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http://jom.sagepub.com/ Journal of Management http://jom.sagepub.com/content/39/3/660 The online version of this article can be found at:   DOI: 10.1177/0149206311398136 2013 39: 660 originally published online 15 March 2011 Journal of Management Jennifer Jordan, Michael E. Brown, Linda K. Treviño and Sydney Finkel\ stein of Ethical Leadership Follower Ethical Reasoning and Perceptions - Someone to Look Up To: Executive     Published by: http://www.sagepublications.com On behalf of:     Southern Management Association can be found at:

Journal of Management Additional services and information for         http://jom.sagepub.com/cgi/alerts Email Alerts:   http://jom.sagepub.com/subscriptions Subscriptions:   http://www.sagepub.com/journalsReprints.nav Reprints:   http://www.sagepub.com/journalsPermissions.nav Permissions:   What is This?   - Mar 15, 2011 OnlineFirst Version of Record  - Feb 25, 2013 Version of Record >> at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Someone to Look Up To: Executive–Follower Ethical Reasoning and Perceptions of Ethical Leadership Jennifer Jordan University of Groningen Michael E. Brown Penn State Erie, The Behrend College Linda K. Treviño The Pennsylvania State University Sydney Finkelstein Dartmouth College Despite a business environment that highlights the importance of executi\ ves’ ethical leadership, the individual antecedents of ethical leadership remain largely unknown.\ In this study, the authors propose that follower perceptions of ethical leadership depend o\ n the executive leader’s cognitive moral development (CMD) and, more importantly, on the relati\ onship between execu- tive leader and follower CMD. In a sample of 143 leader–follower dyads, the authors find a direct positive relationship between leader CMD and perceptions of ethic\ al leadership. Using polynomial regression, they find that ethical leadership is maximized wh\ en the leader’s CMD diverges from and is greater than the follower’s CMD. The authors exp\ lain these findings using a social learning theory framework. Leaders who are more advanced ethica\ l reasoners relative to their followers are likely to stand out as salient ethical role model\ s whose ethics-related com- munication and behavior attract followers’ attention. The authors discuss the research and practical implications of these findings. 660 Acknowledgments: This article was accepted under the editorship of Talya N. Bauer. We would like to thank Jeff Edwards for his generous advice and support with our data analyses. We also thank Theresa Glomb and Elizabeth Welsh for sharing insights into their analyses.

Corresponding author: Jennifer Jordan, University of Groningen, Faculty of Economics and Business, Department of HRM/OB, Nettelbosje 2, 9747 AE Groningen, The Netherlands.

Email: [email protected] Journal of Management Vol. 39 No. 3, March 2013 660-683 DOI: 10.1177/0149206311398136 © The Author(s) 2011 Reprints and permission: http://www.

sagepub.com/journalsPermissions.nav at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 661 Keywords: ethical leadership; moral reasoning; ethics; leadership; cognitive moral\ development The ethical culture and climate of organizations are greatly influenced \ by executive-level leaders who set the organizational agenda in ethical (Kelly, Kocuurek, McGaw, & Samuelson, 2004; Treviño, Brown, & Hartman, 2003; Treviño, Hartman, & Brown, \ 2000) as well as strategic domains (Hambrick & Mason, 1984; Mintzberg, 1973). Executives also influence the thinking of other high-level members of the organization who work fo\ r them. Recent research has found that the positive effects of executive ethical leader\ ship cascade to lower level employees through the ethical leadership practiced by supervisors \ (Mayer, Kuenzi, Greenbaum, Bardes, & Salvador, 2009). Ethical leadership positively inf\ luences many important employee outcomes (Brown, Treviño, & Harrison, 2005; Mayer\ et al., 2009). But, despite its obvious importance, little is known about its antecedents (for an exception, see Walumbwa & Schaubroeck, 2009). In this study, we investigate the direct relationship between leaders’ style of ethical reasoning (i.e., cognitive moral d\ evelopment; Kohlberg, 1969; Rest, 1993) and followers’ perceptions of leaders’ ethical leadership. We also examine the more complex relationship between leader and follower ethical reason\ ing style and per- ceptions of ethical leadership. It is important to focus on what makes followers perceive senior executives to be ethical leaders, because these individuals are strategic leaders who formulate o\ rganizational policies and objectives (Barnard, 1938), engage in organizational planning (Pa\ ge & Tornow, 1987), and provide the organization’s strategic vision (Smidt, 1998). Seni\ or executives also estab- lish and communicate the organization’s value system and develop new \ leaders (House & Aditya, 1997; Ireland & Hitt, 1999). Many scholars propose that it is t\ he tone that is set within the organization’s upper echelons, ethics (Treviño et al.,\ 2003; Treviño et al., 2000) and nonethics related (Barney, 2005; Weaver, Treviño, & Agle, 2005)\ , that has the greatest impact on the organization. In addition, social learning theory (Bandur\ a, 1986) asserts that power and status enhance the likelihood that an individual will be a mod\ el for the imparta- tion of normatively appropriate behaviors. There is little question that\ executive leaders possess the greatest power and status in their organization, thus servin\ g as potentially the most potent sources of ethical leadership. Perceptions of a leader’s \ demonstration of ethical leadership can vary from follower to follower depending on the follower’s experiences with the leader and the follower’s own characteristics. In this investigat\ ion, we hypothesize that follower perceptions of ethical leadership are directly related to the l\ eader’s cognitive moral development and are related as well to the relationship between leader a\ nd follower cogni- tive moral development. We hypothesize that perceptions of ethical leade\ rship are maxi- mized when the leader reasons about ethical issues at a level that is mo\ re sophisticated than the follower’s. Ethical Leadership While the topic of ethical leadership is not new to the philosophical li\ terature—for exam - ple, see Marcus Aurelius’s Meditations (2008; original work from AD 170-180) and Plato’s at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 662 Journal of Management / March 2013 Republic Book VII (2007; original work from 380 BC)—an empirically based understandi\ ng of the construct is still in its early stages. Construct development wor\ k commenced with a qualitative, interview-based approach in which Treviño and colleagues (Treviño et al., 2003; Treviño et al., 2000) asked corporate executives to characterize executive-level ethical lead- ers with whom they were familiar. Informants perceived that ethical lead\ ers possessed per- sonal qualities such as demonstrating care, trustworthiness, honesty, and fairness, and they modeled behaviors that included explicitly demonstrating ethical conduct\ , making fair and principled decisions, communicating the importance of ethics to followers, rewarding posi- tive ethical behavior, and disciplining unethical behavior.In subsequent construct development work, Brown and colleagues (2005) \ developed a formal constitutive definition of ethical leadership, defining it as “\ the demonstration of nor- matively appropriate conduct through personal actions and interpersonal \ relationships, and the promotion of such conduct to followers through two-way communication\ , reinforce- ment, and decision-making” (p. 120). Thus, ethical leaders are perc\ eived as caring, honest, and principled individuals who make fair and balanced decisions. Ethical\ leaders are also perceived as engaging in explicit communication about ethical issues and\ supporting this communication with consistent ethical action and reinforcement of others’ ethical conduct (Brown & Treviño, 2006). The researchers proposed that followers form perceptions of their leaders’ ethical leader- ship via processes derived from social learning theory (Bandura, 1977, \ 1986), including modeling and attractiveness. According to Bandura (1977), to be a mode\ l one must be attrac- tive and credible, as well as elicit attention from those in one’s en\ vironment. Ethical leaders are attractive and credible because they model normatively appropriate behavior and use the performance management system to consistently reinforce ethical conduct.\ Brown and colleagues (2005) developed a 10-item scale to measure ethic\ al leadership based upon social learning theory and the personal qualities and behavio\ rs uncovered in previous research. In studying the outcomes of ethical leadership, they \ found that subordi- nates led by those they perceived to be ethical leaders were more likely\ to exert extra effort on the job, to see the leader as effective, and to report problems to th\ ese supervisors. More recently, Mayer and colleagues (2009) found that perceptions of ethica\ l leadership were associated with reduced organizational deviance and increased citizenship behaviors, such as extrarole helping. Walumbwa and Schaubroeck (2009) found that perce\ ptions of ethical leadership were related to increased employee voice via their influences\ on heightened psy- chological safety. Thus, perceptions of ethical leadership have been sho\ wn to favorably influence a number of significant employee outcomes. Yet, researchers have only begun to uncover its antecedents. For example, Walumbwa and Schaubroeck found that two of the Big Five personality traits, leader agreeableness and conscientiousness,\ were positively related to subordinate perceptions of ethical leadership. The goal of the current investigation is to contribute to knowledge abou\ t a particularly important individual-difference antecedent of ethical leadership: cognit\ ive moral develop- ment (Kohlberg, 1969). This construct represents the cognitive structu\ res and criteria that an individual employs when reasoning about ethical issues. We examine both \ the direct associa- tion between the leader’s cognitive moral development and the followe\ r’s perception of ethi - cal leadership and the relationship between leader and follower cognitiv\ e moral development at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 663 and the follower’s perception of ethical leadership. We focus on this\ construct because it is conceptually and theoretically tied to ethical cognition and behavior an\ d has been found to influence ethical decision making and action in organizational contexts \ (see Kish-Gephart, Harrison, & Treviño, 2010, for a meta-analysis). In summary, researc\ h has consistently found a moderate-sized correlation between cognitive moral development and a v\ ariety of ethical behaviors (Blasi, 1980; Rest & Narvaez, 1994), making it a viable cand\ idate for examining the individual-difference correlates of ethical leadership perceptions.

