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J Bus Ethics (2012) 108:299–312
DOI 10.1007/s10551-011-1091-7
CEO Ethical Leadership, Ethical Climate, Climate Strength,
and Collective Organizational Citizenship Behavior
Yuhyung Shin
Received: 3 March 2011 / Accepted: 8 August 2011
Ó Springer Science+Business Media B.V. 2011
Abstract In spite of an increasing number of studies on
ethical climate, little is known about the antecedents of
ethical climate and the moderators of the relationship
between ethical climate and work outcomes. The present
study conducted firm-level analyses regarding the relationship between chief executive officer (CEO) ethical
leadership and ethical climate, and the moderating effect of
climate strength (i.e., agreement in climate perceptions) on
the relationship between ethical climate and collective
organizational citizenship behavior (OCB). Self-report data
were collected from 223 CEOs and 6,021 employees in
South Korea. The results supported all study hypotheses.
As predicted, CEOs’ self-rated ethical leadership was
positively associated with employees’ aggregated perceptions of the ethical climate of the firm. The relationship
between ethical climate and firm-level collective OCB was
moderated by climate strength. More specifically, the
relationships between ethical climate and interpersonally
directed collective OCB and between ethical climate and
organizationally directed collective OCB were more pronounced when climate strength was high than when it
was low. Theoretical and practical implications of these
findings are addressed herein.
Keywords Ethical leadership Ethical climate
Climate strength Organizational citizenship behavior
Due to recent corporate scandals and increasing attention to
the importance of corporate social responsibility, the need
Y. Shin (&)
School of Business, Hanyang Universtiy, 17 Haengdangdong,
Seongdong-gu, Seoul 133-791, Republic of Korea
e-mail: yuhyung@hanyang.ac.kr
for strong corporate ethics is greater than ever (Waddock
2004). In accordance with this global trend, a vast amount
of research has explored the relationships between organizational ethics and outcomes. A majority of corporate
ethics research has focused on ethical climate as a critical
antecedent of organizational outcomes. Ethical climate is
defined as employees’ shared perceptions of the ethical
practices and procedures of a firm (Victor and Cullen
1988). Past research has shown that ethical climate is
significantly associated with a number of work outcomes
such as job satisfaction (Deshpande 1996; Elçi and
Alpkan 2009; Schwepker Jr. 2001; Tsai and Huang 2008;
Valentine and Fleischman 2004), organization commitment
(Cullen et al. 2003; Schwepker Jr. 2001; Tsai and Huang
2008), turnover intentions (Mulki et al. 2009; Schwepker
Jr. 2001), ethical behavior (Deshpande and Joseph 2009;
Wimbush et al. 1997), and in-role and extra-role behaviors
(Leung 2008).
While ethical climate research has provided meaningful
insight into the role ethical climate plays in organizations
and how it affects employees’ attitudes and behavior, past
research about ethical climate has been limited in several
ways. First, in contrast to a great deal of research into the
relationships between ethical climate and its consequences,
very few studies have identified antecedents of ethical
climate. However, in order to foster a strong ethical climate
in a firm, it is essential to identify factors that affect or
contribute to ethical climate. Drawing on the organizational climate literature (Ozcelik et al. 2008; Walumbwa
et al. 2010), the current study focuses on chief executive
officers’ (CEOs) ethical leadership as a critical antecedent
of ethical climate. Although recent studies have begun to
address the role of ethical managerial behavior or leadership as an antecedent of ethical climate, such studies have
mainly focused on managers’ or supervisors’ ethical
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leadership rather than that of CEOs (e.g., Neubert et al.
2009). Moreover, the linkage between CEO ethical leadership and organizational ethical climate has rarely been
empirically tested. Given that it is the CEO who establishes
ethical norms and directs the ethical practices and activities
of the firm (Carlson and Perrewe 1995; Posner and Schmidt
1992; Schminke et al. 2005), it is a meaningful endeavor to
explore the relationship between CEO ethical leadership
and ethical climate.
