Ethical leadership across cultures: a comparative analysis of German and US perspectives

Business Ethics: A European Review Volume 18 Number 2 April 2009

Ethical leadership across cultures: a comparative analysis of German and US perspectives Gillian S.Martin,Christian J.Resick,Mary A.Keating and MarcusW.Dicksonn This paper examines beliefs about four aspects of ethical leadership – Character/Integrity, Altruism, Collective Motivation and Encouragement – in Germany and the United States using data from Project GLOBE (Global Leadership and Organizational Behavior Effectiveness) and a supplemental analysis. Within the context of a push toward convergence driven by the demands of globalization and the pull toward divergence underpinned by different cultural values and philosophies in the two countries, we focus on two questions: Do middle managers from the United States and Germany differ in their beliefs about ethical leadership? And, do individuals from these two countries attribute different characteristics to ethical leaders? Results provide evidence that while German and US middle managers, on average, differed in the degree of endorsement for each aspect, they each endorsed Character/Integrity, Collective Motivation and Encouragement as important for effective leadership and had a more neutral view of the importance of Altruism. The findings are reviewed within the social-cultural context of each country.

Introduction Recent years have witnessed a number of revelations of corporate scandals both in Europe and in the United States. Whereas in previous decades, the fallout from these could be contained more easily within national boundaries, globalization has ensured that their impact is felt more immediately in other parts of the world. Scandals such as Enron and Worldcom have stimulated global debate around issues of corporate governance, business ethics and the ethical accountability (or lack of accountability) of corporate leaders. The multinational nature of many 21stRespectively, Department of Germanic Studies, Trinity College, Dublin, Eire; Management Department, LeBow College of Business, Drexel University, Philadelphia, PA, USA; School of Business, Trinity College, Dublin, Eire; Department of Psychology, Wayne State University, Detroit, MI, USA. r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd., 9600 Garsington Road, Oxford, OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA

century corporations and the increasingly global reach of corporate scandals suggest that ‘the primary venue for ethical debates in the future will more and more be the world stage’ (Carroll 2004: 114). Thus, there is a need to achieve a clearer understanding of the demands and challenges of leading ethically across cultural boundaries, which, in turn, necessitates an understanding of beliefs about ethical leadership in different cultures. Jackson (2001) has observed that there is a lack of empirical study of cross-cultural differences in managerial ethics, along with ‘a lack of cultural explanation of national differences’ (2001: 1268). Brown & Trevin˜o (2006) have reiterated this view, noting a lack of empirical investigation of differences in ethical leadership across cultures. While concerns about leader ethics have been raised for many years on both sides of the Atlantic, the manifestation of these concerns, in

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terms of focus, impact and attitudes toward leader ethics, differs between Europe and the United States (Vogel 1993). Despite these different philosophical approaches to business ethics, some commentators (e.g. Levitt 1983, Boyacigiller et al. 1996) have argued that globalization is driving the convergence of organizational practices. In addressing the convergence–divergence debate, Adler (2002: 66) asks whether ‘the world [is] creating one way to conduct business or [. . .] maintaining a set of distinct markets defined by equally distinct national boundaries, each with its own culturally distinct approach to business’. In response to this debate, Dorfman & House (2004: 54) suggest that ‘[a]lthough some convergence is likely taking place with respect to management practices, there is also a great deal of stability with respect to the more fundamental aspects of both cultural practices and psychological commonalities within cultural entities’. Moreover, findings from Project GLOBE (Global Leadership and Organizational Behavior Effectiveness), a 62-society study of leadership and culture, demonstrated convincingly the influence of societal culture on shaping implicitly held leadership beliefs (House et al. 2004). In this paper, we explore the significance attached to ethical leadership in two countries, namely, the United States and Germany. More specifically, we address two questions: Do middle managers from the United States and Germany differ in their beliefs about ethical leadership? And, do individuals from these two countries attribute different characteristics to ethical leaders? In addressing these questions, we focus on four dimensions of ethical leadership identified by Resick et al. (2006) through a review of the conceptual literature on ethical and moral leadership and empirical analyses of Project GLOBE’s leadership scales. Our rationale for comparing the United States and Germany is twofold. Firstly, the two countries have a long history of cross-national partnerships and strategic alliances among organizations in their business communities. Economic development in each country has been characterized by periods of both convergence and divergence around forms of managerial capitalism (Dore et al. 1999). The most recent period of convergence occurred during the 1990s with evidence of

