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THE IMPACT OF PERCEIVED ETHICAL LEADERSHIP ON EMPLOYEES’ PREDISPOSITION TO BEHAVE ETHICALLY: A CASE STUDY WITHIN A SOUTH AFRICAN-BASED FINANCIAL INSTITUTION

BY

Rudzani Magau 216790034

Submitted in partial fulfilment of the requirements for the degree:

MASTER IN BUSINESS ADMINISTRATION

In the Faculty of Business and Economic Sciences at the

Nelson Mandela University

Supervisor: Dr B. Robinson

April 2019 DECLARATION BY CANDIDATE

NAME : Magau Rudzani STUDENT NUMBER : 216790034 QUALIFICATION : Master in Business Administration TITLE OF PROJECT : The impact of perceived ethical leadership on employees’ predisposition to behave ethically: A case study within a South African-based financial institution.

DECLARATION: In accordance with Rule G5.6.3, I hereby declare that the above-mentioned treatise is my own work and that it has not previously been submitted for assessment to another University or for another qualification.

SIGNATURE :

DATE : 31 January 2019

2019 – Magau R – Nelson Mandela University – MBA I

ABSTRACT

Ethical leaders consistently set ethical principles within the institution and act in accordance with them; hence, leaders should be a key source of ethical guidance for employees. As the business world is constantly evolving, leaders increasingly are required to ethically lead across different sectors. Current literature on ethical leadership and its influence of employees reflects mostly a Western, European and Asian-based private-sector perspective, pointing toward a compliance-oriented understanding of ethical and unethical leadership. This study examined how perceived ethical orientation of a leader has an impact on employees’ predisposition to behave ethically within a South African context.

Qualitative data was collected as the study adopted the interpretivist paradigm, which made it easier for participants to use descriptive words and qualifying statements to express the level of influence their leaders had on their ethical orientation. The target population of the study included all staff of the institution; and participants were chosen using the purposive sampling method. Data was collected from 12 employees using semi-structure interviews. Thereafter, thematic analysis was used to identify and organise participants’ experiences into themes that established the basis for the study findings.

These findings confirmed that perceived leader ethical orientation has an impact on employees’ predisposition to behave ethically. The study found that ethical leaders had a track record of being consistent, honest, trustworthy, truthful and credible, and being a role model. In addition, the study also found that unethical leaders are easily identifiable by their perpetual inability to uphold principles of integrity, reliability, rationality, and social justice and fairness.

The researcher concluded that the moral identity of the leader has an influence on followers’ predisposition to behave ethically or unethically. The implications of this study are that ethical morals, by their very nature, are transferable from one person to the other and ethical leadership was one antecedent through which this transfer

2019 – Magau R – Nelson Mandela University – MBA II

takes place. However, ethical leadership was not the only apparatus that influenced employees’ ethical predisposition and these afford opportunities for future research.

Key concepts: Ethics, leadership, ethical leadership, unethical leadership, ethical behaviour and unethical behaviour.

2019 – Magau R – Nelson Mandela University – MBA III

ACKNOWLEDGEMENTS

To Almighty God, I thank you for the wisdom, courageousness and an understanding that you have blessed me with, which made it possible to complete this qualification. You have indeed made my path straight and renewed my strength throughout the journey. Glory be unto you Almighty God. Proverbs 3: 6 and Proverbs 30: 8-9.

The completion of this treatise would not have been possible without the support, guidance and encouragement of the following: - My late mother, it is with sadness that you left us during the course of this journey; however your love, words of encouragement and support are engraved in my heart. I will forever be grateful for your unfailing love and all the sacrifices you have made to see us grow. Love you Mom. Proverbs 1: 8b. - Dr B. Robinson, thank you for your guidance, encouragement, constructive and timely feedback and an understanding throughout the preparation and completion of this study. - My group members, Lloyd, Bram, Mlu, Sam and all classmates, lecturers, doctors and professors for contributing immeasurably to my learning and development. - Mbeki Mkhize, a brother and mentor, I thank you for planting the seed to commence on this journey and for nurturing it throughout. If it was not for you, I would not have started this journey as earlier as I did. Thank you. - To all the colleagues who participated in this study, thank you for your valuable input, support and taking time off your respective schedules and meeting me for the interviews. - To my family, brothers and friends, thank you for your support and understanding in losing my companionship during the period of my studies. - To Naledi Bangaza, I appreciate the time and effort in reviewing my work and challenging my pattern of thinking in writing this study.

To you all, may God richly bless you and keep you safe. Numbers 6: 24-26.

2019 – Magau R – Nelson Mandela University – MBA IV

TABLE OF CONTENTS

CHAPTER 1 ...... 1 SCOPE OF THE STUDY ...... 1 1.1. INTRODUCTION ...... 1 1.2. PROBLEM STATEMENT ...... 3 1.3. LITERATURE REVIEW ...... 4 1.4. GAPS IDENTIFIED IN EXISTING LITERATURE ...... 8 1.5. RESEARCH OBJECTIVES ...... 9 1.5.1. Primary objective ...... 9 1.5.2. Secondary objectives ...... 9 1.6. RESEARCH QUESTIONS ...... 9 1.7. SIGNIFICANCE OF THE STUDY ...... 10 1.8. RESEARCH METHODOLOGY ...... 11 1.8.1. Research paradigm ...... 11 1.8.2. Research approach ...... 11 1.8.3. Sampling design ...... 12 1.8.4. Data collection ...... 12 1.8.5. Ethical considerations ...... 12 1.8.6. Data analysis method ...... 13 1.8.7. Method of reporting and synthesis ...... 13 1.9. DEFINITION OF CONCEPTS ...... 13 1.9.1. Ethics ...... 14 1.9.2. Leadership ...... 14 1.9.3. Ethical leadership ...... 15 1.9.4. Ethical behaviour ...... 15 1.9.5. Unethical behaviour ...... 16 1.10. OUTLINE OF THE STUDY ...... 16 1.11. CONCLUSION ...... 17

CHAPTER 2 ...... 18 LITERATURE REVIEW ...... 18

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2.1. INTRODUCTION ...... 18 2.2. PHILOSOPHICAL VIEWS OF ETHICAL BEHAVIOUR ...... 18 2.2.1. Utilitarian view ...... 19 2.2.2. Individualism view ...... 19 2.2.3. Justice view ...... 20 2.2.4. Moral rights view ...... 20 2.3. PREDOMINANT ATTRIBUTES OF ETHICAL LEADERSHIP ...... 20 2.3.1. Integrity ...... 21 2.3.2. Trustworthiness ...... 21 2.3.3. Altruism/selflessness ...... 22 2.3.4. Fairness ...... 22 2.3.5. Role-modelling ...... 22 2.3.6. Ethical awareness ...... 23 2.4. IMPACT OF ETHICAL LEADERSHIP ON EMPLOYEE ORIENTATION .... 23 2.4.1. Social learning theory ...... 24 2.4.2. Moral attentiveness of the follower ...... 25 2.4.3. Moral disengagement of the leader ...... 26 2.5. CONSEQUENCES OF UNETHICAL LEADERSHIP ...... 27 2.5.1. Job losses ...... 27 2.5.2. Financial losses ...... 28 2.5.3. Reputational damage ...... 28 2.6. ANALYSIS OF UNETHICAL CHALLENGES IN SOUTH AFRICA ...... 28 2.7. THE FINANCIAL SERVICES SECTOR (ETHICS/UNETHICAL BEHAVIOUR) ...... 31 2.7.1. Currency rigging ...... 32 2.7.2. VBS Mutual Bank (VBS) ...... 33 2.7.3. Price-fixing of the rand (ZAR) ...... 34 2.8. FACTORS IMPACTING ETHICAL BEHAVIOUR OF EMPLOYEES ...... 35 2.8.1. Individual factors ...... 36 2.8.2. Organisational factors ...... 36 2.8.3. External factors ...... 37 2.9. KING IV REPORT ON ETHICAL LEADERSHIP ...... 37

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2.10. CONCLUSION ...... 39

CHAPTER 3 ...... 40 METHODOLOGY OF THE STUDY ...... 40 3.1. INTRODUCTION ...... 40 3.2. PHILOSOPHICAL ASSUMPTIONS ...... 41 3.2.1. Ontology ...... 41 3.2.2. Epistemology ...... 42 3.2.3. Axiology ...... 42 3.3. RESEARCH PHILOSOPHY ...... 42 3.3.1. Positivism ...... 43 3.3.2. Critical realism ...... 43 3.3.3. Postmodernism ...... 43 3.3.4. Pragmatism ...... 44 3.3.5. Interpretivism ...... 44 3.4. RESEARCH PARADIGM ...... 45 3.4.1. Quantitative research ...... 45 3.4.2. Qualitative research ...... 46 3.4.3. Mixed-method research ...... 46 3.5. RESEARCH STRATEGIES...... 48 3.5.1. Experiment ...... 48 3.5.2. Survey ...... 48 3.5.3. Archival and documentary research ...... 49 3.5.4. Ethnography ...... 49 3.5.5. Action research ...... 49 3.5.6. Grounded theory ...... 49 3.5.7. Narrative inquiry ...... 50 3.5.8. Case study ...... 50 3.6. SAMPLING DESIGN ...... 51 3.6.1. Population ...... 51 3.6.2. Sampling techniques ...... 51 3.6.2.1. Probability sampling ...... 51

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3.6.2.1.1. Simple random ...... 51 3.6.2.1.2. Systematic random ...... 52 3.6.2.1.3. Stratified random ...... 52 3.6.2.1.4. Cluster sampling ...... 52 3.6.2.1.5. Multi-stage sampling ...... 52 3.6.2.2. Non-probability sampling ...... 53 3.6.2.2.1. Quota sampling ...... 53 3.6.2.2.2. Volunteer sampling ...... 53 3.6.2.2.3. Haphazard sampling ...... 54 3.6.2.2.4. Purposive sampling ...... 54 3.7. DATA COLLECTION METHODS ...... 55 3.7.1. Surveys ...... 56 3.7.2. Observation ...... 56 3.7.3. Focus groups ...... 56 3.7.4. Experimentation ...... 57 3.7.5. Interviews ...... 57 3.7.5.1. In-depth interviews ...... 57 3.7.5.2. Structured interviews ...... 57 3.7.5.3. Semi-structured interviews ...... 58 3.8. THE MEASURING INSTRUMENT ...... 58 3.8.1. Section A: Demographic data ...... 58 3.8.2. Section B: Research questions ...... 59 3.9. ETHICAL CONSIDERATIONS ...... 59 3.10. PILOT STUDY ...... 60 3.11. DATA ANALYSIS ...... 61 3.11.1. Content analysis ...... 61 3.11.2. Computer Assisted Qualitative Data Analysis Software (CAQDAS) .. 61 3.11.3. Discourse analysis ...... 62 3.11.4. Narrative analysis ...... 62 3.12. METHOD OF REPORTING AND SYNTHESIS ...... 62 3.13. CONCLUSION ...... 63

2019 – Magau R – Nelson Mandela University – MBA VIII

CHAPTER 4 ...... 64 EMPIRICAL RESULTS ...... 64 4.1. INTRODUCTION ...... 64 4.2. RESEARCH OBJECTIVES ...... 64 4.3. RESPONSE RATE ...... 64 4.4. PROFILE OF THE PARTICIPANTS ...... 65 4.5. DATA ANALYSIS PROCESS ...... 66 4.5.1. Familiarising with the data ...... 67 4.5.1.1. Anonymising the data ...... 67 4.5.2. Generating phrases and codes ...... 67 4.5.3. Searching for themes ...... 67 4.5.4. Reviewing themes ...... 68 4.5.5. Defining and naming themes ...... 68 4.5.6. Reporting ...... 69 4.6. FINDINGS OF THE STUDY ...... 70 4.6.1. Theme 1: Conceptualisation of ethical leadership ...... 70 4.6.2. Theme 2: Attractiveness of the leader ...... 72 4.6.2.1. Subtheme 2.1: Desirable qualities of a leader ...... 73 4.6.2.2. Subtheme 2.2: Undesirable qualities of a leader ...... 74 4.6.3. Theme 3: Leader moral identity ...... 75 4.6.3.1. Subtheme 3.1: Ethical orientation of a leader ...... 75 4.6.3.2. Subtheme 3.2: Unethical orientation of a leader...... 76 4.6.4. Theme 4: Situational influences ...... 76 4.6.4.1. Subtheme 4.1: Individualistic vs collaborative ...... 76 4.6.4.2. Subtheme 4.2: Empowerment of followers ...... 77 4.6.5. Theme 5: Manipulative leaders ...... 77 4.6.6. Theme 6: Erosion of trust ...... 79 4.6.7. Theme 7: Observing and reporting misconduct ...... 79 4.6.8. Theme 8: Individual factors ...... 80 4.6.9. Theme 9: Organisational factors ...... 81 4.6.9.1. Subtheme 9.1: Organisational culture ...... 82 4.6.9.2. Subtheme 9.2: Ethical programmes and awareness ...... 82

2019 – Magau R – Nelson Mandela University – MBA IX

4.6.9.3. Subtheme 9.3: Unrealistic expectations ...... 82 4.6.10. Theme 10: External factors ...... 82 4.6.10.1. Theme 10.1: Intimidation of employees ...... 83 4.6.10.2. Theme 10.2: Trade practices ...... 83 4.6.10.3. Theme 10.3: Level of education and experience ...... 84 4.7. CONCLUSION ...... 84

CHAPTER 5 ...... 86 DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS ...... 86 5.1. INTRODUCTION ...... 86 5.2. FINDINGS OF THE STUDY ...... 86 5.3. CONCLUSIONS OF THE STUDY ...... 90 5.4. RECOMMENDATIONS ...... 92 5.5. LIMITATIONS OF THE STUDY ...... 93 5.6. OPPORTUNITIES FOR FUTURE STUDY ...... 93 5.7. CONCLUSION ...... 94

REFERENCES ...... 95

LIST OF APPENDICES ...... 111 ANNEXURE A – ETHICS CLEARANCE (FORM E) ...... 111 ANNEXURE B – INVITATION LETTER ...... 112 ANNEXURE C – DATA COLLECTION INSTRUMENT (INTERVIEW GUIDE) ... 113 ANNEXURE D – TURNITIN REPORT ...... 115 ANNEXURE E – CERTIFICATION OF PROOFREADING AND EDITING ...... 116 ANNEXURE E - PERMISSION TO SUBMIT A TREATISE FOR EXAMINATION 117 ANNEXURE F: PERMISSION TO SUBMIT FINAL COPIES OF TREATISE ...... 118

2019 – Magau R – Nelson Mandela University – MBA X

LIST OF TABLES

Table 4.1. Demographic representation of participants …………………………….. 65

2019 – Magau R – Nelson Mandela University – MBA XI

CHAPTER 1

SCOPE OF THE STUDY

1.1. INTRODUCTION

Ethics have become a critical enabler of today’s organisations’ reputation and performance. Leaders need to comprehend this phenomenon and understand that for any business to succeed, it should be built on pillars of trust, transparency, integrity and sustainability. The challenge of ethical leadership has become an issue for all spheres of society.

Moreover, widespread global ethical scandals has prompted regulators to develop standards and legislations for organisations to manage and institutionalise ethics in a more robust manner. The United States of America (US) has enacted the 2002 Sarbanes-Oxley Act (SOX), which set new standards for public accounting firms, corporate management and corporate boards of directors (Peavler, 2018, para. 2). While in South Africa, the Companies Amendment Act No. 3 of 2011 (Section 72(4)) introduced provisions dealing with the appointment of social and ethics committees (Johnston, n.d., para. 8).

Despite these regulatory developments and requirements both locally and globally, there is still a significant number of employees (executives, managers and junior staff) who get dismissed or voluntarily resign for various types of misconduct. Some examples of this are as follows:  UBER fired 20 employees (Isaac, 2017, para. 1). These employees were dismissed over the acts of harassment, discrimination and inappropriate behaviour.  Resignation of the Public Investment Corporation Chief Executive Officer (CEO) (Zulu, 2018, para. 7). The CEO resigned at a time when the organisation had been the subject of numerous claims ranging from

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corruption, nepotism and incompetence, of which the CEO had been implicated.  KPMG dismissing a number of employees (include a top US auditor for unethical behaviour (Colson, 2017, para. 2). The unethical behaviour related to leaks of confidential information. These employees either had improper advance warnings of engagements to be inspected by the Public Company Accounting Oversight Board or knew other colleagues who had received such information, but failed to properly report those incidents in a timely manner.  The Chief Financial Officer (CFO) of Giyani Municipality, who was dismissed for alleged involvement in VBS Mutual Bank investment scandal (CFO South Africa, 2018, para. 2). The CFO was dismissed as a result of his direct involvement in the VBS investment scandal and was also accused authorising payments for projects that were not completed.

Specifically within the banking and financial services sector, all individuals working within this sector are expected to act in a fair and honest manner as to ensure that the interests of customers, colleagues, counterparties and the society as a whole are protected (Institute of Bankers South Africa, 2013, Introduction section, para. 1). However, the industry has been sparked with a series of ethical scandals of late, such as the collapse of VBS Mutual Bank (Rossouw, 2018, para. 2); currency-rigging and price-fixing by banks (Investec, ABSA Bank Limited, Standard Bank of South Africa Limited, among others) (Competition Commission of South Africa, 2018, pp. 45-47) and Deutsche Bank AG (Department of Financial Services, 2018, para. 1); the questionable role of KPMG auditors who audited a Gupta-owned firm (Linkway Trading) which allegedly diverted funds earmarked for the Vrede dairy project to foot a multimillion rand bill for a family wedding (Khumalo, 2018, para. 1); the relationship between the Bank of Baroda and the Gupta family, which relates to money- laundering (Van Zyl, 2018, para. 1). Unethical practices can no longer be tolerated. The public is well educated and informed through real-time media platforms that informs the public on such unscrupulous conduct daily.

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Most often, employees have been found to reciprocate the behaviour of their leaders, which makes their ethical behaviour dependent on the quality of the ethical leader they have (Lu & Lin, 2014, pp. 209-223; Brown & Treviño, 2006, pp. 595-616; Xu, Loi & Ngo, 2016, pp. 493-504). Researchers such as Xu et al. (2016, p. 493) deemed ethical leadership as an emerging core stream of leadership research following a vast number of ethical scandals in reputable corporations worldwide (for example, the collapse of Enron in the United States and the Sanlu milk scandal in China). In this regard, the focus of this study is to understand the perceived impact of leaders’ ethical orientation on their followers’ ethical predisposition.

Apart from setting the tone of the study, this chapter presents the background, problem statement, research objectives and questions, definition of key terms and research methodology. This chapter will conclude by highlighting the research gaps on numerous related studies and its significance within the financial industry.

1.2. PROBLEM STATEMENT

The essential concern of this study is that a sizeable number of leaders within financial institutions seem to overlook their impact and role in fostering and reshaping the ethical predispositions of their followers (Culp, 2015, para. 2). Reddy (2017, para. 1) argued that South Africa has a general shortage of good leaders and in particular ethical leaders; leaders who place service to the people they lead ahead of power and self-interest.

Leaders are the custodians of ethical ideals and ethos of the organisation and are deemed to be the guardians and custodians of the organisation’s ethical culture and values (Institute of Directors in Southern Africa, 2016, pp. 44-45). Leaders should, therefore, understand that these ethos and ideals are subconsciously adopted by employees by means of their actions and conducts (Lu & Lin, 2014, pp. 220-221). Thus, leaders’ unethical conduct is undesirable for many reasons; however, in terms of leading and managing within the organisation, it is particularly problematic as leaders directly influence their followers’ ethical predisposition. Every year, a

2019 – Magau R – Nelson Mandela University – MBA 3

significant number of employees are dismissed for various acts of misconduct of ethical nature. The recent VBS scandal could be indicative that efforts to strengthen the ethical environment within the financial sector are not bearing much of the desired results.

