J Bus Ethics

DOI 10.1007/s10551-014-2162-3

How Ethical Leadership Shapes Employees Job Performance:

The Mediating Roles of Goal Congruence and Psychological
Capital
Dave Bouckenooghe Asma Zafar
Usman Raja

Received: 13 June 2013 / Accepted: 23 March 2014

Springer Science+Business Media Dordrecht 2014

Abstract Drawing from research on ethical leadership,

psychological capital, and social learning theory, this study
investigated the mediating effects of goal congruence and
psychological capital in the link between supervisors
ethical leadership style and followers in-role job performance. Data captured from 171 employees and 24 supervisors showed that ethical leadership has a positive effect
on followers in-role job performance, yet this effect is
explained through the role of psychological capital and
followerleader goal congruence, providing evidence of
mediation. These findings have significant implications for
research and practice.
Keywords Ethical leadership  Psychological capital 
In-role job performance  Goal congruence  HLM

Introduction
Ethical leadership is considered important for organizations because it helps reduce business costs (Thomas et al.
2004). Numerous studies have explored the beneficial
impact ethical leadership has on reducing unethical practices and harmful follower behaviors (Mayer et al. 2009;
Walumbwa and Schaubroeck 2009). However, relatively

D. Bouckenooghe (&)  A. Zafar  U. Raja

Faculty of Business, Brock University Goodman School of
Business, 500 Glenridge Avenue, Saint Catharines,
ON L2S 3A1, Canada
e-mail: dbouckenooghe@brocku.ca
A. Zafar
e-mail: az10jc@badger.ac.brocku.ca
U. Raja
e-mail: uraja@brocku.ca

less attention has been paid to the effects of ethical leadership on followers in-role performance (e.g., Walumbwa
et al. 2011b, 2012; Piccolo et al. 2010). Few studies have
examined how and why ethical leadership relates to in-role
performance; however, a framework that has been very
instrumental in explaining this relationship is Brown
et al.s (2005) social learning perspective. One of the basic
assumptions of this framework is that ethical leaders
influence the conduct of followers via modeling. By
demonstrating moral management behavior, such as communicating about ethics and rewarding employees based on
ethical compliance, ethical leaders as role models encourage followers not to engage in behaviors that may compromise bottom-line performance (Brown et al. 2005;
Piccolo et al. 2010).
While the relationship between ethical leadership and
in-role performance has received little research attention,
research about the intervening mechanisms through which
ethical leadership relates to task performance is even
scarcer (e.g., Piccolo et al. 2010; Walumbwa et al. 2011b,
2012). To the best of our knowledge, there are three studies
that explain the processes through which ethical leadership
is related to performance (Piccolo et al. 2010; Walumbwa
et al. 2010, 2012). In these studies, the quality of the
relationship between leaders and followers appears to play
a key role in ethical leadership having a positive impact on
employees job performance (Walumbwa et al. 2011b,
2012). While previous studies mainly focused on trust as an
indicator for assessing the quality of the relationship (Pillai
et al. 1999; Schaubroeck et al. 2011 as cited in Zhu et al.
2013), this study focuses on the alignment in goals between
leaders and followers as a potentially important mechanism
that explains how ethical leadership is related to followers
in-role job performance. More specifically, building upon
Brown et al.s (2005) social learning perspective, we

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D. Bouckenooghe et al.

assume that ethical leaders instill similar goals and values

among their followers (De Hoogh and Den Hartog 2008),
which in turn increases the likelihood that these followers
will engage in behaviors that contribute to the realization
of these goals (Walumbwa et al. 2011b).
Second, while earlier studies connected the motivational
impact of ethical leadership to the motivational propensity
inherent to meaningful and high quality relationships
between followers and leaders and its mediating effect on
in-role job performance (e.g., Walumbwa et al. 2011b;
Avey et al. 2012), they did not give sufficient attention for
including motivational resources that reside at the individual level, which are equally, if not more, important
(Hobfoll 2002). One such variable that may be of great
value in further unpacking the relationship between ethical
leadership and followers in-role performance is psychological capital (PsyCap). PsyCap has emerged as an
important part of research on positive organizational
behavior (Avey et al. 2010), and it represents an overarching individual motivational propensity that accrues
through positive psychological constructs such as efficacy,
optimism, hope, and resilience (Luthans et al. 2007a). Not
only has it been found to play a vital role in explaining
employee performance (Abbas et al. 2012; Peterson et al.
2011; Luthans et al. 2007a, 2008; Norman et al. 2010), but
prior studies also reveal that PsyCap acts as a mediator
between other styles of leadership (e.g., authentic leadership and transformational leadership) and different follower outcomes (Gooty et al. 2009; Rego et al. 2012;
Walumbwa et al. 2011a). Building further on this research,
and drawing from Browns social learning theory perspective of ethical leadership, it is assumed that ethical
leaders proactive communication about what is (un-)ethical behavior, and their transparent and open information
sharing, gives followers a model of what is appropriate
behavior to be successful at work. This clarity and transparency in expectations increases followers motivation in
Fig. 1 Graphical representation
of the studys conceptual model

Level 2 (work unit)

the form of increased efficacy, hope, optimism, and resilience (Luthans et al. 2007a). Therefore, it is pivotal for
research that explores the relationship between ethical
leadership and in-role performance to include psychological capital as a potentially important mediator variable.
Taken together, we thus seek to make the following
contributions. First, we focus on the mediating role of a
critical, yet scarcely investigated, aspect of employee
supervisor relationships in the ethical leadershipemployee
job performance link, namely, followerleader goal congruence. Second, we identify and examine the role of a
motivational resource (i.e., PsyCap) as a critical mechanism through which ethical leadership positively influences
performance. By incorporating goal congruence between
followers and leaders, along with PsyCap (for the first
time), we respond to previous calls to identify the mechanisms that help us to make sense of how ethical leadership
affects followers in-role job performance (Brown and
Trevino 2006; Walumbwa et al. 2010). In this study, we
use theories of ethical leadership and social learning to
address the abovementioned challenges. From these theories, we derive our studys hypotheses and develop the
conceptual framework summarized in Fig. 1.

