• Analyze at least 3 legal compliance issues that you as an HR professional need to undertake to ensure the performance management system is consistently compliant with all relevant laws of the state in which the organization does business. 
• Analyze 2 ethical situations that could arise when addressing employee issues.  
• Explain how an HR professional can appropriately address at least 1 specific employee issue without violating its governing law.
• Outline the types of consequences an organization could face if it is found in violation of the governing law referenced above.

350 words apa format

Ethical Leadership and Reputation: Combined Indirect Effects
on

Organizational Deviance

Pedro Neves • Joana Story

Received: 19 August 2013 / Accepted: 2 December 2013 / Published online: 12 December 2013

� Springer Science+Business Media Dordrecht 2013

Abstract The interest in ethical leadership has grown in

the past few years, with an emphasis on the mechanisms

through which it affects organizational life. However,

research on the boundary conditions that limit and/or

enhance its effectiveness is still scarce, especially con-

cerning one of the main misconceptions about ethical

leadership, its incompatibility with effectiveness (Brown,

Organ Dyn 36:140–155, 2007). Thus, the present study

(a) examines the relationship between ethical leadership

and organizational deviance via affective commitment to

the organization, as a reflection of the quality of the

employee–organization relationship and (b) proposes this

relationship is conditional on the supervisor’s personal

reputation for performance (i.e., the moral standards are

coupled with work effectiveness). Using a sample of 224

employees and their respective supervisors from 18 orga-

nizations, we confirmed our hypotheses (moderated medi-

ation model). Our findings suggest that ethical leadership is

positively related to employees’ affective commitment to

the organization, particularly when supervisor’s reputation

for performance is high, which in turn is associated with

decreased organizational deviance. The theoretical and

practical implications of these findings conclude the paper.

Keywords Ethical leadership � Reputation for
performance � EOR � Organizational commitment �
Organizational deviance

Introduction

The corporate scandals that have come to the general

public’s attention in the past years (e.g., Enron and Fannie

Mae’s accounting practices, HP and Deutsch Bank’s spy-

ing accusations) have again highlighted the importance of

the ethical conduct of those in influential positions. Much

has been written about the normative or philosophical view

of ethical leadership (see Brown and Treviño 2006 and

Eisenbeiss 2012 for a review), and the ethical dimension is

present in the contemporary models of leadership (e.g.,

idealized influence dimension of transformational leader-

ship—Bass and Avolio 1994). Yet, and while organizations

have started to express the importance of having leaders

that behave ethically (Stouten et al. 2012), ethical scandals

are still commonplace.

Although it has been in the mind of researchers, prac-

titioners, and the general public for a long time, only

recently the construct (and corresponding measure) of

ethical leadership was developed (Brown et al. 2005).

These authors have defined ethical leadership as ‘‘the

demonstration of normatively appropriate conduct through

personal actions and interpersonal relationships, and the

promotion of such conduct to followers through two-way

communication, reinforcement, and decision-making’’

(p. 120). This definition highlights three key characteris-

tics: (a) the leader is a legitimate and credible role model;

(b) the leader not only explicitly emphasizes the impor-

tance of ethics, but also reinforces ethical behaviors (while

disciplines those that do not comply with the standards);

and (c) the leader evaluates the ethical implications of his/

her decisions.

Since Brown et al.’s (2005) seminal paper, researchers

started to examine how ethical leadership affects employ-

ees’ conduct, i.e., the processes through which its influence

P. Neves (&) � J. Story
Nova School of Business and Economics, INOVA, Universidade

Nova de Lisboa, Campus de Campolide, 1099-032 Lisbon,

Portugal

e-mail: pneves@novasbe.pt

123

J Bus Ethics (2015) 127:165–176

DOI 10.1007/s10551-013-1997-3

takes place. Researchers have highlighted multiple mech-

anisms, including the work environment (poor working

conditions: Stouten et al. 2010; ethical climate and culture:

Neubert et al. 2009; Mayer et al. 2010; Schaubroeck et al.

2012; Shin 2012), job characteristics (workload: Stouten

et al. 2010; task significance and autonomy: Piccolo et al.

2010) and employees’ (individually or as a group) trust in

leader (Newman et al. 2013) work engagement (Den Har-

tog and Belschak 2012), well-being (Kalshoven and Boon

2012), voice (Avey et al. 2012; Walumbwa et al. 2012),

psychological ownership (Avey et al. 2012), safety (Wal-

umbwa and Schaubroeck 2009), and conscientiousness

(Walumbwa et al. 2012).

Despite this growing evidence concerning the mecha-

nisms linking ethical leadership and employee outcomes,

authors still highlight the need for further research in this

area (e.g., Mayer et al. 2012; Newman et al. 2013).

Moreover, the boundary conditions that limit or enhance

the effectiveness of ethical leadership have received much

less attention and usually emphasize either the role played

by the work environment, such as organizational politics

(Kacmar et al. 2011) and human resource management

practices (Kalshoven and Boon 2012) or by employees’

characteristics, such as self-esteem (Avey et al. 2011) or

gender (Kacmar et al. 2011). Further research on the

boundary conditions of ethical leadership is particularly

relevant as it may help explain under what conditions

ethical leadership becomes more valuable for organizations

and influential for employee behavior.