This study is concerned with the view that leaders within the financial sector seem to be doing only the bare minimum (code of conduct, appointment of ethics officers, implementing various reporting mechanism, among others) to institutionalise ethical ideals among the workforce. This study, therefore, seeks to evaluate the perception of employees on the ability of their leaders to influence their ethical predispositions.

1.3. LITERATURE REVIEW

An attempt has been made to review the concepts of leadership, ethical leadership, employees’ behaviour and commitment in various literature, and thus there was a substantial foundation of conceptual background behind this research proposal. Various researchers (DuBrin, 2016, pp. 179-195; Schermerhorn, 2012, pp. 56-71; Mihelič, Lipičnik & Tekavčič, 2010, pp. 31-41; Brown, Treviño & Harrison, 2005, pp. 117-134; Bogan & Dedeoglu, 2017, pp. 511-531; Farooqi, Abid & Ahmed, 2017, pp. 69-80) have found that leadership and its different associated styles have an enormous impact on how employees behave, perform and react to the organisational culture. Other researchers such as Xu et al. (2016, p. 493) indicated that ethical leadership has emerged as a core stream of leadership research following a vast number of ethical scandals in reputable corporations worldwide (e.g., the collapse of Enron in the US and the Sanlu milk scandal in China).

Financial institutions are operating in a society that is increasingly ethically minded and thus failure to observe ethical ethos could be to their detriment (Fryer, 2007, para. 1). A single Google (2019) search on businesses that collapsed due to ethical failures resulted in more than 31 million search results from Google Search within the 21st century alone. Enron (Peavler, 2018, para. 6), a US energy giant, is one such an organisation. The company’s leaders were accused of fabricating or

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understating the company’s debts, embezzlement of corporate funds, illegal manipulations of the energy market as well as falsifying company’s financial performance. All this was aimed at deliberately misleading the public and shareholders. The widespread fraud at Enron and other companies prompted the 2002 Sarbanes-Oxley Act (SOX), which has since set new standards for public accounting firms, corporate management and corporate boards of directors (Peavler, 2018, para. 2). SOX intended to protect investors by improving the accuracy and reliability of corporate disclosures in financial statements.

VBS Mutual Bank, a South African mutual bank, is one of the local and latest examples. The bank’s leaders (Gerber, 2018, para. 3) were accused of fraud, theft, corruption, money-laundering, racketeering as well as falsifying accounts and returns to the South African Reserve Bank (SARB).

Lu and Lin (2014, p. 219) conducted a study on the effects of ethical leadership on ethical climate and ethical behaviour of employees at the Taiwan International Ports Corporation and found that ethical leadership had a significant impact on ethical climate and the ethical behaviour of employees of the corporation. The research findings revealed that ethical leadership had a direct positive effect on ethical behaviour. However, Van Gils, Van Quaquebeke, Van Knippenberg, Van Dijke and De Cremer (2015, p. 191) indicated that many researchers on ethical leadership (Brown & Mitchell, 2010; Brown & Treviño, 2006a) describes ethical leadership as “a general leadership process that transfers ethical leader behaviour into follower behaviour through the general mechanisms of social learning, exchange and identity” (Treviño, Brown & Hartman, 2003; Walumbwa, Mayer, Wang, P., Wang, H., Workman & Christensen, 2011). Lu and Lin (2014, pp. 209-223) did not take into account the moral attentiveness that determines the response of the follower. Van Gils et al. (2015, p. 198) examined how follower moral attentiveness determines the response of followers to ethical or unethical leadership and determined that the effects of ethical leadership are not similar for all followers, but instead dependent on follower moral attentiveness.

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The aspect of moral attentiveness of the followers has been substantiated by Iyer and Reckers (2017, pp. 1-10) in a study of leader-follower dynamics in ethical lapses in tax practice. Iyer and Reckers (2017, pp. 4-5) found that unethical behaviour in the corporate arena was often a result of destructive leaders influencing willing followers. They concluded that followers obey the instructions of destructive leaders because they are either conformers (afraid to confront the leader) or colluders (believe in the leader or participate for material and personal gain).

Leaders’ unethical conduct is undesirable for many reasons, but in terms of managing subordinates, it is particularly problematic because leaders directly influence the ethics of their followers and are expected to set the ethical ethos of the organisation from the top. Bonner, Greenbaum and Mayer (2016, pp. 734-735) examined the relationship between supervisor moral disengagement and employee perceptions of ethical leadership. They argued that some leaders cognitively remove the personal sanctions associated with misconduct, which provides them with the ‘‘freedom’’ to ignore ethical shortcomings. Kalshoven, Van Dijk and Boon (2016, p. 509) examined why and when ethical leadership evoke unethical follower behaviour. They disputed that ethical leadership evokes followers’ engagement in unethical behaviour when such behaviour benefits the organisation or followers themselves. Their findings postulated that under certain conditions, such as those of less autonomy, ethical leaders could make followers more susceptible to unethical conduct.

While social learning theory provides a perspective on ethical leadership that focuses on the transfer of ethical behaviour from leader to follower by displaying ethical behaviour, leaders are believed to transform followers’ inclination and deeds in making them more focused toward ethical matters. Kalshoven et al. (2016, p. 502) postulated that even though social learning theory provides a solid explanation to why and how ethical leadership increases followers’ moral awareness, it fell short in explaining why and how ethical leadership is related to the moral behaviour of followers. In an attempt to address this, Lee, Choi, Youn and Uk Chun (2017, p. 49) examined the role of ethical leadership in relation to a direct ethical outcome of

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employees’ moral behaviour. This study focused on how and when ethical leadership motivates employees to speak up about ethical issues. Furthermore, the study also provided insight on the moral efficacy as a key channel through which ethical leaders influence employees to take moral action despite fears and concerns on ethical issues. Seeing that the role of ethical leadership is a global concern as shown by these studies, a deeper investigation is required to understand the South African context.

According to Reddy (2017, para. 1), South Africa has a critical shortage of ethical leaders. Reddy (2017, para. 1) further argued that leaders who sacrifice their self- interests at the expense of society’s common good are rare or difficult to find. Morally deficient leaders are postured to be among the reasons behind the sharp rise in corporate scandals in both the private and public sector. In a report titled King IV Ethical Leadership, Deloitte (2017, p. 3) highlighted that good corporate governance is grounded on ethical leadership. The King IV Report on Corporate Governance for South Africa 2016 (Deloitte, 2017, p. 4) emphasised the need for ethical leadership and the establishment of an ethical culture. The two questions to ask are:  Why is there a rise in ethical failures, both in public and private sector?  What can be done to improve the ethical atmosphere within these sectors?

According to the King IV Report on Corporate Governance for South Africa 2016 (Institute of Directors in Southern Africa, 2017, pp. 43-45) and Reddy (2017, para. 2), the solution to these two crucial questions lies in the hands of ethical leaders. It would also be difficult to fix South Africa’s ethical crisis without solving the broad leadership dilemma confronting society as a whole. A leader’s actions, behaviour and attitude towards ethics can influence the ethical environment or direction of the entire organisation, especially what the leaders constantly promote and demote, as they ought to set the ethical tone from the top.

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1.4. GAPS IDENTIFIED IN EXISTING LITERATURE

Researchers and scholars have previously investigated the level of influence the ethical orientation of a leader has on the ethical disposition of followers. However, this study has identified a gap for further research notable on the following studies.

From the study conducted by Lu and Lin (2014, pp. 209-223) which focused on the effects of ethical leadership and ethical climate on employees’ ethical behaviour, these researchers found that ethical behaviour of the employees was significantly positively impacted by ethical leadership. This study failed to consider the attributes of a leader and conditions in which this positive effect existed.

From a study conducted by Eisenbeiss and Van Knippenberg (2015, pp. 182-195) on the impact ethical leadership taking into account the role of follower mindfulness and moral emotions, it was found that both moral emotions and mindfulness of the follower affect the interrelation between ethical leadership and follower discretionary work behaviour. This study, however, failed to take into account the challenges and factors that could influence followers’ susceptibility.

This study seeks to explore these gaps by examining ethical influence of leaders on employees’ ethical orientations from the perspective of employees themselves, given their experiences and exposure within the financial institution. Do leaders’ attributes and certain conditions show an impact on followers’ ethical orientation? What are challenges and factors which could influence followers’ susceptibility? This study is therefore unique in that it attempts to critically examine the perceived ethical influence of leaders from the perspective of employees within a South African-based financial institution.

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1.5. RESEARCH OBJECTIVES

1.5.1. Primary objective The primary objective of this study was to examine from the impact of leader’s ethical orientation on employees’ predisposition to behave ethically.

1.5.2. Secondary objectives Leaders possess various attributes that potentially could have an impact on their followers to remain true to their moral principles, regardless of the conditions faced. Furthermore, challenges are constantly encountered and there are certain factors that make these challenges more daunting and create situations that require ethical decision-making. Thus, to achieve the primary objective, the following secondary objectives were constructed:  To identify the attributes of the leader which are conducive for employees to be susceptible to their leader’s ethical orientation.  To establish the conditions which employees perceive to make them more susceptible to their leaders’ ethical orientation.  To identify ethical challenges posed by leaders within a financial institution using employees’ lived experiences.  To establish the factors which influences the employees’ ethical orientation within the financial institution.

1.6. RESEARCH QUESTIONS

The following research questions were developed with the aim to support the research objectives and aid in addressing the gaps identified:  What are the attributes of the leader which are conducive for employees to be susceptible to their leader’s ethical orientation?  What are the conditions which employees perceive to make them more susceptible to their leaders’ ethical orientation?  What are the ethical challenges posed by leaders within a financial institution using employees’ lived experiences?

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 What are the factors which employees perceive to be influencing their ethical orientation within their work environment?

1.7. SIGNIFICANCE OF THE STUDY

The challenge of ethical leadership is increasingly becoming a fundamental concern worrying all spheres of society. In most cases, it is society that ultimately bears the brunt when a financial institution or any other organisation (both in public and private sector) falls into an ethical crisis. A number of prominent companies both locally and internationally have been implicated in one ethical misdeed after another, such as KPMG, Enron, SAP, McKinsey, Steinhoff, Bank of Baroda, Standard Bank, Barclays, African Bank and of late VBS, among others. For example, McKinsey (Cameron, 2017, para. 1) reportedly suspended one of its South African-based directors pending an investigation into his unethical conduct. SAP (Hosken, 2017, para. 2) also suspended a number of South African-based senior employees for failure to observe good ethics.

Furthermore, the ongoing revelations at the Zondo Commission of Inquiry on State of Capture (Miya, 2018, para. 1) have also revealed the deterioration of ethics both in the public and private sector. These revelations have reinforced the criticality of a leadership and governance model that sets the right tone from the top and ensures appropriate accountability and responsibility at every level of leadership in organisations.

This study may contribute to the empowerment of leaders within financial institutions, particularly as the industry has adopted and implementing the King IV report, which came into effect on 1 April 2017 (KPMG, 2016, p. 5-6). The findings of this study could benefit these leaders in understanding the impact of their ethical orientation on the ethical behaviour of their followers. Ethics, human resource and compliance leaders within the financial industry may also use the findings of this study to strengthen the ethical ethos and reforms within their organisation and in the sector at large.

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1.8. RESEARCH METHODOLOGY

This section provides a brief introduction to the research methodology followed in this study. The research design and methodology is detailed and discussed in Chapter 3 of this study.

1.8.1. Research paradigm The philosophical assumptions of this study were shaped and influenced by the interpretivist paradigm. The interpretivist paradigm holds that social reality can be best interpreted by people who interact with it on a daily basis (Saunders, Lewis & Thornhill, 2015, pp. 140-141). An interpretivist paradigm was preferred ahead of other methods as the researcher preferred to afford employees an opportunity to express their views and experiences on the perceived influence of their leaders’ ethical inclinations on their ethical dispositions.

While the philosophical assumption of this study is premised on the interpretivist paradigm, its methodological paradigm is located within the qualitative approach. Qualitative research focuses on the way that people interpret and make sense of the experiences under real-world conditions and also contributes insights into existing or new concepts that may assist to describe human social behaviour (Yin, 2011, p. 9). The use of the qualitative method allowed the employees an opportunity to narrate their own experiences using their own choice of statements and descriptive words.

1.8.2. Research approach A case study was preferred to examine the nature of the ethical influence leaders wield on their followers’ ethical orientation. A case study provided a detailed context- specific account on the unique ethical challenges confronting the employees within the financial institution. Researchers (Dubois & Gadde, 2002; Eisenhardt 1989; Eisenhardt & Graebner, 2007; Ridder, Hoo, & McCandless Baluch, 2014; and Yin, 2014) in Saunders et al. (2015, pp. 184-187) postulated that a case study strategy has the ability to generate insights from intensive and in-depth research into the study of a phenomenon in its real-life context, leading to rich, empirical descriptions

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and the development of theory. Since every sector exhibits a unique leadership- driven ethical culture, using the case study design to study the link between a leader’s ethical beliefs and employees’ ethical behaviour or thinking was the most rational approach.

1.8.3. Sampling design According to Saunders et al. (2015, p. 274), it is not always feasible to collect data from the entire population. They emphasised that for a study in which it would not be feasible to collect data from the entire population, a sample should be selected. Likewise, it would have been impractical to collect data from the entire population for this study. Thus, a sample was selected using a heterogeneous purposive sampling. The use of purposive sampling was informed by the need to select employees who possess demonstrable understanding or knowledge of the financial institution’s ethical ideals and ethos. Since the researcher was familiar with the organisation’s ethical environment, using the purposive sampling method made the participant selection activity more achievable.

1.8.4. Data collection The study was informed and shaped by one data sources, that is, primary data. For the empirical study, the primary data was collected through semi-structured interviews. One-on-one interview sessions were scheduled and conducted with the selected participants with the aid of an interview guide. The sessions were audio recorded to enhance data collection and ease of transcribing and interpretation into a report.

1.8.5. Ethical considerations In line with the rules and regulations of the Nelson Mandela University regarding conducting research using human subjects, the following ethical considerations were taken into account during the course of the study:  Permission was obtained from appropriate personnel within the financial institution at which the research was conducted.

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 A consent and confidentiality clause was included in the invite letter (see Annexure C) sent to assure all participants stating that their names, the names of their business units and the name of the financial institution would be dealt with in the strictest confidence.  The principle of voluntary participation was explained to the respondents and they were informed that they had the right to withdraw from the study at any time.

The study was further subjected to the FORM E ethics clearance process of the university (see Annexure A).

1.8.6. Data analysis method The data collected was analysed through the thematic narrative analysis method. The essence of the thematic approach is to search for themes or patterns (Saunders et al., 2015, p. 579) and thus it this method enables the researcher to code the qualitative data collected to identify themes for analysis. Using this method, the researcher was able to identify cross-cutting responses and subsequently formulated relevant themes for analysis.

1.8.7. Method of reporting and synthesis In this study, the primary data collected via interviews using an audio recorder was transcribed and subsequently arranged into specific themes, while preserving the organisation and participants’ anonymity. The researcher made use of the six-step process postulated by Braun and Clarke (2006, pp. 77-101) to conduct thematic analysis to achieve the study research objectives, which includes familiarising with the data, generating phrases or codes, searching for themes, reviewing themes, defining and naming themes, and writing a report.

1.9. DEFINITION OF CONCEPTS

The following are key concepts and terminology used throughout the study:

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1.9.1. Ethics According to Mihelič et al. (2010, p. 32), the word “ethics” originated from Greek word “ethos”. Ethos means custom or character and is concerned with describing and prescribing moral requirements and behaviours (Minkes, Small & Chatterjee, 1999, pp. 327-328). This description is supported by DuBrin (2016, p. 179), who indicated that ethics is the study of moral obligations and of separating right from wrong. Ethics are thus values and accepted guidelines that people use to determine what is right or wrong, to influence their actions and behaviours.

Schermerhorn (2012, p. 56) defined ethics as “the code of moral principles that sets standards of good or bad, right or wrong, in peoples’ conduct”. This definition has been supported by Northhouse (2015, p. 330), who emphasised that ethics is concerned with the kinds of values and morals an individual or a society finds desirable or appropriate.

These definitions of ethics are indicative that there are acceptable and unacceptable ways of behaving, beyond mere legal compliance, that serve as a function of philosophical principles.

1.9.2. Leadership Leadership has widely been researched and interest in this field continues, yet researchers still vary on a widely accepted definition. Some definitions describe leadership as an act of influence, some as a process and yet others have looked at a person’s attributes.

DuBrin (2016, p. 2) defined leadership as “an ability to inspire confidence and support among the people who are needed to achieve organisational goals”. Nel, Van Dyk, Haasbroek, Schultz, Sono & Werner (2004) in Crispen, Michael and Tendai (2011, p. 8339) described leadership as the process whereby an individual influences others to eagerly and unreservedly direct their efforts and abilities towards attaining set objectives. These researches agree that a fundamental role of the leader is to inspire confidence and to influence others to act in a certain way or

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manner. Thus, the leaders’ actions and behaviour have an impact on the actions and behaviour of their followers, positive or negatively.

1.9.3. Ethical leadership Brown et al. (2005, p. 120) defined ethical leadership as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement and decision-making”. The definition by Brown et al. (2005, p. 120) focused on the “moral person” and “moral leader” dimensions of ethical leadership. At the core of the moral person dimension is fairness, honesty and integrity, while the moral leader dimension is demonstrated by selflessness, people orientation, ethical guidance and setting an exemplary for ethical behaviour. Likewise, Ciulla (1995) and Gini (1997) in Eisenbeiss and Van Knippenberg (2015, p. 182) postulated that ethical leadership refers to treating others with dignity, trustworthy fully respecting their rights, and using power in socially responsible ways.

1.9.4. Ethical behaviour Sims (1992) in Mihelič et al. (2010, p. 32) defined ethical behaviour as “a behaviour which is morally accepted as ‘good’ and ‘right’ as opposed to ‘bad’ or ‘wrong’ in a given situation”. Mihelič et al. (2010, p. 32) indicated that there are, however, ethical dilemmas that are present in uncertain situations, in which different interests, values, beliefs pertaining to multiple stakeholders are in conflict. Thus, ethical behaviour should be acceptable both legally and morally to society at large. Schermerhorn (2012, p. 57) indicated that ethical behaviour is values-driven and further argued that ethical behaviour extends beyond legality and extends to the underlying beliefs and judgments regarding what is desirable or wrong and what influences individual attitudes and behaviours. Ethical behaviour, thus, is acting in ways that are consistent with how society and the business world views moral principles and values.

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1.9.5. Unethical behaviour Eisenbeiss and Brodbeck (2014, p. 345) indicated that there has been a limited research conducted both theoretically and empirically on unethical leadership. Eisenbeiss and Brodbeck (2014, p. 345) further indicated that a precise definition of the construct was provided by Brown and Mitchell (2010, p. 11), who defined unethical leadership as ‘‘behaviours conducted and decisions made by organisational leaders that are illegal and/or violate moral standards, and those that impose processes and structures that promote unethical conduct by followers’’.

1.10. OUTLINE OF THE STUDY

The study comprises five chapters.

Chapter 1: Scope of the study. This chapter outlines the background, problem statement, research objectives and questions, definition of key concepts, and research methodology; highlights the research gaps identified from studies of related nature and its significance within the financial sector.

Chapter 2: Literature review. This chapter contains a review of relevant literature pertaining to the study as well as the theoretical framework of study.

Chapter 3: Methodology of the study. This chapter explains the research design and methodology, which includes the research paradigms, research approaches and theory development. The approach used to collect and analyse data as well as the technique employed to select study participants are further outlined in this chapter.

Chapter 4: Empirical results. In this chapter, the empirical results from the data gathered are discussed.

Chapter 5: Discussion, conclusions and recommendations. The final chapter contains the conclusions and recommendations drawn from the study. This chapter further highlights the limitations and opportunities for future study.