Theory and Hypotheses

Ethical Leadership and Employees Job Performance
The communitys increased attention to morally acceptable
business practices by managers has led to an emerging
interest in ethical leadership (Trevino et al. 2006).
Although ethical leadership has had considerable intuitive
support, only recently has this leadership approach
received strong theoretical support in the management literature (e.g., Brown and Trevino 2006; Brown et al. 2005).
Ethical leadership has been identified as a valid distinct
Level 1

Level 1

Psychological capital

Ethical leadership

In-role job performance

Follower-leader goal
congruence

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Ethical Leadership and Job Performance

leadership construct rather than just another aspect of

major leadership practices (e.g., transformational, transactional, and authentic leadership) (Brown and Trevino 2006;
Brown et al. 2005; Walumbwa et al. 2011b). In their
seminal work, Brown et al. (2005) defined ethical leaders
as considerate, trustworthy, and morally upright individuals who make just decisions, candidly communicate
acceptable ethical standards to their followers, and become
excellent role models by practicing these ethical standards
themselves (p. 120). Ethical leadership incorporates two
important dimensions. The first is the moral person
dimension, which overlaps with the ethical dimensions
inherent to more traditional leadership styles (e.g., transformational leadership, authentic leadership). Moral persons possess personal traits and characteristics such as
honesty, integrity, and trustworthiness. The second
dimension is that of the moral manager, who proactively
seeks to influence followers ethical conduct (Brown and
Trevino 2006). These proactive efforts encompass the
communication of high performance expectations and rolemodeling behaviors that are normatively appropriate and
good for the collective using reinforcement systems to hold
people responsible for appropriate conduct while treating
people fairly and with respect (Brown and Mitchell 2010;
Toor and Ofori 2009; Trevino et al. 2006). While other
leadership styles, such as transformational and authentic
leadership, also capture leaders personal traits, what
clearly sets ethical leadership apart from more traditional
leadership styles is the hands-on approach that characterizes the moral manager dimension (Brown et al. 2005;
Piccolo et al. 2010; Walumbwa et al. 2010).
Empirical research on ethical leadership is still in its
infancy, yielding a number of pivotal questions that remain
to be answered (Mayer et al. 2009). In this inquiry, we
address one such key question, which is exploring the
processes through which ethical leadership relates to
employees in-role job performance. A number of studies
have demonstrated a link between ethical leadership and
employee outcomes, including citizenship behaviors,
deviant behaviors, and employees ethical conduct and
cognitions (Avey et al. 2010; Piccolo et al. 2010; Schaubroeck et al. 2012; Walumbwa et al. 2010). Brown et al.
(2005), Piccolo et al. (2010), and Walumbwa et al. (2010)
all suggest that through their normatively appropriate
(Brown et al. 2005, p. 120) conduct and candid communication of ethical standards, ethical leaders render themselves as credible role models and important sources of
information. This develops a shared understanding of
acceptable behaviors among followers and makes them
learn and emulate their leaders conduct, thereby ultimately
enhancing task performance (Piccolo et al. 2010; Walumbwa et al. 2011b). Banduras (1997) social learning
perspective offers a comprehensive framework to explain

how ethical supervisors exert their influence on followers

task-related performance. This theory proposes that ethical
leadership exerts its influence on followers conduct in
large through modeling (Brown et al. 2005; Walumbwa
and Schaubroeck 2009). Followers can learn what behavior
is required and expected to perform well on the job via role
modeling. Ethical leaders are attractive and legitimate role
models that hold their followers attention, and they
influence them effectively by helping their employees
reach their potential at work (Bandura 1986; Brown et al.
2005). In sum, it is argued that ethical leaders have a
positive impact on employees performance because,
through rewarding or punishing (in)appropriate behavior,
they clarify to the followers that what the right thing is to
do on the job (De Hoogh and Den Hartog 2008).
Some studies have also explored the processes underlying the ethical leaderfollower outcomes link (Brown
et al. 2005; Piccolo et al. 2010; Walumbwa et al. 2011b)
and have demonstrated that affective trust between both
parties is a crucial mediating mechanism (Epitropaki and
Martin 2005; Manz and Sims 1993). While we acknowledge the importance of the quality of social exchange
between leaders and followers measured as affective trust
(Zhu et al. 2013), this emphasis on trust may have obscured
the consideration of other dimensions or facets that define
high quality relationships between followers and leaders
(Zhang et al. 2012). In this regard, we focus on goal congruence as an important indicator of high quality relationships, reflecting the extent to which employees share a
common perspective, goal, or understanding with their
supervisors (Cicourel 1973). Additionally, few studies have
made an attempt to explain how ethical leadership has a
positive indirect effect on employees job performance
shaped through individual psychological resources of
motivation. This is somewhat surprising because several
theories in OB emphasize how pivotal psychological
resources of motivation are to successful performance
(Gooty et al. 2009; Hobfoll 2002). Furthermore, a number
of scholars (Avolio and Gardner 2005; Brown and Trevino
2006; Walumbwa et al. 2008) and practitioners (George
2003) argue that leader behaviors that draw upon and
promote an internalized moral perspective and positive
ethical climate enable the emergence of employees positive behaviors and psychological capacities. Henceforth,
this study not only considers the role of goal congruence
between followers and leaders but also takes into account
the mediating effect of psychological capital in the ethical
leadershipperformance link.
The Role of FollowerLeader Goal Congruence
Followerleader goal congruence captures the presence of
shared goals and values between followers and leaders

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D. Bouckenooghe et al.