Thus, the present study aims to contribute to the dis-

cussion concerning the process of ethical leadership,

namely how and under what circumstances it influences

employee behavior. First, we extend our knowledge of the

process of ethical leadership by examining the role of

social exchanges. Social exchange theory (Blau 1964) has

been a predominant framework in organizational behavior

(Cropanzano and Mitchell 2005), and particularly in the

study of leadership (Dirks and Ferrin 2002; Tse et al.

2013). Nonetheless, and while it has been discussed (the-

oretically) as a key dimension in the relationship between

ethical leaders and their subordinates (Brown and Treviño

2006), the social exchange mechanisms through which

ethical leaders influence follower behaviors are yet to be

examined empirically (ibidem). For example, Brown and

Treviño (2006) argue that through a high quality exchange

relationship with managers, ethical leadership should

decrease the likelihood of engagement in negative behav-

iors—yet, such mechanisms are not detailed in their

propositions. Therefore, we propose and test that ethical

leadership contributes to the reduction of employee’s

deviant behaviors through an increase in employees’

affective organizational commitment, one of the main

indicators of a high quality social exchange relationship

with the organization (Colquitt et al. 2013), since the

actions of the supervisor are, to some extent, interpreted as

actions on behalf of

the organization.

Second, we further develop our understanding of the

conditions that significantly affect the strength of the

impact of ethical leadership. While there is an overall

agreement that the demonstration of high moral standards

by leaders is an important determinant of employee

behavior (see Brown and Treviño 2006 for a review), there

is also evidence (although this line of inquiry is still in its

infancy) that the impact of such actions varies substantially

between individuals (e.g., Avey et al. 2011) or across

contexts (Kalshoven and Boon 2012). Given that one of the

main misconceptions about ethical leadership is that ethics

and effectiveness are not compatible (Brown 2007), visible

in the popular adage ‘‘nice guys finish last’’ (ibidem), it is

urgent that researchers provide empirical tests of this

assumption. In this paper, we suggest that the role ethical

leadership plays in the employee–organization relationship

(EOR) varies significantly depending on the supervisor’s

reputation for performance, such that ethical leadership

should be more effective when leaders also demonstrate a

high potential for success. High ethical leadership com-

bined with high reputation for performance indicates that

the supervisor not only fulfills his/her performance obli-

gations at the workplace, but does so following a set of

moral standards. Finally, and based on a social exchange

framework, we expect that employees reduce their deviant

behaviors as a response to ethical leadership (conditional

on supervisor’s reputation for performance), through

increased affective commitment to the organization (i.e.,

moderated mediation effect).

Overall, this paper adds to the literature in two main

ways by highlighting: (a) the employee–organizational

relationship as a key social exchange mechanism through

which ethical behavior by leaders, as agents of the orga-

nization, reduces deviant behaviors directed at the organi-

zation; and (b) reputation for performance, as an indication

that the leader is competent and helpful, as an employee

perception that significantly shapes how employees react to

ethical leadership.

Ethical Leadership and the EOR

As we previously discussed, researchers have begun to

explore the mechanisms linking ethical leadership and

employee behaviors. However, and while multiple aspects

of the organizational life have been examined as potential

mechanisms, the EOR has been largely overlooked, despite

its key role for organizational functioning (see Rhoades

and Eisenberger 2002 and Meyer et al. 2002 for meta-

analyses on perceived organizational support, POS, and

organizational commitment, respectively). These two

166 P. Neves, J. Story

123

concepts capture both sides of the positive EOR: how

employees perceive the treatment received by the organi-

zation (POS: Eisenberger et al. 1986) and how employees

characterize their relationship with the organization (Meyer

and Allen 1991).

The EOR is ‘‘an overarching term to describe the rela-

tionship between the employee and the organization’’

(Shore et al. 2004, p. 292) and is drawn on social exchange

theory (Blau 1964). Social exchange theory posits that

unlike the specific benefits or commodities involved in an

economic exchange, the favors or benefits exchanged are

indicative of mutual support and investment in the rela-

tionship (Aryee et al. 2002). As such, only social exchan-

ges tend to engender feelings of personal obligation,

gratitude, and trust; purely economic exchanges do not

(Blau 1964).

Underlying the application of social exchange theory to

the EOR are the key assumptions that: (a) the employee

attributes humanlike characteristics to the organization;

and (b) organizational agents pursue the organization’s

interests in their relationship with their subordinates (Co-

yle-Shapiro and Shore 2007). In fact, the personification of

the organization is actually strengthened by the legal,

moral, and financial responsibility for the actions of its

representatives (Eisenberger et al. 1986). Moreover, the

role of direct supervisors as agents of the organization is

critical since they are the ones responsible for coordinating

work, assigning tasks, and evaluating the performance of

employees.

The norms governing social exchanges, based on reci-

procity, predict that an imbalanced relationship would

evolve over time in order to achieve congruence, that is,

either mutual positive or negative feelings. Thus, it is of

interest to understand whether employees reciprocate eth-

ical leadership, as behaviors enacted by an organizational

representative (i.e., supervisors), by stimulating the bond

employees develop with their organization, particularly

‘‘the emotional attachment to, identification with, and

involvement in the organization,’’ i.e., affective organiza-

tional commitment (Meyer and Allen 1991, p. 67). As

Cropanzano and Mitchell (2005) highlighted, commitment,

together with trust and loyalty, forms one of the basic

tenets of social exchanges. The reasoning is that virtuous

behavior—based on principles of fairness and integrity—

from leaders contributes to the thriving of all members of

the community (Neubert et al. 2009) and as such would

strengthen the emotional bond between employees and

their organization, one of the motivational mechanisms

supporting social exchanges in the workplace.