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1.11. CONCLUSION

This chapter had outlined the context on which the foundation of this study is laid. It has also highlighted the problem statement, gaps identified within existing literature, the significance of the study, research objectives, and a brief outline of research methodology and definition of key concepts within the study. The next chapter reviews the relevant literature for the study.

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CHAPTER 2

LITERATURE REVIEW

2.1. INTRODUCTION

The stability of financial institutions and a country’s financial system is crucial to the economic growth of the country and the development of a nation; thus the financial institutions play a critical role in any economy. The upsurge of corporate scandals that has been experienced by the financial services sector could leave the public with a loss of confidence on financial institutions and subsequently the financial system. From the 2007/8 global financial crisis, the world has learnt that ethics are critical influencers of business competitiveness and survival (Kelly & Vilks, 2012, pp. 1-4). Helleiner (2011, p. 68) indicated that a substantial number of globally known financial institutions collapsed, while several others survived only with enormous state support or were nationalised.

The purpose of this chapter is to examine the theoretical aspects of the attributes of an ethical leader, conditions in which employees are more susceptible to their leader’s ethical influence, challenges posed by leaders, and the factors that potentially impact ethical behaviour of employees outsourcing in organisations. Most importantly, this chapter provides a comprehensive outline from literature on the role ethical leaders’ play in shaping and influencing the ethical orientation of their employees. Since this study is concerned with the predisposition of employees’ ethical behaviour, the researcher began the review of the literature by examining philosophical views of ethical behaviour.

2.2. PHILOSOPHICAL VIEWS OF ETHICAL BEHAVIOUR

What is considered ethical varies among moral reasoning approaches. There are four philosophical views of ethical behaviour: utilitarian, individualism, justice and moral right views (Schermerhorn, 2012, p. 58).

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2.2.1. Utilitarian view The term utilitarian can be traced to the 19th century to the work of the philosopher John S. Mill and it focuses on the results or outcomes of an unethical conduct or behaviour (Schermerhorn, 2012, p. 58). This view attempts to evaluate the moral implications of a decision or behaviour in terms of respective consequences. The decision is focused on what would be the best outcome to most people; it is futuristic and yet difficult to predict and/or measure accurately.

Conway, Goldstein-Greenwood, Polacek and Greene (2018, p. 242) emphasised that utilitarianism maintains that the right act is the one that yields the greatest outcome for many. Actions and decisions that enhance the quality of life of many need to be promoted and advanced. Strategic attention should be directed towards activities that promote common good. Likewise, Kahane, Everett, Earp, Farias and Savulescu (2015, p. 207) argued that utilitarianism should reject any “deontological” moral constraints on the pursuit of their positive aim. They have found that utilitarian judgments in sacrificial dilemmas were not driven by this utilitarian aim of impartially maximising aggregate welfare but rather the more modest, unremarkable and ordinary thought; that is, ceteris paribus. According to Kahane et al. (2015, p. 207), not all decisions involve demanding commitment to always maximise aggregate well- being (e.g. by being willing to sacrifice 10 to save 11); however, decisions are taken in a maximally impartial manner, taking into equal account the interests of all involved.

2.2.2. Individualism view Contrary to the utilitarian view, individualism focuses on advancement of self- interest. Biddle (2014, para. 2) indicated that individualism is the view that an individual has an absolute right to do as he/she sees fit and pursue the values of his/her choosing. Schermerhorn (2012, p. 59) argued that not everyone agrees with this notion and that while this view could result in honesty and integrity, it would, however, more often result in a pecuniary ethic. An individual does not have unlimited freedom and cannot infringe on the rights of others or deprive others of theirs rights while advancing self-interest.

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2.2.3. Justice view According to Schermerhorn (2012, p. 59), this view of moral reasoning considers an ethical behaviour as it relates to people being treated impartially and fairly, according to standards and legal rules. The justice view is divided into four aspects: procedural justice, distributive justice, interactional justice and commutative justice:  Procedural justice – focuses on the fair application of policies and rules.  Distributive justice – focuses on treating people the same, regardless of personal characteristics.  Interactional justice – is the degree to which others are treated with dignity and respect.  Commutative justice – focuses on the fairness of exchanges or transactions.

2.2.4. Moral rights view This view is based on the teachings of John Locke and Thomas Jefferson, who believed that everyone has a right to life, liberty and fairness before the law (Schermerhorn, 2012, p. 60). Thus, moral-rights view concentrates on the fundamental rights of all human beings.

2.3. PREDOMINANT ATTRIBUTES OF ETHICAL LEADERSHIP

According to Treviño, Brown and Hartman (2000, p. 130), ethical leadership consists of the moral person dimension and the moral leader dimension. The moral person dimension is about possessing personal traits such as honesty, integrity and trustworthiness, whereas the moral leader dimension portrays a manager who seeks to influence followers’ ethical conduct. While Yukl (2006) in Mihelič et al. (2010, p. 32) argued that the criteria relevant for judging ethical behaviour of a leader include stage of moral development, conscious intentions, individual values, freedom of choice, types of influence used, and use of ethical as well as unethical behaviour. The predominant traits of an ethical leader have been best encapsulated by DuBrin (2016, p. 186), who postulated that ethical leaders are characterised by honesty, integrity and trustworthy, fairness, respect and selflessness.

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These characteristics could thus be summarised as integrity, trustworthiness (honesty), altruism, fairness, role-modelling and ethical awareness. The following paragraphs describes each of these traits.

2.3.1. Integrity Integrity is associated with doing what one says or promises (Brown & Treviño, 2006, p. 596). The Institute of Directors in Southern Africa (2016, p. 14) indicated that integrity is possessing the value of being honest and having strong moral principles. Kalshoven, Hartog and De Hoogh (2011) in Elsetouhi, Hammad, Nagm and Elbaz (2018, p. 101) concluded that integrity has been recognised as an essential element of ethical leadership. This has been substantiated by Bogan and Dedeoglu (2017, p. 514), who concluded that behavioural integrity is important for fostering positive individual and organisational outcomes.

Similarly, when employees perceive that their leaders treat them with integrity, they reciprocate such behaviour within the organisation (Elsetouhi et al., 2018, p. 109). They further concluded that such leaders are regarded as role models by their followers. Burke, Sims, Lazzara and Salas (2007, p. 617) argued that followers may not be obedient to a leader whom they perceive to be dishonest and lacking in integrity. This suggests that when employees perceive their leaders leading with integrity, it positively influences their confidence in them.

2.3.2. Trustworthiness Trustworthiness is associated with honesty, truthfulness and integrity. Lawton and Paez (2015, p. 645) argued that trust is required to provide moral example and to inspire others. According to Brown and Treviño (2006, p. 605), trust is a building block for sustainable and lasting relationships. This implies that trust is a fundamental element in developing relationships between a leader and a follower and, thus, the extent to which a leader behaves can influence the extent to which their followers will trust them and subsequently reciprocate similar behaviour.

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2.3.3. Altruism/selflessness According to Sağnak and Kuruöz (2017, p. 448), altruism is central to an ethical doctrine. They emphasised that leaders influence followers’ altruistic behaviour. When the moral value of an individual’s action depends on the effect of the consequences on others, regardless of the individual’s self; that is, selflessness (Sağnak & Kuruöz, 2017, p. 448). This suggests that leaders should behave in a selfless manner as it would influence the behaviour of their followers; and likewise, the followers would emulate similar behaviour.

2.3.4. Fairness Fairness refers to the equitable and reasonable treatment of others (Institute of Directors in Southern Africa, 2016, p. 12). Mihelič et al. (2010, p. 30) indicated that ethical leaders have a profound devotion to fairness, with high focus and emphasis on the others. As such, ethical leaders should communicate consistently with their all stakeholders, including their followers, in an open and fair manner, and be consistently willing to provide reasons behind their decisions.

2.3.5. Role-modelling Ethical leaders provide guidance and set priorities to successfully accomplish organisational goals (Eisenbeiss & Brodbeck, 2014, p. 355). According to Amsale, Bekele and Tafesse (2016, p. 362), attributes such as fairness, altruism and modelling ethical behaviour of ethical leadership should always be prevalent when describing the ethical behaviour of a leader. The modelling of ethical behaviour attributes has been substantiated by Brown and Treviño (2006, p. 597), who indicated that ethical leaders become attractive and credible role models to their followers through maintaining their ethical standards and behaving in a normatively appropriate manner.

Brown and Treviño (2006, p. 597) further argued that since ethical leadership to a large extent relies on the social learning process, organisations can use role- modelling to shape employees’ ethical predisposition. Leaders should be trained to understand the importance of their ethical orientation and how they can become

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ethical guardians for their employees, concluded Brown and Treviño (2006, p. 611). The findings of Brown and Treviño (2006, pp. 595-616) has been substantiated by Schermerhorn (2012, p. 68), who indicated that the manner in which leaders approach ethics make a difference in what happens within an organisation and, thus, leaders as role models inspire ethical conduct on their followers. Ethical leaders are thus attractive role models who could influence employees’ ethical inclination.

2.3.6. Ethical awareness According to Farooqi et al. (2017, p. 78), organisations need to create an ethical climate in which employees become ethical partners and do the right thing, not because they must, but because they want to and it is the right thing to do. Schermerhorn (2012, p. 68) indicated that leaders have the power to shape policies and the ethical climate within the organisation. Likewise, Brown and Treviño (2006, p. 597) had earlier found that ethical leaders communicate the importance of ethical standards and also use the performance management system to hold employees accountable for their conduct.

Therefore, leaders’ attributes such as integrity, trustworthiness (honesty), altruism, fairness, role-modelling and ethical awareness or lack thereof can impact on followers’ ethical orientation. Leaders should communicate clear ethical standards and be consistent in disciplining those who violate them. In this study, participants will be asked to highlight some of the attributes of a leader which they perceive to have an influence on their ethical predisposition.

2.4. IMPACT OF ETHICAL LEADERSHIP ON EMPLOYEE ORIENTATION

To fully understand the essence of the impact of the ethical orientation of the leader on employees’ predisposition, it is important to begin by asking the following thought- provoking questions:  Are ethics transferable instruments; that is, can ethics be passed from leaders who value them to employees who undervalue them?

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 Is it possible for a corrupt-ridden employee to change his/her unethical ways if that employee is located in an environment of ethically focused leaders?  Similarly, is it possible for an unethical leader to transfer a wrong set of ethics into the ethical system of ethically grounded employees?  Are employees easily corruptible when they are put under the tutelage of ethically deficient leaders?

The answers to these questions can be yes or no, depending on the nature and context in which they are asked and the prevalent conditions within the financial institution. In an attempt to answer some of these pertinent questions, DuBrin (2016, p. 191) postulated that leaders have a part to play in influencing and shaping the ethical character or behaviour of their employees. Schermerhorn (2012, p. 62) and Minke et al. (1999, p. 332) highlighted that the world is full of examples or incidences where the ethical character of any organisation was largely attributed or linked to that of its leaders. Conversely, Xu et al. (2016, p. 493) indicated that ethical leadership has been found by several researchers (Chughtai et al., 2014; Miao et al., 2013; Ogunfowora 2014; Tu & Lu, 2013; Walumbwa et al., 2011; Walumbwa & Schaubroeck, 2009) to affect some important employee outcomes such as unethical behaviour, job satisfaction, voice, job performance, employee wellbeing and innovation. Since the primary role of a leader is to influence their followers towards a carefully structured goal-oriented direction, leaders should thus actively play a prominent role in redefining the moral and ethical character of their employees.

2.4.1. Social learning theory According to Bandura’s social learning theory in Brown et al. (2005, p. 119), virtually anything that can be learned through direct experience can also be learned indirectly; that is, by observing others’ behaviour and its consequences. This process seems particularly relevant when the behaviour observed and experienced is that of an ethical nature. The social learning theory provides a perspective on ethical leadership that focuses on the transfer of ethical behaviour from a leader to a follower by displaying ethical behaviour; leaders are believed to transform followers’ orientation and make them more attentive toward moral issues. Based on the social

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learning perspective, Brown and Treviño (2006, p. 132) suggested that modelling, communication and rewarding are the methods through which the ethical orientation of leaders influence employees’ orientation.

Kalshoven et al. (2016, p. 502) argued that even though the social learning theory provides a substance to explain why and how ethical leadership increases followers’ moral consciousness, it did not articulate why and how ethical leadership is related to the moral and ethical behaviour of followers. According to O’Fallon and Butterfield (2012, p. 128), unethical behaviour is more complex than the ‘‘monkey see, monkey do’’ view suggested by the social learning theory. In an attempt to address this gap, Lee et al. (2017, p. 54) examined the role of ethical leadership in relation to a direct ethical outcome of employees’ moral behaviour focusing on how and when ethical leadership motivates employees be vigilant and raise ethical issues. They found that moral efficacy is a key psychological conduit through which ethical leaders motivate employees to take moral (or unethical) action despite fears and concerns about expressing sensitive ethical opinions. Eisenbeiss and Van Knippenberg (2015, p. 191) argued that followers vary in terms of their sensitivity and how they process and consume ethical information, as conveyed and portrayed by ethical leaders. They also argued that these individual differences determine the strength of the link between ethical leadership and follower discretionary behaviour.

2.4.2. Moral attentiveness of the follower Van Gils et al. (2015, p. 190) indicated that many researchers on ethical leadership (Brown & Mitchell, 2010; Brown & Treviño, 2006a) explained ethical leadership as a process that conveys ethical leader behaviour into follower behaviour through mechanisms such as social learning, exchange and identity (Treviño et al., 2003; Walumbwa et al., 2011). These researchers, however, did not take into account the moral attentiveness that determines the response of the follower.

In addition, Van Gils et al. (2015, pp. 199) examined how follower moral attentiveness determines the response of followers to ethical or unethical leadership. They found that the effects of ethical leadership are dependent on follower moral

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attentiveness and, thus, the response of the followers was not the same, depending on their moral attentiveness. The aspect of moral attentiveness of the followers has been substantiated by Iyer and Reckers (2017, pp. 1-10) in a study of leader-follower dynamics in ethical lapses in tax practice. Iyer and Reckers (2017, pp. 4-5) argued that unethical behaviour in the corporate arena is often a result of destructive leaders influencing willing followers. They concluded that followers obey the instructions of destructive leaders because they are either conformers (afraid to confront the leader) or colluders (believe in the leader or participate for material gain). The keynote from this study is the emphasis on “willing followers” and, thus, the question on determinants of ethical behaviour on those who resist the influence of destructive leaders should be established.

2.4.3. Moral disengagement of the leader Unethical and destructive conduct of any leader are undesirable for many reasons; however, it is particularly problematic in terms of managing subordinates, as leaders directly influence (positively or negatively) the conduct of their followers. Bonner et al. (2016, p. 731) examined the relationship between manager moral disengagement and employee perceptions of ethical leadership. They concluded that some leaders deliberately remove the personal sanctions associated with misconduct, which provides them with the ‘‘freedom’’ to ignore ethical shortcomings.

Likewise, Kalshoven et al. (2016, p. 500-504) examined why and when ethical leadership evokes unethical follower behaviour. They concluded that ethical leaders evoke followers’ engagement in unethical behaviour when such behaviour benefits the organisation or themselves. Their findings suggest that under conditions of less autonomy, ethical leaders may even make followers more susceptible to (specific forms of) unethical conduct. However, this study also failed to consider the moral attentiveness of the follower and ethical climate within the organisation.

Hoch, Bommer, Dulebohn, and Wu (2018, p. 511) in their recent meta-analysis, concluded that ethical leaders improve desirable employee outcomes such as employee engagement, job satisfaction, organisational commitment and

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organisational citizenship behaviours. This influence has been substantiated by Byun, Karau, Dai and Lee (2018, p. 51), who highlighted that ethical leadership flows down from top leaders to lower leaders and results in desirable employee outcomes in the form of reduced social loafing and improved task performance. When leaders are morally deficient and disengaged, through their influential position they can positively influence the ethical orientation of their followers to mimic that of their own to advance their self-interests.

Therefore, conditions brought about by the social environment, morally disengaged leaders and how strong the moral attentiveness of the followers is, could impact on ethical behaviour of followers.

2.5. CONSEQUENCES OF UNETHICAL LEADERSHIP

Failure to operate a business in an ethical manner can negatively affect the reputation of the business and affect its performance and competitive standing within the industry as well as the society in which it operates. The 2007-2008 global financial crisis revealed that there is a great need for ethical leaders and transparency within the financial sector. Unethical leadership behaviour has the power to ruin careers and to cause the demise of organisations, whether it is a single lapse in integrity or continuous unscrupulous way of doing business.

2.5.1. Job losses The Enron Corporation remains a striking example of what happens when a firm’s ethical structure collapses or is evidently compromised. At Enron (Bragg, 2002, para. 2), thousands of employees lost their jobs through no fault of their own; they bear the scars of a failed institution.

At VBS Mutual Bank (Cowan, 2018, para. 1), more than 80% of employees had been retrenched in the aftermath of the bank’s R2-billion fraud orchestrated by the bank’s senior executives, including the chairman of the board.

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2.5.2. Financial losses KPMG lost about R140-million in annual audit fees as a result of Barclays Africa’s decision to terminate its relationship (Ziady, 2018, para. 1). The decision to terminate this relationship came weeks after VBS Mutual Bank was added to the list of KPMG’s audit failures. In addition, the Deutsche Bank AG was fined $205-million by the Department of Financial Services (2018, para. 1) for unlawful, unsafe and unsound conduct in its foreign exchange trading business.

2.5.3. Reputational damage Since the start of 2017, KPMG (Marriage, 2018, para. 1) has lost at least 20 listed audit clients in South Africa, whereas Sasfin and Barclays Africa were among the companies in South Africa that have terminated their contracts with McKinsey (Marriage, 2017, para. 11). This followed weeks after the consultancy apologised for making “errors of judgment” in working alongside a company linked to the politically contentious Gupta family, which has been entangled in South Africa’s biggest political scandal since the apartheid era. This demonstrates the extent of the reputational damage to the firm stemming from a damaging corruption scandal. This followed widespread criticism of the auditing firm over its work for South Africa’s controversial Gupta-linked companies and its audit of collapsed mutual bank VBS.

These examples further affirm the findings of the study conducted by Onakoya, Moses, Iyiola, Salau and Ayoade (2018, p. 851), which found that ethical culture within an organisation had a significant positive influence on the reputation of the firm. Nedbank (Sicetsha, 2018, para. 1) and Barclays Africa (Ziady, 2018, para. 1) were among those 20 listed clients who cut business ties with KPMG. Hence, many of these consequences contribute to the factors that create unethical challenges, and these are analysed in the following section.

2.6. ANALYSIS OF UNETHICAL CHALLENGES IN SOUTH AFRICA

Rossouw (2017, para. 1) admitted that South Africa has had its fair share of corporate scandals. According to Rossouw (2017, para. 11), the most recent

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involved Gupta-linked companies. Even international giants such as Naspers, KPMG, McKinsey and SAP were embroiled in a series of damming unethical conduct. Rossouw (2017, para. 12) further indicated that the integrity of some of the leaders in key positions of authority in both the public and private sectors has been questioned, and that this included the position of the country’s former president, Jacob Zuma, who had failed to uphold the Constitution of the Republic. Kuwana in van Zyl (2017, para. 4) posed two fundamental questions regarding ethics and ethical leadership: “Could the real challenge South Africa is facing economically be a collapse of the foundational pillars of an ethical value system (integrity, ethics, values, clean living) that is a prerequisite to creating a conducive environment that encourages people to trade and do business with each other? And, has South Africa become a society so driven by greed and selfish material accumulation that it has tossed out the values of moral humanness that are a major ingredient for achieving collective prosperity?”

