This week’s articles consider what makes ethical leaders.

Ethically solvent leaders 
The popular media has repeatedly pointed to pride as one of the key factors motivating leaders to behave unethically. However, given the devastating consequences that leader unethical behaviour may have, a more scientific account of the role of pride is warranted.

The present study differentiates between authentic and hubristic pride and assesses its impact on leader ethical behaviour, while taking into consideration the extent to which leaders find it important to their self-concept to be a moral person.

In two experiments the authors found that with higher levels of moral identity, authentically proud leaders are more likely to engage in ethical behaviour than hubristically proud leaders, and that this effect is mediated by leaders’ motivation to act selflessly. A field survey among organisational leaders corroborated that moral identity may bring the positive effect of authentic pride and the negative effect of hubristic pride on leader ethical behaviour to the forefront.

Read this Open Access article in full for free online.

Stacey Sanders, Barbara Wisse, Nico W. Van Yperen and Diana Rus. 2018. On Ethically Solvent Leaders: The Roles of Pride and Moral Identity in Predicting Leader Ethical Behavior. 
Journal of Business Ethics, 150(3), 631–645.


CEO narcissism increases firms’ vulnerability to lawsuits 
Although some researchers have suggested that narcissistic CEOs may have a positive influence on organisational performance (e.g., Maccoby, 2007; Patel & Cooper, 2014), a growing body of evidence suggests that organisations led by narcissistic CEOs experience considerable downsides, including evidence of increased risk taking, overpaying for acquisitions, manipulating accounting data, and even fraud.

In the current study the authors show that narcissistic CEO’s subject their organisations to undue legal risk because they are overconfident about their ability to win and less sensitive to the costs to their organisations of such litigation. Using a sample of 32 firms, the authors find that those led by narcissistic CEOs are more likely to be involved in litigation and that these lawsuits are more protracted.

In two follow-up experimental studies, the authors examine the mechanism underlying the relationship between narcissism and lawsuits and find that narcissists are less sensitive to objective assessments of risk when making decisions about whether to settle a lawsuit and less willing to take advice from experts.

The authors discuss the implications of the research for advancing theories of narcissism and CEO influence on organisational performance.

Charles A. O’ReillyIII, Bernadette Doerr and Jennifer A. Chatman. 2018. “See You in Court”: How CEO narcissism increases firms’ vulnerability to lawsuits. 
The Leadership Quarterly, 29(3), 365-378.


Underpaid and corrupt executives in China’s state sector 
This study examines the role of executive compensation in public governance. The authors collect data on corruption cases that involve top-level executives in Chinese listed state-controlled firms.

The authors find a significant positive relationship between underpayment of executives and the likelihood of an investigation into corrupt behaviour. The authors also show that corruption is positively associated with firm performance and that the relationship between underpayment of executives and corruption is influenced by firm performance, suggesting that top managers are more likely to engage in illicit behaviour if they are compensated poorly while the firms under their control perform well.

Finally, the authors find that pay-performance sensitivity decreases when top executives are involved in corruption investigations, indicating a lack of pecuniary incentives.  The empirical findings point toward an important relationship between executive compensation and corrupt behaviour, thus providing valuable input to the understanding of executive pay and its effects in China’s state sector.

Xunan Feng and Anders C. Johansson. 2018. Underpaid and Corrupt Executives in China’s State Sector. 
Journal of Business Ethics, 150(4), 1199–1212.


Middle managers and self-interest 
The authors propose that middle managers’ perceived organisational support enhances their performance through the sequential mediation of their behavioural integrity and follower organisational citizenship behaviours. The authors test the model with data collected from middle managers, their direct subordinates, and their direct superiors at 18 hotel properties in China.

The current study’s findings contribute to the existing literature on perceived organisational support and behavioural integrity. They also add a practical self-interest argument for middle managers’ efforts to maintain their word-action alignment by demonstrating that middle manager behavioural integrity positively affects middle managers’ own task performance ratings, both directly and via its positive effect on subordinates’ organisational citizenship behaviours.

Sean A. Way, Tony Simons, Hannes Leroy and Elizabeth A. Tuleja. 2018. What is in it for Me? Middle Manager Behavioral Integrity and Performance. 
Journal of Business Ethics, 150(3), 765–777.


Ethical leadership perceptions if you’re black or white 
Ethical scandals in business are all too common. Due to the increased public awareness of the transgressions of business executives and the potential costs associated with these transgressions, ethical leadership is among the top qualities sought by organisations as they hire and promote managers.

This search for ethical leaders intersects with a labour force that is becoming more racially diverse than ever before. In this paper, the authors propose that the ethical leadership qualities of business leaders may be perceived differently depending upon the race of the leader.

Using two experimental studies in the USA, the researchers examined the difference in ethical leadership perceptions between a Black (White) hypocritical CEO and an ethical CEO (Study 1). Next, they considered a Black (White) ethically ambiguous CEO and an ethical CEO (Study 2).

The findings indicate that a Black leader faces larger negative impact in hypocritical and ambiguous conditions than a similar White leader. There were no significant race effects in the ethical conditions in which a leader demonstrated a personal commitment to ethics through words or actions. The authors discuss the implications of these findings.

Dennis J. Marquardt, Lee Warren Brown and Wendy J. Casper. 2018.  Ethical Leadership Perceptions: Does It Matter If You’re Black or White?
Journal of Business Ethics, 151(3), 599–612.


Ethical leadership in Japan 
In recent times, international comparative studies on managers’ beliefs regarding ethical/unethical leadership have increased in number. These studies focus on both Eastern and Western countries. However, although these previous studies focused on the effects of national culture, they did not pay sufficient attention to the effects of institutions. Moreover, these studies covered only a few countries.

Despite Japan’s strong influence on the world economy, it has not been included in previous studies on ethical leadership. Thus, to reveal unexplored factors—particularly cultural and institutional factors—and to determine the generalisability of previous findings, this study used a qualitative research method to examine Japanese business managers’ beliefs about ethical/unethical leadership.

The data revealed the convergence and divergence in beliefs regarding ethical/unethical leadership between managers in Japan and in other countries. The analysis identified mostly the same themes of ethical/unethical leadership as found in other countries albeit with different distributions. In addition, the authors identified new themes that may be specific to Japan or that were neglected in previous studies.

Moreover, this study suggests the necessity of considering each society’s history of business ethics and current ethics-related institutional contexts in ethical/unethical leadership studies.

Takuma Kimura and Mizuki Nishikawa. 2018. Ethical Leadership and Its Cultural and Institutional Context: An Empirical Study in Japan.
Journal of Business Ethics, 151(3), 707–724.