Do Business Ethics Pay Off

Abstract

The ability to attract highly qualified employees constitutes a significant competitive advantage, and is ultimately linked to an organization’s economic success. Creating and maintaining organizational attractiveness is therefore crucial to organizations. While previous research has demonstrated that an organization’s ethical conduct (e.g., corporate social responsibility) enhances its attractiveness for potential employees, there is no empirical evidence on whether the ethical behavior of an organization’s leaders can also affect organizational attractiveness. Using both experimental and correlational data we investigate the influence of leader ethical behavior on organizational attractiveness and examine the underlying mechanisms behind this relationship. In line with our hypotheses, ethical leader behavior leads to significantly higher ethical leadership ratings and to significantly higher ratings of organizational attractiveness. Furthermore, higher ethical leadership ratings were associated with str...