Another limitation of previous studies of ethical climate
is that they mainly targeted relationships between ethical
climate and individual work outcomes. Most studies on
ethical climate have examined linkages between employees’ perceptions of ethical climate and their own attitudes
and behaviors (e.g., Deshpande 1996; Elçi and Alpkan
2009; Mulki et al. 2008; Schwepker Jr. 2001; Tsai and
Huang 2008). However, these studies are vulnerable to
methodological problems resulting from common method
variance (CMV) since both independent and dependent
variables were measured from the same source. In addition,
given that an ethical climate itself is a collective construct,
it is worthwhile to explore the relationships between ethical
climate and organizational-level outcomes. Accordingly,
the current study isolates firm-level organizational citizenship behavior (OCB) as a collective construct that
relates to ethical climate. OCB refers to discretionary,
extra-role behavior that is conducive to organizational
effectiveness (Organ 1988). In spite of its relevance to
organizational ethics, the relationship between ethical climate and OCB has rarely been tested, let alone the relationship between ethical climate and collective OCB.
Therefore, the present study is the first attempt to shed light
on the linkage between ethical climate and firm-level OCB.
In addition, by obtaining measures of ethical climate and
collective OCB from different sources, the current study
aims to resolve CMV issues that are prevalent in ethical
climate research.
Finally, and more importantly, the present study intends
to examine the moderating role of climate strength on the
relationship between ethical climate and collective OCB.
Climate strength is defined as the extent to which members
of a work-unit or an organization agree in their perceptions
of the workplace climate (Lindell and Brandt 2000). In
organizational climate research, climate strength has often
been identified as a moderator of the relationships between
climate perceptions and organizational outcomes (Colquitt
et al. 2002; González-Romá et al., 2002, 2009; Schneider
et al. 2002; Sowinski et al. 2008). Despite the importance
of climate strength, virtually no research in the domain of
business ethics has investigated its moderating effect on
ethical climate. This is a critical omission because many
studies have demonstrated that even similar levels of climate can lead to different outcomes, depending on the
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Y. Shin
strength of the climate. In particular, climate strength is
even more relevant to ethics research because when
employees hold similar perceptions of the ethical climate
of their organization, they experience less ambiguity with
regard to what is right and wrong in the organization and
consequently engage in more ethical or prosocial behavior
(Mischel 1976). In this sense, it is pivotal to examine the
role of climate strength plays in the relationship between
ethical climate and collective OCB.
In summary, the objective of the current study is twofold. As mentioned earlier, the first objective is to investigate the linkage between CEO ethical leadership and
ethical climate. The second objective is to test the moderating effect of climate strength on the relationship
between ethical climate and collective OCB. The research
propositions developed in the current study were empirically tested using large-scale data obtained from 223 CEOs
and 6,021 employees in South Korea.
Theoretical Background and Research Hypotheses
Ethical Climate
Ethical climate is a topic that has drawn much attention
from business ethics researchers. Climate refers to shared
perceptions of the policies, practices, and procedures, both
formal and informal, of an organization (Reichers and
Schneider 1990). Ethical climate is considered a type of
organizational climate that reflects employees’ perceptions
of the ethical policies, practices, and procedures of the
organization (Martin and Cullen 2006). Although there is
evidence that perceptions of organizational climate can
vary within an organization and that different subunits or
work groups may possess different climates (Victor and
Cullen 1988), in the present study, ethical climate is conceptualized as an organizational-level construct that represents employees’ shared perceptions of the ethical
climate of the firm. Because the behaviors of employees of
a firm are dictated by the same company policies, procedures, and code of ethics, they tend to hold similar perceptions of its ethical climate. Furthermore, a firm’s ethical
climate determines its ethical values and behavior and
influences the ethics of its employees (Wimbush and
Shepard 1994; Verbeke et al. 1996). Therefore, in terms of
ethics, employees are likely to be more strongly affected by
organizational climate than by their work group climate.
While it is quite controversial whether ethical climate is
a uni-dimensional or multi-dimensional concept, many
scholars consider ethical climate as a construct that consists of several subdimensions. The most well-known
classification of ethical climate is Victor and Cullen’s
(1988) typology. Victor and Cullen (1988) classified
Ethical Climate and Collective OCB
ethical climate into five dimensions: caring, law and code,
rules, instrumental, and independence. The current study
focuses only on the rules and law and code aspects of
ethical climate for the following reasons. First, among the
five dimensions of ethical climate, the rules and law and
code dimensions best reflect the essence of ethical climate. Scholars who endorse a uni-dimensional view of
ethical climate conceptualize ethical climate as employees’ perceptions of the presence of a code of ethics,
corporate policies on ethics, and top management actions
with regard to ethics (Jamarillo et al. 2006; Schwepker Jr.