(Nahapiet and Ghoshal 1998), and by extension, it indicates whether followers perceive a strong fit with their
organization overall (Vancouver and Schmitt 1991). Several studies have used goal congruence as an indicator of
the quality of relationships between followers and leaders
(De Clercq et al. 2009; Merlo et al. 2006). When
employees experience high levels of similarity between
their own goals and those of others in the organization,
including their supervisor (Cropanzano and Mitchell 2005),
they are more likely to engage in positive behaviors and
avoid harmful activities that might undermine the organizations performance (Colbert et al. 2004).
We argue for a positive relationship between ethical
leadership and followerleader goal congruence. Conceptually, ethical leaders, through their caring style, transparent
information sharing style, and high moral values, are likely
to be seen as trustworthy and attractive role models who
promote identification with the organization by conveying
values and goals that resonate with their followers goals
and values (Tyler 1997; Walumbwa et al. 2011b). With
their proactive actions aimed at encouraging high moral
standards, ethical leaders are more likely to have a major
influence on the values internalized by followers. Because
of their perceived credibility and attractiveness as role
models, ethical leaders arouse a collective sense of mission
(Conger 1999). Thus, prior research suggests that ethical
leaders influence followers because they are attracted to the
leaders vision and values (Bono and Judge 2003; Howell
1988; Shamir and Lapidot 2003). Put differently, ethical
leadership should be associated with followerleader goal
congruence. Accordingly, we formulate a first hypothesis:
H1 There is a positive relationship between a supervisors ethical leadership style and followerleader goal
congruence.
We also anticipate that followerleader goal congruence
will enhance in-role job performance. When followers and
supervisors share the same goals, followers will have
insight into information useful to their effective functioning. More specifically, a shared understanding of the
importance of specific goals by leaders and their followers
reduces ambiguity about effort allocation and ensures that
their followers activities directly contribute to their organizations overarching goals (Colbert et al. 2008). We also
expect goal congruence to be positively associated with job
performance because goals in themselves are important
motivational forces that help employees select the activities
on which they should expend effort (Locke and Latham
2002). Put differently, goal congruence increases the
motivation to invest high levels of personal energy in work
because such investment is believed to benefit not only the
entire organization but also ones own objectives (Nahapiet
and Ghoshal 1998). Based on the above, we hypothesize:

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H2 There is a positive relationship between follower

leader goal congruence and in-role job performance.
We lastly also propose that the effect of ethical leadership on employees in-role performance operates through
followerleader goal congruence, which is in line with the
argument that high quality relationships provide access to
valuable resources that can be utilized to achieve workrelated individual and group goals (Dakhli and De Clercq
2004; Nahapiet and Ghoshal 1998). Consistent with Nahapiet and Ghoshal (1998) and Tsai and Ghoshal (1998),
we propose that the alignment of goals embedded in the
followerleader relationship directs followers energies
toward task-related behaviors more effectively. Because
ethical leaders candidly communicate their acceptable
behaviors and discipline or reward employees accordingly
while functioning as legitimate role models (Brown et al.
2005), they are likely to establish organizational identification and goal congruence with their followers. This goal
congruence, in turn, becomes important for in-role performance, as it provides cognitions of shared understanding
of organizational objectives and steers employees actions
in the right direction (Nahapiet and Ghoshal 1998; De
Clercq and Sapienza 2006;). Thus, we hypothesize:
H3 Followerleader goal congruence mediates the relationship between ethical leadership and employees in-role
job performance.
The Role of PsyCap
Psychological capital is a positive psychological resource
comprising the four facets of hope, resilience, self-efficacy,
and optimism. These four facets have been found to converge, mirroring the overarching construct of PsyCap
(Avey et al. 2010; Luthans et al. 2007b), which operates as
an important source of internal motivation. Breaking down
the four facets, hope is defined as the perceived capability
to derive pathways to desired goals, and motivate oneself
via agency thinking to use those pathways (Snyder 2002,
p. 249). Hope confers the ability to remain committed for
continuously finding novel ways to accomplish the desired
goal(s). Second, resilience captures a persons ability to
rebound from adversity, uncertainty, conflict, and failure
and can even capture positive change, progress, and
increased responsibility (Luthans 2002; Masten and Reed
2002). Essentially, resilience depicts an individuals positive restoration efforts during unfavorable circumstances.
Third, optimism accounts for an individuals realistic
expectations (Seligman 1998). Lastly, self-efficacy is primarily inferred from Banduras (1997) work, which was
later adapted by Stajkovic and Luthans (1998) to the
workplace as an employees firmly grounded confidence in
marshaling the required resources to accomplish a task in a

