Modeling Ethical Leadership and Employee Role of Psychological Empowerment and Moderating Role of Ethical Climate, Power Distance and Leaders Social Distance
Over the past few decades, scholars and practitioners have increasingly recognized the significance of ethical leadership for organizations. This study extends the literature on ethical leadership through empirically examining its seven dimensions as identified by Kalshoven, Den Hartog and De Hoogh (2011) to produce desired employee outcomes i.e. job satisfaction, organization commitment, cynicism, and job embeddedness. It further constructs and empirically tests a moderated mediation model, with ethical climate, power distance orientation, and leaders’ social distance as moderators and psychological empowerment as a mediator in the relationship between ethical leadership and employee outcomes. Social exchange theory provides overarching support and LMX theory is utilized to explain dyadic relationships. Thus, this study examines ethical leadership using an uncommon yet more comprehensive scale to measure ethical leadership behavior in the context of South Asia. This study also examines various constructs which have seldom been explored with ethical leadership i.e. psychological empowerment, power distance orientation, leader’ social distance, and job embeddedness.
This study is based on a deductive research approach and a time-lag research design. Data were collected from four major cities of Pakistan i.e. Islamabad, Rawalpindi, Lahore, and Karachi using a survey questionnaire. The questionnaire was divided into different sections to collect data at Time 1 and Time 2 with a time lag of 4 weeks. The final sample size was 585 employees working in private and public sector organizations, and the overall response rate was 73%. The data analysis procedures included exploratory factor analysis (EFA), confirmatory factor analysis (CFA), tests for data normality and multi-collinearity, followed by hypothesis testing using SPSS, AMOS and Process Macro.
Results supported seven dimensions of ethical leadership, and a varying positive relationships of these dimensions with employee outcomes of job satisfaction, organization commitment, and job embeddedness, and a negative relationship with cynicism. Out of the seven-dimensions of ethical leadership, people orientation, fairness, and power-sharing had a strong association with a majority of the employee outcomes, ethical guidance and role clarification had a moderate relationship, while concern for sustainability and integrity had a limited influence. Results also supported the positive association between the second order composite form of ethical leadership and job satisfaction, organization commitment, and job embeddedness, and a negative relationship of composite form of ethical leadership with cynicism, as proposed using social exchange theory. Out of the three contextual moderating constructs, ethical climate was found to moderate the relationship between ethical leadership and psychological empowerment, while the moderating role of power distance orientation and leader’s social distance were not supported. Psychological empowerment mediated the relationship between ethical leadership and job embeddedness, but was not found to mediate the remaining relationships. Lastly, the moderated mediation analysis was supported with ethical climate, power distance orientation and leaders social distance failed to moderate the mediation.
This study contributes to the literature by highlighting the unique impact of specific dimensions of ethical leadership on outcomes. Secondly, this study examines the distinctive influence of internal and external contextual moderators i.e. ethical climate, power distance orientation and leader’s social distance on the relationship between ethical leadership and psychological empowerment. Data collection from private and public sector organizations also adds to generalizability of results which is unlike in other ethical leadership studies
This study has several implications for the practitioners and managers, it suggests that congruent leader-member values can produce a strong exchange relationship and desired outcomes. It identifies people orientation and fairness are the two most effective dimensions of ethical leadership, and provides deeper insights into impact of particular dimensions e.g. power sharing resulting in increasing employees’ job satisfaction, organization commitment and job embeddedness. It also highlights the role of developing an ethical work culture to make ethical leaders more effective.