Professor M. Soko (n.d., para. 2) from the University of Cape Town’s Graduate School of Business indicated that even though corruption is not a unique challenge to South Africa as shown by the Global Perceptions Index, the scale of what is going on in South Africa of late is unprecedented; some of which were contained in a State of Capture report which was released in November 2016 by the Public Protector. According to the report published by the Global Perceptions Index 2017 (Transparency International, 2018, p. 4), corruption in South Africa is fast spiralling out of control. The country has been ranked 71 out of 180 countries. The report laments that the country lost nearly R100-billion through illicit deals or tender corruption. According to the report, the scourge of tender corruption also negatively affected South Africa’s international image.

According to the 2017-2018 World Economic Forum Global Competitiveness Index (World Economic Forum, 2016, p. 34), South Africa slipped 14 positions to 61 out of 137 economies assessed in the annual survey. While corruption and theft were sighted as some of the concerns, “poor work ethic in the national labour force” was sighted as another factor which contributed to the deterioration. The concern on work

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ethics was also highlighted in the South African Business Ethics Survey Report (The Ethics Institute, 2016, p. 9), which found that 42% of employees who observed a misconduct did not report it because of fear of victimisation. What is pertinent on this finding is that they were aware that such conduct was improper; however, they attentively chose not to report it. The findings of this report further highlight that the South African business environment is infiltrated by unethical and improper conduct.

The South African Business Ethics Survey report (The Ethics Institute, 2016, p. 10) further reported that almost 10% of participants experienced pressure to compromise their organisation’s ethical standards, often an indicator of future misconduct. What was further concerning about the findings of the report was that 30% of the workforce reported that they were not familiar with their organisation’s ethical code. From the business ethics report, it can be concluded that unethical conduct has increased and that there is high level of awareness of what constitute unethical behaviour. The survey found out that some employees blindly engage in corrupt activities while others willingly take part in unethical conduct due to a number of factors, such as work pressure, personal gains and peer pressure, among other things.

According to the Nedbank Governance and Ethics Review 2016 report (Nedbank, 2019, p. 15), the bank’s ethics office received 120 reports of unethical behaviour, which included social media incidents, extramarital affairs in the working environment, working under the influence and general bad behaviour.

The ethical challenges facing the global society as articulated by Gino (2015, p. 107), could be summarised as corruption, dishonesty, theft, manipulation and organisational misconduct; and it is quite evident that South Africa is not immune to these as well. How prevalent are these challenges within the financial services industry? The next section provides an analysis of some of the prominent scandals in this sector.

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2.7. THE FINANCIAL SERVICES SECTOR (ETHICS/UNETHICAL BEHAVIOUR)

In 2017, the United Kingdom Institute of Business Ethics (IBE) published a report on ethical concerns and lapses in business. The IBE (2017, p. 2) indicated that the financial sector had experienced the highest number of unethical breaches as noted in its 2016 report. These breaches were in the areas of insider trading, price-fixing, fraud, money-laundering and mistreatment of stakeholders.

According to the Institute of Bankers South Africa (2013, section 1), the banking and financial services industry is founded on the principles of mutual trust and public confidence. Consequently, all individuals engaged in this field must always maintain the highest standards of honesty, integrity, fairness and transparency to safeguard that trust and confidence.

South Africa has implemented a “Twin Peaks” approach through the nascent Financial Sector Regulation Act (FSRA) 9 of 2017, which has come into force but only partially in effect in 2018. The objective of the FSRA has been to split the regulating authorities of the financial services sector into two centres. The first centre will be a Prudential Authority, which will fall within the Reserve Bank and will regulate the financial institutions and supervise their safety and soundness, headed by the Governor of the Reserve Bank. The second centre is the Financial Sector Conduct Authority (FSCA), which has replaced the Financial Services Board. The FSCA serves as a market conduct regulation, including investment funds and investment managers, and supervises the way financial institutions conduct business and treat their customers (Laskov, 2018, para. 2). According to FSCA, the Twin Peaks model follows two policy papers that respond to lessons learnt from the 2007-2008 global financial crisis – A safer financial sector to serve South Africa better (National Treasury, February 2011) and Implementing a twin peaks model of financial regulation in South Africa (Financial Regulatory Reform Steering Committee, February 2013).

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Mitchell, Lewis and Reinsch (1992, p. 197) undertook an exploratory study of ethical behaviours and perceptions in banks, which was prompted by a decade characterised by prominent ethical abusers in the banking industry. They cited researchers such as Frank (1986), Magnet (1986), Clifford (1986), Singer (1987), Crock and Jaben (1985), who indicated that laundering drug money, insider trading, conspiracy, filing false documents, embezzlement, as well as improper loans and withdrawals were most prevalent over the same period. While Mitchell et al. (1992, p. 203) found that businesspeople were generally perceived as behaving ethically, employees (mostly younger ones) at lower level regarded unethical behaviour as more prevalent. They concluded that knowledge of ethical issues and their perceived seriousness could be influenced by a level place in the organisational hierarchy, as others could be in positions with increased opportunities to observe the behaviour of others, possess a heightened sense of personal responsibility or other factors.

Why are there still vast number of scandals within this sector? Below are some of the scandals which scourged the financial services industry of late.

2.7.1. Currency rigging The Deutsche Bank AG has been fined $205-million by the Department of Financial Services (2018, para. 1) for unlawful, unsafe and unsound conduct in its foreign exchange trading business. The Department of Financial Services found that Deutsche Bank AG employees also improperly shared confidential customer information and misled customers to benefit the bank. Certain elements of the bank’s electronic foreign exchange trading platforms were also found to have the potential to disadvantage customers and improperly affect markets. These violations took place between 2007 and 2013 and included efforts to improperly coordinate trading activity through online chat rooms, sharing confidential customer information, trading aggressively to rig prices, and misleading customers. The Department of Financial Services found that Deutsche Bank AG supervisors were engaging in improper activity, and that certain traders and salespeople repeatedly abused the trust of their customers.

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Other banks that had settled similar charges in the past include the Bank of America, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Goldman Sachs, JPMorgan Chase, Morgan Stanley, Royal Bank of Canada, Societe Generale, Standard Chartered and UBS (Reuters, 2018, para. 6).

2.7.2. VBS Mutual Bank (VBS) On 11 March 2018, South Africa’s Minister of Finance, upon recommendation from the then Registrar of Banks, placed VBS Mutual Bank (VBS) under curatorship (SARB, 2018, p. 1). According to the SARB and National Treasury (Cairns, 2018, para. 1), the primary issue at VBS was that since 2015 it had been taking several large deposits from few municipalities, which created a mismatch between these typically short deposits and the loans it was granting to clients, which were mostly longer term; this subsequently led to a liquidity crisis at the bank. According to the Governor of the SARB (Omarjee, 2018, para. 1), in terms of the Municipal Finance Management Act No. 56 of 2003, it was not legal for municipalities to make deposits into mutual banks as they are not registered in terms of The Banks Act 90 of 1990 and, thus, the municipalities by making deposits with VBS had broken the law and so did VBS in accepting the deposits. But why did VBS continued to accept these deposits from municipalities, knowingly that it was wrong to do so?

The Deputy Governor of SARB and CEO of the Prudential Authority (Cairns, 2018, para. 1) subsequently appointed an investigator into the affairs of the bank with the mandate to establish if any of the business of VBS was conducted with the intent to defraud depositors or other creditors of the bank. The investigation was also to attempt to find if there had been any irregular conduct by VBS’s shareholders, directors, executive management, staff, stakeholders and/or related parties.

According to the SARB (Omarjee, 2018, para. 1), in an affidavit filed on a court application initially launched by Vele Investments, the majority shareholder of VBS; the bank was severely mismanaged and there was reason to believe that there had also been fraudulent reporting as well as manipulation of financial information, as per the initial findings by an assessment by the curator. The findings by the curator also

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show that VBS was paying brokerage commissions to entities to attract deposits and mainly from municipalities, which was highly unusual for banks.

In the affidavit, the VBS former head of treasury confirmed that he had received R10-million for his part in defrauding the bank of just more than R1.5-billion, as reported by Kgosasa (2018, para. 1). The head of treasury further alleged that he had to facilitate a cash withdrawal of R5-million which was delivered to the chairman of VBS majority shareholder, Vele Investments; the money was to be used to bribe a senior executive at the Public Investment Corporation so that VBS could receive swift support regarding bank funding that was needed. How could a chairman, representing a majority shareholder, encourage such conduct which seems to bring the integrity and conduct of the bank into disrepute? Why did the head of treasury concede to be party to all these shenanigans of unethical conduct and reckless practices? As is central to this study, did the ethical orientation of the chairman as the custodian of ethical ideals of VBS influence that of the head of treasury as an employee?

2.7.3. Price-fixing of the rand (ZAR) Three South African banks (Investec, ABSA Bank Limited and Standard Bank of South Africa Limited) have been implicated among 17 banking groups in “widespread” collusion relating to the price-fixing of the South African rand. According to the Competition Commission of South Africa (2018, pp. 45-47), the case relating to price-fixing and market allocation in the trading of foreign currency pairs involving the rand has been investigated since April 2015. The Competition Commission further indicated that the banks seem to have used an instant messaging chat room to coordinate their trading activities when giving quotes to customers who were buying or selling currencies. It has been alleged that currency traders were buying and selling US dollars in exchange for the rand at fixed prices, and that this was accomplished by making false sales to drive up demand or colluding to agree not to trade for specified periods of time.

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According to the Competition Commission (2018, pp. 45-47), Citibank N.A agreed to pay a R70-million administrative penalty in a settlement agreement for its role in the forex cartel after conceding to fixing bids, offers and bid-offer spreads in relation to spot trades on ZAR currency pairs through coordination/alignment of the bids, offers and bid-offer spreads quoted to customers. This while the CEO of Barclays Africa Group has been reported by Bonorchis (2017, para. 1) as having apologised for its role in a rand-fixing and indicated that they had alerted regulators about the practice after suspending two of its traders. “We deeply regret that this conduct took place within our organisation”, Bonorchis (2017, para. 2) quoted the CEO of Barclays Africa Group as saying. The Competition Commission subsequently did not issue a fine against the bank (ABSA). The question one could ask is whether pleading guilty to manipulation and abuse of networks would solve the problem being faced by the big banks?

Other international banks that were involved include Bank of America, Merrill Lynch International, BNP Paribas, JP Morgan Chase & Co, JP Morgan Chase Bank, Standard New York Securities, HSBC Bank, Standard Chartered Bank, Credit Suisse Group, Commerzbank AG, Australia and New Zealand Banking Group, Nomura International, Macquarie Bank, Barclays Capital and Barclays Bank. Therefore, these scandals highlight that there are significant challenges that employees and leaders are faced with that puts them in compromising situations; subsequently almost inevitably leading to unethical behaviour.

2.8. FACTORS IMPACTING ETHICAL BEHAVIOUR OF EMPLOYEES

Ayodeji, Clinton and Tyali (2016, p. 16) indicated that ethical conduct is paramount in the running of an organisation, as it provides employees with conceptual guidelines on how to conduct themselves. Ayodeji et al. (2016, p. 18), however, found that unethical practices were still prevalent within organisations and that this could be attributed to greed, favouritism, political influence, monopoly of bigger companies over smaller and emerging companies, and pressure to meet unrealistic company objectives and deadlines, among others.

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2.8.1. Individual factors There are several individual factors that impact employees’ ethical behaviour, such as personality, family influences, personal values, religion, life experiences and peer influences, to mention but a few. DuBrin (2016, p. 184) indicated that an individual’s character contributes significantly to ethical behaviour; that is, the higher one’s moral attentiveness, the more likely an individual will behave ethically. DuBrin (2016, p. 183) also highlighted that the level of moral development is another notable contributor to an employee’s ethical behaviour; that is, some individuals are morally challenged, whereas others are morally advanced. This is supported by Van Gils et al. (2015, p. 198), who found that the response of the followers, in this case employees, could be dependent on employee moral attentiveness.

2.8.2. Organisational factors From an organisation’s perspective, ethical climate, leaders’ behaviour, peer conduct, organisation’s policies and values are among the factors which influences employees’ ethical conduct. According to Deshpande, Joseph and Prasad (2006, p. 212), ethical behaviour of peers in a work environment was found to have a significant impact on ethical behaviour. Saba, Fatina, Ahmad and Atif (2015, p. 950) found that the ethical climate, organisational justice and organisational citizenship positively affected ethical behaviour of employees within the organisation. DuBrin (2016, p. 184) indicated that unethical and immoral behaviour can also be influenced by the situation and particularly organisational culture. Steven (2008, p. 607) concluded that codes of ethics are effective instruments for shaping ethical behaviour and guiding employee decision-making within an organisation.

Regarding leaders’ behaviour, Lu and Lin (2014, p. 209) indicated that the ethical behaviour of the employees was significantly impacted by ethical leadership within an organisation. The finding of Lu and Lin (2014, p. 209) have been substantiated by Eisenbeiss and Van Knippenberg (2015, p. 191), who concluded that there is a strong link between ethical leadership and follower discretionary behaviours.

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The 2013 Europe, Middle East, India and Africa Fraud Survey conducted by Ernst & Young (2013, p. 8) showed that 20% of employees (including executives) surveyed were aware of financial manipulation within their own company; however, they turned a blind eye instead and did not report it. This study found that employees and executives were succumbing to unethical behaviour due to challenging market conditions, increased pressure to grow revenue and as such resorted to misrepresentation, unethical business practices and financial manipulation, such as overstated sales and understated costs.

2.8.3. External factors Government laws and regulations, societal norms and values, and competitive climate in an industry can also influence employees’ ethical behaviour. In a study conducted in China, Chow, Wu and Chan (2006, p. 636) found that legal considerations had significant influences on the ethical behaviour of individuals in the areas of social responsibility, integrity and accountability.

In addition, the Companies Amendment Act No. 3 of 2011 (Section 72(4)) has introduced provisions dealing with the appointment of social and ethics committees (Johnston, n.d, para. 8). Organisations should therefore develop strategies to manage and institutionalise ethics in a more robust manner.

Therefore, these three factors can impact on the emotions of employees and leaders, leading to unethical behaviour.

2.9. KING IV REPORT ON ETHICAL LEADERSHIP

The King Committee on Corporate Governance was established in July 1993 by the Institute of Directors in Southern Africa (n.d.). Four reports have since been issued since its establishment, that is, King I (1994), King II (2002), King III (2009) and King IV (2016). The first King Report on Corporate Governance (King I) was published in November 1994 by the King Committee on Corporate Governance Committee on Corporate Governance, headed by former High Court judge, Mervyn

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King S.C, and its aim was to promote the highest standards of corporate governance in South Africa (Cliffe Dekker Attorneys, n.d.). The latest King IV in 2016 builds on King III and became effective for financial years commencing from 1 April 2017; and while its adoption is voluntary (unless prescribed by law or a stock exchange listings requirement), it has been envisaged that it will be applicable to all organisations irrespective of their form or manner of incorporation (KPMG, 2016, p. 5-6).

Deloitte (2017, p. 3) published a report titled King IV: Ethical Leadership, which highlighted that good corporate governance is essentially about effective ethical leadership. The King IV Report on corporate governance for South Africa 2016 emphasises the need for ethical leadership and the establishment of an ethical culture. According to this report (Institute of Directors of Southern Africa, 2016, p. 20), ethical leadership is exemplified by integrity, fairness, competency, transparency, accountability and responsibility. It further emphasised that leaders should act ethically beyond mere legal compliance (Institute of Directors of Southern Africa, 2016, p. 29).

KPMG (2016, p. 10) emphasised that both stakeholders within the organisation have the responsibility to be good corporate citizens. This could be achieved by governing and leading organisations in a way that supports the establishment of an ethical culture, leading with integrity and being socially responsible to ensure continued existence. According to Nedbank (2016, p. 9), financial institutions are expected to be able to adapt to regulatory and global best practices changes; one of these best practices being good corporate governance (King IV). Nedbank (2016, p. 1) maintained that good governance contributes to value creation through enhanced accountability, strong risk and performance management, transparency and effective, ethical leadership.

According to Nedbank (2016, p. 7), adopting King IV within financial services industry is a commitment to the philosophy of stakeholder inclusivity, corporate citizenship and sustainable value creation. This will ensure that principles and practices are applied with a focus on achievement of the four corporate governance

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outcomes; that is ethical culture, good performance, effective control and legitimacy. This commitment has been reiterated by Standard Bank Group in its 2017 annual integrated report, which indicated that its approach to corporate governance extends beyond compliance. The King Report on Corporate Governance (King Code) has formed the cornerstone of this approach and lays the groundwork that the bank regards good governance as an enabler that creates competitive advantage through enhanced accountability, effective risk management, clear performance management, greater transparency and effective ethical leadership (Standard Bank Group, 2018, p. 14).

2.10. CONCLUSION

The increased evidence of unethical behaviours within the financial services sector and corporate are of serious concern. Financial institutions clearly have a vested interest in promoting integrity and discouraging unethical behaviour. Despite various legislation, best practice codes and organisational codes of ethics guiding stakeholders’ practices within the financial industry, there has been a steady rise in unethical practices in the sector. As a result, the sector has been exposed to huge financial losses, reputational damage and lack of confidence in the system, as well as other detrimental consequences for the country such as loss of business confidence.

It is quite clear from the literature that leaders are widely regarded as guardians of moral ethos and there is an urgent need for them to step up. Yet, there is not sufficient empirical research that focuses on an ethical dimension of leadership. Xu et al. (2016, p. 501) suggested that more research to evaluate the impact of ethical leadership on organisation outcomes, including employees’ ethical orientation, is needed. This chapter has identified knowledge gaps within existing literature regarding the level of ethical influence wielded by leaders over the ethical disposition of their followers, which justifies the reasoning behind the need for further studies in this area. The next chapter discusses the methodological framework of the study.

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CHAPTER 3

METHODOLOGY OF THE STUDY

3.1. INTRODUCTION

Research has been defined by Saunders et al. (2015, p. 5) as “a process that is undertaken in a systematic way to find out things, thereby increasing the knowledge”. This definition is aligned to that of Amaratunga, Baldry, Sarshar and Newton (2002, p. 17), who indicated that research involves inquiring and investigating, a process should be undertaken in a systematic and methodical manner and ultimately should increase knowledge. This process includes formulating and clarifying a topic, reviewing the literature, designing the research, collecting the data, analysing the data and writing it up (Saunders et al., 2015, p. 11).

According to Saunders et al. (2015, p. 163), research design is a plan which outlines how the researcher intends to conduct the study in order to answer the research question(s) and objectives. The primary objective of this study is to examine from an employee’s perspective their perceived impact of their leader’s ethical orientation on their predisposition to behave ethically. The researcher in this study assumes that since a leader’s primary role has been found to be that of influencing followers towards a shared goal, it then follows that leaders have the potential to transfer their ethical orientation to those they lead or to people who swear allegiance to them; and thus, unethical behaviour does not happen in a vacuum. Specifically, the researcher sought to address the following research objectives in this study:  To identify the attributes of the leader which are conducive for employees to be susceptible to their leader’s ethical orientation.  To establish the conditions which employees perceive to make them more susceptible to their leaders’ ethical orientation.  To identify ethical challenges posed by leaders within a financial institution using employees’ lived experiences.

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 To establish the factors which influences the employees’ ethical orientation within the financial sector.

It is very crucial for a researcher to give due diligence to the research methodology when conducting any study. In this chapter, the researcher outlines the research methodology which has been followed in conducting this study. This includes philosophical assumptions in research, research paradigms and strategies, sampling design, data collection and analysis, ethical considerations, reporting and synthesis of research findings. In this study, the researcher’s choice of methodology was influenced by the need to examine the level of influence leaders’ ethical orientation has on the ethical behaviour of those who they lead, gaining insights from participants’ lived experience within the institution.

3.2. PHILOSOPHICAL ASSUMPTIONS

Research philosophy refers to “a system of assumptions and beliefs about the development of new knowledge” Saunders et al. (2015, p. 124). This suggests that the researcher’s philosophy includes assumptions about the way in which the researcher views the world. Burrell and Morgan (1979) in Saunders et al. (2015, p. 124) and Kivunja and Kuyini (2017, p. 28), among others, concurred that ontology, epistemology and axiology have been found to be the three basic philosophical assumptions in research.