Ethical Leadership and Job Performance

specific context. In conclusion, PsyCap has emerged as an

important part of research on positive organizational
behavior (Avey et al. 2010) and has been found to play a
vital role in explaining employee performance (Peterson
et al. 2011; Luthans et al. 2007a, 2008; Norman et al.
2010).
Drawing from Banduras (1986) social learning theory,
and from studies that explored the role of other leadership
styles (e.g., Gooty et al. 2009; Rego et al. 2012), this study
proposes that ethical leadership has a positive direct effect
on employees PsyCap. Social learning theory assumes that
role models serve as a platform for employees behavior.
By observing their role models, followers learn to make
sense of events, which gives them a framework for their
own behavior. In alignment with Lewins (1943) field
theory, psychologically proximal elements in the employees work context have a more dominant effect on their
attitudes and behavior than those that are more distant.
Along these lines of thinking, it is assumed, then, that the
leadership of immediate supervisors has a greater impact
on followers motivations and behaviors than senior management, who are less psychologically proximate to followers (Mayer et al. 2009; Ruiz et al. 2011).
As noted earlier, two key characteristics of supervisors
ethical leadership style are their proactive communication
about what constitute (un)ethical behaviors and their
transparent and open information sharing. Both characteristics contribute to the perception of ethical leaders being
fair and trustworthy role models who provide followers
with constructive and useful feedback about what is
expected from them to thrive at work. Put differently, an
ethical leaders role-modeling can serve as a clear roadmap
for what constitutes desirable behaviors directed toward
goal attainment, which helps build positive psychological
states and resources essential to perform well on the job
(Gardner et al. 2005; Gooty et al. 2009). Our contribution
lies in the development of a model that connects ethical
leadership to in-role performance through motivational
propensity inherent to PsyCap.
More specifically, ethical leaders may enhance followers self-efficacy because ethical leaders are very consistent
in clarifying how followers actions and tasks will contribute to achieve the organizations goals (De Hoogh and
Den Hartog 2008). By encouraging followers to assess the
ethical consequences of their actions and decision-making,
followers learn to think more strategically, which enhances
their perceived ability to execute specific tasks or challenges, and thus contributes to their self-efficacy. Additionally, it is proposed that ethical leaders, by engaging in
behaviors such as honesty, fair treatment of employees, and
consideration of others, are likely to be evaluated by followers as attractive and therefore credible role models
(Howell and Avolio 1992). By engaging in transparent,

fair, and caring actions, and by creating a fair working

environment, the ethical leader becomes an important
source of information, identification and, last but not least,
motivational hope. Furthermore, when confronted with an
obstacle or challenging situation, followers with ethical
leaders are likely to develop more positive coping skills
and are more resilient in the face of adverse situations
(Snyder 2000; Masten 2001) because they can fall back on
leaders who will stand beside them and help them face
those challenges. Lastly, ethical leaders are more likely to
exhibit active and adaptive coping skills when faced with
setbacks (Luthans and Avolio 2003). It has been shown that
when leaders adopt these positive approaches to problem
solving, followers are likely to do the same (Peterson
2000), resulting in the development of a positive outlook or
attribution of events (i.e., optimism). In sum, these ethical
leadership characteristics and actions all seem fundamental
in nurturing PsyCap, and therefore, it is hypothesized:
H4 There is a positive relationship between a supervisors ethical leadership style and followers PsyCap.
With the emerging trend of positive organizational
behavior, several scholars have begun to explore the relationship between PsyCap and a number of desirable workrelated behaviors (Abbas et al. 2012; Gooty et al. 2009;
Luthans et al. 2007b, 2008; Peterson et al. 2011). Based on
these studies findings, we argue for a positive relationship
between PsyCap on in-role employee performance. Significant theoretical and empirical works suggest that individuals who possess stronger levels of psychological
resources are more likely to strive to achieve their workrelated objectives (Frederickson 2001; Gooty et al. 2009;
Hobfoll 2001). Particularly, this view advocates the notion
that employees need to build up strong psychological
resources so they can develop positive work-related cognitions and positive energy that directs them toward positive work-related outcomes. Additionally, these resources
are crucial because they act as armor against the daily
workplace challenges that adversely affect work-related
performance (Gooty et al. 2009; Hobfoll 2001). PsyCap
represents an important psychological resource in the form
of hope, optimism, resilience, and self-efficacy (Gooty
et al. 2009; Luthans et al. 2010), which provides the necessary fuel to perform successfully. More specifically,
being hopeful about ones work has been related to the
motivational drive required to succeed at work, optimism
has been linked to a positive approach toward ones work,
self-efficacy has been associated with the mobilization of
resources required for successful task accomplishment, and
resilience has been related to perseverance in the face of
adversity (Luthans et al. 2010; Norman et al. 2010; Peterson et al. 2011). Consistent with this research, we
hypothesize:

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D. Bouckenooghe et al.

H5 There is a positive relationship between followers

PsyCap and in-role job performance.
Thus far, hypotheses 45 assume that ethical leadership
and PsyCap are positively related to in-role job performance.
Below, we provide a rationale for why ethical leadership has
an indirect effect on in-role job performance through PsyCap. Leaders play a central role in shaping employees
positive psychological states and behavior (Avolio et al.
2004; Howell and Hall-Merenda 1995), mainly because of
their unique position as role models in dispersing cues and
crucial information about effective behavior (Bandura 1986;
Salancik and Pfeffer 1978). Also, several theories have
highlighted how substantial positive psychological resources are in guiding employees to high-level performance
(Frederickson 2001; Gooty et al. 2009; Hobfoll 2002). PsyCap is one of these powerful positive psychological resources, appearing in the form of resilience, efficacy, optimism,
and hope that builds a strong internal drive to perform well.
Not only is PsyCap an important source of superior in-role
performance, but it also acts as an important buffer against
daily workplace stressors that may impede work-related
performance (Avey et al. 2009). Furthermore, building on
social learning theory (Bandura 1986), we argue that ethical
leaders are important role models who provide employees
with a guiding framework that enables them to interpret
events and, in turn, guide their behavior (Salancik and
Pfeffer 1978). By providing positive cues about the work
context and their openness in information sharing, ethical
leaders enable the emergence of subordinates positive
psychological states and behaviors (Brown et al. 2005).
Thus, based on the above proposed arguments, we suggest
that ethical leaders, through their role model behavior, provide constructive feedback to followers, which helps foster a
positive work environment characterized by employees who
are efficacious, hopeful, optimistic, and resilient. PsyCap, in
turn, operates as an internal drive to employees to undertake
activities that are desirable to the organization. To summarize, we argue that supervisors ethical leadership style
serves as a favorable context for PsyCap to flourish. In turn,
this psychological source of internal motivation is manifested in enhanced in-role job performance. Accordingly, we
formulate the following hypothesis:
H6
Employees PsyCap mediates the relationship
between ethical leadership and in-role job performance.