Previous research has showed that employees generalize

their views concerning the actions of their supervisors to

the organization. In fact, Meyer et al. (2002) argued that

among the things the organization can do to enhance

employee commitment is to provide strong leadership,

since employees view their leaders as agents working on

the organization’s behalf. Their meta-analytical findings

supported their argument and presented a strong correlation

between transformational leadership (which encompasses

ethical behaviors) and affective organizational commit-

ment. The few studies that have examined the relationship

between ethical leadership and affective organizational

commitment (Den Hartog and De Hoogh 2009; Kalshoven

et al. 2011; Neubert et al. 2009) provide strong empirical

support to this claim, since, and despite using different

measures and conceptualizations of ethical leadership, this

relationship is fairly stable and strong. Thus,

Hypothesis 1 Ethical leadership is positively related to

affective commitment to the organization.

The Moderating Role of

Reputation for Performance

Ethical leadership, as an influence process between leaders

and subordinates, is influenced by the general character the

latter attribute to the leader. One key feature of the char-

acter of leaders employees try to assess is personal repu-

tation. As Hochwarter et al. (2007) put it, examining

influence processes without considering how they relate to

different reputations provides a fairly incomplete perspec-

tive. Personal reputation concerns the positive image one

tries to develop based on how other individuals perceive

them as performing their jobs competently and being

helpful in the workplace (Zinko et al. 2012). It is defined as

a ‘‘complex combination of salient characteristics and

accomplishments, demonstrated behavior, and intended

images presented over some period of time’’ (Ferris et al.

2003, p. 213).

One of the arguments put forth to explain why personal

reputation acts as a boundary condition for influence pro-

cesses is that it serves an important signaling function

(Posner 1997), carrying information about an individual’s

intentions. For example, Laird et al. (2009) found that an

increase in felt accountability in the workplace presented

quite different results, depending on the person’s reputa-

tion. Similarly, Hochwarter et al. (2007) found that the

relationship between political behavior and several out-

comes (uncertainty, exhaustion, and performance) varied

significantly depending on the levels of personal reputa-

tion. In both studies, reputation determined whether polit-

ical behavior and accountability presented positive (when

reputation was high) or negative (when reputation was low)

outcomes.

As one can develop reputations for a myriad of things

(e.g., a person that has a reputation for being highly crea-

tive does not necessarily have a reputation to deliver

Ethical Leadership and Reputation 167

123

outputs on time), in the present study we are particularly

interested in the reputation concerning the supervisor’s

ability to perform one of the high-order dimensions that

compose personal reputation in the context of organiza-

tions (Zinko et al. 2012). This dimension of personal rep-

utation concerns whether employees see the supervisor as

someone that ‘‘gets things done,’’ which is crucial since

ethical leaders are also concerned with how people perform

their jobs (Stouten et al. 2010). Thus, while consistent

ethical supervisor behaviors should always contribute

positively to the EOR, we argue that employees put their

assessments of ethical leader behavior in perspective and

look for additional information concerning the leader’s

reputation for performance, as they look for additional

signals (Posner 1997) to try to make sense of the impli-

cations of his/her ethicality.

A second argument for the examination of reputation for

performance in our model concerns its role in the assess-

ment of the leader’s trustworthiness, a key input for the

development of the EOR. The characteristics and actions of

individuals make others trust them more or less (Mayer

et al. 1995). For example, ethical leadership positively

contributes to trust in the leader, mainly because it signals

that the leader has integrity, a key dimension of trustwor-

thiness (Newman et al. 2013). Another important charac-

teristic of the trustee is competence (or ability), the

expertise, knowledge, and skills that enable a party to have

influence within some specific domain (Mayer et al. 1995).

Reputation for performance is built around demonstrations

of competence as a leader, which influences not only trust

but also affective commitment to the organization (Colquitt

et al. 2007), two of the principal mechanisms in social

exchanges (Colquitt et al. 2013).

Finally, the examination of reputation for performance

provides an important contribution to one of the key mis-

conceptions about ethical leadership identified by Brown

(2007), that ethics and effectiveness are not compatible ‘‘in

the rough and tumble business world’’ (p. 149). As Brown

(2007) highlighted, the preliminary data concerning how

ethical leadership is related to positive outcomes are

compelling. Yet, we are not aware of any studies that

examine the intertwinement between assessments of leader

ethics and effectiveness and how it influences employee

behavior. In light of these arguments, we believe the

examination of the interplay between ethics and effec-

tiveness is central for a deeper understanding of the ethical

leadership process. Therefore, we suggest that a positive

reputation for performance will enhance the effectiveness

of ethical leadership in the development of an emotional

bond between employees and the organization, by (a) sig-

naling that the leader is someone that delivers but that does

not follow the maxim ‘‘by all means necessary’’ and

(b) showing that the leader is trustworthy. A negative

reputation for performance should lessen the effectiveness

of ethical leadership, as it would signal the leader is

someone with good intentions but unable to provide what

the organization requires, and, therefore, untrustworthy,

which should also affect employees’ organizational life as

the organization may limit the amount of resources pro-

vided to the supervisor.

