Ethical preferences of transformational leaders: an empirical investigation

This study looked at the relationship between the four factors of transformational leadership ± charisma, inspirational leadership, intellectual stimulation, and individualized consideration ± and the leader's preference for unethical behavior. Five ethical scenarios ± bribery, endangering the physical environment, lying, personal gain, and favoritism ± were studied using a sample of 100 pairs of managers and subordinates from four multinational organizations in India. Relationships between the leader's ethical preferences and three outcomes ± followers' willingness to put in extra effort, perceived effectiveness, and satisfaction ± were also analyzed. Findings indicate that inspirational leadership is negatively related to the leader's preference for bribery and favoritism, and intellectual stimulation is negatively related to preference for bribery. Charisma and individualized consideration are not related to the leader's ethical preferences. Followers' willingness to put in extra effort is also negatively related to the leader's preference for bribery and favoritism. Results also suggest that organizational culture might moderate the relationship between transformational leadership and ethics. Received: April 2000 Revised: July 2000 Accepted: July 2000 decision making in organizations (Saul, 1981). Conflicting motives require the evaluation of duties, values, and consequences. Organizational members must have a conscience to weigh decisions and ensure that public safety prevails over duties to stockholders. Five ethical scenarios Based on our study of Fritzsche and Becker (1983), Monappa (1977), Weber (1990) and Fritzsche (1995), we identified five ethical scenarios. The scenarios center on: 1 bribery; 2 endangering the physical environment; 3 lying; 4 personal gain; and 5 favoritism. These situations have been chosen because they are the most common ethical dilemmas worldwide. The situation centering on the physical environment has special significance in today's corporate world, where environmental issues are yet to be accorded top priority and defaulting on such issues rarely evokes stringent punishment. Given the duration of legal proceedings and the intricacies of the legal system, one's level of ethical beliefs finally determines behavior. Transformational leadership Leadership over human beings is exercised when persons with certain motives and purposes mobilize and engage in competition or conflict with others, institutional, political, psychological and other resources, to arouse, engage and satisfy the motives of followers. It is inseparable from followers' needs and goals. The essence of the leaderfollower relation is the interaction of persons with different levels of motivations and power potentials including skill, in pursuit of a common or at least a joint purpose. This interaction is expressed in two types of leadership (Burns, 1978): 1 transactional; and 2 transformational. At the outset, it is necessary to differentiate between transformational and transactional leadership (Bass, 1985; 1997, 1998; Keeley, 1995). Transactional leadership satisfies the immediate and separate purposes of both leaders and followers whereas transformational leadership goes much beyond that. Schuster (1994) feels that the tools used in transactional leadership are power brokering, withholding favors, and quid pro quo. It is always tied to position power. In transformational leadership, the purposes of leaders and followers that might have started out as separate but related, as in the case of transactional leadership, become fused (Burns, 1978). According to Bass (1985), transformational leadership and transactional leadership are conceptually distinct and are likely to be displayed by the same individuals in varying amounts and intensities. Most authors seem to agree that transformational leadership and transactional leadership are not opposite ends of a continuum (Scandura and Schriesheim, 1994; Yukl, 1998). There should be little debate that ethical behavior within organizations depends on the ethical quality of its leadership. This is because all managers and employees look to higher levels of management for cues as to what is acceptable. Standards of business ethics cannot be achieved in any organization without the continuous commitment, enforcement, and modeling of leadership. Leaders help to set the tone, develop the vision, and shape the behavior of all those involved in organizational life. A major task for leaders is bringing together their followers around common values. Superior performance and performance beyond normal expectations is possible only by transforming followers' values, attitudes and motives from a lower to a higher plane of arousal and maturity (Bass, 1985). According to Burns (1978, p. 4): a transforming leader looks for potential motives in followers, seeks to satisfy higher needs, and engages the full person of the follower. The goals of leader and followers may have started as being different, but they are eventually transformed to a common goal. Transforming leadership is also known as elevating, mobilizing, inspiring, uplifting, exhorting and exalting. It eventually becomes moral by raising the level of human conduct and ethical aspiration of both the leader and the led. Ideological movements united behind high moral purpose and in conflict with opposing ideologies are tantamount to transformational leadership. An ideological movement involves seeking substantial social change, and organizing political movements that pursue these goals (Burns, 1978). Transformational leadership is more concerned with end-values, such as liberty, justice, and equality, than with means-values. However, it is important to note that insufficient attention to means can corrupt the ends (Burns, 1978). Ethical leaders would use their charisma in a socially constructive way to serve others (Bass and Steidlmeier, 1999). Transformational leaders can be very effective ethical leaders (Keeley, 1995). Burns (1978, p. 20) claimed that transforming [ 406 ] Priyanka Banerji and Venkat R. Krishnan Ethical preferences of transformational leaders: an empirical investigation Leadership & Organization Development Journal 21/8 [2000] 405±413 