Ethical Reasoning Prior to Lawrence Kohlberg’s research in the mid-20th century, ethica\ l behavior was thought to be a function of societal rules and norms. Kohlberg (1969) \ argued that it was not just society that dictated ethical behavior but that the individual deci\ sion maker also played an important role—particularly the person’s cognitive capacity to \ reason through ethical issues. Based upon decades of empirical research, Kohlberg devised a ste\ p-based hierarchi- cal model of ethical reasoning (i.e., cognitive moral development) tha\ t focused on the struc- tures of reasoning that people used to decide what was and was not ethically right and how those structures developed over time and life experience. Cognitive moral development is a construct that explains the structures \ of reasoning that individuals apply when thinking through ethical issues and resolving eth\ ical dilemmas.

Kohlberg’s (1969) theory asserts that individuals develop from chil\ dhood onward in their ability to reason about ethical issues and rarely regress to earlier stages. Kohlberg’s argu- ment, based upon Jean Piaget’s (1932/1965) earlier theorizing on hu\ man development, is a cognitive consistency one: Individuals who are capable of reasoning at h\ igher levels find it unnatural to reason at lower levels and therefore predominantly reason a\ t their highest capa- bility levels. It is important to note that the construct of cognitive moral developmen\ t focuses on moral reasoning, not behavior. Piaget (1932/1965) acknowledged a potential d\ isconnect between cognition and behavior, stating that how a person thinks about moral iss\ ues is not always exemplified in the way he or she acts in ethics-related situations. And \ Krebs and Denton (1997, 2005) presented convincing evidence that individuals do not always use moral rea- soning for moral ends. However, how individuals think about ethical issues has been found to be related (albeit at a moderate magnitude) to how they behave. The\ significant relation- ship between ethical reasoning and behavior has been found across life d\ omains, including organizational contexts (e.g., Blasi, 1980; Kish-Gephart et al., 2010)\ , helping to secure Kohlberg’s approach as the dominant one in empirical ethical decision-making research for the past 40 years (Rest, Thoma, Narvaez, & Bebeau, 1997). According to cognitive moral development theory, ethical reasoning progr\ esses through three levels, from preconventional to conventional to postconventional. The large majority of adults reason at the conventional level. And some adults never progre\ ss past the preconven - tional level (Kohlberg, 1981; Rest, 1986; cf. Treviño, 1992). Preconventional ethical reasoners, the least sophisticated reasoners, are egocentric thi\ nkers.

They conceive of morality as a set of rules that is imposed by outside a\ uthorities, and they at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 664 Journal of Management / March 2013 make decisions based upon self-interest (asking, “What’s in it fo\ r me?”). They seek rewards, avoid punishments, and are inclined to obey the dictates of authority fi\ gures.Conventional ethical reasoners base decisions upon upholding the ethical norms of sig- nificant others, including their peer groups, leaders, families, or soci\ eties (including looking to rules and laws for guidance). In contrast to preconventional reasone\ rs, they are less self- interested and more others-focused. Conventional reasoners receive satis\ faction from fulfill- ing duties and obligations that accompany their roles. They conform to t\ he expectations of significant others about what is right (Kohlberg, 1981), looking to ot\ hers in their referent groups and their organizations or to societal laws when making decisions\ about ethics. Finally, postconventional reasoning is more autonomous than are the other two levels in the basis for its judgment. A postconventional reasoner goes beyond identification with others’ expectations, rules, and laws and beyond looking to others for guidance \ about what is right.

For the postconventional reasoner, what is right is determined based upo\ n considerations of the greater good and universal principles of rights and justice. For exa\ mple, a postconventional reasoner would be more likely to make ethical decisions by applying a br\ oadly applicable set of justice-based rules rather than by basing the decisions on the reward\ s or punishments that might ensue from each option (viz., the preconventional level) or what\ significant others think is appropriate (viz., the conventional level). Kohlberg’s theory has been the target of criticism and revision (e.g\ ., Gibbs, Basinger, Grime, & Snarey, 2007; Gilligan, 1982; Krebs & Denton, 2005). Some of the criticism has lacked empirical substantiation. For example, Gilligan (1982) contende\ d that gender differ- ences exist in styles and foci of ethical reasoning. She argued that, wh\ ereas men are more likely to reason based on principles of justice, women are more likely t\ o consider care-based structures in their ethical reasoning. This difference did not hold up i\ n empirical examination, particularly when studying adult women in work contexts (e.g., Cohen, P\ ant, & Sharp, 1998; Derry, 1989; Gilligan & Attanucci, 1994; Walker, 1984). An additional, and more cogent, criticism of Kohlberg’s (1969) theo\ ry for the current research questions focuses on the progressive step-based model of moral \ reasoning that assumes continual increases in a positive direction (Krebs, Denton, Vermeulen, Carpendale, & Bush, 1991; Siegler, 1997). In contrast, Krebs and Denton (2005: 633\ ) argued and found that “moral development is defined more by an expansion in the range \ of structures of moral reasoning available to people than by the last structure they acquire.”\ We explain the central relevance of this finding in greater detail when we discuss our divergen\ ce hypothesis in the sections below.

Leader Cognitive Moral Development and Ethical Leadership First, we propose a direct, positive relationship between executives’\ cognitive moral development and followers’ perceptions of their ethical leadership. K\ ohlberg (1981) consid- ered higher levels of cognitive moral development to be preferable to lower levels, on the grounds that more developed reasoners were more likely then their lower \ level counterparts to include the principles of fairness, justice, and human rights in thei\ r decision making.