Hypothesis 2 Reputation for performance moderates the

relationship between ethical leadership and affective

commitment to the organization, such that when reputation

for performance is high the positive relationship is stronger

than when reputation for performance is low.

Carryover Effects on Organizational Deviance

Researchers have been particularly concerned with the

relationship between ethical leadership and employee

behaviors, particularly performance (e.g., Kacmar et al.

2011; Shin 2012; Walumbwa et al. 2012) and deviance

(e.g., Avey et al. 2011; Den Hartog and Belschak 2012;

Mayer et al. 2009). As we previously discussed, social

exchange theory (Blau 1964) has provided the conceptual

underpinning of research on work attitudes and behaviors

(Settoon et al. 1996; Wayne et al. 1997), and affective

commitment to the organization is one of its key mecha-

nisms. In general, positive treatment received from the

supervisor makes employees develop a felt obligation to

reciprocate those positive actions, mostly through an

increase in affective commitment to the organization (Ei-

senberger et al. 2010). That is, subordinates feel indebted

and obliged to repay organizations and its representatives

(i.e., supervisors) in kind over time (Walumbwa et al.

2009).

These behaviors (i.e., performance and deviance) rep-

resent two forms of reciprocating the treatment received by

the organization and its agents that have an important

impact on organizational functioning. It is particularly

important to further analyze deviant behaviors directed at

the organization (e.g., intentionally working slower, come

in late without permission, lie about the number of hours

worked) for three reasons: (a) workplace deviance is an

expensive and pervasive problem for organizations that

happens rather frequently (Bennett and Robinson 2000);

(b) it represents how much employees engage in ‘‘volun-

tary behaviors that violate significant organizational norms

and in so doing threatens the well-being of an organization

its members or both’’ (Robinson and Bennett 1995, p. 556),

which is an important behavioral indicator of the negative

employee view of the EOR, since it is specifically directed

at the organization and carries the implications described in

the previous point; and (c) it results from a deliberate desire

to violate organizational norms derived from basic moral

168 P. Neves, J. Story

123

standards (Feldman 1984), including those upheld by

organizational agents such as supervisors.

Moreover, we could only find a handful of studies that

examine the relationship between ethical leadership and

deviant behaviors, and only two of those studies exam-

ined potential pathways and moderators of such rela-

tionship. Den Hartog and Belschak (2012) found that

ethical leadership reduced deviant (or counterproductive)

behaviors through an increase in work engagement, but

that increase varied depending on the levels of leader

Machiavellianism. In another study, Avey et al. (2011)

found that ethical leadership decreased the engagement

in deviant behaviors only when subordinate’s self-esteem

was low.

Thus, we propose that, based on social exchange theory

(Blau 1964) and the norm of reciprocity (Gouldner 1960),

ethical leadership should affect subordinates’ behavior

through an increase in affective commitment to the orga-

nization, conditional on the supervisor’s personal reputa-

tion for performance. As ethical leadership increases,

employees become more committed to the organization

(since supervisors personify, to some extent, the organi-

zation and treatment received by the supervisor is also

attributed to the organization), particularly when the

supervisor has a high reputation for performance (as an

indication that the leader is also known for ‘‘delivering the

goods’’), which should in turn reflect itself, as a result of

the norm of reciprocity, in the reduction of voluntary

negative behaviors directed at the organization.

Hypothesis 3 Affective organizational commitment is neg-

atively related to organizational deviance.

Hypothesis 4 The indirect effect of ethical leadership on

organizational deviance through affective commitment to

the organization will be stronger when reputation for per-

formance is high.

Overall, our conceptual model describes a moderated

mediation, i.e., a conditional indirect effect model, where

the magnitude of an indirect effect at particular values of

the moderator is examined (Preacher et al. 2007). Specifi-

cally, we examine if the relationship between ethical

leadership and organizational deviance via affective orga-

nizational commitment is conditional on supervisor’s rep-

utation for performance (see Figs. 1, 2).

Methods

Sample and Procedures

Initially, 25 organizations were identified and contacted to

participate in a larger study on Ethics and Social Respon-

sibility. Organizations were identified by either having a

strong commitment toward ethics and social responsibility

as highlighted on their website or if they had appeared on

the media about their ethics and social responsibility pro-

gram. Corresponding organizational representatives (top

management or/and HR managers or/and Public Relations

office) were then contacted asking to participate in the

study. Eighteen organizations (72 % response rate) agreed

to participate by having a sampled supervisor and corre-

sponding subordinate to fill out a survey. We only provided

the survey if both, employee and respective supervisor,

were willing to participate in the study. In our first contact,

we requested 364 subordinate and supervisor participants

to participate, however, only 273 agreed to take the survey,

representing a 75 % response rate. This high response rate

can be explained by the fact that surveys were handed out

personally. We had to exclude 49 dyads, because they did

not complete the survey or did not have corresponding

supervisors/subordinates surveys completed. Our final

sample consisted of 224 subordinate–supervisor dyads.