Method
Sample and Procedure
Our sample consisted of 24 groups representing 171 whitecollar employees working in different sectors in Lahore,

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the second largest city in Pakistan. The respondents were

employed in companies that operated in the following
areas: manufacturing (17.5 %), services (29.2 %), banking
and finance (21.6 %), not-for-profit (15.8 %), telecommunication (7 %), consumer goods (7 %), and higher education (1.8 %). Overall, 83 % of the study participants were
male and had an average tenure of 4.8 years with their
present organizations. Furthermore, the majority of the
respondents had worked with at least two organizations.
Pakistan is a collectivistic society with strong religious
influence on all aspects of life. Economically, the country
has low per capita income, a high level of poverty, and high
unemployment rates. The countrys situation is further
complicated by recent waves of violence and terrorism
(OECD 2013). Taken together, the work conditions in
Pakistan are most likely more challenging and stressful on
average in comparison with any Western country and,
therefore, may also yield more pronounced findings than
data from countries with a more stable climate.
English is the official language of correspondence in all
companies that participated in this study. We decided to
target only white-collar employees with degrees from high
schools and universities in Pakistan with English as the
official language of instruction. Thus, given our sampling
frame, we administered the scales in English, which is
consistent with the approach adopted by previous studies in
Pakistan (e.g., Abbas et al. 2012; Butt et al. 2005; Raja and
Johns 2010; Raja et al. 2004).
Access to the participants was gained through personal
and professional contacts of the author(s). The members of
each group reported to a common immediate supervisor
and met on a regular basis to discuss issues related to the
work group unit. Data were collected in two waves over a
6-week period. The measures for ethical leadership, PsyCap, and followerleader goal congruence were completed
during the first wave of data collection. The data for ethical
leadership were aggregated at the group level to be consistent with past research and the notion that employees
working in the same work group are likely to experience
similar leadership behaviors (Dansereau and Yammarino
1998; Kirkman et al. 2009; Shamir et al. 1998). During the
second wave, the 24 supervisors, one for every work unit,
were asked to evaluate the in-role job performance of their
employees. The self- and supervisor-report forms were
similarly numbered for pairing of received responses. A
cover letter attached to both questionnaires that explained
the purpose and scope of the study assured the respondents
of the strictest confidentiality of their responses and that the
decision to participate in the study was voluntary. The
letter instructed the respondents to fill out the self-report
forms and return them directly to the author(s). We
requested that immediate supervisor of each respondent
rate their employees performance.

Ethical Leadership and Job Performance

This design was chosen because it reduces the potential

for common method bias by temporally separating the
measurement of our independent variable and mediators
(i.e., ethical leadership, psychological capital, and followerleader goal congruence) and the dependent variable
(i.e., in-role job performance). The IV and DV were
measured at two points in time, and assessments of ethical
leadership were gathered from the employees while their
in-role job performance was supervisor-rated. The potential
for common method bias between the IV and the mediators
was reduced because ethical leadership is a group level
variable, whereas the mediators were measured at the
individual level. Of the total of 400 surveys distributed, we
received 171 paired usable responses, resulting in a
response rate of 43 %.

research on how to assess ethical leadership (Mayer et al.

2009, 2012; Walumbwa and Schaubroeck 2009; Walumbwa et al. 2011b, 2012), we decided to aggregate ethical
leadership to the work group level to reflect members
perceptions of ethical leadership behavior. Thus, to obtain
a measure of ethical leadership we averaged across group
members evaluations of their group supervisor. Not only is
our approach similar to previous research, another positive
by-product is that by aggregating ethical leadership to the
group level we overcame a potential problem with samesource response bias (Walumbwa et al. 2011b).
Psychological Capital was measured using the psychological capital questionnaire (PCQ). As in the original
PCQ, we gathered self-reports about individuals hope,
resiliency, self-efficacy, and optimism. The sample items
include the following: (a) efficacy: I feel confident in
representing my work area in meetings with management,
and I feel confident helping set targets/goals in my work
area; (b) hope: Right now I see myself as being pretty
successful at work, and If I should find myself in a jam
at work, I can think of many ways to get out of it;
(c) resilience: When I have a setback at work, I have
trouble recovering from it, moving on (R), and I usually
take stressful things at work in stride; and (d) optimism:
I always look on the bright side of things regarding my
job, and If something can go wrong for me work-wise, it
will (R). We conducted a second-order CFA to determine
whether optimism, mental resiliency, hope and self-efficacy loaded on PsyCap as a second-order factor. The
results yielded a good fit (v2/df = 1.506; GFI = .88;
IFI = .93; RMR = .03; RMSEA = .05). The internal
consistency reliability of the 24 items measuring PsyCap
was .91.
FollowerLeader Goal Congruence was operationalized
and measured following De Clercq and Sapienza (2006). The
participants were required to assess their relationship with
their immediate supervisors in terms of goal alignment. This
assessment was measured using five items (e.g., My
supervisor and I think alike on most issues with respect to the

Measures
Table 1 provides the descriptive statistics (i.e., means and
standard deviations), bivariate correlations, and reliabilities
of the scales used. All scales were measured using 5-point
Likert scales except for the in-role job performance scale
(7-point Likert scale).
Ethical Leadership was measured using the ethical
leadership scale (ELS) proposed by Brown et al. (2005).
Individual respondents were asked to indicate their agreement or disagreement regarding the ethical conduct of their
immediate supervisors. All 10 items as proposed by Brown
et al. (2005) were used in the current study. Example items
for ethical leadership include the following: My supervisor listens to what employees have to say, and My
supervisor conducts his/her life in an ethical manner. A
one-factor solution using the 10 items yielded the best fit
(v2/df = 1.83; GFI = .93; IFI = .97; RMR = .03;
RMSEA = .07). The internal reliability of ethical leadership was .91. Consistent with the notion that work group
members are likely to be consistent (homogeneous) in their
perceptions of the leader (Dansereau and Yammarino
1998; Shamir et al. 1998), and following mainstream
Table 1 Correlations and descriptive statistics
M(SD)

