VIETNAM NATIONAL UNIVERSITY – HO CHI MINH CITY INTERNATIONAL UNIVERSITY SCHOOL OF BUSINESS The mechanism between ethical leadership and employees’ ethical behavior In Partial Fulfillment of the Requirements of the Degree of BACHELOR OF ARTS in BUSINESS ADMINISTRATION Student name: Ton Nu Hoang Uyen ID: BABAIU17081 Advisor: Assoc. Nguyen Van Phuong Ho Chi Minh City, Viet Nam 2021 1 The mechanism between ethical leadership and employees’ ethical behavior APPROVED BY: Advisor APPROVED BY: Committee Nguyen Van Phuong, Assoc. Nguyen Van Phuong, Assoc., Chairman Ngo Hoai Son, M.A, Secretary Tran Tien Khoa, Assoc. Huynh Thi Ngoc Hien, Ph.
THESIS COMMITTEE ACKNOWLEGEMENT 2 First and foremost, I would like to express my deepest respect and gratitude to my advisor, Assoc. Nguyen Van Phuong, who has given me great guidance and support towards completing my graduation thesis. He is one greatest teacher, the true inspiration due to his devotion and passion in teaching and researching over the years. He encourages and supports me to my fullest potential, and even to achieve further targets in my academic path.
It is needless to say that I am so blessed to have such an incredible teacher in my life. In addition, I would also want to send my genuine appreciation for my family, my friends, my colleagues and every wholesome individual who have given me feedbacks and suggestions, as well as devoted their time to help me with my data collection procedure. There are inevitable obstacles during the way of completion, but you have fulfilled me with strengths, helping hands and even compassion. I would not have come this far without any of you.
Lastly, I am thankful for all the memorable experience and lessons in four years of study in International University. These lessons also play significant roles as they well equip me with sufficient knowledge and efficient tools for this graduation thesis. 3 TABLE OF CONTENTS CHAPTER I: INTRODUCTION 1 1.1 Background of the Study 1 1.1 Ethics as the rising concern 1 1.2 The influence of ethical leadership 2 1.4 Significance of the Study 6 1.5 Scope and Limitations 6 1.6 Structure of the Study 7 CHAPTER II: LITERATURE REVIEW 9 2.1 Social learning theory 9 2.2 Social exchange theory 10 2.2 Employee’s Ethical Behavior 12 2.3 Ethical Leadership, Employee’s Ethical Behavior and Coworker’s Ethical Behavior 14 2.4 Ethical Leadership, Employee’s Ethical Behavior and Perceived 4 Organizational Politics 15 2.5 Ethical Leadership, Employee’s Ethical Behavior and Organizational Commitment 18 CHAPTER III: METHODOLOGY 21 3.1 Research Design and Process 21 3.2 Research Method and Tools 24 3.4 Questionnaire Design and Measurement Items 25 3.5 Data Collection and Analysis 28 CHAPTER IV: DATA ANALYSIS 30 4.1 Demographic profile of respondents 30 4.2 Reliability and validity testing 32 4.3 Common method bias 37 4.4 Path analysis and Hypothesis testing 39 4.5 Model Fit 42 CHAPTER V: DISCUSSIONS AND IMPLICATIONS 44 5.3 Practical implications 47 5 CHAPTER VI: CONCLUSION AND LIMITATIONS 49 6.2 Limitations and future studies 49 REFERENCES 51 AUTHOR’S PUBLISHED PAPER 66 APPENDIX 67 6 LIST OF TABLES Table 1. Measurement Items 27 Table 2.
Demographic characteristics 31 Table 3. Summary of key indicators 34 Table 4. Outer Loading Values 35 Table 5. Fornell & Lacker criterion 36 Table 6.
Heterotrait-Monotrait Ratio (HTMT) criterion 37 Table 7. Outer VIF values 38 Table 8. Inner VIF values 39 Table 9. PLS-SEM path coefficients 40 Table 10.
R-Squared values 42 Table 11. Q-squared values 43 Table 12. Model Fit 43 7 LIST OF FIGURES Figure 1. The research model 20 Figure 2.