The 18 sampled organizations were from a variety of

industry, including: Tourism (3 %), Services (4 %), Health

(11 %), Consulting (13 %), Transportation (13 %), Energy

(20 %), and Financial Services (31 %). Out of the super-

visor sample, 54 % were male with mean age of 44,

ranging from 25 to 62 years old. Thirty-six percent of them

have worked in the organization for more than 20 years,

Fig. 1 Conceptual model

3.00

4.00

5.00

Low Ethical leadership High Ethical leadership

A
ff

ec
ti

ve
c

om
m

it
m

en
t

to
t

he
o

rg
an

iz
at

io
n

Low Reputation for
performance

High Reputation for
performance

Fig. 2 Plot of the interaction effect between ethical leadership and
reputation for performance

Ethical Leadership and Reputation 169

123

32 % between 10 and 20 years, and 27 % between 5 and

10 years. Forty-two percent of the supervisor sample had at

least a Master’s degree with 32 % having a Bachelor’s

degree. Subordinate population was 56 % female with

40 % having a Bachelor’s degree and 26 % having at least

a Master’s degree. Average age for subordinates partici-

pants were 35 ranging from 18 to 63 years old. In terms of

tenure, 31 % of them have worked in the organizations

between 1 and 5 years, 21 % between 5 and 10 years, and

20 % between 10 and 20 years. Supervisor sample rated

their respective subordinate organizational deviance, while

subordinate sample rated their leaders on ethical leadership

and reputation for performance and auto-reported their

organizational commitment.

Measures

Control Variables

Previous research has found that age, tenure, gender, and

education are sometimes related to affective

commitment

to the organization and organizational deviance (Berry

et al. 2007; Meyer et al. 2002). Therefore, our set of

analysis included these demographic variables as

controls.

Ethical Leadership

Ethical leadership was rated on 10 items developed by

Brown et al. (2005). Sample items include ‘‘my supervisor

has the best interests of employees in mind’’ and ‘‘my

supervisor sets an example of how to do things the right

way in terms of ethics.’’ Cronbach’s a was 0.88.

Reputation for Performance

Reputation for performance was rated on six items taken

from the Personal Reputation scale developed by Hochw-

arter et al. (2007). This set of items specifically measures

one’s reputation for performance. Sample items include

‘‘Others regard my supervisor as someone who gets things

done’’ and ‘‘People know my supervisor produce only high

quality results.’’ Cronbach’s a was 0.74.

Affective Organizational Commitment

Affective organizational commitment was rated using the 6

items developed by Meyer et al. (1993). Sample questions

include ‘‘I would be very happy to spend the rest of my life

in this organization’’ and ‘‘I do not feel emotionally

attached to this organization’’ (reversed). Cronbach’s a
was 0.75.

Organizational Deviance

Organizational deviance was rated by supervisors on 9

items (Aquino et al. 1999). Sample questions include

‘‘This subordinate took undeserved breaks to avoid work’’

and ‘‘this subordinate left work early without permission.’’

Cronbach’s a was 0.80.
All scales used 5-point Likert-type scales, anchored in

1—Completely disagree and 5—Completely agree.

Results

Descriptive statistics, reliabilities, and correlations are

presented in Table 1. The strong correlation between eth-

ical leadership and reputation for performance is note-

worthy. Despite being theoretically distinct, in light of the

trustworthiness literature such a correlation is not surpris-

ing. When developing their model of trustworthiness,

Mayer et al. (1995) emphasized that although each factor

captures some unique elements of trustworthiness, the fact

that they are separable does not mean they are unrelated. If

we examine the pattern of relationships between integrity

and competence, two of the underlying factors of trust-

worthiness that are closely related to ethical leadership and

reputation for performance, respectively, we find similar

results (Colquitt and Rodell 2011; Colquitt et al. 2007;

Mayer and Davis 1999). In these studies, the zero-order

correlation between integrity and competence ranged from

0.68 (in the meta-analysis conducted by Colquitt et al.

2007) to 0.78, but the factor analyses always supported the

distinction between the dimensions. Our results point in the

same direction as the trustworthiness studies. Moreover,

and as we will describe in detail in the following para-

graph, the CFA results (see differences between the

3-factors and the 2-factor models) support the distinctive-

ness of the constructs.

Since ethical leadership, reputation for performance, and

affective commitment to the organization were collected

from the same source (i.e., subordinate), we tested the dis-

tinctiveness of the three constructs using confirmatory factor

analysis (CFA). We compared our three-factor measurement

model with two alternative, less-differentiated models (see

Table 2): a two-factor model that combined the two evalu-

ations of the supervisor (ethical leadership and reputation for

performance); and a one-factor model where all the mea-

sures collected from the subordinate were combined.

Lagrange multiplier tests (Bentler 1995) for adding param-

eters suggested adding two residual correlations to our

model. The most differentiated model (three-factor model)

presented the best fit (v2(204) = 400.09**; CFI = 0.90;
RMSEA = 0.07; SRMR = 0.08). The Chi square differ-

ence tests demonstrated a better fit as the models became

170 P. Neves, J. Story

123

more differentiated (Dv2(2) = 22.14, p \ 0.05 between the
three-factor and two-factor model; and Dv2(1) = 196.53,
p \ 0.05 between the two-factor and one-factor model).
Loadings ranged from 0.46 to 0.77 for ethical leadership,

0.34 to 0.79 for reputation for performance, and 0.36 to 0.86

for affective commitment to the organization. Thus, we used

the hypothesized model in our analysis.

