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ABSTRACT. This study analyzes the relationship between CEO values, leadership style and ethical practices in organizations. The ethical practices of formal statement of ethics and diversity training are included in the study, as well as four categories of values based on Rokeach's (1973) typology including personal, social, competency-based and morality-based. Results indicate that all four types of values are positively and significantly related to transformational leadership, with transactional leadership positively related to morality-based and personal values, and laissez-faire leadership negatively related to competency-based values. When size of company and values are controlled, transformational leadership explains a significant amount of change in formal statement of ethics, and transactional leadership explains a significant amount of change in diversity training.
KEY WORDS: ethical practices, high-technology firms, transformational leadership, values
Introduction
Researchers and managers have increasingly been interested in the evolution and consequences of corporate ethical performance. This interest is due to multiple factors, including the growing lack of confidence in ethical corporate practices and the current emphasis on quality of life (Carlson and Perrewe, 1995). Increasing legal attention to ethical practices regarding the environment, management of diversity, employment, and product development and distribution has drawn further attention to the ethical orientation of organizations. This study adds to the literature on developing and maintaining an ethical orientation in organizations by examining the underlying values and leadership style of the top manager and their effects on corporate ethical practices.
An individual's values are the basic principles and tenets that guide beliefs, attitudes, and behavior (Gordon, 1996). A value is believed to be the most abstract type of social cognition, whose function is to guide the individual's adaptation to the surrounding environment (Kahle and Goff Timmer, 1983). Thus, values are the point at which the individual intersects with society (Grunert and Scherhorn, 1990). Rokeach (1973) classified values into either terminal values (desirable end-states of existence), or instrumental values (modes of behavior or means of achieving the desirable end-states). Terminal values can be further divided into social or personal values, and instrumental values can be divided into morality-based and competency-based values. Social values include such items as freedom, equality, and world at peace and morality-based values include such items as politeness, helpfulness, affection, and forgiveness. These types of values imply an...