1. Ethical leadership

3.98(0.68)

(.91)

2. Psychological capital

4.04(.0.49)

0.60**

(.91)

3. Goal congruence
4. In-role job performance

3.87(0.62)
4.93(0.74)

0.50**
0.28**

0.37**
0.40**

(.71)
0.37**

(.72)

5. Gender

0.09

0.05

0.04

0.05

6. Age

0.03

0.01

0.01

-0.03

-0.25**

0.04

0.04

-0.04

-0.07

-0.15

7. Tenure

4.83(5.69)

0.56***

Notes ** P \ 0.01 (two tailed test); With the exception of ethical leadership (Level 2, N = 24), all other variables are Level 1 (N = 171)
The numbers in italics on the main diagonal represent the internal consistency of the measures

123

D. Bouckenooghe et al.

organization; My supervisors work-related goals are

fully aligned with mine). The alpha reliability was .71 for
followerleader goal congruence (v2/df = .21; GFI = .99;
IFI = .99; RMR = .01; RMSEA = .01).
In-role Job Performance here refers to the supervisors
assessment of each employees performance in their workgroup. Seven items were adopted from Williams and
Anderson (1991). Example items are the following:
Employee X meets his/her formal performance requirements and Employee X adequately completes his/her
assigned duties. A one-factor CFA using seven items
yielded an excellent fit (v2/df = .71; GFI = .99; IFI = .99;
RMR = .03; RMSEA = .01). The seven items were
averaged to calculate the composite in-role job performance (a = .72).
Control variables To account for alternative explanations for variations in in-role performance, we controlled
for employees gender (0 = male; 1 = female), age, and
tenure (number of years worked in the firm). We included
these three demographic variables as control variables
because previous studies indicated that all three impact
supervisor rated in-role performance. More specifically, a
recent meta-analysis showed that females, on average,
were rated as performing better than males (Roth et al.
2012). Also, different studies have examined whether
performance ratings can be attributed to differences in
employees age and found that supervisors rated older
subordinates lower than younger subordinates (Ferris et al.
1985). Lastly, organizational tenure was included as a
control variable because a recent meta-analysis indicated
that organizational tenure was positively related to in-role
performance after controlling for chronological age (Ng
and Feldman 2010).

Analysis Procedure
Step one in our analysis was to examine the construct
validity of our measures. In addition to CFA analyses and
reliability analyses, we examined whether we could justify
the aggregation of ethical leadership at the work unit level
by computing the intraclass correlation coefficients and
Rwg(j) values (James et al. 1993). Because of the nesting
of data (i.e., employees were nested within units), we used
hierarchical linear modeling (HLM: Raudenbush et al.
2011) to test our hypotheses. First, we estimated a null
model that had no predictors at either level 1 (individual
level) or level 2 (unit level) to partition performance variance into within and between units. Next, we tested for a
2-1-1 multilevel mediation model (Zhang et al. 2009) using
HLM 7.0 (Raudenbush et al. 2011). Following Hofmanns
recommendations, we used grand-mean centering for the
independent variables at each level.

123

Results
Construct Validity
We confirmed the discriminant validity of the four focal
constructs. First, following Fornell and Larcker (1981), we
computed the AVE estimates of the constructs and found all
estimates to be greater than the squared correlations
between corresponding pairs of constructs (see Table 2).
Second, significant differences were found between the
unconstrained model and the constrained model (Anderson
and Gerbing 1988) for all six pairs of constructs (see
Table 3). For example, for the psychological capitalethical
leadership pair, the fit of the unconstrained model
(v2 = 627.00) was significantly better (Dv2(1) = 79.72,
P \ .001) than that of the constrained model (v2 = 706.73).
Data Aggregation
As noted earlier, and consistent with previous research, we
aggregated ethical leadership at the work unit level.
Although it has long been a running debate within leadership theory and research at large whether leadership
should be measured at the work unit level (Dansereau and
Yammarino 1998), the mainstream suggests that work
group members are likely to be consistent (homogeneous)
in their perceptions of the leader. A leader, these scholars
suggest, is likely to treat his/her subordinates in a similar
and consistent fashion, causing subordinates to describe
their leader in similar terms. Furthermore, the interaction
among team members is likely to render team members
homogeneous in their perceptions of their leader. This
implies that ethical leadership is a construct that is shared
by members of a unit. Thus, if ethical leadership captures
consistent shared observable behavior instead of just a
projection of followers implicit theories or response tendencies, followers should show greater within-group or
within-leader homogeneity in their ELS scores (ethical
leadership) than would be expected on the basis of chance.
Because shared unit properties emerge as a collective
aspect of the unit as a whole, one has to check for restricted
within-unit variance (Klein and Kozlowski 2000). Two
indices were used to compute the level of restricted withinunit variance: (1) Rwg(j), an index of within-group consensus and agreement (James et al. 1993; Lebreton and
Senter 2008), and (2) the intraclass correlation coefficient
ICC(1) (Bliese 2000). The median Rwg(j) values for ethical leadership (.95) indicate strong agreement within each
unit about ethical leadership. The ICC(1) has a medium
effect size with a value of 0.17 and meets the cutoff value
recommended by Bliese (2000). In sum, because the values
of Rwg(j) and ICC(1) were well above the acceptable cut
offs, aggregation is justified and in line with previous