We tested our hypotheses using multiple regression and

bootstrapping analysis since it is the most endorsed method

to test conditional indirect effects, i.e., moderated media-

tion models (Preacher et al. 2007). Before creating the

interaction term, we centered both predictors, i.e., ethical

leadership and reputation for performance (Cohen et al.

2003). The results of our model are described in Table 3.

Ethical leadership had a significant positive relationship

with affective commitment to the organization (B = 0.58,

p \ 0.01), thus supporting hypothesis 1. Moreover, and
while reputation for performance did not present a signif-

icant relationship with affective commitment to the orga-

nization (B = 0.12, p [ 0.05), it significantly moderated
the relationship between ethical leadership and affective

commitment to the organization (B = 0.35, p \ 0.01).
Following the recommendation of Cohen et al. (2003),

we plotted the interaction effect. As predicted in hypothesis

2, the relationship between ethical leadership and affective

commitment to the organization was stronger when repu-

tation for performance was high (?1 SD; t = 6.78,

p \ 0.05) than when it was low (-1 SD; t = 3.74,
p \ 0.05). Although the relationship between ethical
leadership and affective commitment to the organization

remained significant when reputation for performance was

low, the difference between slopes is significant (t = 4.26,

p \ 0.05).
Finally, and since affective commitment to the organi-

zation presented a significant negative relationship with

organizational deviance (B = -0.15, p \ 0.01), thus

supporting hypothesis 3, we examined the indirect carry-

over effects of the interaction to organizational deviance

through affective organizational commitment. When rep-

utation for performance was high, the conditional indirect

effect of ethical leadership on organizational deviance

through affective commitment to the organization was

significant (B = -0.11, 95 % CI [-0.2410 to -0.0439]).

When reputation for performance was low, the conditional

indirect effect was also significant, albeit smaller

(B = -0.05, 95 % CI [-0.1505 to -0.0127]). These

results support hypothesis 4. That is, as ethical leadership

increases, subordinate’s organizational deviance decreases

via (increased) affective commitment to the organization,

particularly when subordinates rate their supervisors as

having a high reputation for performance.
1

Table 1 Descriptive statistics, reliabilities, and zero-order correlations

Variables M SD 1 2 3 4 5 6 7 8

1. Subordinate’s age 34.65 10.43 –

2. Subordinate’s tenure with the supervisor 2.92 1.26 0.39* –

3. Gender 0.58 0.52 -0.04 0.02 –

4. Education 3.93 0.82 -0.15* -0.17* -0.18** –

5. Ethical leadership 4.00 0.63 -0.11 0.11 -0.04 0.03 (0.88)

6. Reputation for performance 3.99 0.62 -0.09 0.06 -0.06 -0.08 0.74** (0.74)

7. Affective organizational commitment 4.04 0.67 0.12
�

0.19** 0.04 -0.08 0.45** 0.35** (0.75)

8. Organizational deviance 1.26 0.43 -0.04 -0.18** 0.08 0.12
�

-0.26** -0.14* -0.33** (0.80)

N = 224. Cronbach’s as are provided in parentheses on the diagonal. Tenure with the supervisor was coded as 1 = less than 6 months;
2 = between 6 months and 1 year; 3 = between 1 and 5 years; 4 = between 5 and 10 years; 5 = between 10 and 20 years; 6 = more than

20 years. Education was coded as 1 = fourth grade (primary education); 2 = ninth grade (secondary education); 3 = 12th grade (high school);

4 = undergraduate; 5 = graduate. Gender was coded as 0 = male; 1 = female

** p \ 0.01; * p \ 0.05; � p \ 0.10

Table 2 Confirmatory factor analysis

v2 df Dv2 CFI RMSEA SRMR

3 Factors 400.09** 204 0.90 0.07 0.08

2 Factors
a

423.04** 206 22.14* 0.88 0.07 0.08

1 Factor
b

619.57** 207 196.53* 0.78 0.09 0.08

a
Equating ethical leadership and reputation

b
Equating ethical leadership, reputation, and affective organizational

commitment

** p \ 0.01

1
As one of the anonymous reviewers noted, it is possible that there

are potential differences between organizations. Thus, we tested a

fixed effects model using the pooled within variance (i.e., controlling

for the variance within organizations) of the dependent variables. Our

bootstrapping model provided an almost identical model: ethical

leadership was related to affective commitment to the organization

(B = 0.51, p \ 0.01); the interaction effect was also significant
(B = 0.30, p \ 0.01); and affective commitment to the organization
was related to organizational deviance (B = -0.08, p \ 0.05).

Ethical Leadership and Reputation 171

123

Discussion

This paper examined how (i.e., through an increase in

affective commitment to the organization) and under what

conditions (i.e., depending on reputation for performance)

ethical leadership affects employee-deviant behaviors

directed at the organization. Overall, the results supported

our hypotheses. Ethical leadership was significantly related

to affective commitment to the organization, particularly

when supervisors also have a high reputation for perfor-

mance. Furthermore, the conditional effect of ethical

leadership on affective commitment to the organization

(depending on the levels of reputation for performance)

presented carryover effects for employee deviance directed

at the organization. Taken together, these results contribute

to the literature on ethical leadership by examining two

understudied topics: how ethical leadership is associated

with employees’ behaviors and the boundary conditions

that affect that relationship.