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some German multinational organizations moving toward the system of shareholder capitalism common in the United States. Secondly, while some convergence has occurred in terms of forms of managerial capitalism and corporate governance, both countries have maintained distinctive cultural norms, values and philosophical frameworks. This was clearly demonstrated by Project GLOBE (Gupta & Hanges 2004). Differences in cultural values are associated with expectations regarding moral behavior and are likely to have implications for how ethical leadership is conceptualized in the two countries. The push toward convergence driven by the demands of the global business environment and the simultaneous pull toward divergence underpinned by very different ethical philosophies and value orientations generate an interesting context in which to explore the cultural perceptions of ethical organizational leadership in the United States and Germany and to ascertain whether convergence is ‘slowly washing out the effects of differing cultural traditions’ (Dore et al. 1999: 75) in terms of what it means to lead ethically. In the first part of the paper, we present perspectives on the relationship between societal culture and business ethics and on societal culture and ethical leadership. We then describe the empirical study that forms the basis of our quantitative comparative analysis of ethical leadership in the United States and Germany. In the third section, we examine our findings in the light of particular cultural values and societal norms that may underpin the understanding of ethical leadership in the two countries. The final section presents preliminary conclusions, implications for management practice, and avenues for further investigation.

Societal culture and business ethics In the mid-1990s, GLOBE researchers collected data from 62 societies to investigate the interrelationship between societal culture and preferred leadership styles. Project GLOBE defined culture as ‘the common experiences of individuals which result in shared motives, values, beliefs, identities, and interpretations (meanings) of sigr 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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Table 1: GLOBE culture dimensions and definitions Dimension Definition Power Distance The degree to which members of a society expect power to be distributed equally Uncertainty The extent to which a society relies on Avoidance social norms, rules and procedures to alleviate unpredictability of future events Humane The degree to which a society Orientation encourages and rewards individuals for being fair, altruistic, generous, caring and kind to others Institutional The degree to which societal Collectivism institutional practices encourage and reward collective distribution of resources and collective action In-Group The degree to which individuals express Collectivism pride, loyalty and cohesiveness in their families Assertiveness The degree to which individuals are assertive, dominant and demanding in their relationships with others Gender The degree to which a society minimizes Egalitarianism gender inequality Future The extent to which a society Orientation encourages future-orientated behaviors such as delaying gratification, planning and investing in the future Performance The degree to which a society Orientation encourages and rewards group members for performance improvement and excellence Source: House et al. (2004). GLOBE, Global Leadership and Organizational Behavior Effectiveness. ................................................................

nificant events’ (House et al. 1999: 5). Middle managers in three industry sectors (financial services, food processing, and telecommunications) were surveyed on nine dimensions of societal culture concerning how things are in their society, that is, common practices (‘As Is’ scales) and how things should be, or values (‘As Should Be’ scales). Definitions of the nine dimensions can be found in Table 1. Managers responded using a seven-point scale (see House & Javidan (2004) and Hanges & Dickson (2004) for a full discussion of the GLOBE scale development and validation process). Results r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