Ethical Leadership and Job Performance

Table 2 AVE-based test for
discriminant validity

PsyCap psychological capital,

EthLead ethical leadership,
GoalCong goal congruence,
Perf in-role performance,
DV discriminant validity

Table 3 v2 difference test for

discriminant validity

Average variance explained (AVEs)

EthLead

PsyCap

EthLead $ PsyCap

0.52

0.35

EthLead $ GoalCong

0.52

EthLead $ Perf

0.52

0.41
0.35

PsyCap $ Perf

0.35

GoalCong $ Perf

v2 values

0.34

0.38

0.09

0.18

0.41

0.19

0.41

0.29

v2 difference

Constrained
(Cov = 1)

PsyCap psychological capital,

EthLead ethical leadership,
Perf in-role performance,
DV discriminant validity,
DF degrees of freedom,
CV critical value

0.40
0.40

Support for DV
(AVE [ common
variance)

Perf

0.40

PsyCap $ GoalCong

Pairs of constructs

GoalCong

Common variance

DDF

(CV)

Unconstrained
(Cov = 1)

Discriminant
validity
(v2 diff [ CV)

EthLead $ PsyCap

706.73

627.01

79.72

3.84

EthLead $ GoalCong

183.73

123.57

60.17

3.84

EthLead $ Perf
PsyCap $ GoalCong

209.67
496.17

134.63
397.62

75.04
98.55

1
1

3.84
3.84

Y
Y

PsyCap $ Perf

502.79

418.29

84.50

3.84

84.26

34.70

49.56

3.84

GoalCong $ Perf

studies that measured ethical leadership (Mayer et al. 2009,

2012; Walumbwa and Schaubroeck 2009; Walumbwa et al.
2010, 2012).
Findings
Before testing our hypothesis, we investigated whether
there was sufficient significant systematic variance in
supervisor-rated in-role job performance. The results of a
null model revealed 20 % of variance in job performance
between work groups (0.11/0.56). As shown by the results
in Table 4, ethical leadership is significantly related to inrole job performance. The findings also indicate that ethical
leadership is significantly and positively related to followerleader goal congruence and PsyCap after controlling
for age, gender, and tenure. The results provide support for
H1 (model 2, c = 0.84; P \ .001) and H4 (model 3,
c = 1.04; P \ .01). Additionally, in support of H2, we
found that followerleader goal congruence is positively
related to in-role job performance (model 4, c = 0.36;
P \ .01). Furthermore, providing support to H5, our study
demonstrated a positive relationship between PsyCap and
in-role job performance (model 4, c = 0.42; P \ .01).
In addition, we followed Kenny et al.s (2003) procedure to test the mediating effects of followerleader goal
congruence (H3) and PsyCap (H6). In step 1, ethical
leadership should have a significant relationship with inrole job performance, which was the case (model 1,
c = 0.55; P \ 0.05). In step 2, ethical leadership should be

related to followerleader goal congruence (H1) and PsyCap (H4). Lastly, for full mediation of the effect of our
mediating variables (i.e., followerleader goal congruence
and PsyCap), the relationship between ethical leadership
and in-role job performance should become non-significant, or at least the strength of the relationship between
ethical leadership and in-role job-performance should
weaken (Table 4, model 4). Taken together, the results
reveal that the ethical leadershipperformance relationship
was fully mediated by followerleader goal congruence
and psychological capital, offering support for H3 and H6,
respectively. Lastly, a post hoc analysis also indicated that
an incremental 4 % of variance in job performance was
explained when PsyCap was included while controlling for
followerleader goal congruence (model 4).

Discussion
Theoretical Implications
Recent work has highlighted the importance of linking
leadership in general to in-role job performance, yet relatively limited attention has been devoted to the mechanisms through which ethical leaders influence followers to
achieve desired outcomes (Kark and Van Dijk 2007). By
exploring the simultaneous roles of followerleader goal
congruence and PsyCap, we respond to the call that the role
of the follower (i.e., PsyCap) should be equally important

123

D. Bouckenooghe et al.
Table 4 HLM results

In-role
job performance (M1)

Goal congruence
(M2)

Psychological
capital x(M3)

Step 2
Age

c (SE)
.01 (.07)

c (SE)
.05 (.10)

Gender

-.01 (.15)

.01 (.14)

Tenure

-.01 (.00)*

.01 (.01)

Ethical leadership

.84 (.20)***

1.04 (.30)**

.29

.19

Step 1

c (SE)

Age

.05 (.07)

Gender

-.00 (.11)

Tenure

-.02 (.00)*

Ethical leadership

.55 (.21)*

.17

With the exception of ethical

leadership (Level 2, n = 24), all
other variables are Level 1
(n = 171). M model. Values in
parentheses are standard errors
* P \ .05; ** P \ .01;
** P \ .001

Step 3

c (SE)

Age

.00 (.06)

Gender

-.02 (.14)

Tenure

-.00 (.01)

Ethical leadership

.46 (.25)

Goal congruence

.36 (.08)**

PsyCap

.42 (.12)**

R2

.30

for understanding the influence of the leadership process on

behavioral outcomes, as should the quality of the relationship between leader and follower. This is a critical
distinction from other studies that only looked at the
quality of the relationship between leaders and followers as
a key mechanism that explains the instrumental role of
ethical leadership in shaping followers in-role job performance (e.g., Schaubroeck et al. 2012). Put differently,
our findings show that ethical leadership may enhance
followers in-role job performance by fostering peoples
positive motivation in the form of PsyCap.
Our finding that followers perceptions of ethical leadership are positively related to their PsyCap is novel and
conceptually appealing because it integrates the ethical
dimension of leadership with the motivational propensity
of PsyCap. These findings are promising, especially when
considering that scholars of positive organizational
behavior have called for investigations into the ways in
which followers PsyCap can be developed (e.g., Luthans
et al. 2007b). From a practical perspective, this finding
highlights the significance of an ethical leader in energizing
the workforce toward positive psychological resources.
Also, several critics of the positive organizational behavior
movement (Fineman 2006; Lazarus 2003) have expressed
concern about the utility of PsyCap with respect to work
outcomes. With this study, we weigh in on this topic by