Specifically, whereas preconventional-level reasoners are primarily concerned with gaining at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 665 rewards and avoiding punishments and conventional-level reasoners are pr\ imarily concerned with maintaining positive interpersonal relationships, postconventional-\ level reasoners con- sider justice, individual rights, and the well-being of others to be par\ amount—even when such consideration might lead to disapproval from powerful others, may n\ ot benefit those within one’s personal network, or may even lead to less self-beneficial outcomes. Thus, higher level ethical reasoning may facilitate perceptions of ethical leadership\ because executives who reason at this level are perceived to care about employees’ well-\ being, value employees’ opinions, make decisions that balance multiple interests, and act in a f\ air and principled manner—all of which are components of the ethical leadership construc\ t (Brown & Treviño, 2006; Brown et al., 2005; Treviño et al., 2003).In addition, as noted earlier, ethical reasoning is moderately correlate\ d with actual ethical behavior (Kish-Gephart et al., 2010), such as reduced cheating (Malin\ owski & Smith, 1985), greater prosociality (Kohlberg & Candee, 1984), increased whistle-blow\ ing (Brabeck, 1984), and fewer unethical decisions (Treviño & Youngblood, 1990). Modelin\ g such normatively appropriate behavior should increase followers’ perceptions of ethica\ l leadership in these individuals. Hypothesis 1: Leaders’ cognitive moral development is positively related to follow\ ers’ perceptions of the leader’s ethical leadership. Leader and Follower Cognitive Moral Development and Ethical Leadership We argue next for a more complex relationship between perceptions of ethical leadership and leaders’ levels of cognitive moral development; how the follower’s cognitive moral development relates to the leader’s may also be important in shaping \ the follower’s percep- tion of the leader’s ethical leadership. Research has found that a su\ bstantial proportion of perceived leader behavior is explained by perceiver-based effects (Lord, Phillips, & Rush, 1980)—sometimes as much as the variance explained by the leader’s\ own characteristics.

Thus, perceptions of ethical leadership are likely to depend in part on \ a follower’s cognitive construal of the leader’s behavior (Maddux, 1999). We will argue he\ re that the relationship between leader and follower ethical reasoning should affect perceptions of ethical leader- ship. And we propose that divergence between leader and follower ethical\ reasoning, particu - larly when the leader is above the follower, will lead to the strongest \ perceptions of ethical leadership because such a leader will garner attention from followers th\ rough making prin- cipled decisions and modeling normatively appropriate behavior. Kohlberg asserted that individuals do not understand reasoning that is a\ t levels more advanced than their own (Kohlberg, 1981; Rest, 1994). Therefore, it is\ reasonable to ques - tion if leaders who are more advanced in ethical reasoning than their fo\ llowers can effectively communicate about ethics with these lower level individuals.\ But, post- Kohlbergian research suggests that individuals who reason at higher leve\ ls of cognitive moral development both can “speak the same ethical language” as those who are less developed than themselves and can present their more advanced ways of thinking about ethical issues at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 666 Journal of Management / March 2013 (Krebs & Denton, 2005), creating, in a sense, an ideal ethical model. \ Thus, this research suggests that leaders who are advanced moral reasoners are able to relat\ e to individuals who are at levels below their own level of cognitive moral development, as w\ ell as be capable of presenting novel ethical arguments to them (Krebs et al., 1991; Levine,\ 1979). In contrast to Kohlberg’s (1969) cognitive moral development theory, which asserts\ that individuals “transform and displace” their previous structures of ethical reas\ oning as they advance (Colby & Kohlberg, 1987), more recent research finds that individuals do not engage in displacement (Krebs et al., 1991). As Krebs and Denton (2005) explai\ n in their influential review and critique of Kohlberg’s work, progress in moral development is characterized by an expansion in the range of structures available to the reasoner, not a\ progression accom- panied by an abandonment of earlier structures—what they labeled the \ layer cake model. So, while individuals may be unable to comprehend reasoning that is at stage\ s above their own (Rest, 1994), individuals who are at more advanced levels are capable of comprehending reasoning below their own, making it possible for them to tailor their c\ ommunication to a less ethically developed audience. Relevant to the research question at \ hand, this assertion suggests that leaders who are more advanced in ethical reasoning can simultaneously (1) present novel, justice-oriented ways of reasoning about ethical issues a\ nd (2) speak to their followers using ethical reasoning at levels that their followers can com\ prehend (i.e., at levels below the leader’s highest capacity).Perhaps most important for the divergence hypothesis is the fact that th\ e ethical leader- ship construct (Brown et al., 2005) is built upon a social learning theory foundation. Social learning theory (Bandura, 1977, 1986) asserts that being a model depen\ ds on being noticed, garnering attention, and conveying attractive information in one’s so\ cial environment.

Ethical leaders are proposed to be attractive and credible role models w\ ho elicit followers’ attention to messages about ethics by both modeling ethical behavior and\ reinforcing it in relevant others (Brown et al., 2005; Brown & Treviño, 2006). By def\ inition, role modeling (i.e., being that attractive and credible behavioral example) includes one individua\ l looking up to another. Thus, reasoning about ethical issues at a more advanced l\ evel than one’s fol- lower should attract the follower’s attention and be noticed. Schmink\ e, Ambrose, and Neubaum (2005) acknowledged this point by asserting that individuals prefer an\ d are more attracted to higher levels of ethical reasoning, even if they are not yet cognitiv\ ely capable of reasoning at such levels themselves. In addition, social learning theory emphasizes the centrality of message salience for laying the foundation for social learning processes to occur (Bandura, 1986).\ Qualitative research on ethical leadership demonstrates that the salience of a leader’s mo\ ral message (i.e., “con- veying an ethics message that will stand out and be noticed”; Treviñ\ o et al., 2003: 26) is integral to being perceived as an ethical leader. For ethical leaders, s\ alience may be estab- lished by demonstrating ethically appropriate behavior, especially behav\ ior that is novel or unexpected (Fiske, 1980; Fiske & Taylor, 1991). Note that unless a mes\ sage is considered to have an ethical valence, mere message novelty is unlikely to elicit p\ erceptions of ethical leadership. Thus, we propose that salience related to ethics-related com\ munication and behav - ior results from followers being exposed to ethical reasoning more advan\ ced than their own.

Such communications and behaviors are likely to be noticed by followers,\ thereby contribut- ing to perceptions of ethical leadership. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 667 We have argued for a divergence hypothesis, but it is plausible that con\ vergence between leader and follower ethical reasoning might lead to the strongest percep\ tions of ethical lead- ership. While there is little research looking at the effects of leader \ and follower “fit,” research examining leader and follower cognitive convergence has found t\ hat it is associated with a number of positive outcomes. For example, Gibson, Cooper, and Con\ ger (2009) found that convergence on how a team leader and the team as a whole view\ the extent to which the team has accomplished its goals and engages in constructive co\ nflict maximizes team performance. In the ethics domain, Schminke and colleagues (2005)\ found that follow- ers report greater job satisfaction when they converge with their leader’s cognitive moral development. The researchers drew their explanation from the values congruence literature (Kluckhohn, 1962; Schneider, 1987), arguing that individuals who shared a style of reason- ing about ethical issues were also likely to share values—leading to \ greater subordinate job satisfaction. But job satisfaction and perceptions of ethical leadership\ are very different types of outcome variables. With job satisfaction, liking of and similar\ ity with the leader (i.e., congruence) are likely to be paramount in forming one’s perceptions. But with percep- tions of ethical leadership, what is important is that the leader commun\ icates an ethics mes- sage that stands out and is noticed by the follower. For that outcome, d\ ivergence should be more important. Thus, the evidence from recent research advancing Kohlbe\ rg’s cognitive moral development theory (Krebs & Denton, 2005), combined with the soc\ ial learning foun- dation of ethical leadership (Brown et al., 2005), suggests that diver\ gence, particularly when the leader reasons at a level more advanced than that of his or her foll\ ower, will likely lead to the strongest perceptions of ethical leadership.