The Research Process 23 Figure 3. Initial outer loading values 32 Figure 4. Outer loadings and Cronbach's Alpha after elimination 33 Figure 5. Results of Structural Equation Modeling 41 8 ABSTRACT Employees’ unethical conduct has remained a relatively concerning issue regarding business ethics and organizational performances.
Given its detrimental effects and high frequencies in developing countries, studies on this problem would serve as fundamental empirical document that clarifies the dynamics around employee’s integrity and further implies solutions for future ethical management. The current research aims at investigating the mechanism linking ethical leadership to employees’ ethical behaviors with the inclusion of coworker ethical behavior, perceived organizational politics and organizational commitment. Applying Social learning and Social exchange theories, the study will comprehensively examine correlations among these variables. Design/Methodology/Approach: Quantitative methodology is applied with online questionnaire distributed using snowball and convenience sampling techniques.
The target respondents comprise of employees who are working in joint stock companies in Ho Chi Minh City of Vietnam. For analyzing the collected data, the study first utilizes SPSS to obtain statistical descriptions, then Smart-PLS software with PLS-SEM approach to conduct Confirmatory Factor Analysis and Structural Equation Modeling. Findings: From 222 valid observations, the study’s findings reveal significant effects of ethical leadership on enhancing employees’ ethical conducts, widely shared morality by their coworkers, individual’s emotional attachment to the organizational as well as creating more ethical working climate where perception of organizational politics is minimized. Employees are therefore encouraged to behave ethically in accordance with others’ supportive actions and the organizational bonds developed out of leaders’ genuine care for subordinates’ well-being and advancement.
Surprisingly, in the presence of political practices, employees are found pressured to behave ethical yet not challenge the circumstance so that they do not provoke any influential individuals. Implications: The study sheds lights on comprehensive understanding about the positive correlation between ethical leadership and employees’ ethical conducts by 9 including coworker ethical behavior, perceived organizational politics and organizational commitment to the theoretical model. The findings also signal implementation of ethical trainings and selection for managers, transparent organizational regulations, convenient methods for open discussion, honest report as well as sufficient support for employees’ development. Limitations/Future research: Since the study is conducted within a short period of time with limited variation in organizational types, future work with longitudinal approach and different respondent groups can make further causal and generalized inferences.
Future studies can also collect observation data from managers and colleagues besides self-reported evaluation to have more objective measurement. Keywords: Ethical leadership, employees’ ethical behavior, coworker ethical behavior, organizational commitment, perceived organizational politics, joint stock companies. 10 CHAPTER 1 INTRODUCTION This first chapter includes background information of the topic. After that, the direction of the study is determined by the addressed research objectives and questions.
In addition, significance of the study as well as its scope and limitation are mentioned in detail.1 Background of the Study 1.1 Ethics as the rising concern Living in the Information Age, people are inspired to lean towards being socially active and taking ethical standards into their decisions. This, in turn, progressively alters the notion of a successful organization (Waddock et al. Companies are put under immense pressure not only to possess better production, adapt to simultaneous change and competition but also to operate their business in an ethical manner, delivering greater sustainability and contributing to societies (Al Halbusi, Williams, Ramayah, et al. Nguyen et al.
Moreover, business scandals such as Apple’s intentional slowdown of former iPhone devices to enforce customers’ new purchases and Facebook’s inappropriate privacy policy have raised large concern about business ethics for researchers, practitioners and governments. Nevertheless, this is only the tip of the iceberg as ethical matters can deeply root in daily business activities. Specifically, it has been found that employees may behave 1 unethically in the pursuit of fulfilling their self-interest objectives and personal advantages (Brown & Treviño, 2014; Manz et al., 2008; Treviño et al. These unethical behaviors are mostly conducted at the expense of the organization’s internal and external stakeholders, causing decreased benefits for the greater group of people (Padilla et al., 2007; Schaubroeck et al.