123

In-role job
performance
(M4)

providing support for scholarly conceptual positions, indicating that PsyCap is related to in-role job performance
(Luthans 2002; Wright 2003).
Another primary contribution is that we not only identified a psychological resource variable (i.e., PsyCap) by
which ethical leadership is associated with in-role performance, but we also highlighted social learning theory
(Bandura 1986) as an explanatory framework by which
ethical leaders impact their followers. Consistent with the
theorizing of Brown et al. (2005), we found that follower
leader goal congruence is an important intervening mechanism in the ethical leadershipperformance relationship.
By including multiple mediating mechanisms, our study
represents an important attempt to integrate psychological
processes and the role of the quality of the relationship
between leaders and followers in explaining the relationship
between ethical leadership and employee performance.
Although this study does not provide a direct test of
whether ethical leadership varies or is universal, the fact
that our data were collected in Pakistan, a country that
differs significantly from many western developed countries, is a first step in the right direction. Being a collectivistic society with strong religious influence on all aspects
of life (Khilji 2002), the application of the ethical leadership construct and westernized theoretical frameworks (i.e.,
social learning theory) on data collected from Pakistan

Ethical Leadership and Job Performance

appears to be very robust, as most of our hypotheses were

supported, contributing to the cross-cultural validity of
ethical leadership and performance research.
Managerial Implications
Apart from many theoretical implications, the studys
findings also have substantial practical implications. First,
organizations should value ethics and treat it as a primary
pillar on which the foundation of their organizational culture is built. For example, leaders integrity, transparency,
and trust are likely to promote a culture where high PsyCap
becomes the norm. More specifically, our findings suggest
that ethical leadership not only has a normative role by
encouraging ethical behavior among followers (Brown
et al. 2005; Brown and Trevino 2006), it also has a positive
impact on in-role performance by strengthening followers
individual motivational propensity (i.e., PsyCap) and
alignment in goals between leaders and followers. The fact
that ethical leadership indirectly affects followers performance makes the case that organizations should emphasize
ethics as an essential part of their leadership development
programs. Additionally, our findings imply from a strategic
viewpoint that organizations that include ethics as an
important criterion in their employee recruitment and
promotion strategies may benefit from the positive effects
of ethical leadership on employees in-role performance.
Future Research Directions and Limitations
There are some limitations of the study, particularly with
the study design. Because our study is cross-sectional by
design, no inferences about causality can be drawn. For
example, it could be that PsyCap shapes followers perceptions of ethical leadership and not just the causal order,
as we predicted. Therefore, future directions of research
should include a temporal or longitudinal component to
address the causality issues. Furthermore, taking a longitudinal approach to this research stream would allow capturing more data points given throughout a timeframe and
help clarify how fluctuations in a state-like characteristic
such as PsyCap may influence in-role job performance.
Although our sample size was sufficient to detect significant effects in our mediation analyses, future research
will require a larger sample size that would allow testing
our model with a more sophisticated analysis technique,
such as Multilevel Structural Equation Modeling (Hox
et al. 2010). We lastly measured in-role job performance
with evaluations from supervisors. Because prior research
has shown meta-analytically that objective and subjective
performance ratings cannot be equated (Bommer et al.
1995), we encourage future studies to replicate our findings

using objective performance measures from secondary data

where possible.
Additionally, researchers should try to develop better
and more inclusive models that refine our predictions of
our mediator variables followerleader goal congruence
and psychological capital. The inclusion of context variables such as workplace stressors or resources may further
enhance our understanding of the boundary conditions
under which PsyCap and goal congruence mediate the
relationship between ethical leadership and in-role job
performance. With this request for testing more inclusive
models, future studies should perhaps also control for other
leadership styles (e.g., transformational leadership, spiritual leadership, and authentic leadership) that overlap with
the ethical leadership domain.
To conclude, this study also has multiple strengths. The
data for performance were not self-reported, which helped
us reduce potential issues associated with common method
bias (Podsakoff et al. 2003). Also, the context of the current
study differed from most of the developed western countries of North America and Europe, expanding the international perspective of job performance research (e.g., Butt
et al. 2005; Jamal and Al-Marri 2007; Raja et al. 2004). A
final strength of this inquiry is that it simultaneously
examined several intervening mechanisms within the same
study, as this allows determining the relative importance of
each of the mediators. This is an important addition to
previous leadership research that tends to include only one
mediator per study (Walumbwa et al. 2011a).

Conclusion
The main objective of this study was to deepen our
understanding of the relationship between ethical leadership and employees in-role job performance. The perspectives of social learning theory and psychological
capital were applied to further develop our understanding
of the link between ethical leadership and performance.
Second, our data were collected in South Asia, which is
playing an increasingly important role in the global economy, as multinationals are moving to these regions. Unless
we test the theories largely developed in the United States
in non-Western settings, researchers and practitioners
would have little confidence about their generalizability to
those regions (Tsui et al. 2007). Our study provides greater
insights into the generalizability of concepts such as ethical
leadership, PsyCap and followerleader goal congruence in
Pakistan. Even if this study is only a drop in the ocean, we
hope it will encourage other scholars to continue to extend
the knowledge of these concepts or related concepts in
other cultural settings.

123

D. Bouckenooghe et al.

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