Hypothesis 2: Divergence between leader and follower cognitive moral development, whe\ n the leader is more advanced than the follower, will lead to the strongest perceptio\ ns of ethical leadership. Method Participants and Procedures Participants were senior executives participating in a university execut\ ive education pro- gram and their direct reports. The participants came from a variety of o\ rganizations and industries. We contacted the executives with the request that they participate in a study on executive leadership. They were each sent a letter describing the projec\ t, including the request that they would be asked to submit the names of 5 to 10 of their\ direct reports. We directly contacted these direct reports with an explanation of the proje\ ct and what would be required of them. We assured participants that individual-level data or \ confirmation of their participation would not be shared with their organizations. We also assu\ red them that their leaders would not know if they participated in the project and would not\ be provided with their responses. The executives we contacted included those in positions such as chief op\ erating officer, chief financial officer, chief information officer, and vice president. \ Of the 38 executives we contacted as part of their executive education course, 31 completed a\ ll study-related at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 668 Journal of Management / March 2013 materials (82% participation rate); however, 3 of these leaders did no\ t submit the names of their direct reports.We distributed 209 direct report surveys, and 140 direct reports complet\ ed and returned them (67% participation rate). These direct reports held relatively hi\ gh-level positions in the organizations, including facilities management officer, operations offic\ er, and regional man- ager. All of the direct reports worked directly for the executive, and a\ ll reported having regular in-person and virtual contact with the executive. See Table 1 for sample\ descriptive statistics.

Executive and Direct Report Measure Cognitive moral development. The executives and their direct reports completed the short form of the Defining Issues Test (DIT; Rest, 1979), the most widely us\ ed measure of cogni- tive moral development (Gibbs & Widaman, 1982; see Rest, Narvaez, Bebea\ u, & Thoma, 1999) and, according to a recent meta-analysis, the one most used in in\ vestigations of ethical cognition in organizations (Kish-Gephart et al., 2010). The measure ta\ kes approximately 20 minutes to complete. Its P-score, the most commonly reported index (Res\ t et al., 1997), measures the extent to which an individual engages in postconventional e\ thical reasoning. The DIT presents three ethical dilemmas. After reading each dilemma, individuals are asked to indicate what the protagonist should do and then to rate a seri\ es of 12 statements for how important each is to determining how to act in the dilemma. Rati\ ngs range from great importance to no importance. The individual is then asked to select the four most important statements for deciding how to resolve the dilemma. Each of th\ e 12 statements corresponds to a specific level of cognitive moral development. An individual’s combined rating and selection of the statements, each of which represents an impo\ rtant consideration for the situation, is used to compute his or her P-score. If an individu\ al is at a particular level of reasoning, he or she will recognize the corresponding level ite\ ms as being impor - tant. If the individual is below that level, he or she will not understa\ nd the relevance of those higher level items to resolving the dilemma and dismiss them as unimportant or irrel- evant (Rest, 1994). The DIT also provides an M-score, which measures the extent to which Table 1 Leader and Direct Report Descriptive Statistics Variable LeaderDirect Report Gender (% male) 10067 Race (% Caucasian) 50 41 Age (average years) 45.36 (5.35)42.07 (8.34) Formal education (years) 17.79 (1.79)17.19 (2.00) Experience in profession (years) 19.64 (6.31)16.09 (8.24) Number of individuals directly supervised 8.33 (3.65) Ethical reasoning (P-score) 31.51 (13.09)35.14 (15.13) Ethical leadership (as rated by direct reports) 4.17 (0.48) Note: N s ranged from 28 (for leader-based variables) to 143 (for direct repo\ rt–based variables). Except for gender and race, all fields contain sample means and standard deviations (in p\ arentheses). at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 669 the individual selected meaningless, albeit erudite-sounding, statements\ . Individuals with scores above 8 should be eliminated (Rest, 1993). Our sample contained\ no M-scores above this cutoff.

Direct Reports Measure Ethical leadership. We measured followers’ perceptions of ethical leadership using Brown and colleagues’ (2005) 10-item scale (a = .85). We instructed direct reports that the items on this scale asked about their executive leader and to respond to\ each item on a 5-point Likert-type scale (1 = strongly agree to 5 = strongly disagree). We reverse-scored the responses so that a higher score indicated a greater perception of t\ he leader’s ethical leadership. Sample items included, “Listens to what employees have to\ say,” “Has the best interests of employees in mind,” and “Sets an example of how to do\ things the right way in terms of ethics.” Results Ethical Reasoning Scores (DIT) Three leaders and 11 direct reports had incomplete responses on the DIT,\ the measure of cognitive moral development, warranting the exclusion of these scores fr\ om the analyses.

Using multiple-missing-data imputation methods (Enders, 2001; Newman, 2\ 009; Schafer, 1997), described in detail below, we included these 11 direct reports i\ n our data set; how- ever, since we could not determine the ethical leadership ratings for the three leaders without DIT scores (these individuals did not have direct reports who rated the\ m and therefore had no ethical leadership scores as well), these leaders were excluded from\ the analyses. These exclusions left us with 143 pairs on which to complete the analyses, comprising 28 execu- tives. There was an average of 5.11 (SD = 2.28) direct reports per executive in the final sample analyzed. The median number of direct reports was 5 and the mode \ was 4. In 59 (41%) executive–direct report pairs, the executive had a greater cognitive \ moral development score than his or her direct report. The average difference for this group was\ 16.09 (SD = 9.47). In 80 (56%) pairs, the executive’s cognitive moral development score w\ as less than that of his or her direct report. The average difference for this group was –16.2\ 1 (SD = 11.71). And 4 (3%) pairs had equal cognitive moral development scores. Note that it is not necessary to have exactly equivalent leader and follower cognitive moral development \ scores in order to test the effects of divergence or convergence (J. Edwards, personal communication, February 4, 2010). Because of missing data due to purged or missing DIT scores (see the se\ ction above), we employed standardized data imputation techniques (Newman, 2009) to acc\ ount for these missing values. We first performed a multiple-missing-data analysis, whi\ ch showed that our missing data were missing completely at random (MCAR; Little’s MCAR \ test, c 2(58) = 61.44, p = .35; Little & Rubin, 1987). An MCAR result allowed confidence in the a\ ssumption at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 670 Journal of Management / March 2013 that we were using unbiased maximum likelihood techniques in our data im\ putation. Because our missing values were composed primarily of scale-level nonresponses (\ e.g., missing the entire DIT or ethical leadership score), we imputed these values using the expectation maximization (EM) variation of the maximum likelihood technique (Ende\ rs, 2001; Schafer, 1997). The EM technique assumed a distribution for the partially missin\ g data and based its inferences on the likelihood under that distribution (Newman, 2003, 200\ 9). We reported all descriptive statistics that follow based on the EM algorithm (Enders, 2\ 001; Newman, 2003; Schafer & Graham, 2002).

Ethical Reasoning and Ethical Leadership Table 2 contains the intercorrelations between the study variables. To t\ est our hypothesis on the relationship between leader cognitive moral development and perce\ ptions of ethical leadership (Hypothesis 1), we used linear regression. To test the rela\ tionship between leader and follower cognitive moral development and perceptions of ethical lead\ ership (Hypothesis 2), we used polynomial regression analyses (Edwards & Parry, 1993). Doing \ so allowed us to examine the relationship among these three variables by examining patter\ ns in the data and the shape of these patterns when graphed on a three-dimensional surface \ (see Edwards, 2002).