According to Thomas (2004), deviant behaviors will cause the company to suffer higher financial risks and costs, as well as unfavorable reputation, which will consequently lower the value of the firm and stakeholders’ return. Moreover, a study conducted by Henle (2005) discovered that decline in company’s productivity and performance also occurred due to employees’ misbehaviors (Dunlop & Lee, 2004). These negative impacts will later lead to decrease in firm’s long-term competitive strengths and significantly lessen other individuals’ performance. Litzky (2006) also reported lower quality of work, damaging public image and expensive expenditure for legal matters as additional consequences.
Like other emerging countries, Vietnam’s inefficiency of ethical management has let employees’ misconduct remain an unresolved issue. The problem’s infamous examples include 25 bank staff assisting Nguyen Thi Thanh Ha to appropriate more than 400 billion; Huynh Thi Huyen Nhu of over 4 trillion appropriation from 9 companies, 4 banks and 3 individuals; and Do Van Nham of 1.7 trillion appropriation from his own company. As whether employees act ethically or not can have significant impacts on organizations, exploration of factors and correlations related to their behaviors should shed light on the enhancement of firms’ performance management and societal well-being. Despite witnessed distressing outcomes and importance of the subject, few studies have been conducted on the issue, especially in Vietnam.
Therefore, it is crucial that we carry out this study to clarify the dynamics and correlation around employees’ ethical behaviors.2 The influence of ethical leadership Ethics in the workplace is supposed to evolve and be formed by the members of 2 the organization, in which leaders play critical roles. A long-lasting successful work environment can be established when leaders exhibit ethical role models and highest moral behaviors which give subordinates a general moral framework to emulate (Grojean et al., 2004; Mendonca, 2001; Ofori, 2009; Treviño et al. On the other hand, when leaders demonstrate unethical behaviors, not only firm’s reputation and performance are damaged but employees’ negative attitudes and behaviors will also follow afterwards (Mackey et al., 2017; Simon et al. Unethical leadership can eliminate the trust subordinates have in their superiors, causing more perplexity about the standards and principles of the organization (Ng & Feldman, 2015; Norman et al.
Adam Neumann - CEO of WeWork faced lawsuits of inappropriate behaviors of alcohol drinking, sexual harassment and drug use within the workplace. Top managers of Toshiba set unrealistic profit targets and encouraged flawed accounting principles in 2015. Hua Thi Phan - senior advisor of TrustBank caused a loss of more than 1,300 billion by appropriating firm’s property and deliberately committing practices against the State's regulations on economic management. These are all examples of how leaders’ misbehaviors can lead to prejudicial issues for an organization as a whole and its individuals.
Consequently, appropriate forms of leadership are extensively explored across nations, and ethical leadership has received particular attention from practitioners and academicians for the past few years (Kalshoven, Den Hartog, & De Hoogh, 2013). Former studies showed that ethical leadership was a fundamental antecedent of positive organizational outcomes (Brown & Treviño, 2006; Mayer et al., 2009; Neubert et al., 2009; Treviño et al. Particularly, earlier research suggests that ethical leadership can impact on employees’ ethical and unethical behaviors by explicitly setting normative behaviors at work (Brown & Treviño, 2006; Ko et al., 2018; Mitchell et al. Although several studies confirmed the effect of ethical leadership on decreasing workers’ tendency of committing workplace misconducts and unethical behaviors (Avey et al., 2011; Mayer et al., 2009, 2010; Stouten et al., 2010), there is lack of solid evidence showing whether employees’ ethical behaviors can be 3 necessarily increased with this style of leadership.
Furthermore, the organizational climate that employees work in is discovered to have prominent effect on their ethical behaviors (Al Halbusi & Amir Hammad Hamid, 2018; Deshpande & Joseph, 2009; Luria & Yagil, 2008; Treviño et al. A healthy and positive atmosphere can enforce employees’ positive impression on the firm’s policies of payment and decision-making system, and they are more likely to act ethical accordingly in their daily work (Demirtas & Akdogan, 2015; Lu & Lin, 2014). Contrarily, a negative social condition which permits unethical business practices can deter subordinates from behaving morally. High levels of collectivism, power distance as well as bureaucratic structure found in Vietnamese workplace exemplifies this idea (D.
Nguyen et al.