3.2.1. Ontology Saunders et al. (2015, p. 127) indicated that ontology refers to the assumptions about the nature of reality, assumptions which shape the way in which the researcher see and study the research objects. These objects include organisations, management, individuals’ working lives and organisational events and artefacts. According to Lancaster (2005, p. 35), ontology is “a philosophical approach to theory building based on investigating the universal and necessary characteristics of all existence”. South African banks (Investec, ABSA Bank Limited and Standard Bank of South Africa Limited) have been implicated among the 17 banking groups in a

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“widespread” collusion relating to the price-fixing of the rand (Competition Commission of South Africa, 2018, pp. 45-47). The collapse of the VBS bank (Rossouw, 2018, para. 2) and the scandals that recently befell KPMG (Khumalo, 2018, para. 1) also comes to mind.

3.2.2. Epistemology Epistemology is a philosophical approach to theory-building which examines the nature, grounds, limits and validity of human knowledge (Lancaster, 2005, p. 35). According to Burrell and Morgan (1979) in Saunders et al. (2015, p. 127), epistemology is concerned with assumptions about knowledge; what constitutes acceptable, valid and legitimate knowledge; and how such knowledge is communicated to others. Having worked in the financial services sector for more than 10 years, the researcher had a deep appreciation of the ethical environment that prevailed within at least two such financial institutions.

3.2.3. Axiology According to Saunders et al. (2015, p. 128), axiology refers to the role of ethics and values within the research process. Kivunja and Kuyini (2017, p. 28) indicated that axiology is concerned with the ethical issues that should be considered when planning research. The researcher obtained permission to conduct the study within the financial institution and those who participated consented to part of the study. Consent and confidentiality clauses were included in the invitation to assure participants that their personal details and the name of the financial institution would be dealt with in the strictest confidence.

3.3. RESEARCH PHILOSOPHY

Saunders et al. (2015, p. 124) indicated that there are five major research philosophies commonly used in business and management research spheres. Those are positivism, critical realism, interpretivism, postmodernism and pragmatism. Kivunja and Kuyini (2017, p. 36) postulated that an important relationship exists between a research paradigm and a methodology. This implies that the

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methodological implications of paradigm choice informs the research question/s, sampling, data collection methods and how the data collected would be analysed.

3.3.1. Positivism According to Saunders et al. (2015, p. 135), positivism entails working with an observable social reality to produce law-like generalisations. According to O’Neil and Koekemoer (2016, p. 3) the aim of the positivist paradigm is to discover a particular truth and this paradigm is associated with realism and objectivism. The positivist paradigm is grounded in what is regarded as the scientific method of investigation and it advocates the use of quantitative research methods as the foundation of the study. The positivist paradigm gives a researcher an opportunity to be detailed in the description of parameters and coefficients in the data (Kivunja and Kuyini, 2017, p. 31). This suggests that when a positivist paradigm is employed, it should be easier to understand the associations embedded in the data.

3.3.2. Critical realism Saunders et al. (2015, p. 138) highlighted that the philosophy of critical realism focuses on the amplification of what is seen and experienced. This philosophy is a useful philosophical basis for social sciences, with one of its doctrines being that the nature of reality (ontology) cannot be reduced to people’s knowledge of reality (epistemology); in this regard it deviates from both positivism and constructivism (Fletcher, 2017, 182).

3.3.3. Postmodernism Yin (2011, p. 311) asserted that postmodernism maintains that all human endeavours are implicitly influenced by the desire to exercise control over other people, this could be from doing abstract painting to conducting scientific research. Likewise, Saunders et al. (2015, p. 141) indicated that postmodernism emphasises the role of language and power relations, challenges the status quo and provides an alternate to ostracised views.

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3.3.4. Pragmatism According to Kelemen and Rumens (2008) in Saunders et al. (2015, p. 143), pragmatism proclaims that ideas are relevant when supported by action. Likewise, Yen (2011, p. 311) asserted that pragmatism supports the selection of suitable research methods in relation to the research questions and objectives. This suggests that researchers could use either method (quantitative, qualitative method, or mixed method), depending on which method best suits the research objectives.

3.3.5. Interpretivism According to O’Neil and Koekemoer (2016, p. 3), interpretivism (sometimes referred to as anti-positivism) focus on uncovering perceived meaning of variables as ascribed by the participants. Interpretivism emphasises that humans are different from physical phenomena, as they create meanings (Saunders et al., 2015, p. 140). The purpose of interpretivist research is to create new, richer understandings and interpretations of social worlds and contexts (Saunders et al., 2015). With its focus on complexity, richness, multiple interpretations and meaning-making, interpretivism is, however, explicitly subjectivist.

Kivunja and Kuyini (2017) postulated that an important relationship exists between paradigm and methodology because the methodological implications of paradigm choice permeate the research question/s, participants’ selection, data collection instruments and collection procedures, as well as data analysis. Kivunja and Kuyini (2017) asserted that it is common for research scholars to link the interpretivist paradigm to qualitative methods.

The philosophical assumptions of this study were shaped and influenced by the interpretivist paradigm. An interpretivist paradigm was preferred ahead of other methods as the researcher preferred to afford employees an opportunity to express their views and experiences on the perceived influence of their leaders’ ethical inclinations on their ethical dispositions. As argued by Wahyuni (2012, p. 71), interpretivist researchers prefer to interact and engage participants in social settings with which they are more familiar. This enabled the researcher with an opportunity to

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comprehend the social world from the experiences and subjective meanings that participants attach to it. This method is suitable for this study as it would allow the researcher an opportunity to understand the phenomenon being studied from the experiences and subjective meanings that the participants attach to it, and the researcher would be able to interact and have a dialogue with the participants.

3.4. RESEARCH PARADIGM

Research paradigms are basic assumptions and beliefs that distinguish how the world is perceived, which then serve as thinking frameworks, guiding the actions of researchers; these paradigms are used to address the philosophical proportions of social sciences (Jonker & Pennink, 2010 in Wahyuni, 2012, p. 69). Likewise, Collis and Hussey (2009, p. 11) defined a research paradigm as “a philosophical framework that guides how scientific research should be conducted”.

3.4.1. Quantitative research Saunders et al. (2015, p. 166) indicated that quantitative research examines relationships between variables, which are measured numerically and analysed using a range of statistical and graphical techniques; this method of research often incorporates controls to ensure the validity of data. According to Amaratunga et al. (2002, p. 20), the quantitative approach places considerable reliability in numbers that represent opinions or concepts. The quantitative method is regarded as a scientific method and is generally associated with positivism, especially when used with predetermined and highly structured data collection techniques (Saunders et al., 2015, p. 136).

This research paradigm is generally associated with experimental and survey research strategies as emphasised by Saunders et al. (2015, p. 166). Wegner (2016, p. 10) stated that quantitative variables generate numeric response data and this data can be statistically manipulated. According to Saunders et al. (2015, p. 166), quantitative research is usually associated with positivism and a deductive approach,

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where the data collected is used to test a theory; however, it may also integrate with an inductive approach when the data collected is used to develop a theory.

3.4.2. Qualitative research According to Saunders et al. (2015, p. 168), qualitative research uses a variety of data collection techniques and analytical procedures to study the participants’ perceptions, meanings and the relationships between them; and subsequently develop a conceptual framework and theoretical contribution. Bansal and Corley (2011) in Saunders et al. (2015, p. 168) pointed out that while qualitative research is characterised by methodological variations, it remains vital irrespective of the method used to demonstrate methodological rigour and theoretical contribution. Wegner (2016, p. 10) stated that qualitative variables generate non-numeric response data and this data then is represented by themes or categories.

Qualitative research focuses on the way that people interpret and make sense of their experiences under real-world conditions, and contributes insight into existing or emerging concepts that may help to explain human social behaviour (Yin, 2011, p. 312). This method is often associated with an interpretivist philosophy in research (Denzin and Lincoln, 2011, in Saunders et al., 2015, p. 168).

Saunders et al. (2015, p. 168) postulated that many varieties of qualitative research start with an inductive approach to theory development, where a naturalistic and emergent research design is used to develop theory. Likewise, this study will follow an inductive approach as it aims to find meaning from data collected, interpret and make sense of participants’ experiences from the real-world setting and contribute to existing or emerging concepts that may help to explain human social behaviour.

3.4.3. Mixed-method research Researchers can design a study which uses both quantitative and qualitative methods, should this be beneficial to address the research question(s) of interest. According to Saunders et al. (2015, p. 169), mixed-method research combines the use of quantitative and qualitative data collection and analytical procedures.

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Saunders et al. (2015, p. 169) further indicated that quantitative and qualitative techniques could be combined in a variety of ways that range from simple, concurrent forms to more complex and sequential forms.

Additionally, Amaratunga et al. (2002, p. 19) postulated that both quantitative and qualitative are best regarded as complementary and could be used together in research at times. Amaratunga et al. (2002, p. 19) further emphasised that the weaknesses in quantitative and qualitative research would thus be compensated by the counter-balancing strength of the other.

In this study, the research paradigm selected was qualitative. Qualitative data was collected as the study adopted the interpretivist paradigm. The qualitative method was preferred over the quantitative and mixed methods for various reasons. The use of the qualitative method assisted the researcher to search for meaning and significance in the behaviour of leaders and their followers. The qualitative method gave participants an opportunity to reveal the influencers of their ethical disposition within the institution.

In addition, this method made it easier for participants to use descriptive words and qualifying statements to express the level of influence their leaders had on their ethical behaviour. This method was encouraging for employees to express the nature of influence their leaders had on their ethical orientations. Related studies conducted elsewhere successfully employed the qualitative method to examine the ethical influence leaders had on the ethical inclinations of their followers. These include Treviño et al. (2003, pp. 5-37), who conducted a qualitative investigation of perceived executive ethical leadership: perceptions from inside and outside the executive suite.

In this regard, the search for meaning and significance in the behaviour of leaders and their followers, as well as related events, would best be aided by this method. The researcher in this study aims to interpret and make sense of data collected as expressed by the respondents. Qualitative methodology was deemed appropriate for

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this study because empirical research in this area has mainly been conducted either through qualitative or mixed methods, such as by Lu and Lin (2014, pp. 209-223), who studied the effects of ethical leadership on ethical climate and ethical behaviour of employees at Taiwan International Ports Corporation. The insights from this study are symbolic and subjective in nature that would have been difficult to capture with other methodologies.

3.5. RESEARCH STRATEGIES

Saunders et al. (2015, p. 177) defined a research strategy as “a plan of how a researcher will go about answering her or his research question”. This was supported by Denzin and Lincoln (2011) in Saunders et al. (2015, p. 177), who indicated that a research strategy is a methodological link between the research philosophy and a choice of methods to be used to collect and analyse data. In practice, the following are commonly used strategies in research:

3.5.1. Experiment Saunders et al. (2015, p. 178) asserted that the foundation of experimental research lies in natural science, even though it features prominently in psychological and social science researches. Kotler and Armstrong (2013, p. 114) indicated that experimental research attempts to explain a cause-effect relationship. Similarly, Saunders et al. (2015, p. 178) stated that the primary aim of experimental research is to establish the probability of an influence an independent variable causes on dependent variable. Saunders et al. (2015, p. 179) indicated that experimental research uses hypotheses rather than research questions; this is primarily due to the fact that the researcher anticipates and seeks to establish whether or not a relationship will exist between the variables.

3.5.2. Survey According to Saunders et al. (2015, p. 181), survey associated with exploratory and descriptive research and it is mostly used to answer “what”, “who”, “how much” and “how many” questions in research. Kotler and Armstrong (2013, p. 113) highlighted

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that survey research is associated with the gathering of descriptive data, such as people’s knowledge, attitudes and behaviour.

3.5.3. Archival and documentary research According to Kridel (n.d., para. 1), documentary research studies the issues related to the role and use of documents (both public and private records) and produces artefacts and material culture through artistic representation, images and sound recordings. Saunders et al. (2015, p. 183) highlighted that with developments in technology and digitisation of information, the emergence of online archives has increased and simplified the possibilities for researchers to use an archival or documentary research strategy.

3.5.4. Ethnography Saunders et al. (2015, p. 187) indicated that ethnography is primarily used to study the culture or social relations of people. Similarly, Kotler and Armstrong (2013, p. 112) concurred that ethnographic research involves the researcher interacting with the participants in their natural habitat. This suggests that this strategy supports research that fuses social critique, rigorous theory and pays equal attention to social relations and the details of experiences of the participants.

3.5.5. Action research Coghlan (2011) in Saunders et al. (2015, p. 189) referred to “action research” as “an emergent and iterative process of inquiry that is designed to develop solutions to real organisational problems through a participative and collaborative approach, which uses different forms of knowledge, and which will have implications for participants and the organisation beyond the research project”. This implies that the researcher should be more involved in the action in order to plan, facilitate and monitor change.

3.5.6. Grounded theory According to Saunders et al. (2015, p. 193), grounded theory has been more prevalent on development of theoretical explanations of social interactions and processes in a wide range of contexts. The view of Saunders et al. (2015, p. 193)

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has been supported by McCallin (n.d., para. 5), who postulated that grounded theory allows the researcher to seek out and conceptualise the latent social patterns and structures within a study through the process of constant comparison and evaluation of concepts.

3.5.7. Narrative inquiry Haydon, Browne and Van der Riet (2018, pp. 125-126) indicated that narrative inquiry is located in the interpretive paradigm and explores the experience of participants and how their physical, social, and cultural environment impacts and shapes their individual experiences. According to Saunders et al. (2015, p. 198), this strategy is associated with a small and purposive sample, as it is quite intensive and is likely to generate large amounts of data in the form of interview transcripts or observational notes.

3.5.8. Case study A case study research is regarded as “an in-depth inquiry into a topic or phenomenon within its real-life setting” (Yin, 2014, in Saunders et al., 2015, p. 184).

The researcher selected the case study as the strategy to be applied in this study. This strategy will allow the researcher to intensely examine the impact the leader’s ethical orientation has on employees in the real setting, the environment in which their perceptions will be drawn. By using the case study design, it was easier for the researcher to take into account the personal feelings and lived experiences of the employees regarding the bank’s ethical culture. Lastly, using the case study approach afforded the researcher an opportunity to generate context-specific insights from the perspective of people who possess intimate knowledge on the bank’s ethical performance history. Dubois and Gadde (2002), Eisenhardt (1989), Eisenhardt and Graebner (2007), Ridder et al. (2014) and Yin (2014) in Saunders et al. (2015, p. 185) supported the use of case study by arguing that it has great capacity to generate insights from a qualitative research in real-life context, leading to rich, empirical descriptions and development of theory.

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3.6. SAMPLING DESIGN

It is not always feasible to collect data from the entire population and thus for all research questions where it would be impracticable to collect data from the entire population, a sample should be selected (Saunders et al., 2015, p. 274). As is in this study, it will be impractical to collect data from the entire population. In research, conclusions are usually drawn by studying a small segment of the total population (Kotler & Armstrong, 2013, p. 117).

3.6.1. Population Wegner (2016, p. 5) indicated that a population is a universe from which a collection of relevant data to the study is possible. In this study, the entire staff complement of the institution constituted the population.

3.6.2. Sampling techniques Kotler and Armstrong (2013, p. 117) regarded a sample as a segment of the population selected for a particular study to denote the entire population. Sampling techniques fall into two categories, namely probability sampling and non-probability sampling (Saunders et al., 2015, p. 275; Wegner, 2016, pp. 161-162).

3.6.2.1. Probability sampling This sampling method comprises selection methods through which the sample is selected from the target population randomly, by chance (Wegner, 2016, p. 162). Likewise, other researchers (Saunders et al., 2015, p. 275; Kotler & Armstrong, 2013, p. 118) postulated that with probability sampling, the chance or probability of each item being selected from the population is known and equal.

3.6.2.1.1. Simple random Charlesworth and Morley (2000) in Lancaster (2005, p. 153) indicated that each item within the population has an equal chance of being selected through this sampling method. Saunders et al. (2015, p. 287) highlighted that simple random sampling involves the selection of the sample at random from the population and this could be

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done using computer programs, random number tables or by randomly selecting items from the population without any criteria being applied.

3.6.2.1.2. Systematic random Wegner (2016, p. 163) indicated that systematic random sampling is a process that begins by selecting randomly selecting sampling units. Similarly, Saunders et al. (2015, p. 289) indicated that systematic sampling involves selecting the sample at predefined intervals from the sampling frame. This suggests that there is an element of randomness involved in this method, which includes using regular intervals to select an item from the population.

3.6.2.1.3. Stratified random According to Saunders et al. (2015, p. 290), stratified random sampling is a modification of random sampling in which the researcher would usually divide the target population into more than one significant strata based on the on certain criteria. Similarly, Wegner (2016, p. 164) indicated that this method involves dividing the population into segments from which a simple random samples would subsequently be selected from each stratum.

3.6.2.1.4. Cluster sampling Barnett (2002) in Saunders et al. (2015, p. 291) indicated that this method is also referred to as “one stage cluster sampling” and that it uses the same approach as stratified. Likewise, Wegner (2016, p. 164) indicated that once the population has been divided into clusters, a subset of clusters is randomly selected for inclusion in the overall sample with the ultimate sample consisting of all (or samples of) units from these stratums.

3.6.2.1.5. Multi-stage sampling Saunders et al. (2015, p. 293) indicated that multi-stage cluster sampling is mostly used in a geographically dispersed population and when face-to-face contact is needed or where it is time-consuming and costly to construct a sampling frame for a large geographical area. This method could be viewed as an extension of the

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principles of cluster sampling and could generally be applied in big studies which extend to considerable a massive geographical area such as a country or continent.

3.6.2.2. Non-probability sampling According to Kotler and Armstrong (2013, p. 119), non-probability sampling is the opposite of probability sampling, as through this method each item of the target population does not have a known and equal chance of being selected. Saunders et al. (2015, p. 295) indicated that the probability or chance of each item within the population being selected is unknown when using this method, and that it is often impossible to answer research questions or to address objectives that require the researcher to make statistical inferences about the characteristics of the population. This suggests that there could be an element of bias against which the researcher should guard. The researcher should exercise objectivity and sound judgment when using this method, as this allows for the results obtained from an analysis of deliberately selected sample to be tolerably reliable.

3.6.2.2.1. Quota sampling According to Charlesworth and Morley (2000) in Lancaster (2005, p. 153), quota sampling is the selection of a sample so that its most important demographic characteristics match those of the target population. Wegner (2016, p. 162) postulated that the researcher selects and interviews a prescribed number of people in each of the quota of the population.

Barnett (2002) as cited in Saunders et al. (2015, p. 299) argued that quota sampling is a type of stratified sample in which the selection of items is entirely non-random. Saunders et al. (2015, p. 301) warned that this method is subject to bias as researchers tend to choose respondents who are easily accessible and who seem willing to participate in the study.

3.6.2.2.2. Volunteer sampling Volunteer sampling consists of snowball and self-selection sampling methods (Saunders et al., 2015, p. 303). Snowball refers to instances where participants

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volunteer to be part of the research rather than being chosen, whereas self-selection is when participants to indicate their desire to take part in the research (Saunders et al., 2015, p. 303).

3.6.2.2.3. Haphazard sampling According to Saunders et al. (2015, p. 304), this method is also known as convenience or availability sampling. Kotler and Armstrong (2013, p. 120) indicated that convenience sampling is used when the researcher selects the easiest items or cases of the target population to obtain or gather information. Saunders et al. (2015, p. 304) concurred with Kotler and Armstrong (2013, p. 120) by postulating that haphazard sampling occurs when the researcher selects items or cases from target population without any obvious principles of organisation in relation to the research question.