2001). This conceptualization of ethical climate is captured in the rules and law and code dimensions. Second, a
number of studies have shown positive relationships
between rules and law and code dimensions and work
outcomes (e.g., Elçi and Alpkan 2009; Cullen et al. 2003;
Shapira-Lishchinsky and Rosenblatt 2009; Tsai and Huang 2008). Indeed, Leung (2008) categorized rules and
law and code dimensions as higher levels of ethical climate than the other dimensions and suggested that extrarole behaviors are more often found in higher levels of
ethical climate than in lower levels of ethical climate.
Based on these prior studies, the present study conceptualizes ethical climate based on Victor and Cullen’s
(1988) law and code and rules dimensions, and operationalizes ethical climate as employees’ shared perceptions of ethical policies, practices, and procedures within
the firm.
CEO Ethical Leadership and Ethical Climate
While a number of studies have investigated relationships
between ethical climate and various work outcomes, relatively little effort has been directed toward exploring factors that form or foster an ethical climate. However, ethical
leadership is one factor that has been identified as an
antecedent of ethical climate. Ethical leadership is defined
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 decisionmaking’’ (Brown et al. 2005, p. 120). Although scholars
agree that leaders have a significant role in shaping the
ethical climate of a firm (Grojean et al. 2004; Mulki et al.
2009), there is not much empirical evidence regarding the
association between CEO ethical leadership and ethical
climate. Given that CEOs or top management strongly
affect organizational and employee outcomes by articulating and communicating a vision and shaping an organizational culture (Boal and Hooijberg 2001; Ireland and
Hitt 1999; Vera and Crossan 2004; Zaccaro 2001), it is
critical to examine how a CEO’s ethical leadership relates
to the ethical climate of his or her firm.
301
The current study predicts a positive relationship
between CEO ethical leadership and ethical climate for
several reasons. First, according to social learning theory
(Bandura 1977), when role models are present in the work
environment, employees tend to emulate these models.
Although employees’ supervisors and managers can be role
models, the CEO also serves as a significant role model.
Employees learn desired behaviors by observing how the
CEO behaves and what behavior he or she rewards and
punishes (Mayer et al. 2009). In particular, the social
learning process is important when the target behavior is
ethical conduct, since the CEO strongly affects employees’
behavior through his or her assigned role, status, and power
to influence the behavior and consequences of others
(Brown et al. 2005). Thus, CEOs’ ethical leadership is
likely to elicit employees’ collective engagement in ethical
conduct, which creates an ethical climate characterized by
shared ethical work norms and perceptions (Dickson et al.
2001).
In addition to the CEO’s direct effect on employees’
ethical conduct, past research suggests that the ethical
leadership of top management also affects employees’
prosocial behavior through the intervening mechanism of
supervisory ethical leadership (Mayer et al. 2009). By
testing a trickle-down model, Mayer et al. (2009) demonstrated that the CEO’s ethical leadership has a positive
effect on supervisors’ ethical leadership, which in turn
influences their immediate subordinates’ prosocial behavior. In this way, the CEO not only serves as a strong role
model for employees, but also affects the ethical conduct of
the firm as a whole by enhancing the ethical leadership of
managers and supervisors, which consequently contributes
to the formation of an ethical climate.
Theoretically, the ethical leadership of the CEO should
produce an ethical climate in the workplace through social
learning principles and intervening processes of supervisory leadership. However, few empirical studies have
examined whether there is a direct, positive association
between CEO ethical leadership and organizational outcomes. One study found that CEO ethical leadership is
positively related to top management team effectiveness
(De Hoogh and Den Hartog 2008), but did not examine the
organizational ethical climate. However, it has been shown
that senior managers’ ethical leadership is positively correlated with leader effectiveness, employee willingness to
put in extra effort, employee satisfaction with the leader
(Toor and Ofori 2009), and ethical climate (Neubert et al.