for the United States and Germany on the nine societal culture dimensions are summarized in Table 2. From this table we can see that the cultural profile for the former East and West Germany is remarkably similar on six of the nine dimensions for cultural practices (‘As Is’ scales), the exceptions being Power Distance, In-Group Collectivism, and Future Orientation. The cultural profile of the United States is rather different from the German profiles. The most significant differences are on the dimensions Institutional Collectivism, Humane Orientation, Uncertainty Avoidance and Performance Orientation. The Project GLOBE research team then grouped together those societies that are similar to each other along multiple cultural dimensions using a cluster analysis technique (see Gupta & Hanges 2004). Societies were grouped together into one of 10 culture clusters; in addition to sharing similar cultural values and practices, societies within a cluster tend to be linked by language, religion, and in many cases geography. The use of culture clusters provides an efficient approach toward identifying convergent and divergent practices and values across different societies. On the basis of these findings, the GLOBE study assigned the United States to an Anglo culture cluster, along with Australia, Canada, England, Ireland, New Zealand, and White South Africa, and Germany to a Germanic Europe culture cluster alongside Austria, German-speaking Switzerland and the Netherlands (Ashkanasy et al. 2002, Gupta & Hanges 2004). Cultural value systems are also closely linked to the understanding of moral or ethical issues and expectations regarding moral behavior. Indeed, there is substantial evidence from the literature that business ethics is differently understood and practiced in the United States and Germany. The US approach to business ethics has its basis in utilitarianism and emphasizes the moral responsibility of the individual, and the relationship between the individual and the firm (Steinmann & Lo¨hr 1992, Palazzo 2002). In contrast, German ‘Wirtschaftsethik’, which loosely translates as the ethics of relationships between economics and society (Ciulla 1991), is more deeply rooted in Kantian philosophy and emphasizes social partnerships and companies as social institutions.

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Table 2: GLOBE mean culture scores for respondents from Germany and the United States Culture dimension

Uncertainty Avoidance Future Orientation Power Distance Institutional Collectivism Humane Orientation Performance Orientation In-Group Collectivism Gender Egalitarianism Assertiveness

Practices ‘As is’ Germany – Germany – former West former East 5.22 5.16 4.27 3.95 5.25 5.54 3.79 3.56 3.18 3.40 4.25 4.09 4.02 4.52 3.10 3.06 4.55 4.73

US 4.15 4.15 4.88 4.20 4.17 4.49 4.25 3.34 4.55

Values ‘As should be’ Germany – Germany – former West former East 3.32 3.94 4.85 5.23 2.54 2.69 4.82 4.68 5.46 5.44 6.01 6.09 5.18 5.22 4.89 4.90 3.09 3.23

US 4.00 5.31 2.85 4.17 5.53 6.14 5.77 5.06 4.32

Source: based on data from House et al. (2004). Responses range from 1 (low) to 7 (high). ......................................................................................................................................

Thus, in Germany, there has traditionally been a stronger focus on consensual ethics or ‘communicative ethics’ [Dialogethik] (van Luijk 1990), where decisions lie not with the individual, but with the moral community (van Luijk 1990). Issues that, in the United States, are deemed to be part of the ‘ethics of business’ and within the remit of every manager are bound in Germany by regulations above the company level ‘in which corporate associations, trade unions and governments each play an indispensable role’ (van Luijk 1990: 543). In the United States, business ethics emphasizes the individual’s ethical decision-making and conduct as opposed to the characteristics of the social system. The focus on consensual ethics in Germany can be linked to the tenets of a social market philosophy and to the nature of the stakeholder system of German corporate governance, which is distinguished by cooperation and consensus over competition and individual gain (Charkham 1995). However, while the German economic model delivered sustained growth from the post-war years until the early 1990s, a loss of competitiveness in conjunction with the internationalization of markets has put traditional concentrated ownership patterns under pressure: ‘Companies such as Daimler-Benz and Deutsche Bank, previously seen as synonymous with the distinctive German post-war system of managerial capitalism, have emerged at the forefront of a shareholder-value