Our findings suggest that ethical leadership contributes

significantly to the development of the EOR through social

exchange mechanisms. Given the attention other mecha-

nisms have received in the literature (i.e., work environ-

ment, job characteristics), our research highlights the need

to further examine the implications of ethical behaviors for

social exchanges. The demonstration of normatively

appropriate conduct through personal actions and inter-

personal relationships (Brown et al. 2005) by supervisors

provides cues concerning the values of the organization,

thus enhancing employees’ affective organizational com-

mitment. Thus, our results provide evidence not only that

employees need ethical guidance from leaders, another of

the main misconceptions Brown (2007) highlighted about

ethical leadership, but also that they make inferences about

the organization’s intentions based on the supervisor’s

actions, one of the visible features of the organization’s

anthropomorphization (Levinson 1965).

Furthermore, we found that the strength of the relation-

ship between the supervisor’s ethical conduct and employ-

ees’ commitment to the organization varied according to the

supervisor’s reputation for performance. Specifically, the

impact of ethical leadership on the EOR is amplified for

leaders that are also evaluated as high performers. Personal

reputation is an important asset, because it reduces uncer-

tainty concerning future behavior by signaling that the

individual is trustworthy and has the necessary abilities to

deal with workplace demands (Laird et al. 2009). This

interaction effect is aligned with Hochwarter et al.’s (2007)

claim that in order to fully understand how influence pro-

cesses take place, one needs to examine the role of personal

reputation.

Interestingly, if leaders are not perceived as ethical,

regardless of their personal reputation for performance,

employees show the lowest levels of affective commitment

to the organization. It appears ethical leadership is a nec-

essary but not sufficient condition for employees to dem-

onstrate the strongest emotional bond with the organization.

That is, when defining their relationship with the organiza-

tion, employees examine both sides of the supervisor’s

‘‘means to an end’’ equation as an agent of that organization.

It is as if employees ask two questions: Does this supervi-

sor’s work conduct follow higher moral standards (i.e., does

(s)he have high ethical leadership? If so, does (s)he also

demonstrate high work effectiveness and achieve the pro-

posed ends (i.e., does (s)he have a high reputation for

performance)?

Table 3 Results of the moderated mediation analysis

Predictors Outcomes

Affective commitment Organizational deviance

B t R
2 DR2 B t R2 DR2

Control variables

Subordinate’s age 0.01 2.34* 0.00 0.33

Subordinate’s tenure with the supervisor 0.02 0.68 -0.04 -1.52

Subordinate’s gender 0.04 0.50 0.09 1.55

Subordinate’s education -0.04 -0.84 0.05 0.05 0.06 1.71 0.05 0.05

Main effects

Ethical leadership 0.58 5.67** -0.15 -2.73**

Reputation for performance 0.12 1.22 0.25 0.20 -0.00 -0.00 0.14 0.09

Interaction

Ethical leadership 9 reputation 0.35 4.15** 0.31 0.06 -0.08 -0.45 0.14 0.00

Mediator

Affective commitment to the organization -0.15 -2.88** 0.18 0.04

172 P. Neves, J. Story

123

Lastly, we found that ethical leadership was indirectly

related to employee deviance through an improvement in

the EOR, measured by the increase in affective commit-

ment to the organization. As Brown (2007) put it, ethical

leaders encourage employees to aspire to do the right thing,

which is more than simply obeying the law, and are quite

effective at doing it. These results are also aligned with the

norm of reciprocity (Gouldner 1960), in that employees

feel obligated to reciprocate the higher standards (both

ethical and for performance) put forth by the organization’s

representatives, in this case the supervisor, through their

own actions.

Our study also carries implications for practice. Our

results demonstrate that promoting ethical leadership has

an impact that goes beyond shaping ethical conduct

(Brown et al. 2005). Ethics is a process (Brown 2007), and

organizations and managers should be aware that ethical

leadership influences how employees view the organization

and determines their actions in the workplace. Organiza-

tions that aspire to promote a positive EOR and minimize

deviant behaviors should, therefore, invest in the promo-

tion of high ethical standards. A lot of attention has been

given by the media to the (un)ethicality of top management

teams and CEOs. Our study reinforces the idea that orga-

nizations also have to worry about the moral standards of

those in direct supervision positions, as they are important

role models due to their ability to reward or punish sub-

ordinates (Brown et al. 2005). Thus, organizations should

make clear that they do not tolerate individuals—at any

level of the hierarchy—that play the game close to the foul

line, as Keough (2008) put it.

Organizations can effectively promote ethical leadership

in multiple ways. They can, for example, measure appli-

cants’ ethical standards at the time of entry in the organi-

zation and/or examine their actions in exercises or solving

ethical dilemmas, selecting only those that are aligned with

the set of moral standards held by the organization. They

can also provide training to their line and middle-level

supervisors, highlighting the organization’s core values and

members’ expected actions, and explaining how leaders

may convey those norms of conduct to their subordinates

(e.g., inviting honest feedback or reinforcing employees

that did ‘‘the right thing’’, regardless of the outcomes:

Brown 2007). Finally, they can also develop a corporate

culture based on values with a strong emphasis on ethics.