3.6.2.2.4. Purposive sampling According to Saunders et al. (2015, p. 301), this method is also known as judgmental sampling. Kotler and Armstrong (2013, p. 120) stated that with purposive sampling, the researcher uses own judgment to select items (sample) from the target population which are perceived to good prospects for accurate information. Likewise, Saunders et al. (2015, p. 301) concurred that with purposive sampling, the researcher uses own judgment to select cases that will best answer research question(s) and meet the study objectives.

The participants in this study were selected by a means of the purposive sampling method. Saunders et al. (2015, p. 297) indicated that a sample range of five to 25 for semi-structured interviews was deemed acceptable. This implies that when making use of purposive sampling, the sample size should neither be unreasonably large nor too small; it should rather be optimum. A total of 12 employees participated in the study, however 15 were earmarked from a total of 27 invitations sent. The 12 employees were from the institution’s ethics office, compliance, risk, forensic, human capital and other client-facing business units or divisions.

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Furthermore, the researcher ensured that only employees that possessed in-depth knowledge and an understanding of the institution’s ethical environment were invited. Out of the 12 participants, at least 50% were at a senior level; that is, senior managers and executives. The majority of the participants had been employed by the financial institution in question for more than 10 years. The use of purposive sampling was informed by the need to select employees who possess demonstrable understanding or knowledge of the financial institution ethical ideals, ethos and challenges. Since the researcher was familiar with the organisation’s ethical environment, using the purposive sampling method made the participant selection activity more achievable.

3.7. DATA COLLECTION METHODS

Data for research may be obtained from various sources. Wegner (2016, p. 13) indicated that data sources could be classified as primary and secondary sources, and this could be available either within (internal) and/or outside (external) of the organisation. This has been substantiated by Saunders et al. (2015, p. 316), who highlighted that researchers can consider data from either primary or secondary or both sources.

Primary data collection in qualitative research is usually associated with an interpretivist paradigm. The data collected from a qualitative research has a high level of subjectivity as it is normally interpreted in the context of the study, and has high levels of validity but low reliability and generalisability. This is in contrast to quantitative studies, which generally has high reliability and generalisability but low validity (Collis & Hussey, 2009).

Primary data refers to fit-for-purpose data obtained from a specific source for the first time by the researcher (Wegner, 2016, p. 14; Kotler & Armstrong, 2013, p. 107). The main advantage of using primary data is that it is of high quality and the researcher generally has greater control, while the disadvantages include that it can be time- consuming to collect and costly (Wegner, 2016, p. 14). Primary data may be

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collected using various methods. According to Wegner (2016, p. 14), the main methods of collecting data are surveys, observations and experimentation. Saunders et al. (2015, p. 419), however, highlighted focus groups as another method of data collection, which was not included by Wegner (2016, p. 14).

3.7.1. Surveys Kotler and Armstrong (2013, p. 113) indicated that surveys are the most commonly used method of collecting primary data and involves asking respondents questions about their knowledge, preferences, attitudes and behaviour. Wegner (2016, p. 15) indicated that surveys are conducted through personal interviews, telephonic or online using a questionnaire (closed or open-ended) to structure and record the data collection. Saunders et al. (2015, p. 439) cautioned that questionnaires are mostly not preferred for exploratory or other research that requires large numbers of open- ended questions; however, questionnaires are mostly preferred to be used for descriptive or explanatory research.

3.7.2. Observation According to Wegner (2016, p. 14), observation refers to collection of data by observing a respondent or process in action. Saunders et al. (2015, p. 354) indicated that observation involves the systematic viewing, recording, description, analysis and interpretation of people’s behaviour or reactions under certain conditions.

3.7.3. Focus groups According to Krueger and Casey (2009) in Saunders et al. (2015, p. 420), focus groups occur in an open and tolerant environment in the form of group interviews that focus on a particular topic and encourages discussion among the participants and the sharing of perceptions. Devault (2018, para. 1) indicated that through this method, people are purposefully selected to gather and participate in a planned discussion that is intended to elicit their perceptions about a topic being studied.

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3.7.4. Experimentation According to Kotler and Armstrong (2013, p. 114), experimentation involves gathering of data by selecting coordinated groups of subjects, giving them different treatment while controlling unrelated factors and checking for differences in their responses; this method is mainly used to collect primary data. Wegner (2016, p. 17) asserted this by indicating that experimentation methods involves manipulation of certain variables under a controlled environment.

3.7.5. Interviews According to Saunders et al. (2015, p. 388), research interview refers to a purposeful conversation between the researcher and respondent(s), requiring the interviewer to ask concise and unambiguous questions, to which the interviewee respond willingly. There are unstructured, semi-structured and structured types of interview.

3.7.5.1. In-depth interviews Saunders et al. (2015, p. 391) referred to in-depth interviews as an informal and unstructured conversation (inquiry) which the researched uses to explore in-depth a topic or area of interest. According Gill, Stewart, Treasure and Chadwick (2008, para. 4), unstructured interviews do not reflect any predetermined ideas of the researcher and should be conducted with very little or no organisation. Morse (2015, p. 1218) indicated that in-depth interviews are narrative in nature, in which the interviewee(s) respond to a general question, telling a story with minimal interruption.

3.7.5.2. Structured interviews According to Saunders et al. (2015, p. 391), structured interviews make use of questionnaires based on a predetermined set of questions and are mostly regarded as interviewer-completed questionnaires. Structured interview questions can either be open-ended or closed-ended.

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3.7.5.3. Semi-structured interviews For semi-structured interviews, the researcher has a list of predetermined themes and some key questions to be covered, although their use may vary from interview to interview (Saunders et al., 2015, p. 391).

This study made use of semi-structured interviews to collect the primary data. The semi-structured interviews were done with the aid of an interview guide. The sessions were audio recorded to enhance data collection and ease of transcribing and interpretation into a report. The researcher preferred semi-structured interviews in order to give participants an opportunity to express their perceptions of the influence their leaders’ ethical orientation has on their predisposition to behave ethically within the financial institution. Using open-ended questions helped employees to narrate unique ethical dynamics and challenges within the institution from their own perspective by using words of their choice.

3.8. THE MEASURING INSTRUMENT

The research instrument for this study comprised open-ended questions which required the participants to provide their understanding of concepts and share their lived experiences within the institution related to the phenomenon being studied. The development of the questionnaire was aided by the use of literature resources including journals, books and publicly available organisational reports which were consulted relevant to the study (Lu & Lin, 2014, pp. 220-221; Van Gils et al., 2015, pp. 190-203; Bonner et al., 2016, pp. 734-735; and Eisenbeiss & Van Knippenberg 2015, pp. 182-195).

The questionnaire was divided into two main sections, attached as Annexure C.

3.8.1. Section A: Demographic data This section was intended to obtain participants’ demographic information considered a value-add to this study. These included age group, gender, tenure and employee level within the institution, highest level of qualification and role orientation.

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Personal data that could have resulted in the identification of the participants’ identity was not collected.

3.8.2. Section B: Research questions This section was used to identify attributes of a leader which were deemed favourable for employees and ethical challenges posed by them. Further, this section aided to established conditions and factors which employees perceive to make them more susceptible to their leaders’ ethical orientation.

3.9. ETHICAL CONSIDERATIONS

Schermerhorn (2012, p. 56) defined ethics as “the code of moral principles that sets standards of good or bad, right or wrong, in peoples’ conduct”. Saunders et al. (2015, p. 239) postulated that in the context of research, ethics refer “to the standards of behaviour that guide the conduct of the researcher in relation to the rights of those who become the subject of the study or affected by it”.

In addition, Saunders et al. (2015, p. 243) identified and articulated ethical principles for consideration through the research process for researchers. - The researcher should avoid potential psychological and physical harm to participants or those affected by the study. - The researcher should obtain consent of participants and thus participation should be voluntary. - The researcher should warrant anonymity and privacy of participants. - The researcher should respect the dignity of participants, be transparent, be honest and avoid misrepresentation. - The researcher should ensure reciprocity by ensuring that the study is mutually beneficial to both the participants and the researcher.

For this study, the following ethical considerations were taken into account during the course of the study.

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- Permission was obtained from appropriate personnel within the financial institution at which the research was conducted. - To address the issue of confidentiality and anonymity, consent and confidentiality clauses were included in the invitation letter sent to participants which assured the participants that their responses would be kept confidential and anonymous. - The principle of voluntary participation was explained to the participants at the beginning of each interview. Participants were informed that they had the right to withdraw from the study at any time during the interview. - The participants will not involve young or vulnerable person, nor school learners. - Further an ethical clearance form (Form E) was completed and may be reviewed within Annexure A.

A summary of research findings, conclusions and recommendations would be made available in an electronic format to those participants who expressed interest to receive the research report.

3.10. PILOT STUDY

A pilot study is designed to test the questionnaire in order to improve the quality and reliability of the study. Saunders et al. (2015, p. 182) concurred that a pilot study is vital during a research as it enables the researcher to refine the questionnaire and address unintended weaknesses in the design, strategy and techniques selected for the study. They further postulated that it is important to conduct a pilot to test the usefulness of the strategy and data collection techniques selected for a study.

In this research study, a pilot study involving two employees was conducted; that is, one at management level and the other one at an executive level. After the pilot study, it was noted that the initial questionnaire erroneously omitted the highest qualification level. The omission was rectified and the two participants were re- approached to ascertain their highest qualification level.

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3.11. DATA ANALYSIS

For any study undertaken, whether it be quantitative, qualitative or mixed-method research, the data collected should be analysed to enable the researcher to answer the research question(s), objectives and/or hypothesis.

For quantitative research, data collected get recorded using numeric codes to facilitate the analyses and to explore relationships using statistics and testing for significance (Saunders et al., 2015, p. 511). According to Saunders et al. (2015, p. 511), this exploration of relationships is achieved through the use of statistical computer programs such as Excel™ to more advanced data management and statistical analysis software packages such as Minitab™, SAS™, IBM SPSS Statistics™ and Statview™. Likewise, qualitative data will likely be large and complex in nature as the researcher could be confronted with either a mass of paper, still images, visual recordings or electronic files that will need to be explored, analysed and synthesised (Saunders et al., 2015, p. 569). Below follows a brief discussion on various data analysis methods/techniques relevant to a qualitative including the selected and rationalisation on method selected for this study.

3.11.1. Content analysis Saunders et al. (2015, p. 608) highlighted that content analysis technique codes and categorises qualitative data in order to analyse them quantitatively. This could range from analysing the contents of documentary materials such as books, magazines, newspapers and the contents of all other verbal materials that can be either spoken or printed.

3.11.2. Computer Assisted Qualitative Data Analysis Software (CAQDAS) According to Yin (2011, p. 180), this is a computer software devoted to the analysis of qualitative data. Saunders et al. (2015, p. 615) concurred and indicated that CAQDAS refers to a range of computer programs containing a range of tools to facilitate the analysis of qualitative data.

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3.11.3. Discourse analysis Saunders et al. (2015, p. 604) outlined that this method involves studying textual sources or passages of naturally occurring dialogue and explores how these discourses construct or constitute social reality and social relations through creating meanings and perceptions.

3.11.4. Narrative analysis Saunders et al. (2015, p. 600) stated that narrative analysis is used to preserve and analyse narrative data a whole unit or narrative sequence; however, categories, themes and facets of content may still be identified and coded within a narrative.

Maitlis (2012) and Riessman (2008) in Saunders et al. (2015, p. 601) indicated that narrative analysis consists of thematic narrative analysis and structural narrative analysis approaches. Thematic narrative analysis identifies analytical themes within narratives and focuses on the content of a narrative, rather than on the way in which it is structured; whereas structural narrative analysis analyses the way in which a narrative is constructed (Saunders et al., 2015, p. 601).

The data collected was analysed through the thematic narrative analysis method. The researcher was able to identify cross-cutting logical themes within the narratives of the respondents and focused on analysing the content rather than on the way in which it is structured. In developing the themes, the researcher made use of the six- step process postulated by Braun and Clarke (2006, p. 79). This process involves familiarising with the data, generating phrases, searching for themes, reviewing themes, defining and naming themes and writing a report.

3.12. METHOD OF REPORTING AND SYNTHESIS

Saunders et al. (2015, p. 661) highlighted that synthesising is the process of putting together various elements of the data collected to create a new statement or conclusion. Synthesising enables a comprehensive description of the phenomenon

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being studied; with the data being scrutinised, examined and compressed to make it more usable.

For this study, a description of the essence of the participants’ perceptions was captured and reported upon based on the themes or patterns on which a future model for research can be based.

3.13. CONCLUSION

In this chapter, the research methodology adopted for this study was described. The differences between various research paradigms, research strategies were explained and a justification for adopting a qualitative approach and case study strategy provided. The next chapter discusses and presents the key findings of the research.

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CHAPTER 4

EMPIRICAL RESULTS

4.1. INTRODUCTION

This study is aimed at establishing the perceived impact of ethical leadership on employee’s predisposition to behave ethically. The study was conducted through a collection of primary data and involved soliciting perceptions from employees within one of the South African-based financial institutions by a means of interviews. This chapter presents the empirical results and involves the analysis and interpretation of the primary data. The findings are discussed and linked to the literature review where applicable.

4.2. RESEARCH OBJECTIVES

This study was concerned with an examination from an employee’s perspective of their perceived impact of their leader’s ethical orientation on their predisposition to behave ethically. The study sought to address the following research objectives:  Identify the attributes of the leader which are conducive for employees to be susceptible to their leader’s ethical orientation.  Establish the conditions which employees perceive to make them more susceptible to their leaders’ ethical orientation.  Identify ethical challenges posed by leaders within a financial institution using employees’ lived experiences.  Establish the factors which influences the employees’ ethical orientation within the financial institution.

4.3. RESPONSE RATE

Invitations were sent to 27 employees at various level within the institution; however, only 15 expressed interest to participate in the study. Out of the 15 employees who

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indicated that they were willing to take part in the study, only 12 ultimately availed themselves for the interview. Effectively, this represented an 80% participation rate. The three non-participants who failed to participate cited pressing work and time constraints as reasons for non-participation.

4.4. PROFILE OF THE PARTICIPANTS

This section positions the profile of the participants. Table 4.2 provides a summary of the demographic details of the participants which were obtained during the interview; that is, age, gender, tenure (years of experience), job level, highest level of education and role orientation. These demographics represent the background of the participants behind the range of views, opinions and experiences expressed.

TABLE 4.2. DEMOGRAPHIC REPRESENTATION OF PARTICIPANTS

The majority (58%) of the participants were aged between 35 and 50 years, followed by those aged between 18-34 years at 25%, while those above the age of 50 years were in the minority (17%). The widespread ages of the participants ensured that valuable insights, challenges and experiences were obtained from the younger and older generation. The age group 18- 34 years made up 25% of the group and had less than five years of experience within the institution. The majority (67%) of the participants were female, while the males were in the minority (33%).

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In addition, the majority (50%) of the participants had been employed by the financial institution for more than 10 years, while those who had less than five years of experience were the second most represented. Only 8% of the participants had been working within the institution for between five and 10 years. Those at junior management level were the most represented (33%), while those at executive and senior management were tied at 25% each. General staff were the least represented (17%).

Likewise, the majority (50%) of the participants had an undergraduate qualification, while those who had a postgraduate honours degree or postgraduate diploma were second most represented at 33%. Only 17% of the respondents had a master’s degree. A significant number (83%) of participants did not directly interact with clients. Only 17% of the participants were customer-facing.

Therefore, the demographics of all participants give a strong impression that the participants were academically equipped and familiar enough with the ethical climate of the institution to effectively deal with the topic of the study.

4.5. DATA ANALYSIS PROCESS

This study made use of a thematic analysis method as it allowed the researcher to identify commonalities across participants’ experiences and organised them into cross-cutting themes. Braun and Clarke (2006, p. 79) postulated that this method is useful in identifying, analysing and reporting patterns (themes) within the collected data.

The researcher made use of the six-step process postulated by Braun and Clarke (2006, p. 87) to conduct thematic analysis to achieve the study research objectives, which include familiarising with the data, generating codes, searching for themes, reviewing themes, defining and naming themes, and writing a report. These steps are briefly discussed below.

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4.5.1. Familiarising with the data According to Braun and Clarke (2006, p. 87), the researcher must listen to the audio recorded while noting any initial analytical observations, read and reread transcribed data in order to be immensely and intimately familiar with the data collected. A word- for-word transcription was conducted from the audio recorded during the interviews capturing participants’ perceptions and experiences into a document. The researcher immensely familiarised himself with the data through listening to the audio and reading the transcribed documents numerous times while making note of analytical observations. This step provided the foundation for the subsequent analysis.

4.5.1.1. Anonymising the data In line with the non-disclosure agreement and anonymity assured to the participants and the financial institution at which the study was conducted, the identity of the institution, the participants and names referred to during the interview were removed from the transcripts, including any other information that could identify the institution and the participants. This was done to ensure compliance with the non-disclosure agreement as well as confidentiality and ethical considerations.

4.5.2. Generating phrases and codes Braun and Clarke (2006, p. 88) emphasised that the researcher must commence with the identification of preliminary codes once he/she is familiar with the data; these are features that appear interesting and meaningful from the data collected. The researcher made initial annotations of terms, adjectives and short phrases which reflected the participants’ observations, experiences and perceptions regarding the phenomenon being studied and were recorded in a separate worksheet.

4.5.3. Searching for themes Braun and Clarke (2006, p. 89) indicated that searching for themes is the beginning of the interpretive analysis of the codes generated where the data extracts get aligned to the overarching themes. The researcher in this study searched for themes through listening to the audio recordings, reading and rereading the transcribed documents and reviewing of notes taken during the interviews to find issues,

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observations and perceptions that were common from the participants’ feedback. The researcher then determined the themes guided by the research questions, which showed a pattern and commonality across the participants’ responses.

4.5.4. Reviewing themes According to Braun and Clarke (2006, p. 91), the researcher must review the themes created to ensure that they communicate a convincing and compelling story about the data in relation to the research objectives and explain each theme and the connection between the themes. In this study, the researcher reviewed the themes by selecting words, adjectives and short phrases which were common among the responses from the participants. Some of the themes and subthemes were collapsed and consolidated in the process in relation to the codes, short phrases, adjectives and words extract to ensure relevance to the research questions and objectives.

4.5.5. Defining and naming themes This phase involves refining, naming and defining the themes and potential subthemes from the data. Braun and Clarke (2006, p. 92) stressed the need for the researcher to ask the following questions: What story does this theme tell? How does this theme fit into the overall story about the data? In answering these questions, the researcher should be able to identify the gist of each theme and subsequently construct a concise and informative description of each theme. This step enabled the researcher to provide a summarised concept by naming of themes and ensuring that the overarching themes are concise, informative and representative of the issues identified from the data.

Below is a list of themes identified:  Theme 1: Conceptualisation of ethical leadership  Theme 2: Attractiveness of a leader o Subtheme 2.1: Desirable qualities of a leader o Subtheme 2.2: Undesirable qualities of a leader  Theme 3: Leader moral identity o Subtheme 3.1: Ethical orientation of a leader

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o Subtheme 3.2: Unethical orientation of a leader  Theme 4: Situational influences o Subtheme 4.1: Individualistic vs collaborative o Subtheme 4.2: Empowerment of followers  Theme 5: Manipulative leaders  Theme 6: Erosion of trust  Theme 7: Observing and reporting misconduct  Theme 8: Individual factors  Theme 9: Organisational factors o Subtheme 9.1: Organisational culture o Subtheme 9.2: Ethical programmes and awareness o Subtheme 9.3: Unrealistic expectations  Theme 10: External factors o Subtheme 10.1: Intimidation of employees o Subtheme 10.2: Trade practices o Subtheme 10.3: Level of education and experience

4.5.6. Reporting The final step in the process of thematic analysis according to Braun and Clarke (2006, p. 93) is for the researcher to transform his/her analysis into an interpretable section of writing by using vivid and compelling extract examples that relate to the themes, research question, and literature. Braun and Clarke (2006, p. 93) argued that the report must convey the outcome of the analysis in a manner that convinces the reader of the merit, reliability and validity of the analysis and not only a simple description of themes without empirical evidence which supports and addresses the research questions. In this study, the researcher will provide the report by first defining and describing the overarching themes. Detailed explanations and verbatim provision will be provided as context and empirical evidence for each subtheme. The next section is the presentation of the empirical results.