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movement in Germany in the mid- to late 1990s’ (Dore et al. 1999: 88–89). Recent corporate scandals within German organizations have also called into question the ability of the system (of corporate governance) to protect against unethical behavior. Along side this, scandals such as those generated by Enron and Worldcom represent the dangers of convergence toward dispersed patterns of ownership common in the United States. The response to these ethical scandals in the United States has focused on calls for increased monitoring of corporate practices and a renewed interest in the implementation of formal ethical codes of conduct. New legislation, such as SarbanesOxley, has been enacted to safeguard against unethical or illegal conduct and to restore public trust and confidence in business. Such actions reflect the longer tradition of legislating and formalizing ethics in United States organizations. In contrast, companies throughout Europe have been more skeptical of, and slower to adopt, such codes of conduct (Robertson & Schlegelmilch 1993). However, there is evidence of change in response to the evolving global economic environment. Increasingly diverse workforces, stakeholder networks that require companies to clarify their values, and the larger size of organizations create a need for more formalized communication (Ciulla 1991). The issue of possible convergence toward USstyle formalized models of business ethics stimur 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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lated a study by Ulrich et al. (1996), which sought to ascertain whether this trend was spilling over to Germany and Switzerland. Their findings revealed that while respondents do recognize an increasing need for business ethics, they are reluctant to institute formal programmes. Rather, CEOs pointed to the continued existence of a traditional company ethos. With this, there is a sense that ethical behavior in Germany continues to be understood as going beyond mere compliance and, therefore, cannot be legislated for (Palazzo 2002). Such a belief may, in turn, indicate a stronger sense of equivalence between ethics and morals in Germany than in the US.

Societal culture and ethical leadership Cross-cultural leadership research has found that beliefs about leadership vary systematically across cultures (e.g. Gerstner & Day 1994, Den Hartog et al. 1999, Dickson et al. 2003). Contextual factors such as cultural norms and values create expectations of acceptable or unacceptable leader behavior in a given situation, which places constraints on the types of leader behaviors and characteristics that are endorsed by followers (Lord et al. 2001). The GLOBE study revealed a divergence in the perceptions of effective organizational leadership among middle managers in the United States compared with middle managers in the former West and East Germany in respect of the strength of endorsement of Charismatic, Humane, and Autonomous Leadership (Brodbeck & Frese 2007, Hoppe & Bhagat 2007). On the basis of these findings, we contend that beliefs about ethical leadership will also be shaped by the differing dominant cultural values held by US and German citizens. While the notion that ethical leadership is a unique and important form of leadership has gained increasing acceptance in recent years (see Brown & Trevin˜o 2006), clarification on the full range of ethical leadership behaviors has been slower to emerge. From a general perspective, Gini (1997) argued that ethical leadership concerns how leaders use their social power in the decisions they make, the actions they engage in r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

and the ways in which they influence others. Similarly, Ciulla (2004) understands ethical leadership as leading in a manner that respects the rights and dignity of others. Brown et al. (2005) presented a social learning approach to ethical leadership that focused on role modelling and promoting ethical behavior among staff, managing ethical accountability and rewarding ethical conduct. Most recently, Resick et al. (2006) examined ethical leadership based on four attributes that focus primarily on the use of social power, including Character/Integrity, Altruism, Collective Motivation and Encouragement. To date, the Resick et al. (2006) study is the only investigation of components of ethical leadership across multiple cultures that we are aware of. As such, we rely on their approach towards understanding ethical leadership in the current paper. In doing so, we, acknowledge that we are not examining the full range of attributes and behaviors that have been linked to ethical leadership, for example, ethical awareness and managing ethical accountability. We now review the four components of ethical leadership used in this study. Integrity is commonly mentioned in the literature as a fundamental component of ethical leadership (Petrick & Quinn 1997, Fluker 2002, De Hoogh & Den Hartog 2008) and of leadership in general (e.g. Bennis 1989, Bass 1990). It involves the ability to determine the ethically correct course of action in a given situation, as well as the willingness to engage in that behavior notwithstanding external pressures (Emler & Cook 2001). Ethical leaders are also altruistic, reflecting a focus on ‘serving the greater good’ (Trevin˜o et al. 2003: 19; see also Avolio’s section of Avolio & Locke 2002). Kanungo & Mendonca (1996) contend that altruism constitutes the ethical foundation of leadership. Ethical leaders are collectively oriented and exercise their social power for the collective interests of the group rather than solely for their own personal interests. Moreover, ethical leaders use Collective Motivation to motivate and inspire followers to contribute to the group’s collective efforts and put the interests of the group ahead of their own (Kanungo & Mendonca 1996, Gini 1997, Bass & Steidlmeier 1999, Fluker 2002, Trevin˜o et al. 2003). Finally, ethical leaders are