Polynomial regression is the appropriate alternative to using difference\ scores to examine “(mis)fit” hypotheses. The problem accompanying difference score\ s includes, but is not limited to, that they do not allow researchers to examine how different \ forms of (mis)fit result in unique relationships with the outcome of interest (see Edward\ s, 1994, or Edwards and Parry, 1993, for an in-depth examination of polynomial regression an\ d the problems accompanying difference scores). Within both the linear and polynomial \ regression approaches, we used a cluster regression technique that estimated the variance–co\ variance matrix and assumed covariance between individuals in the same group but none across\ different groups (Antonakis, Bendahan, Jacquart, & Lalive, 2010; Glomb & Welsh, 2005; Ro\ gers, 1993). We employed this technique because some leader–follower pairs in our dat\ a set shared the same leader (that is, there were 28 leaders spread across the 143 leader–direct report pairs).

We also employed a White correction (White, 1980) when calculating the standard errors, Table 2 Intercorrelations for Leader and Direct Report Scale Scores Variable 123 1.

Leader cognitive moral development 2. Direct report cognitive moral development .02– 3. Ethical leadership a .23** –.07– Note: These are maximum likelihood estimates based on the expectation maximiz\ ation algorithm (Enders, 2001; Newman, 2003; Schafer & Graham, 2002); sample Ns ranged from 129 to 143. These correlations should be inter- preted with caution, as there is shared variance in the observations (i\ .e., multiple leader–direct report observations sharing the same leader).

a. Variable 3 was rated by direct reports.

**p < .01. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 671 which accounted for the heteroscedasticity in our regression residuals. \ All of the regression analyses that follow include these corrected estimates.Leader ethical reasoning and ethical leadership. Before examining the full polynomial regression model, we examined the direct hypothesis (Hypothesis 1), th\ at is, our prediction that higher cognitive moral development on the part of the leader would \ relate to greater perceptions of his or her ethical leadership. This prediction was confirmed via a direct, positive effect, b = .01, R 2 = .051, p = .039. Thus, leaders who reasoned at a more advanced level were perceived to be stronger ethical leaders (Kohlberg, 1981).

Leader–follower ethical reasoning divergence and ethical leadership. The polynomial regression analyses involved estimating a quadratic model with perceptio\ ns of ethical leadership as the outcome variable (Z) and both leader (X) and follower (Y) cognitive moral development as the independent variables. The full polynomial equation is ZEL = b o + b 1X + b 2Y + b 3X2 + b 4XY + b 5Y 2. (1) Results of this regression analysis are presented in Table 3, and the co\ rresponding surface is shown in Figure 1.

In this figure, the leaders’ and followers’ cognitive moral develo\ pment scores are located on the X, Y plane, or the “floor” of the graph. Followers’ perceptions of \ their leaders’ ethical leadership are located on the Z-axis, that is, the vertical axis extending up from the floor of the graph. The line of fit, this is where X = Y, is the line that extends from the front to the back of the graph. However, Hypothesis 2 primarily involves what happens\ along the line of incongruence (X = –Y), which extends from the left to the right side of the graph. We were particularly interested in the effects on perceptions of ethical leaders\ hip when a leader’s cognitive moral development was above that of the follower’s, which w\ as represented by the area of the surface on the right side of the graph (i.e., to the right \ of the X = Y line). We hypothesized that there would be a positive slope along the line of inco\ ngruence, such that Table 3 Polynomial Regression Results of Perceptions of Ethical Leadership (Z) on Leader (X) and Follower (Y) Cognitive Moral Development Response Surface Features Fixed Effects Coefficients a X = -Y misfit line X = Y fit line R 2 X Y X 2 X × Y Y 2 Slope (b 1 - b 2) Curvature (b 3 - b 4 + b 5) Slope (b 1 + b 2) Curvature (b 3 + b 4 + b 5) .09* .18* -.10 .01*-.001 .002 .28* .02† .01 .014† Note: The dependent variable used to compute these parameters is the transformed ethical leadership score. Ethical leadership was transformed, (Z - 1) × 25, in order to lift the corresponding graph (Figure 1) off of the fl\ oor (J. Edwards, personal communication, November 20, 2008). Transforming the dependent \ variable did not affect the significance of any of the parameters. aEntries are unstandardized regression coefficients.

†p < .10. *p < .05. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 672 Journal of Management / March 2013 as one advanced along the line of incongruence, where X > Y, values of ethical leadership (Z) would be maximized. We evaluated the divergence hypothesis (Hypothes\ is 2) by exam- ining both the slope (represented by b 1 – b 2) and the curvature (represented by b 3 – b 4 + b 5) along this line. These coefficient values are provided in Table 3. First, as we predicted, the incongruence line (X = –Y) had a positive slope, indicating that the surface (i.e., perceptions of ethical leadership) was increasing a\ s it crossed the X = Y line into the area where X > Y—or the leader’s cognitive moral development was greater than the \ follower’s. In addition, as we predicted, the X = –Y line had positive curvature, with the surface flattening out as it approached the line of congruence. We also examined the line of congruence, as it indicated important attributes of our data that were relevant to examining the divergence hypothesis. For example, \ evidence of a posi - tive slope or negative curvature along the X = Y line would weaken support for the diver- gence hypothesis. As featured in Table 3, the line of congruence had a s\ lope of 0, meaning that perceptions of ethical leadership did not increase or decrease along the\ X = Y line. However, Figure 1 Leader (X) and Follower (Y) Cognitive Moral Development and Perceptions of Ethical Leadership (Z) Note: The X -axis contains the leader’s mean-centered P-score. The Y -axis contains the direct report’s mean-centered P-score. The Z-axis contains the transformed ethical leadership score as assessed by the direct report. Ethical lead- ership was transformed, (Z – 1) × 25, in order to lift the graph off of the floor (J. Edwards, personal communication, November 20, 2008). at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 673 the positive curvature (combined with the curvature also witnessed alon\ g the X = –Y line) indicated a slight bowl shape to the surface. Specifically, an examinati\ on of the three- dimensional surface suggested that perceptions of ethical leadership wer\ e at their minimum when both leader and follower were moderate on cognitive moral development and that any upward curvature stopped (or at least significantly decreased) when le\ aders and followers reached this point (i.e., were both low, as opposed to both high, on co\ gnitive moral develop- ment). We confirmed this visual observation statistically by testing th\ e difference between two points along the fit line. We located a point along the line of fit where both the leader and follower were high on cognitive moral development (i.e., P-score = 60) or both low on cognitive moral development (i.e., P-score = 10). These values corresponded to recommended percentile cutoffs (Rest, 1993; used in Turner, Barling, Epitropaki, Bu\ tcher, & Milner, 2002); thus, the leader and the follower were either both in the first quartile or both in the fourth quartile of ethical reasoning. Using the polynomial equation, we tested the difference between the following two z-hat values for perceptions of ethical leadership at each of these two points (see Edwards & Rothbard, 1999, for a detailed description of\ this analysis). ZEL1 = b 0 + b 1XL1 + b 2YF1 + b 3X2 L1 + b 4XL1YF1 + b 5Y2 F1 (2) ZEL2 = b 0 + b 1XL2 + b 2YF2 + b 3X2 L2 + b 4XL2YF2 + b 5Y2 F2 (3) Results provided statistical evidence that perceptions of ethical leader\ ship were greater when both the leader and the follower were at higher rather than lower l\ evels of cognitive moral development (F = 4.23, p = .04). However, given the fact that perceptions of ethical leadership were not maximized along the line of congruence (which would\ be evidenced by a downward slope along the line of incongruence) and that there was a n\ onsignificant slope along this ridge, one could not conclude from this analysis that converg\ ence, especially at higher levels of leader–follower cognitive moral development, maximiz\ ed perceptions of ethical leadership. However, it did suggest that the upward curvature of\ the convergence line did not extend below moderate levels of cognitive moral development, meaning that when the leader and follower were both low on cognitive moral development, th\ e leader was seen as less of an ethical leader than when both were high on cognitive moral\ development. Another important feature to explore on the response surface was the rot\ ation of the graph along the lines of congruence and incongruence, meaning the examination \ of lateral shifts in the surface along the two lines of focus. An examination of the response\ surface relative to these lines (drawn along the floor of Figure 1) indicated that the gra\ ph was rotated slightly clockwise, into the region where X > Y. This rotation indicated that the leader’s cognitive moral development (X) was playing a larger role in predicting perceptions of his or her ethical leadership than was the follower’s (Y ). This effect was unsurprising for two reasons.