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4.6. FINDINGS OF THE STUDY

4.6.1. Theme 1: Conceptualisation of ethical leadership Schermerhorn (2012, p. 57) and Minkes et al. (1999, p. 331) posited that the manner in which an individual conceptualises the concept of ethical leadership may potentially influence their ethical orientation. To understand how participants conceptualised the idea of ethical leadership, the participants were asked to describe concept of ethical leadership.

Participant 5 described ethical leadership as the ability to distinguish right from wrong in whatever decision that one takes. Likewise, Participant 9 described ethical leadership as leading by example and doing the right thing at all times even when no one is watching.

Participant 10 indicated that ethical leadership means living the values set by the organisation as well as modelling followers around those values, whereas Participant 8 regarded ethical leadership as meaning two different things in an organisation: what an individual can deliver as a promise and how that individual behaves within the organisation.

To demystify the concept of ethical leadership, Participant 6 gave a graphic description of an ethical leader, the CEO of the financial institution. In the words of Participant 6: “The CEO is widely regarded by everyone as an epitome of ethical leadership. The CEO applies a strong set of values when making crucial decisions that have ethical implications to the organisation. When confronted with a tricky ethical question, the CEO does not only look at the decision from a commercial point of view, rather he takes into account a different range of all perspectives.”

Participant 6 also gave an example of the instance where the CEO had to make an unpopular decision: “One such tough decision was when the CEO was tasked to make decisions regarding whether to disengage an auditing firm which was embroiled in a corruption scandal as the institution’s preferred external auditor. By

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then, the firm caught up in scandal was accused of committing various ethical transgressions. In response, the CEO looked at the issue from different lenses, a legal point of view, functional/practicality point of view as well as from an ethical point of view. The CEO did not hesitate to take such an unpopular decisions even when it meant that CEO could [have become] a sworn enemy to those who hold a different view.” The CEO was described as one who sticks to his guns even in the midst of a barrage of criticism from all quarters. According to this participant, ethical leadership has the potential to improve ethical adherence among employees only if an organisation adopts a robust value internalisation initiative.

An analysis of the participants’ responses revealed that although the participants had a broader understanding of what constitutes ethical leadership, their description of the concept had some striking similarities:  Doing the honourable thing, even when it is not popular.  Displaying consistency in your words and actions.  Leading by example.  Being honest, even when no one is watching.  A leader that models organisational values.

The participants’ perceptions of ethical leadership was found to be consistent with the contemporary definitions generated by various ethical leadership theorists. For instance, Ciulla (1995) and Gini (1997) in Eisenbeiss and Van Knippenberg (2015, p. 182) posited that ethical leadership entails treating others with dignity, trustworthy, respecting their rights and using power in socially responsible ways; whereas the King IV Report on Corporate Governance for South Africa 2016 (Institute of Directors of Southern Africa, 2016, p. 20) insists that ethical leadership is grounded on founding principles such as openness and transparency. However, these two attributes were not mentioned by the participants. Despite these theoretical differences, one thing that is common between Brown et al. (2005, p. 123) and the participants’ is that ethical leadership is underpinned by consistently doing what is morally right, even when no one is watching.

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4.6.2. Theme 2: Attractiveness of the leader Ethical leadership theorists universally agree that ethical leaders are commonly identifiable by certain enduring attributes or characteristics. What this means is that one can tell whether a leader is an ethically focused leader or not by the kind of attributes they consistently demonstrate or display. According to Brown et al. (2005, p. 120), leaders embody ethical traits that become permanently part of their moral genes and these moral genes need to be identified and analysed. Ethical leaders embody traits such as honesty, integrity and trustworthy, fairness, respect and selflessness (DuBrin, 2016, pp. 186-187). Similarly, Brown et al. (2005, p. 130) indicated that integrity, trustworthiness (honesty), altruism, fairness, role-modelling and ethical awareness were the main attributes of an ethical leader.

Participant 6 described an ethical leader as someone who is trustworthy, credible, someone whom people look up to as a role model, who walks the talk and embodies the values of honesty and integrity; whereas Participant 7 indicated that ethical leadership has to do with integrity. Similarly, Participant 8 highlighted that being ethical is related to being honest and portraying integrity in everything.

Participant 2 highlighted that honesty and integrity are the obvious attributes linked to ethical leaders. An ethical leader is someone who can be trusted, or someone who qualifies to be a role model.

From the analysis conducted, it was clear that ethical leadership is manifested when a leader consistently demonstrates ethos of honesty and integrity. The participants consistently agree that these characteristics are an enduring outcome linked to ethical leadership that influences their attractiveness. Although the word trustworthiness was mentioned once, the words honesty and integrity were mentioned by more than three participants. To the participants, an ethically oriented leader is a leader who places a great deal of emphasis on values of integrity, honesty and trustworthiness. The participants’ views were consistent with that of various theorists and researchers in outlining the traits of an ethical leader, such as those of DuBrin (2016, pp. 186-187) and Brown et al. (2005, p. 130).

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Ethical values of integrity, transparency, accountability and openness should be exemplified by leaders. As custodians of culture, leaders should play a leading role in influencing and shaping the ethical thinking of those they lead.

4.6.2.1. Subtheme 2.1: Desirable qualities of a leader In the words of Participant 4: “I am attracted to leaders who stay true to their convictions even when it was not palatable or convenient to do so. Leaders who displayed virtues of fairness, truthfulness, transparency and joint accountability. Leaders who were supportive of their followers in spite of the nature of their circumstances. When a follower messes up, such leaders steer such a follower on the path of restoration and recovery. A leader who do not abandon or disown a follower in the wilderness of hopelessness and despair. Such leaders do not hesitate to realign their own value system with those of the organisation they represent.”

Participant 3: “One of the key attributes of an ethical leader is the desire to sacrifice [his or her] own belief or value system in favour of those value systems cherished within the organisation. A leader who swore allegiance to the institution’s values that bind everyone. A leader who is ready to discard their own value system particularly when those value systems do not tally with those of institution.”

Participant 5 indicated that a leader who appreciates and loves his subordinates unconditionally as well as disagrees with his followers in a graceful way was more attractive. The respondent likes leaders who allowed themselves to be vulnerable before their followers, especially when the followers outperform them and a leader who confidently engages in debates. The participant appreciated an honest leader who freely steers the organisation on the path of positive change. According to Participant 6, courageous and articulate leaders who provide an ambitious vision to were naturally attractive. A leader who is incorruptible and who transact with his subordinates in a transparent way.

An analysis of all descriptions provided by the participants reveals an interesting view of what they regard as the most appealing qualities their leaders frequently

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demonstrate. There are two broad categories of traits that participants identified. The first category comprises traits that are traditionally linked to ethical leadership (Schermerhorn, 2012, p. 57). Examples of such traits include honesty, trustworthiness, integrity and transparency. These four traits were cited by most of the participants. A handful of participants were attracted to leaders who embrace the principle of authenticity, supportive and maturity. Accountability, which is one of the widely regarded ethical traits, was mentioned only once. Fairness and social justice were also highlighted once by two participants.

The second category of traits comprises those traits that are linked to leadership in general but not to ethical leaders in particular. Attributes such as being supportive, being passionate about developing followers, conflict-resolution capabilities, demonstrating confidence, professionalism and the ability to respond to change were identified as qualities that every leader should demonstrate. These qualities were not unique to ethical leadership alone.

4.6.2.2. Subtheme 2.2: Undesirable qualities of a leader When asked to highlight the least appealing traits of leaders to which they have been exposed to within the financial institution commonly exhibited, the participants had this to say:

Participant 1 said, “I dislike leaders that would indicate left and turn right. A leader who say all the right things but do the opposite”. Participant 2 was put off by leaders who cannot be trusted and are less reliable, while Participant 5 indicated that a retributive leader was least appealing.

According to Participant 3, “a leader who withholds vital feedback or information from a follower which is vital would automatically lose their allegiance”. The participant maintained that: “A man’s words is his honour. A leader who does not stand up for his/her team was least appealing. Lastly, disingenuous leaders were a ‘no-no’.”

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Participants 5, 6 and 7 were unanimous on their rejection of leaders who are gullible to corruption and who are obsessed with the malicious desire to satisfy their self- interests. They argued that when a leader idolises his/her own interests at the expense of those of an organisation, such a leader becomes a liability to the organisation.

Another frequently mentioned undesirable attribute that many believed was retrogressive was dishonesty. According to Participant 12, when a dishonest leader is allowed to exercise his deeds, such a leader drags the organisation down the path of treachery and corruption. Similarly, Participant 9 echoed this view by cautioning that “in an environment of impunity, dishonesty leaders are very contagious”. Participant 9 argued that if dishonest leaders are not immediately removed, everyone within the organisation may end up being infected by the anatomy of dishonesty.

4.6.3. Theme 3: Leader moral identity Participants maintained that one of the ways leaders can positively shape the ethical orientation of their followers was to lead by example. They argued that the ethical inclination of the leader could contribute to that leader being perceived by their followers as an ethical or unethical leader.

4.6.3.1. Subtheme 3.1: Ethical orientation of a leader Participant 4 said: “Exemplary leadership is the only way to go. It is not optional.” This was corroborated by Participant 5 by posing a challenge to leaders to promote acceptable ethical practices within the workplace through rewarding ethical champions and disciplining known defaulters.

Participants 8 and 9 brought the value dimension of ethics. They maintained that when it comes to ethics, the value system adopted by a leader matters.

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4.6.3.2. Subtheme 3.2: Unethical orientation of a leader All participants admitted that serving under an ethically compromised manager was a seemingly complex and tricky task. According to Participant 6, employees were more susceptible to their leaders’ unethical orientation because of “power imbalance”. The subordinate knows that a leader has the power to promote an employee on training and the power to award a discretionary bonus. If the follower does not have a strong personality, they might be influenced to do unethical things. This view was consistent with that of Iyer and Reckers (2017, p. 5) who argued that unethical behaviour in the corporate arena was often the result of destructive leaders influencing willing followers. Participant 6 further cautioned that sometimes employees start off with own strong morals; however, when exposed to a toxic environment, such morals might end up getting worn down.

Participant 4 substantiated this by an example: “There was an incident where a cashier was coerced to force-balance a till. The leader instructed a cashier to reflect a balanced position, and cited that it was Saturday and [they] did not have time to be tracing the differences. The teller conceded and reflected a balanced position. The teller confessed to this during a surprise check which was conducted the subsequent Monday.”

4.6.4. Theme 4: Situational influences By recognising the conditions that shape employees’ ethical intentions, employers can create an environment that encourages ethical behaviour. Participants 1, 8 and 10 concluded that perpetual organisational instability and uncertainty usually create conducive conditions for employees to behave in an unethical manner.

4.6.4.1. Subtheme 4.1: Individualistic vs collaborative An environment that encourages individualistic behaviour rather than a climate that encourages collaboration was another factor which was found to be common among respondents. Participant 1 highlighted that: “An environment where success is celebrated openly has its pros and cons. Employees might end up manipulating figures just to remain on top and sometimes even compromise themselves just to

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remain in the favour of their leaders, while others out of competitiveness might fall prey to unethical conduct so to dethrone those who are regularly celebrated.” The view of Participant 1 suggests that a highly competitive environment could produce unethical champions. This was echoed by Participant 8, who indicated that in an environment full of crooks where people are still rewarded and recognised despite trumping on protocols and ethos, it is more likely that people will continue with such conduct and others could feel forced to join the bandwagon. In addition, Participant 11 indicated that it is in an environment where a leader is corrupt that employees tend to learn and adopt the wrong habits in order to earn more money and be recognised.

4.6.4.2. Subtheme 4.2: Empowerment of followers Another condition was that of less autonomy, where followers feel less empowered. According to Kalshoven et al. (2016, p. 509), ethical leaders may even make followers more susceptible to (specific forms of) unethical conduct under conditions of less autonomy. This was echoed by Participant 3, who argued that some leaders want to have a final say on everything. Those leaders could be dangerous in that they could manipulate every output to favour them and their clique. As a result, employees could obey their leaders’ unethical directives or act merely to avoid punishment.

Participant 10 stated that, “it seems as if that the higher you go on the organisational hierarchy, the more you find yourself in a place of compromise”.

4.6.5. Theme 5: Manipulative leaders Participants 7 and 9 touched on the issue of power-shift dimension. According to these participants, when organisational power resides in a single individual and that individual has unfettered control over all resources (financial, human, material, opportunities to promote or incentive), the likelihood of abuse of power in such a situation is always high. Participant 11 illustrated this by giving an example: “If I am really struggling financially and I have done anything and [everything] in my power to work certain things out myself and I am still not coming [out] okay; if someone was to

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come and use whatever control or power they have over me; and I can see that over time this could be the solution because when you are in a situation you are too close to even see the difference, whether it is a good thing for you or not, I would concede to such misdeed.”

When questioned on whether they would do something unethical when asked to do so, the participants had this to say. According to Participant 8: “If there is an incentive to it, I would delay it, I know that incentive is coming. I have personally done it.” Participant 7 acknowledged that incentives run out, but your soul remains with you. Accordingly, “regardless of how big the incentive is, there are certain things that I stand for as an individual and I wouldn’t do that”. Participant 1 shared the same sentiments; that is, sometimes you could get such an incentive, however, become miserable afterwards and they would not do it.

Participant 12 reiterated the moral attentiveness and efficacy postulated by Iyer and Reckers (2017, pp. 4-5) and Lee at al. (2017, p. 51). Participant 12 said that, “whether there was an incentive or not, at the end of the day it is the will of an individual to face the threat, to refuse doing something wrong”.

Participants 3, 6 to 12 argued that working under the tutelage of leaders who put little emphasis on ethics is one of the trickiest challenges at the workplace. These participants admitted that they have been asked to do something unethical by their leaders, however they refused. Participant 10, however, argued that sometimes employees get intimidated by their leaders and as a result, they get scared to say no. This view was similar to that of Participant 7, who indicated that ethically deficient leaders tend to instil fear to their followers using the power they have, their position. These leaders victimise people and bully them. Based on the lived experiences of participants 3, 6 to 12, unethically challenged leaders are widely known to be manipulative, subtle and very cunning. The findings of this study were consistent with those of The South African Business Ethics Survey 2016 (The Ethics Institute, 2016, p. 10), which found that almost 10% of the employees acted unethically due to pressure from their superiors. The employees experienced pressure to compromise

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their organisation’s ethical standards and this is often an indicator of future misconduct.

4.6.6. Theme 6: Erosion of trust According to Participant 12, when leaders portray the acts of favouritism it destroys trust to an extent where employees would start looking at their own interests. Participant 8 emphasised that they would not trust a leader who is untrustworthy and dishonest. Participant 10 appreciated an honest and trustworthy leader: “I don’t want to be sold something that it’s not.”

When a leader is presumed by the majority of his followers to be untrustworthy, the task of rebuilding such trust can be a complex one. The participants generally shared the view that when the trust is lost, the relationship between the follower and the leader becomes untenable and at most dysfunctional.

4.6.7. Theme 7: Observing and reporting misconduct The 2013 Europe, Middle East, India and Africa Fraud Survey conducted by Ernst and Young (2013, p. 8) showed that 20% of employees (including executives) surveyed were aware of financial manipulation within their own company however, they turned a blind eye instead and did not report it. Similarly, a staggering 42% of employees who observed some sort of misconduct chose not to report it, despite the fact they knew that such conduct was improper, according to the South African Business Ethics Survey 2016 (The Ethics Institute, 2016, p. 8). This findings of these surveys were consistent with the findings of this study. The majority (67%) of the participants admitted that they have been asked to do something unethical by their leaders. Even though they refused to be part of such conduct, the participants did not report it.

Participants further expressed conflicting view on the level of confidence that they had on the financial intuition’s reporting mechanism. According to Participant 6, employees had various options available at their disposal to escalate any misconduct within the institution. There was an anonymous whistleblowing line,

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employees could approach their business ethics officer, human resource business partner, transformation committee and if they were trade union members, they could go to their shop steward. Participant 8 echoed the same view: “Should I think that I could be victimised by addressing the perceived unethical conduct with my manager, I would use various mechanism available within the institution, such as reporting to the human resource business partner or the whistleblowing line.”

While Participant 10 expressed a mixed view, the participant would probably be selective on the nature of incidents to escalate: “I would use the whistleblowing line, but I don’t think all the time I think it, at times it just feels it’s just too much work.” Participant 11, on the other hand, expressed a lack of confidence on the escalation mechanism put in place by the organisation. In the view of this participant, should they report their leader for unethical conduct, at the end such leader would know who reported them.

Participant 6 cautioned that those making complaints should try to provide as much information as possible to support their complaint. This would reduce the culture of abusing internal redress mechanisms. According to Participant 6: “Internal redress mechanisms are not platforms to settle personal scores and grudges. Employees must always remember that there’s a difference between not agreeing with the decision and that decision being unethical. Many employees do not always appreciate this. Ethics are not feelings, but rather are based on a set of ethical principles and values.”

4.6.8. Theme 8: Individual factors According to DuBrin (2016, p. 183), an individual’s character contributes significantly to ethical behaviour; that is, the higher the qualities of one’s moral, the more likely an individual will behave ethically. In this regard, participants attributed this largely to personal gain and circumstances. When it comes to personal factors, the greatest predictor of unethical behaviour was participants’ emphasis on personal gain.

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According to Participant 7: “I think its personal gain. It’s a personal gain in a sense of, do you get a bigger bonus because you did this, do you stay in someone’s good books because you have done this.” Participant 6, in turn, highlighted desperation as one of the factors. In the words of Participant 6: “One reason is that people are desperate, people personally may be facing some kind of personal financial challenge. And they are put in a role where they get access to certain things and they feel like it is not harmful to take this little bit of money, no one it is going notice it.” Participant 9 concurred with the views of participants 6 and 7 by indicating that employees would do something unethical in order to get some type of financial gain or more power. Financial gain, status and personal circumstances were the most personal factors advanced by participants. Participant 8 argued that money was the most contributing factor. People who are driven by materialistic things tend to pursue short-term gain. They mostly not think about what is the long-term impacts of action that needs to be done or that they could do.

According to Participant 6: “Employees come into the organisation with a set of ethics of their own and those may differ from person to person. Some people would claim their ethical orientation to a particular religion they belong to or believe in, while others from other places. So people come into the organisation with something.”

It is quite clear that when employees are undergoing dire financial constraints, those employee could do everything in their power to remedy their crumbling financial status, the temptation to seek financial comfort through unethical activities becomes high, according to participants 2 and 11. Participant 2 further highlighted greed as another factor.

4.6.9. Theme 9: Organisational factors Ethical climate, leaders’ behaviour, organisations’ policies and values were among the organisational factors highlighted by participants. Unethical behaviour flourishes in an environment of impunity. When known violators of ethics go unpunished, it sends a message to employees that behaving in an unethical way is acceptable.

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4.6.9.1. Subtheme 9.1: Organisational culture According to Participant 6: “Organisational culture plays a role. People look up to their peers and if they think that other people are getting away with the unethical behaviour, they may be more likely to do it themselves. So they may mirror the behaviour of others. So people follow the example of what surrounds them and what gets punished and what doesn’t get punished.”

Participants 4, 5 and 6 argued that as long as an organisation does not have a vibrant ethical programme, it will be difficult to enforce a culture of ethical adherence among its employees. Even though Participant 6 appreciated the role of an ethical climate within the organisation, the participant further argued that no matter how ethical the culture could be within the institution, the employees moral attentiveness could supersede that.