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encouraging and empowering, enabling followers to develop a sense of personal competence and self-efficacy that promotes self-sufficiency (Kanungo & Mendonca 1996, Gini 1997, Bass & Steidlmeier 1999). Resick et al. (2006) provided evidence that the four dimensions of Character/Integrity, Altruism, Collective Motivation and Encouragement were universally viewed as facilitating effective leadership across cultures, but considerable variation existed in the degree of endorsement for each dimension. Using these same four dimensions of ethical leadership, Keating et al. (2007) provided some evidence of within-cluster divergence. They found that middle managers from Ireland and the United States differed in their endorsement of Character/Integrity to a statistically significant degree. The authors suggested that cultural assumptions about individualism and collectivism may exert a particularly strong influence on perceptions and enactment of ethical leadership in the two countries. In the following sections, we address our main research questions, specifically, whether middle managers from the United States and Germany differ in their beliefs about ethical leadership and whether there are differences in the two countries in terms of the characteristics attributed to ethical leaders. To address these questions, we use both quantitative and qualitative approaches and suggest that through the integration of a qualitative dimension, we are responding to Jackson’s (2001) criticism of existing research on managerial ethics.

Quantitative comparison Analytical approach The primary quantitative analyses for our acrossculture examination are based on data from Project GLOBE. A full discussion of the measures used in Project GLOBE may be found in Hanges & Dickson (2004). In brief, GLOBE researchers developed scales to assess 21 dimensions of leadership using a series of 112 attributes or behavioral descriptors (e.g. autocratic, benevolent, nurturing and visionary). Middle managers were asked to rate each descriptor on a seven-point scale

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ranging from 1 – This behavior or characteristic greatly inhibits a person from being an outstanding leader to 7 – This behavior or characteristic contributes greatly to a person being an outstanding leader. The current comparison is based on 411 middle managers from the former West Germany, 44 middle managers from the former East Germany and 398 middle managers from the United States who provided complete responses to the leadership scales. The GLOBE study did not originally examine ethical leadership. Resick et al. (2006) used Q-sort and factor analysis methodologies to derive a 15item, four-dimension ethical leadership measure. In the current study, we use these same four dimensions as a starting point in our comparison of beliefs about ethical leadership among German and US middle managers. In brief, Resick and colleagues asked six graduate students enrolled in a PhD programme in Industrial/Organizational Psychology in the United States, who were familiar with leadership research, to complete a Q-sort exercise. The graduate students were presented with a list of the GLOBE leadership attributes along with a definition of ethical leadership and were asked to identify the attributes that best represented ethical leadership. Next, the researchers identified a total of 23 items for which at least two-thirds of the raters indicated that the item represented ethical leadership. Using the full GLOBE dataset, they then standardized these items within countries and subjected them to an exploratory factor analysis. Four factors were identified that could be clearly matched to aspects of ethical leadership derived from the review of the literature. These factors include Character/Integrity, Altruism, Collective Motivation and Encouragement. Results Before comparing the responses of the GLOBE participants, we wished to explore whether respondents from a German sample would identify the same or a different set of attributes as representative of ethical leadership. Therefore, we first used the same Q-sort approach with a matched German sample. Specifically, the Q-sort instructions and r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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Table 3: Percentage of respondents indicating that the attribute is indicative of ethical leadership Leader attribute Compassionate Fraternal Generous Modest Honest Just Sincere Trustworthy Communicative Confidence builder Group-oriented Motive arouser Team-builder Encouraging Morale booster