2009). Although not in the domain of business ethics,
organizational climate studies have generally found a
positive relationship between leadership and organizational
climate (Ozcelik et al. 2008; Walumbwa et al. 2010).
Ozcelik et al. (2008), for example, found that CEO’s
leadership practices were significantly related to a positive
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emotional climate. In a similar vein, Walumbwa et al.
(2010) evidenced a positive relationship between servant
leadership and procedural justice climate. Mulki et al.’s
(2009) findings showed that instrumental leadership was
positively associated with ethical climate. Collectively,
these findings suggest that ethical leadership, particularly
in top management, is essential to creating an ethical climate in an organization.
While it is controversial whether self- or other-ratings
are a better estimate of ethical leadership, CEO ethical
leadership is measured using self-report in the current
study for two reasons. First, research has shown that subordinates’ evaluations of ethical leadership are accurate
only when subordinates work closely with the leader and
have information pertaining to the way in which the leader
treats employees and makes decisions (Brown and Treviño
2006). However, it is very difficult for employees to
interact frequently with the CEO and precisely assess the
CEO’s ethical leadership. Indeed, a number of studies have
used CEOs’ self-report of moral values, ethics, or ethical
leadership for this reason (Hood 2003; Ozcelik et al. 2008;
Schminke et al. 2005; Weber 2010). Second, studies that
have relied on subordinates’ ratings of leadership often
suffer from methodological problems related to CMV.
Because these studies measured ethical leadership and
outcome variables from the same respondents, the relationship between ethical leadership and outcome variables
might have been inflated due to CMV. To address this
issue, the present study obtained measures of CEO ethical
leadership, ethical climate, and collective OCB from different sources. Drawing on the aforementioned empirical
findings and social learning theory, the CEOs’ self-rated
ethical leadership is expected to be positively associated
with employees’ perceptions of ethical climate.
Hypothesis 1 CEO ethical leadership is positively related
to ethical climate.
Collective OCB
OCB refers to ‘‘individual behavior that is discretionary,
not directly or explicitly recognized by the formal reward
system, and in the aggregate promotes the efficient and
effective functioning of the organization’’ (Organ 1988,
p. 4). OCB is generally categorized as interpersonally
directed OCB (OCBI) and organizationally directed OCB
(OCBO) (Williams and Anderson 1991). OCBI encompasses behaviors that benefit other organizational members,
such as helping others who are behind in their work and
taking a personal interest in others. OCBO refers to
behaviors that benefit the organization in general, such as
providing advance notification when unable to come to
work and obeying informal rules that exist to maintain
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Y. Shin
order. In the current study, collective OCBI is conceptualized as the extent to which employees of an organization
collectively engage in OCBI. Similarly, collective OCBO
is defined as the extent to which employees of an organization collectively perform OCBO. For instance, an organizational member demonstrates individual-level OCBI by
helping new employees learn how to perform their tasks.
When the majority of organizational members assist new
employees in performing their tasks, shared norms and
expectations regarding this OCBI emerge (i.e., ‘‘In this
organization, most people help new employees with their
tasks’’), which affect the level of employees’ collective
OCBI (Nielsen et al. in press). While much research has
examined the relationships between individual-level OCB
and work outcomes, little is known about collective OCBI
and OCBO. However, a growing number of studies have
recognized the importance of collective OCB, based on the
fact that OCB itself is collective in nature (Shin and Choi
2010). Because OCB reflects interpersonal dynamics
among organizational members, it should be examined at
the collective level (Shin and Choi 2010).
The OCB literature suggests that firm-level collective
OCB emerges through several processes. First, the level of
collective OCB within a firm is affected by organizational
factors such as organizational culture, climate, support, and
leadership (Hrebiniak and Alutto 1972; Morris and Sherman 1981; Somech and Drach-Zahavy 2004; Steers 1977).
For instance, firms that pursue collaboration and harmony
exhibit greater OCB than those whose culture is competitive (Somech and Drach-Zahavy 2004). Therefore, organizational culture, climate, support, and leadership
determine the level of OCB within the firm. As a result, the
collective OCB of a firm is distin …
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