Leading with Integrity: CEO Transformational Leadership as a Driver of Ethical Culture and Organizational Success
Keywords:
transformation leadership, ethical culture, CEO, firm performanceAbstract
In rapidly evolving and highly competitive business environments, it is crucial for top leaders to steer organizations towards success while maintaining high ethical standards. This study examines the impact of CEO transformational leadership on organizational ethical culture and firm performance. Specifically, it explores how transformational leadership by CEOs fosters an ethical culture, thereby enhancing overall firm performance. Using a convenience sampling method, data were collected via questionnaires from 64 executives and managers across 20 companies in industries including air express transportation, freight forwarding, pharmaceuticals, contract manufacturing, and automotive manufacturing.
The findings reveal a significant positive relationship between CEO transformational leadership and organizational ethical culture (β = 0.797, p < 0.001, R² = 0.672), indicating that visionary and ethical leadership is pivotal in cultivating an ethical organizational environment. Moreover, the study demonstrates a positive correlation between organizational ethical culture and firm performance (β = 0.543, p < 0.001, R² = 0.618), suggesting that a culture characterized by shared norms, values, and ethical practices enhances firm performance by improving employee satisfaction, reducing misconduct, and strengthening reputation. Mediation analysis confirms that organizational ethical culture significantly mediates the relationship between CEO transformational leadership and firm performance (indirect effect = 0.176, p < 0.001), highlighting the indirect effect of transformational leadership on performance outcomes through the establishment of an ethical culture.
These results provide practical implications for managers, underscoring the importance of investing in leadership development and fostering an ethical organizational culture to achieve sustainable performance.
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