4.6.9.2. Subtheme 9.2: Ethical programmes and awareness The values embodied by the institution were pronounced as central to promoting an ethical climate of the organisation, as all employees are expected to subscribe by them. Participant 7 said that: “There is lot of expectations on the personal and organisational value alignment. Organisational values mean well in a way and is something that is out there, a promise to the public.” Participant 8 elaborated by indicating that honesty and integrity is part of the institution’s values.

4.6.9.3. Subtheme 9.3: Unrealistic expectations Participants 9 and 10 cited work deliverables, tight budgets and overly ambitious targets among other organisational factors. According to Participant 9: “Unrealistic and stretched targets could motivate employees to resort to unethical mischievous such as mispresenting financial accounts, opening fictitious accounts and inflating sales numbers in order to achieve them.”

4.6.10. Theme 10: External factors The global financial crisis that had a contagion effect on financial markets across the world awakened many governments and regulators to the need to improve the

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ethical environment of financial institutions. One of these changes being King IV: Report on Corporate Governance for South Africa 2016, which became effective for financial year commencing from 1 April 2017. While its adoption is voluntary (unless prescribed by law or a stock exchange listings requirement) it has been envisaged that it will be applicable to all institutions, irrespective of their form or manner of incorporation (KPMG, 2016, p. 11). It emphasises the need for ethical leadership and the establishment of an ethical culture.

Participant 8 argued that a widely accepted factor of peer pressure still exist in the workplace: “If you have entered an organisation of thieves, you're going to be influenced by them. So, peer pressure is just as much of a factor.”

4.6.10.1. Theme 10.1: Intimidation of employees Intimidation by syndicates and by leaders were among the reasons advanced by participants as some of the external factors. In the view of Participant 2, intimidation by syndicates was also one of the factors. Likewise, Participant 12 indicated that employees were forced to act unethically because they were being threatened, sometimes to an extent that the employee’s family get threatened.

According to Participant 12, an individual and an organisation’s ethical behaviour must be influenced or shaped by country’s supreme laws or constitution. In other words, their ethos and ideals need to be aligned to the country’s constitution.

4.6.10.2. Theme 10.2: Trade practices Ethical practices includes fair trade practices, not manipulating or false advertising to clients and potential clients. Ethical leadership could be a new source of competitiveness and differentiation. With so much regulatory and code of conduct practices which seeks transparency within the financial industry, leaders could find themselves in a tough situation, having to balance between profits and compliance.

According to Participant 12, different countries have different regulatory frameworks. In one country a facilitation fee might be acceptable while in another it is prohibited.

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Thus, given that the financial institution has a global presence, it meant that the institution was subject to global scrutiny. The view of the participant corroborated the principle that what is deemed ethically should be universally accepted conduct and practice. Further, this view was indicative that leaders should keep abreast of regulatory changes in a global landscape, especially in countries in which their organisations have a presence. The rapid changes in technology, regulatory requirements and increased competition sometimes could put pressure on leaders to act in unethical ways in order to remain competitive

4.6.10.3. Theme 10.3: Level of education and experience Three participants provided a contradictory view in this regard. Participant 4 said, “Those who have been in the institution for longer could find it easier to say ‘no’ to unethical requests, while new entrants could find it hard as they might not necessary be familiar with processes and procedures”. This was supported by Participant 7, who indicated that it takes exposure for employees to understand their rights and their responsibilities towards the institution.

In addition, Participant 7 was of the view that it would be illogical and absurd to link one’s ethical intentions to their academic qualification. The participant further substantiated this by saying, “there has been numerous reports in the media where many educated and experienced people have been convicted for corruption and other misdeeds”. Participant 7 argued that there were many uneducated and unexperienced employees that have never stolen from anyone, whereas Participant 8 was of a different opinion, arguing that employees who may be influenced were mostly younger generation, those who just recently graduated and new to the workplace.

4.7. CONCLUSION

In this chapter, the empirical results were discussed and interpreted which enabled the researcher to make conclusions and recommendations, as presented in Chapter 5. Conceptualisation of ethical leadership, attributes of an ethical leader,

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ethical challenges faced by employee, conditions influencing employees’ ethical predisposition, factors influencing employees’ ethical predisposition and perceived roles of ethical leadership were the predominant themes identified. The empirical results were also linked to literature in Chapter 2 and the alignment is glaring. The participants shared their perception on the phenomenon by divulging their lived experiences and exposures within the institution.

In the next chapter, the conclusion of the study based on the empirical results and the literature is formulated; and recommendations and potential areas of future research are highlighted.

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CHAPTER 5

DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS

5.1. INTRODUCTION

The previous chapter analysed and interpreted the data which was collected through semi-structured interviews. This chapter brings together all the findings from the literature review and the outcomes of the empirical results. This will be provided in a form of a discussion on the findings of the study, conclusions and recommendations. Limitations encountered during the research and opportunities for future research has been highlighted in this chapter.

The essential concern of this study is that a sizeable number of leaders within financial institutions seem to overlook their impact and role in fostering and reshaping the ethical predispositions of their followers. The primary objective of this study was to examine from an employee’s perspective the impact of their leader’s ethical orientation on their predisposition to behave ethically.

5.2. FINDINGS OF THE STUDY

This section encompasses the discussions on the empirical results of the study in relation to research objectives. The findings are also discussed in relation to the conceptual framework which encapsulated the literature on the area of research.

5.1.1. Objective 1: To identify the attributes of the leader which are conducive for employees to be susceptible to their leader’s ethical orientation The research question formulated to achieve this objective was, “What are the attributes of the leader which are conducive for employees to be susceptible to their leader’s ethical orientation?” The participants highlighted what they deemed to be fundamental attributes of an ethical leader. The participants started by

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conceptualising ethical leadership, followed by articulating desirable and undesirable qualities/attributes of a leader and his/her moral identity.

The study found that ethical leaders have a track record of being consistent, honest, trustworthy, truthful, credible and being a role model. It was quite clear that ethical leadership was manifested when a leader consistently demonstrates these ethos. As guardians and custodians of the institution’s ethical essence, leaders should play a leading role in influencing and shaping the ethical thinking of those they lead.

This study found that there were attributes linked to leadership in general but not to ethical leaders in particular. Attributes such as being supportive, being passionate about developing followers, conflict-resolution capabilities, demonstrating confidence, professionalism and the ability to respond to change were the desirable qualities that every leader should demonstrate. These attributes were not unique to ethical leadership alone.

In addition, the study also found that unethical leaders are easily identifiable by their perpetual inability to uphold principles of integrity, reliability, rationality and social justice and fairness. These leaders were identifiable by their least appealing attributes. When an unscrupulous leader is allowed to exercise his/her deeds, such a leader could drag the organisation down the path of treachery and corruption; a path where unethical practices will thrive without any form of retribution. Unethical leaders were found to be victimising and threatening their followers; they enforced their unethical orders with threats of demotion and withdrawal of incentives which such employees rightly deserves.

The moral identity of the leader was found to be having an influence on followers’ predisposition to behave ethically. Having an ethical role model could contribute to employees behaving ethical. Likewise, employees serving under ethically compromised leaders were more susceptible to their leaders’ unethical orientation because of power imbalance and fear of victimisation.

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5.1.2. Objective 2: To establish the conditions which employees perceive to make them more susceptible to their leaders’ ethical orientation The research question formulated to achieve this objective was, “What are the conditions which employees perceive to make them more susceptible to their leaders’ ethical orientation?” This study found that under conditions of less autonomy, individualism, organisational instability and uncertainty, employees were more susceptible to their leaders’ ethical and unethical behaviours. Ethically deficient leaders found in this environment are dangerous in that they manipulate and bully their followers. As a result, employees obey their leaders’ unethical directives and act merely to avoid retribution.

5.1.3. Objective 3: To identify ethical challenges posed by leaders within a financial institution using employees’ lived experiences The research question formulated to achieve this objective was, “What are the ethical challenges posed by leaders within a financial institution using employees’ lived experiences?” From the empirical results, it was evident that despite the concerted efforts by the financial institution to strengthen its ethical climate, there were still ethical challenges posed by leaders. These challenges were leadership- related challenges, erosion of trust and reporting of unethical conduct.

Working under the tutelage of leaders who put little emphasis on ethics is one of the trickiest challenges at the workplace. Under this tutelage, employees were victimised and bullied while leaders were perceived to be manipulative, subtle and very cunning. Employees experienced pressure to compromise their organisation’s ethical standards and this was often an indicator of future misconduct.

In this study, the participants asserted that when the trust is lost, the relationship between the follower and the leader becomes untenable and at most dysfunctional. This could result in employees’ revolt, a weakened ethical climate and an increase in unethical incidents. Employees could be spiteful towards management and the institution.

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The study also found out that most employees do not fully use the reporting mechanism put in place by the institutions. The participants cited fear of retaliation, victimisation and lack of trust as reasons for this underutilisation. Many employees have suffered a great deal at the hands of their morally deficient leaders and are therefore suffering in silence.

5.1.4. Objective 4: To establish the factors which influences the employees’ ethical orientation within the financial institution The aim was to establish the various factors that makes employees susceptible to a leader’s ethical orientation. In this regard, “What are the factors which employees perceive to be influencing their unethical behaviour?” was formulated as a research question. This study found that there were personal, organisational and external factors which influenced the employees’ ethical orientation.

This study found that there were situations that an employee finds him/herself with no choice but to conform to resort to unethical conduct due to personal circumstances. The study established that a financially exposed employee may find it difficult to resist a leader’s unlawful instructions when a tempting financial incentive is offered.

Organisational factors were found to influence an employee’s ethical orientation. For instance, a weak consequence management setting within an institution may be a breeding ground for unethical behaviour for employees. A culture of impunity and unaccountability were found to be posing the danger of creating a culture of low ethical prone employees.

The study established that there were high expectations from external stakeholders (regulators, professional bodies, academics, politicians, shareholders, clients and society) for leaders to demonstrate the highest ethical inclination when discharging their fiduciary duties. These expectations may influence employees to behave in a particular way. Unrealistic financial targets could result in employees and leaders manipulating the financial results to appease the markets and shareholders to the

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detriment of the organisation and society in the long run. Likewise, extended family responsibilities and threats from syndicates put employees in a compromising position and out of distress and fear, they would concede to unethical misdeeds.

Lastly, this study found that the level of education and experience of an employee had a low impact on employees’ susceptibility to their leaders’ ethical orientation.

5.3. CONCLUSIONS OF THE STUDY

The main objective of this study was to establish from an employee’s perspective their perceived impact of their leader’s ethical leadership on their predisposition to behave ethically. From the findings of this study, there is sufficient evidence that ethical behaviour trickles down the hierarchy of the institution and affects the behaviour and emotions of employees at all levels, ethically and unethically.

Regarding employee perceptions, ethical leadership as a concept needs to be differentiated from ethical leadership as a style of leadership. The conceptualisation of ethical leadership for this study was a critical outcome towards understanding the distinction between the two. As a concept, ethical leadership is the process whereby a leader strives to discharge duties and responsibilities in a manner that earns him/her the perpetual trust and respect of those that he/she leads.

Regarding attributes of ethical leadership, the main focus of an ethical leader is to advance the common good of all. This entails sacrificing own ambition and self- interest; whereas as a leadership style, ethical leadership is made visible when a leader demonstrates ideals of trustworthiness, integrity, accountability, responsibility, service to others and role-modelling.

Regarding conditions influencing employees’ ethical predisposition, it is clear from this study that leaders who are morally deficient often produce followers after their own kind. Leaders cannot, therefore, disown the ethical composition of their followers. The findings of this study are consistent with those of other researchers

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and scholars. The indisputable truth is that a leader’s ethical behaviour is subconsciously linked to that of the people he/she leads (Small & Chatterjee, 2010). According to Brown et al. (2005, p. 130), leaders are not only originators of ethical values but also shapers and enforcers of those values. This view is consistent with those expressed by Small and Chatterjee (2010, p. 331). They argued that as catalysts of change, leaders should master the art of influencing the ethical direction of their followers.

Leaders shape the ethical disposition of their followers by what they regularly incentivise and rebuke. Leaders promote ethical behaviour by rewarding employees and followers who consistently display such behaviour. For instance, when a leader makes it a habit to promote ethically inclined employees to positions of influence within the organisation, such a move can send a strong message to other aspiring employees. This can also apply when a leader develops a habit of punishing employees who behave in a manner that is not consistent with the institution’s ethical values. Followers are easily manipulated to act in an ethical or unethical way the day they start adoring and idolising their leader.

Regarding ethical challenges, every employee has an inherent right to decide based on his/her moral convictions whether or not to follow set leader teachings and practices, be it ethical or not. This conclusion is consistent with that of Van Gils et al. (2015, p. 198), who determined that the effects of ethical leadership are not similar for all followers, but instead dependent on the follower’s moral attentiveness. Even in a situation where a morally deficient leader attempts to use gratuitous influence to induce an employee to behave in an unethical manner, there is a general and warranted expectation for a morally upright employee to resist such an attempt.

Regarding factors influencing employees’ ethical predisposition, the researcher also concludes that an ethical inclination of a leader is not the only instrument capable of transmitting ethics to employees. From the empirical results, which were consistent with the existing literature, it was evident that there were other apparatuses that influence employees’ ethical behaviour. Those were personal factors (greed,

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financial distress and obsession with power), organisational factors (ethical climate, leader’s behaviour, peer conduct, organisational policies and values, and performance goals) and external factors (regulations, peer and syndicate pressure, religion, competition and market conditions).

Lastly, this study also conclude that the financial institution has adequate unethical behaviour reporting mechanisms; however, employees did not have a firm belief that these mechanisms were adequate to protect employees who refuse to carry out unethical orders issued by their bosses. The study found out that the fear of retaliation, victimisation and overall lack of trust in the system for protection against retributive bosses were the main concerns. As long as the financial institution does not have trusted reporting mechanisms on which employees can lean when retributive bosses unleash revenge, it will be difficult for employees to open up. There is an urgent need for the institution to prioritise the establishment of victim- friendly ethical reporting mechanisms.

5.4. RECOMMENDATIONS

Based on the findings and conclusions of this study, it is recommended that:  The financial institution should rebuild the shaken employee confidence and trust in its ethical reporting system. This could give employees reassurance about the integrity of its whistleblowing system, assuring them that their identity would be protected (anonymity) as well as being protected against retributive leaders when they report them for violating the institution’s values and ethics principles.  In order to strengthen the financial institution’s ethical environment, the institution could revive its ethical awareness programme. This initiative could include programmes focused at creating the right environment that encourages a good work ethic, ethical decision-making and ethics for leaders.  Lastly, as recommended by one of the participants, the institution should consider having ethics officers at a cluster level. This could ensure that there

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is visibility and accessibility of dedicated ethics champions within the institution.

5.5. LIMITATIONS OF THE STUDY

In this study, the researcher encountered the following limitations:  The sample of the study was rather small, drawn only from one geographical area (Gauteng).  Only one of the participants was a junior employee; these the empirical results were mainly the views and experience of those who were on a management level.  Lastly, the singular data collection method used to solicit the primary data is a limitation on the validity and reliability of the data, as other methods could have been used to triangulate the responses obtained.

5.6. OPPORTUNITIES FOR FUTURE STUDY

Based on the outcome of this study, the researcher has identified the following opportunities for future research:  Further research can be conducted to determine if gender, experience and level of education have a significant positive level of influence on employees’ susceptibility to unethical behaviour.  It would be interesting to see if a similar study could result in the same findings, especially relating to the ethical challenges faced by employees if conducted at the financial services sector level.  A replication of the similar study; however, employing quantitative research methods.  Another area of study could be to contrast the susceptibility of junior employees to that of employees at management level (middle, senior and executive) to the influence of their leader’s ethical orientation.

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5.7. CONCLUSION

The study was concerned with the fact that a sizeable number of leaders within the financial institution seem to overlook their impact and role in fostering and reshaping the ethical predispositions of their followers. The main objective of this study was to establish from an employee’s perspective the perceived impact of their leader’s ethical leadership on their predisposition to behave ethically. The research findings are consistent with the literature and the empirical evidence confirms that ethical leadership has a positive impact on employees’ predisposition to behave ethically.

The study established that ethical morals, by their very nature, are transferable from one person to the other and ethical leadership was one antecedent through which this transfer takes place. This study further found that ethical leadership was not the only apparatus that influenced employees’ ethical predisposition. While it is true that a leader’s ethical orientation plays a significant role in building his/her followers’ ethical base, other variables such as a greed, financial distress, peer pressure, ethical climate, religion, regulations as well as competition, among other things, play an equally crucial role. There were, however, limitations encountered related to sample size and geographical constraint experienced by the researcher. The researcher further highlighted opportunities for future research which seeks to strengthen the reliability and generalisation of the findings of this study.

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LIST OF APPENDICES

ANNEXURE A – ETHICS CLEARANCE (FORM E)

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ANNEXURE B – INVITATION LETTER

Dear Rudzani,

Trust that you are doing well.

I invite you to participate in a research that I am conducting as partial fulfilment of the Master in Business Administration degree titled ‘The impact of perceived ethical leadership on employee’s predisposition to behave ethically: A case study within a South African-based financial institution’ at Nelson Mandela University.

Your input is important in enabling me to obtain a comprehensive understanding of this topical issue. Please note that your participation in this study is entirely voluntary and that you have the right to withdraw from the study at any stage. We also guarantee your anonymity and the confidentiality of the information that you will provide. Neither your name nor the name of the organisation will be mentioned in the study. The data acquired will only be reported as a collective.

Should you be willing to participate in this study, please do so by responding with a ‘Yes’ using the voting button and I will set up a meeting on your calendar accordingly. The session will take approximately 30 minutes to an hour.

If you have any questions or would like further information, please do not hesitate to contact me on (+27) 722685534 or by replying to this email. To verify the authenticity of the study, you may contact Dr Bryan Robinson at [email protected].

Thank you for your assistance.

Regards, Rudzani Magau

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ANNEXURE C – DATA COLLECTION INSTRUMENT (INTERVIEW GUIDE)

Research topic: The impact of perceived ethical leadership on employees’ predisposition to behave ethically – A case study of a South African-based financial institution.

Demographic data: Age: 18 – 34 35 – 50 >50 Gender: Male Female Employee General Junior Middle Senior Executive level: staff management management Managem ent Years of Less than 5 years 5 to 10 years More than 10 service in the years organisation: Qualification Matric Undergraduate Honours/Post Masters Doctorate/ level: graduate PhD diploma Customer facing Non-customer facing

Email address (for sharing research outcome, optional): ______

Research questions: 1. What do you understand by the concept ‘ethical leadership’? or How would you describe the concept ‘ethical leadership’? 2. What are the traits/qualities of the leaders you have been exposed to within the organisation which are most appealing to you? 3. What are the traits/qualities of the leaders you have been exposed to within the organisation which are least appealing to you? 4. How would you describe ethical behaviour? 5. What would you do if asked to do something unethical but there is an incentive? 6. What are the things that may influence an employee’s unethical conduct?

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7. What are the things that a leader does that influences ethical behaviour of employees? 8. What would you consider doing if you became aware that one of your managers has been behaving unethically? 9. What would you do is asked to do something unethical? 10. What is your view regarding employees who would compromise their personal ethical standards to get ahead in their future/career? 11. What do you perceive/regard as the main attributes of a leader that could influence your predisposition to behave ethically? 12. Under what conditions do you think employees are more susceptible to their leaders’ behaviour (ethical or unethical)? 13. Additional information/follow up questions: ______

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ANNEXURE D – TURNITIN REPORT

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ANNEXURE E – CERTIFICATION OF PROOFREADING AND EDITING

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ANNEXURE E - PERMISSION TO SUBMIT A TREATISE FOR EXAMINATION

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ANNEXURE F: PERMISSION TO SUBMIT FINAL COPIES OF TREATISE

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