This culture should be consistently communicated across

all levels of the organizations, in order to make sure:

(a) each member is aware of the core ethical values of the

organization; and (b) unethical behaviors are quickly and

severely sanctioned.

Additionally, we found that ethical behaviors combined

with a high reputation for performance produce the highest

levels of affective commitment to the organization and the

lowest levels of organizational deviance. While ethics are

important, it appears individuals put that in perspective and

search for additional signals concerning the leader’s

intentions: following ethical guidelines but not being able

to achieve goals provides a rather limited contribution to a

positive EOR (and consequently to the employees’ recip-

rocation efforts). Thus, organizations should make an

additional effort to retain those supervisors that present

both features. This would facilitate their role modeling

function, by signaling that both ethics and performance

combined are key features to achieve status and success in

the organization.

Limitations and Directions for Future Research

Despite the promising findings, our research is not without

limitations. The first limitation concerns the cross-sectional

nature of the study. All variables were collected in one

single moment in time; thus, we should not make any

causality inferences. Although our conceptual model was

grounded in theory (and particularly in social exchange

theory) and driven by past empirical research, our results

should be interpreted with this in mind, and future research

should attempt to test the ethical leadership process using

longitudinal designs. A second limitation is related to

common method variance (CMV) since three of the vari-

ables in our model were collected from the same source.

However, our concerns about CMV are minimized by two

reasons: (a) our model includes a variable (organizational

deviance) evaluated by a different source (supervisor),

which was significantly related to employee variables;

(b) CMV does not augment interaction effects—it deflates

them, making it more difficult to detect them (Siemsen

et al. 2009).

Our study also opens up new avenues for research.

Future research should continue to focus on the mecha-

nisms linking ethical leadership and employees’ behavior,

particularly how multiple mechanisms operate simulta-

neously. Research so far has examined these mechanisms

(e.g., work environment, job characteristics, employee

attitudes) separately, but in order to have a more complete

understanding of how these processes take place, we need

to re-examine them simultaneously. For example, as far as

we know, there may be multiple paths to achieve the same

goal (e.g., ethical leadership may be related to performance

because it provides employees with a role model, because

it puts in motion the norm of reciprocity or both) and there

may be different paths to achieve different goals (e.g.,

ethical leadership may help employees deal with major

organizational changes or affect well-being because it

reduces uncertainty, but uncertainty reduction may not be a

key mechanism for the development of an emotional bond

with the organization).

Ethical Leadership and Reputation 173

123

In a similar vein, another potential line of research

concerns the multi-foci conceptualization of social

exchanges (Cropanzano and Mitchell 2005). A number of

papers have underlined that, in order to have a complete

perspective of how social exchanges operate, researchers

should examine multiple social exchange foci simulta-

neously. For example, the studies conducted by Becker and

his associates (Becker 1992; Becker et al. 1996) show that

commitment to other foci, such as top management,

supervisor, and work group, influences employee attitudes

and behaviors over and beyond commitment to the orga-

nization. This multi-foci perspective of social exchanges

has been recently applied to ethical leadership. The study

developed by Hansen et al. (2013) indicates not only that

ethical leadership at different levels (organizational and

supervisory) helps develop commitment to the same foci

through different processes, but also that within-foci effects

are significantly stronger than cross-foci effects. Thus,

future research should attempt to develop models of ethical

leadership that integrate multiple foci of ethical leadership

and its specific antecedents and consequences, as well as

examine both within and across foci effects.

Researchers should also look into other potential

boundary conditions (i.e., moderators), namely for cross-

foci effects. Eisenberger et al. (2010) recently found that

the generalization of supervisor’s actions to the organiza-

tion as a whole depends on the extent to which employees

identify their supervisor with the organization (supervisor’s

organizational embodiment: SOE). In their two studies,

they found that the strength of the relationship between

leader–member exchange and affective commitment to the

organization varied significantly depending on the levels of

SOE. This raises an important question: Do employees

generalize their perceptions of supervisor ethical behavior

to the organization even when the supervisor is not aligned

with the organization’s values and goals (i.e., has a low

SOE)? Due to its implications for management, the role of

SOE in the ethical leadership process deserves further

examination.

In conclusion, our study is among the few to examine both

the mechanisms and boundary conditions that link ethical

leadership and employee behaviors. Overall, we found that

ethical leadership affects the social exchange process

between the employee and the organization (with conse-

quences for employee deviance) and that this relationship is

stronger when supervisors also have a high reputation for

performance. While we believe our research significantly

contributes to the discussion of the implications of (un)eth-

ical behavior in organization contexts, much more research

is needed to fully understand this phenomenon that, although

recognized as a key feature of effective leadership, is still

surrounded by alarming statistics.

Acknowledgments Pedro Neves would like to acknowledge the
support received from Nova Forum.

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• c.10551_2013_Article_1997

Ethical Leadership and Reputation: Combined Indirect Effects on Organizational Deviance
Abstract
Introduction
Ethical Leadership and the EOR
The Moderating Role of Reputation for Performance
Carryover Effects on Organizational Deviance
Methods
Sample and Procedures
Measures
Control Variables
Ethical Leadership
Reputation for Performance
Affective Organizational Commitment
Organizational Deviance

Results
Discussion
Limitations and Directions for Future Research
Acknowledgments
References