employee commitment.
Although research has demonstrated that authentic leadership has a direct positive influence on subordinates’ organisational commitment (Peus et al 2012; Walumbwa et al
While authentic leadership has been shown to influence organizational commitment, more empirical research is needed to fully understand its impact on subordinates' workplace attitudes and behaviors Current evidence supporting the connection between authentic leadership and affective organizational commitment remains limited, highlighting the need to expand theoretical frameworks in this area Building on previous findings, this study hypothesizes that authentic leadership will positively enhance affective organizational commitment among employees, specifically within the Australian workplace context.
Hypothesis 3: Authentic leadership positively and significantly influences affective organisational commitment of subordinates in an organisation
2.4.4 Linking Authentic Leadership to In-role Performance
Research indicates that authentic leadership positively influences organizational outcomes across various levels and significantly enhances both individual and group subordinate performance (Clapp-Smith et al., 2009; Gardner et al., 2011; Walumbwa et al., 2008; Wang et al., 2014) Key characteristics of authentic leaders include relational transparency, which involves openness and acceptance in communication and collaboration, leading to improved performance (Avolio et al., 2004; Gardner et al., 2005; Leroy et al., 2012; Peus et al., 2012) Additionally, authentic leaders lead by example, modeling their actions consistently to empower subordinates and foster workplace engagement, demonstrating their commitment to organizational tasks and guiding followers on maintaining emotional, physical, and cognitive engagement during work (Gardner et al., 2011; Wang et al., 2014).
Authentic leadership, characterized by relational transparency, an internalized moral perspective, and role modeling, fosters subordinates to internalize these qualities as core beliefs, leading to increased performance This leadership style enhances subordinates' psychological capital—comprising self-efficacy, optimism, hope, and resilience—by building mutual trust and providing opportunities for self-development Studies by Clapp-Smith, Vogelgesang, and Avey (2009) demonstrate that authentic leadership significantly boosts psychological capital through trust and mutual learning environments Consequently, authentic leadership improves individual and group-level performance, suggesting a positive impact on in-role performance.
Hypothesis 4: Authentic leadership positively and significantly influences subordinates’ in- role performance
2.4.5 Linking Ethical Leadership to Ethical Climate
Research shows that organizational leadership significantly influences an organization's ethical climate (Grojean et al., 2004; Mulki, Jaramillo & Locander, 2009; Schminke, Ambrose & Neubaum, 2005) Top-level management, especially CEOs practicing ethical leadership, play a crucial role in shaping the organization's ethical environment (Shin, 2012) Ethical leadership is identified as a key antecedent of ethical climate, which reflects what members consider ethically appropriate behavior (Cullen, Victor & Bronson, 1993; Trevino, Butterfield & McCabe, 1998) However, Shin’s (2012) study relied on self-rated measures of ethical leadership, suggesting potential bias in the findings.
Ethical leaders serve as role models by providing moral guidance and holding subordinates accountable for ethical conduct, influencing organizational integrity (Brown & Mitchell, 2010) Their modeling behavior acts as a powerful social influence, shaping the development of subordinates through observational learning (Bandura, 1977) Virtuous actions demonstrated by leaders inspire organizational members to emulate them, fostering a culture of empathy and moral concern (Caza, Barker & Cameron, 2004; Arnaud, 2010) Leaders who exemplify ethical behavior utilize influencing processes that promote positive change and voluntary ethical actions among team members Such leader-subordinate relationships rooted in fairness and consideration enhance healthy interactions, motivate employees, and contribute to the continuous improvement of organizational culture, productivity, and overall outcomes (Walumbwa & Schaubroeck, 2009; Piccolo et al.).
C ONTROL V ARIABLES
Demographic characteristics of employees, such as age, gender, tenure, and education level, are linked to various organizational outcomes at individual, group, and organizational levels (Lau & Murnighan, 1998; Pfeffer, 1985) Research indicates that these demographics influence key outcomes including organizational citizenship behaviors (Podsakoff & MacKenzie, 1997), organizational commitment (Meyer & Allen, 1997), and overall performance (van Dijk, van Engen & van Knippenberg).
2012) However, research on influences of demographic characteristics onto organisational effectiveness to date has been limited (Muchiri & Ayoko 2013)
Research on the impact of demographic characteristics on organizational effectiveness remains inconclusive, with studies presenting conflicting findings (Joshi, Liao & Roh, 2010) Some researchers suggest that demographic incongruence within workgroups negatively affects organizational outcomes like commitment and job satisfaction, while others find no significant impact (Joshi, Liao & Roh, 2010) These mixed results may be due to the inconsistent consideration of contextual variables influencing the relationship between demographics and organizational performance (Jackson, Joshi & Erhardt, 2003; Kunze, Boehm & Bruch, 2011).
Muchiri and Ayoko (2013) found that demographic diversity significantly impacts organizational outcomes, with factors such as gender, organizational tenure, and management level serving as key predictors Their research highlights that demographics directly influence essential organizational behaviors, including citizenship behaviors, affective commitment, productivity, and collective efficacy beliefs, emphasizing the importance of understanding demographic factors for improved organizational performance.
Furthermore, their study revealed that organisational leadership, specifically transformational leadership, was a moderator in the relationship between demographics characteristics and organisational outcomes
Demographic diversity significantly influences organizational outcomes, with numerous leadership studies highlighting the importance of variables like age, gender, educational level, and organizational tenure in assessing leadership effectiveness (Bass, 2008; Dinh et al., 2014; Lussier & Achua, 2013; Yukl, 2012) This recognition underscores the need to consider these demographic factors as control variables in leadership research, as they serve as predictors for attitudinal outcomes within organizations Incorporating such variables enhances the understanding of how demographic diversity impacts leadership performance and organizational success.
C ONCEPTUAL F RAMEWORK
This thesis investigates the impact of authentic and ethical leadership on organizational ethical climate, highlighting how these leadership styles influence subordinates’ organizational citizenship behavior, commitment, and performance It explores the moderating role of ethical leadership on the relationship between authentic leadership and organizational outcomes, while also examining ethical climate as a mediating factor in this dynamic The proposed relationships are visually represented in the conceptual framework (Fig 2.2), emphasizing the interconnected effects of authentic and ethical leadership on organizational effectiveness and ethical culture.
Authentic leadership and ethical leadership are key influencing variables that directly impact organizational and performance outcomes The study emphasizes that ethical leadership complements authentic leadership, enhancing its effects on organizational success Additionally, ethical climate is theorized to shape subordinate attitudes and performance, notably influencing organizational citizenship behavior among employees This highlights the interconnected roles of authentic leadership, ethical leadership, and ethical climate in driving positive organizational results.
Figure 2.2: Conceptual framework based on the literature review of authentic leadership, ethical leadership, ethical climate, organisational citizenship behaviour, organisational commitment and performance
S UMMARY
This chapter explores the relationship between organizational leadership and performance outcomes, emphasizing how authentic and ethical leadership influence ethical climate, organizational citizenship behavior, affective commitment, and in-role performance A theoretical framework was developed based on existing literature to illustrate these influencing relationships and guide hypothesis formulation The proposed conceptual framework identifies both direct and indirect links between leadership styles and organizational outcomes, addressing gaps in prior research It serves as the foundation for 15 key hypotheses examined in this study, highlighting the critical role of ethical and authentic leadership in enhancing organizational performance.