First, the leader was the target of our outcome variable; thus, it is re\ asonable that leader- based characteristics more strongly affected perceptions of ethical lead\ ership. Second, a vast body of literature indicates the importance of leader characteristics fo\ r individual and orga- nizational outcomes (e.g., Hambrick & Mason, 1984; Kelly et al., 2004; \ Mintzberg, 1973).

Schminke and colleagues (2005) also found that leaders’ cognitive m\ oral development was more important than followers’ for predicting their employee-based ou\ tcome variables. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 674 Journal of Management / March 2013 Thus, in sum, the polynomial regression and accompanying response surfac\ e analysis indi- cated the following: (1) There was a positive slope along the line of \ incongruence—ethical leadership increased into the area where the leader’s cognitive moral\ development was above the follower’s. (2) There was no slope along the line of congruence\ , meaning no increase nor decrease along the line where the leader’s cognitive moral development equaled that of the follower’s. (3) The upward curvature along both the incongruence an\ d congruence line indi- cated a slight bowl shape to the overall surface; (4) however, the upw\ ard curvature along the line of congruence stopped (or at least was significantly reduced) at \ points at or below where the leader and follower had moderate levels of cognitive moral developme\ nt. Lastly, (5) there was a slight clockwise rotation of the graph’s surface along the floo\ r, indicating that the leader’s cognitive moral development exerted a larger role in the leader–follo\ wer cognitive moral development to perceptions of ethical leadership relationship.

Post hoc analyses of leader–follower divergence. Given the support for the divergence hypothesis (Hypothesis 2), we conducted post hoc analyses to explore t\ his relationship with greater precision. Specifically, we wanted to know if the magnitude of t\ he difference between leaders’ and followers’ cognitive moral development affect\ ed perceptions of ethical leadership. We examined whether the follower’s perception of ethical \ leadership was affected by the leader’s cognitive moral development being substantially great\ er versus slightly greater than the follower’s own cognitive moral development. To address this \ question, we conducted an analysis similar to the one performed above on the line of congruence (Edwards & Rothbard, 1999); however, here we chose two points along the line of in\ congruence: one where the leader’s cognitive moral development score was substantiall\ y greater and one where it was slightly greater than the follower’s. We had some freedom in deciding what “substantially” and “slightly” implied; however, we selected\ P-score values that corresponded to recommended percentile cutoffs (Rest, 1993) and were actual leader \ and follower values found in our sample. Specifically, we used 60 to represent the leader’\ s P-score and 20 to represent a “substantially” lower follower’s P-score and 43 to \ represent a “slightly” lower follower’s P-score. These three scores corresponded to a first-quarti\ le leader with both a fourth- and second-quartile follower, respectively. This analysis revealed that perceptions of ethical leadership were unaffected when the follower was substantially l\ ower versus slightly lower than the leader (F = 0.01, p = .94). 1 In other words, this analysis indicated that a fol- lower’s perception of ethical leadership was unaffected by the magnit\ ude of discrepancy between his or her cognitive moral development and the leader’s cognitive moral development; what was important was having a leader whose cognitive moral development\ was more advanced (to any extent) than the follower’s. Discussion This investigation examined the previously untested relationship between\ executive leader and follower ethical reasoning and perceptions of the leader’s ethica\ l leadership (Brown & Treviño, 2006). We proposed and found that direct reports’ percep\ tions of ethical leadership were stronger when leaders were higher in cognitive moral development. W\ e also learned at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 675 that divergence on cognitive moral development (when the leader’s co\ gnitive moral devel- opment was above the follower’s) was associated with stronger follow\ er perceptions of ethical leadership.Consistent with Kohlberg’s (1981) initial theorizing that reasoning\ at more advanced ethical stages is preferable to reasoning at less advanced stages and th\ at there is a significant relationship between cognitive moral development and normatively appropr\ iate behavior (e.g., Blasi, 1980; Kish-Gephart et al., 2010), we found a direct rela\ tionship between leaders’ ethical reasoning and perceptions of their ethical leadership. This dire\ ct relationship sug- gests that if a leader reasons at a more sophisticated level of cognitiv\ e moral development, followers are more likely to perceive him or her as an ethical leader. T\ his finding suggests that highly ethically developed leaders are not just reasoning silently \ about ethical issues but are translating this reasoning into communication and (or) action that\ affect followers’ per- ceptions of them as ethical leaders. While we discuss future directions \ for research in detail below, this finding highlights the importance of devoting greater attent\ ion to investigating underlying processes in order to learn more about what such leaders are \ doing or saying to create these perceptions of ethical leadership. While the leader’s ethical reasoning is important to perceptions of ethical leadership, we found that its relationship to the follower’s ethical reasoning is also important. The more complex divergence finding demonstrates that perceptions of ethical leadership are stronger when the leader is above the follower on cognitive moral development. Th\ e divergence find- ing is consistent with the social learning foundation (Bandura, 1977, 1\ 986) of ethical leader- ship (Brown et al., 2005), which emphasizes the importance of the salience and credibility of the leader’s ethics message (Treviño et al., 2003; Treviño \ et al., 2000). Executives appear to maximize perceptions of their ethical leadership by distinguishing themselves from fol- lowers and by being noticed by followers on behavioral dimensions such a\ s explicit com- munication about ethics, fair judgment, care for employees, and reinforc\ ement of ethical conduct. In other words, they “stand out” as ethical leaders. Acco\ rding to the current findings, leaders achieve this, in part, by reasoning about ethical issues at a mo\ re sophisticated level than their followers. The divergence finding suggests that maximizing pe\ rceptions of ethical leadership is also about leader–follower “misfit” on the dimension of cognitive moral devel- opment. As an example, a conventional-level leader (Kohlberg, 1981) would be perceived as stronger on ethical leadership by a preconventional follower. But thi\ s same leader may be perceived to be weaker on ethical leadership by a conventional or a post\ conventional fol- lower. Thus, to be perceived as stronger on ethical leadership, the lead\ er should be a more developed ethical reasoner than his or her follower. Post hoc analyses demonstrated that the divergence finding holds when the leader is greatly above the follower’\ s level of cognitive moral development (three quartiles; Rest, 1993) as well as when slight\ ly above (one quartile).

Post hoc analyses also confirmed conclusions drawn from visual inspectio\ n of the graph:

Divergence does not work both ways; the follower being above the leader \ on cognitive moral development does not strengthen perceptions of ethical leadership. In our review of the polynomial regression findings, we did not find support for a general convergence hypothesis (i.e., no downward curvature along the line of m\ isfit). However, we did find that perceptions of ethical leadership were greater when both t\ he leader and the follower were high (rather than moderate or low) on cognitive moral devel\ opment. This at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 676 Journal of Management / March 2013 additional finding suggests that followers who are also high on cognitiv\ e moral development are more likely than those moderate or low on cognitive moral developmen\ t to perceive their leaders to be ethical leaders when they are paired with a leader who is \ at an equally high level.