leadership is motivating, uplifting, and ultimately `̀ moral, in that it raises the level of human conduct and ethical aspirations of both the leader and the led.'' Such a leader aligns visions with followers' needs and aspirations, propagates open communication and generates team motivation, is a prudent risk taker, helps and coaches in confidence building and promotes team building. Transformational leaders create sufficient energy to launch and sustain a transformation process in the organization. They must be able to articulate a compelling and credible vision and focus everyone on the new critical path. If required the organization has to be redesigned to support the transformation. For this purpose the leaders must leverage their influence and encourage the same at all levels (Miles, 1998). According to Bass (1985), four features distinguish a transformational leader: 1 charisma; 2 inspirational leadership; 3 intellectual stimulation; and 4 individualized consideration. Charisma is the most important component in the larger concept of transformational leadership. Followers describe their charismatic leaders as those who make everyone enthusiastic about assignments, who command respect from everyone, who have a special gift of seeing what is important and who have a sense of mission that they transmit to followers. Inspirational leadership involves the arousal and heightening of motivation among followers. Envisioning a desired future state, making followers see that vision and showing followers how to get to that state are part of the inspirational process (Behling and McFillen, 1996). Intellectual stimulation arouses in followers the awareness of problems and ways of solving them, stirs the imagination, and generates thoughts and insights. Transformational leaders enable followers to think of old problems in new ways. Individualized consideration involves giving personal attention to followers who seem neglected, treating each follower individually and helping each follower get what he/she wants (Bass, 1985). Studies have looked at the separate impact of the various components of transformational leadership on performance and attitudes. Vision and its implementation by the leader have been identified as core components of charismatic or transformational leadership. The leader's vision and vision implementation through task cues affects performance and many attitudes of subordinates (Kirkpatrick and Locke, 1996). Strength of delivery of vision by the leader is an especially important determinant of perceptions of leader charisma and effectiveness (Awamleh and Gardner, 1999). Task feedback interacts with charismatic leadership in affecting performance, and this relationship is mediated by subordinates' self-efficacy (Shea and Howell, 1999). Shamir et al. (1998) found that a leader's emphasis on collective identity was related to a subordinate's level of identification with the leader. Characteristics of the leader moderate the effect of transformational leadership on various outcomes. Avolio et al. (1999) found that use of humor by a leader enhanced the positive effect of transformational leadership on unit performance and reduced the positive effect of transformational leadership on a subordinate's individual performance. House et al. (1991) used archival data on US presidents to demonstrate that charisma was positively related to need for power and activity inhibition, and negatively related to need for achievement. They also showed that charisma was positively related to performance even after controlling for the effects of motives. Ross and Offermann (1997) found that transformational leadership was positively related to levels of pragmatism, nurturance, and feminine attributes, and negatively related to criticalness and aggression. Transformational leadership could be potentially effective across a variety of situations, though certain contextual factors like structure of the organization could facilitate the emergence and impact of transformational leadership (Pawar and Eastman, 1997; Yukl and Howell, 1999). Burns (1978) contended that transformational leaders are instrumental in making ethical decisions. Previous research suggests that managers do not view moral issues generically but respond to moral issues by type of issue (Fritzsche and Becker, 1983; Weber, 1990). It is thus logical to assume that the different aspects of transformational leadership will be related to different ethical dilemmas in different ways. We therefore made separate analyses of the relationships between these four factors of transformational leadership and the five ethical issues: 1 bribery; 2 physical environment; 3 lying; 4 personal gain; and 5 favoritism. Thus, we looked at transformational leadership with respect to each of these five [ 407 ] Priyanka Banerji and Venkat R. Krishnan Ethical preferences of transformational leaders: an empirical investigation Leadership & Organization Development Journal 21/8 [2000] 405±413 different ethical dilemmas rather than with respect to ethics as a whole. H1: Each of the four factors of transformational leadership (charisma, inspirational leadership, intellectual stimulation, and individualized consideration) will be negatively related to the leader's preference for each of the five unethical behaviors (bribery, physical environment, lying, personal gain, and favoritism). Studies have found significant and positive relationships between transformational leadership and the amount of effort followers are willing to exert, satisfaction with the leader, ratings of job performance and perceived effectiveness (Avolio et al., 1988; Hater and Bass, 1988; Kirkpatrick and Locke, 1996; Waldman et al., 1987). We could therefore expect a relationship between ethics and outcomes that parallels the relationship between ethics and transformational leadership. We looked at three outcome variables: 1 followers' willingness to put in extra effort; 2 perceived effectiveness of leader and work unit; and 3 followers' satisfaction with leader. H2: Each of the three outcome variables (extra effort, perceived effectiveness, and satisfaction) will be negatively related to the leader's preference for each of the five unethical behaviors (bribery, physical environment, lying, personal gain, and favoritism).