Followers who are high-level reasoners themselves may be particularly at\ tuned to ethical leadership, and they will be looking for it and will recognize it in lea\ ders who are similarly advanced ethical reasoners.

Implications for Research The finding that leaders’ positive divergence from their followers is\ associated with stronger perceptions of ethical leadership raises interesting theoretica\ l questions about diver- gence or convergence between leaders and followers more generally and wh\ en divergence versus convergence might be associated with beneficial outcomes. Some research on leader– follower fit indicates that divergence leads to more positive outcomes. \ For example, leader– follower divergence on control traits (i.e., the dominance scale of the\ California Personality Inventory), with the leader being above the follower, leads to greater satisfaction with one’s supervisor (Glomb & Welsh, 2005) because these divergent traits produc\ e more seamless, less-conflict-ridden interactions (Kiesler, 1983). And the findings of\ the current study dem- onstrate that divergence in ethical reasoning, with the leader being abo\ ve the follower, is posi - tively related to perceptions of ethical leadership. Yet, other research has found that convergence between leaders and follo\ wers leads to favorable outcomes. For example, perceived leader–follower values con\ gruence, associated with transformational leadership (Jung & Avolio, 2000), has long been \ linked to positive outcomes, such as the quality of leader–member exchange (Ashkanasy &\ O’Connor, 1997) and follower job satisfaction and commitment (Meglino, Ravlin, & Adkins\ , 1989). And, as noted earlier, leader–follower ethical reasoning convergence has been\ associated with greater job satisfaction, commitment, and lower turnover intentions on t\ he part of followers (Schminke et al., 2005). Researchers will need to think carefully (and theoretically) about the variables of study before predicting whether divergence or convergence between leaders and \ followers is likely to be more beneficial. One possible explanation is that divergence leads\ to better outcomes when it is important for the leader to stand out and be noticed, to actu\ ally be different in some way, or when being similar would create conflict (e.g., as when both are high on dominance, viz., Gibson et al., 2009). Alternatively, convergence may lead to the \ most favorable outcomes when similarity, liking, or identification is the important underlying p\ rocess (Byrne, 1971).

Clearly, it is not always good for leaders and followers to share traits\ . Sometimes a better out - come is achieved when they differ (Dryer & Horowitz, 1997; Moynihan & P\ eterson, 2001). As just noted, Schminke and colleagues (2005) found that convergence o\ n leader–follower cognitive moral development can maximize important outcomes, such as emp\ loyee satisfac - tion, commitment, and turnover intentions. We found that divergence prod\ uced stronger per - ceptions of ethical leadership. These differences in findings are most likely a consequence of the very different dependent variables in these two investigations: J\ ob satisfaction and com - mitment are related to perceptions of the job environment and individuals’ psychological at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 677 comfort and contentment within it. They are not necessarily related to perc\ eiving the leader as a stronger or weaker ethical leader. However, another significant dif\ ference between the two investigations lies in the samples. Schminke and colleagues did not \ report the level of contact between their leaders and followers; however, given that their l\ eaders were organi- zational CEOs and less than a third of their followers were in superviso\ ry roles themselves, we assume that the nature of contact between these two groups was lower than was the case in the current sample of executives and their direct reports. In the cur\ rent sample, followers had, at a minimum, direct contact weekly with their leaders. 2 The difference in samples (and outcomes) suggests the possibility of m\ oderators in the relationship between cognitive moral development and perceptions of ethi\ cal leadership. One possible moderator might be the intimacy of leader–follower interacti\ ons. It is possible that when a leader–follower relationship is characterized by greater dista\ nce, how the leader’s cognitive moral development relates to the follower’s may have less i\ mpact on the follower’s perception of the leader’s ethical leadership. Distant subordinates are less likely to have the opportunity to directly observe the leader reasoning about ethical issue\ s, compared with direct reports with a close relationship, and therefore may have insufficient i\ nsight into the leader’s ethical reasoning style for it to significantly influence their ethical \ leadership perceptions. While recognizing this potential moderator, we believe that the upward d\ ivergence rela- tionship found in the current study will likely be robust to myriad char\ acteristics of leader– follower dyads and organizational contexts because of the benefits that \ apparently accompany a leader’s advanced cognitive moral development. Nevertheless, the exploration of this and other moderators remains important for future research. The polynomial regression model, which included both leader and follower\ cognitive moral development, accounted for 9% of the variance in followers’ per\ ceptions of ethical leadership. Given the multitude of factors that likely influence the ext\ ent to which a follower perceives his or her leader as an ethical leader (e.g., the ethical cli\ mate of the organization, other characteristics of the leader, a follower’s moral awareness; Jo\ rdan, 2007), being able to explain nearly one tenth of the variance in ethical leadership is noteworthy. However, nine tenths of the variance remains unexplained. Thus, particularly given the\ importance of ethi- cal leadership, additional research that explores the factors predicting\ perceptions of ethical leadership is needed—particularly research on the antecedents. Potent\ ial antecedents may be, but are not limited to, perceptions of whether the leader has dealt with\ significant organiza- tional crises in a normatively appropriate way and his or her ability to\ recognize and com- municate about ethical issues with followers (Jordan, 2009; Reynolds, 2\ 008). Practical Implications The results of the current investigation have practical implications for organizations. Our findings suggest that to maximize perceptions of ethical leadership, lea\ ders should be advanced ethical reasoners and, preferably, more advanced on this dimens\ ion than their fol- lowers. We know of no organizations that have taken an individual-differ\ ence approach to ethical leadership and none that have focused on the cognitive moral dev\ elopment of leaders or followers. Therefore, this research has the potential to inform organ\ izations about a new at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 678 Journal of Management / March 2013 way of thinking about ethical leadership. They may want to incorporate t\ his information into leadership selection and assessment programs. We discuss this possibilit\ y in detail below.The current findings also draw some important implications for executive\ leader ethics training. As a result of the U.S. Sentencing Guidelines for Organization\ s and Sarbanes- Oxley legislation, as well as measures instituted to reign in reckless b\ usiness practices across the world (e.g., Greek austerity measures, the Dutch “Banking Code”\ ), organizations are expending significant resources to encourage ethical behavior at all lev\ els of management, including the executive and even the board levels. Many of these organizations are searching for information about how to most effectively provide ethics training. T\ he current results suggest that rigorous cognitive moral development–based training should certainly be con- sidered as part of the offerings (Wells & Schminke, 2001). We emphasiz\ e the word “rigorous,” because research has found that advancing an individual’s cognitive m\ oral development is accomplished only through intensive, focused training procedures deliver\ ed by a trained facilitator. The most effective training programs are focused on facilit\ ated ethical discus- sions with peers about hypothetical or real ethical dilemmas. These disc\ ussions challenge individuals’ reasoning by exposing them to reasoning that is one stag\ e above their own (Rest, 1988; Rest & Thoma, 1986; explained in Treviño, 1992). This training\ is most effective when it lasts between 4 and 12 weeks. Trainings of fewer than 4 weeks show negligible effects (Rest & Thoma, 1986). Such extended training would rely on hypothetica\ l ethical dilemmas, or even better, dilemmas taken from the organization’s own experience\ , and would chal- lenge the executives to think about these dilemmas in an increasingly pr\ incipled way. This is a completely unique approach compared with the brief ethics training \ for executives that most organizations currently have in place. Therefore, only organization\ s that are serious about improving executive ethical leadership are likely to adopt such an\ approach. Perhaps they will be convinced by the accumulating evidence about the beneficial influence of ethi- cal leaders, including the reduced deviance (Mayer et al., 2009), incr\ eased willingness to report problems to management (Brown et al., 2005), and increased voic\ e (Brown et al., 2005; Walumbwa & Schaubroeck, 2009) of organizational members. Another important practical issue to discuss is what the current findings suggest about leader (and follower) selection. Previous research has found that mana\ gerial-level ethical leaders are seen as having greater potential to reach senior leadership \ positions within their organizations (Rubin, Dierdorff, & Brown, 2010), so it is reasonable t\ o believe that most organizations value strong ethical leadership within their leadership ranks. We found that perceptions of ethical leadership are maximized when the leader shows advanced reasoning about ethical issues, as well as when he or she is above the follower on\ this dimension. This finding seems to strongly suggest that executive searches should conside\ r the sophistication of a candidate’s ethical reasoning. According to our findings, organi\ zations should think of executives as “thought leaders” in terms of ethics.

Strengths and Limitations Because recent high-profile ethics scandals emanated from the highest le\ vels of organi- zational leadership and because individuals at these levels play such an\ important role in at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 679 setting the organization’s ethical and strategic agenda (Hambrick & \ Mason, 1984; Kelly et al., 2004; Mintzberg, 1973; Treviño et al., 2003; Treviño et al., 2000)\ , we sought to recruit a sample characterized by a high organizational level in both the leaders \ and their direct reports.

The upper echelon sample is unique and, therefore, a strength of the res\ earch. However, recruiting senior executives to complete surveys proved to be a great ch\ allenge, leaving us with a sample size that was smaller than ideal and restricting our abili\ ty to investigate addi- tional questions such as, What are the moderators of the divergence rela\ tionship? Also, this executive-level sample prompts questions about whether our findings will generalize to leaders and followers at lower levels of the organizational hierarchy. T\ heory (e.g., Brown et al., 2005; Treviño et al., 2003) provides no reason to predict that the relationships we found would not hold at lower organizational levels but additional research is needed to address this question. And, as we stated above, the level of contact between the leader and follower may moderate the current divergence finding. Related to this po\ int, we must also temper our conclusions and resulting prescriptions by the fact that they are drawn from a single sample of upper echelon leaders and direct reports. A strength of\ this sample is that our leaders hailed from multiple companies, industries, countries, and races. At the same time, they were from a single sample of leaders (all of whom were takin\ g part in voluntary executive education, which may communicate an above-average aspiration level) and their direct reports. Thus, in order to feel confident in the current research\ conclusions and recommendations, replication is necessary. We strongly encourage other r\ esearchers to heed this call for replication, including examining potential moderators\ and mediators in the process.Related to the previous point, because of the time demands on our senior\ executive sam - ple, we were compelled to keep the surveys as short as possible (e.g., \ even the short form of the DIT takes 20 minutes to complete). Thus, we were unable to probe pr\ ocesses underlying the divergence finding. For example, while Hypothesis 2 was based in soc\ ial learning theory, we were unable to study the modeling processes through which divergence led to greater perceptions of ethical leadership. Additional research is needed to dete\ rmine and understand these mechanisms. Consistent with our theorizing, a potential proposed m\ echanism for the divergence relationship is followers’ perceptions of the leader’s \ message as novel and more salient (Brown et al., 2005). Leaders with greater cognitive moral dev\ elopment may also elicit admiration from followers because of leaders’ abilities to imp\ art ethical guidance while identifying with followers. Theory also points to other potential \ mechanisms, such as perceived transparency of ethical reasoning (Kish-Gephart et al., 2010)\ . It is possible that leaders who are more sophisticated ethical reasoners are also more likel\ y to ruminate over challenging ethical issues, feel confident in talking about ethical issu\ es, and thus be more likely to verbalize their reasoning to followers, providing followers wi\ th a window into their sophisticated reasoning. Finally, another social cognitive theory, moral\ self-regulation (Bandura, 1991), proposes that high moral self-regulators engage in se\ lf-monitoring, judg- ment relative to personal standards, and affective self-reaction in resp\ onse to ethical dilem- mas. It is possible that leaders who are advanced ethical reasoners are \ also high moral self-regulators, engaging their personal ethical standards when making m\ oral judgments. If this engagement is apparent to followers, it may, in turn, lead to stronger perceptions that the leader is an ethical leader who personally cares about ethical issue\ s in the organization at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 680 Journal of Management / March 2013 as well as in his or her personal interactions. These speculations provi\ de interesting directions for future research.Finally, our study was cross-sectional. Therefore, we cannot determine c\ ausality in the relationship between cognitive moral development divergence and percepti\ ons of ethical leadership. However, theory supports the currently proposed direction. F\ uture research should involve a longitudinal design and consider questions such as, How long does it take for fol- lowers to perceive ethical leadership, and do these perceptions change o\ ver time? In the current sample, direct reports were with their leaders for an average of\ 2.59 years (SD = 2.17), presumably enough time to develop perceptions of ethical leadership. How\ ever, the cross- sectional design of this investigation did not allow a deeper analysis t\ o determine questions of how the length of the pairing affected perceptions of ethical leadership and if \ these percep- tions changed over time.

Conclusion The current investigation sheds light on an important domain of the lead\ er–follower organizational experience—perceptions of executive ethical leadership\ . We find that leaders who are more advanced ethical reasoners are more likely to be perceived \ as ethical leaders.

More importantly, when the leader’s cognitive moral development diver\ ges from and is above that of the follower’s, perceptions of ethical leadership are m\ aximized. This finding is consistent with the social learning theory foundation of ethical lead\ ership and the notion that executives of higher ethical reasoning are more likely to be looked up to as ethical lead- ers by their direct reports. Given that ethical leaders have the potenti\ al to affect a wide array of individual, organizational, and societal outcomes, it is particularly important to under- stand the influences on followers’ perceptions of executive ethical leadership.

Notes 1. Because of the upward curvature along the misfit line and the slight \ upward curvature evidenced in the lower left-hand corner of our response surface (see Figure 1), we wanted to \ statistically confirm that divergence when the follower was above the leader did not result in a maximization of percep\ tions of ethical leadership, as was the case when the leader was above the follower. To do so, we chose a first-perce\ ntile leader P-score (i.e., 60) and a fourth- percentile follower P-score (i.e., 20; again, set by the percentile cutoffs indicated by Rest, 1993) to indicate one point along the X = –Y line. We then reversed these values so that the follower’s P-score was in the first percentile and the leader’s P-score was in the fourth percentile and tested the significance in the change between these two points in the line. If our suspicions based on the appearance of the gra\ ph were confirmed, that is, that it was when the leader was above the follower but not when the follower was above th\ e leader that perceptions of ethical leader- ship were maximized, then the difference between these points would be s\ ignificant. If, however, divergence in both directions led to equivalent perceptions of the leader’s ethical leadership, then this difference would be non- significant. As predicted, this difference was significant (F = 5.28, p = .02), suggesting that divergence where the leader was above the follower did not result in the same outcome for per\ ceptions of ethical leadership, as did the case where the follower was above the leader. 2. We should also note that Schminke, Ambrose, and Neubaum (2005) used a different Defining Issues Test index: the N2. However, direct comparisons between the N2 score and the P-score are possible, as the N2 has been adjusted to reflect the same mean and standard deviation as the P-score.\ at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Jordan et al. / Ethical Leadership 681 References Antonakis, J., Bendahan, S., Jacquart, P., & Lalive, F. 2010. On making causal claims: A review and recommenda-tions. Leadership Quarterly, 21: 1086-1120.

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