Ethical leadership dimension Altruism Altruism Altruism Altruism Character/Integrity Character/Integrity Character/Integrity Character/Integrity Collective Motivation Collective Motivation Collective Motivation Collective Motivation Collective Motivation Encouragement Encouragement

Overall (%)

Germany (%)

US (%)

100.0 53.8 84.6 61.5 69.2 61.5 69.2 76.9 46.2 100.0 53.8 76.9 53.8 92.3 92.3

100.0 42.9 85.7 42.9 57.1 57.1 57.1 71.4 14.3 100.0 28.6 57.1 28.6 85.7 85.7

100.0 66.7 83.3 83.3 83.3 66.7 83.3 83.3 83.3 100.0 83.3 100.0 83.3 100.0 100.0

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items were translated into German and then backtranslated to ensure accuracy of interpretation. Then, seven German graduate students researching in Organizational Behavior and Psychology at universities in Germany were asked to complete the Q-sort exercise. Table 3 compares the results across the two samples. For 10 of the 15 attributes, 57% or more of the German Q-sort respondents viewed the attribute as indicative of ethical leadership. For the Character/Integrity and Encouragement dimension, German respondents generally indicated that the attributes composing these two dimensions were reflective of ethical leadership. However, for Character/Integrity, a lower percentage of German respondents (57%) selected three of the four attributes – honest, just and sincere – than their US counterparts. A somewhat different pattern emerged for the Altruism and Collective Motivation dimensions. Regarding Altruism, less than half of the German respondents found two of the four attributes – modest (42.9%) and fraternal (42.9%) – to be indicative of ethical leadership. For Collective Motivation, less than one-third of the German respondents rated three of the five attributes composing this dimension as representing ethical leadership. These attributes include communicative (14.3%), group-oriented r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

(28.6%) and team-builder (28.6%). In general, the results of the Q-sort exercise provide some evidence that the German respondents view Character/Integrity and Encouragement as aspects of ethical leadership. Equally, the results provide an indication that Altruism and Collective Motivation are less central aspects of ethical leadership in Germany than in the United States. Turning now to the GLOBE data, Table 4 summarizes the mean level of endorsement for each of the four dimensions of ethical leadership by middle managers in the former West Germany, former East Germany and the United States. On examination of the scores, we find that the mean level of endorsement was 5.9 or higher for three of the four dimensions, namely Character/Integrity, Encouragement and Collective Motivation. The results suggest that, on average, middle managers from each society viewed these dimensions as important components of effective leadership. The results also suggest that middle managers from these societies had a more neutral view of the importance of Altruism for providing effective leadership. We conducted a series of statistical analyses to determine whether differences among middle manager scores were larger than would be expected by chance alone and, thus, differed to a statistically significant degree. We first conducted

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Table 4: Endorsement of ethical leadership among middle managers in Germany and the United States Country Character/Integrity Germany – former West Mean 6.12 Range (2.50–7.00) Germany – former East Mean 6.11 Range (3.50–7.00) US Mean 6.51 Range (2.00–7.00) Analysis of variance (ANOVA) F 31.59nn df 2, 848 0.07 R2

Altruism

Encouragement

Collective Motivation

4.09 (1.50–7.00)

6.12 (2.00–7.00)

5.99 (4.00–7.00)

4.24 (2.00–6.00)

5.97 (4.50–7.00)

5.91 (4.40–6.60)

4.74 (2.00–7.00)

6.34 (4.00–7.00)

6.32 (2.60–7.00)

62.74nn 2, 848 0.13

11.61nn 2, 848 0.03

43.09nn 2, 848 0.09

Germany – former West, N 5 411; Germany – former East, N 5 44; US, N 5 398. Responses range from 1 (greatly inhibits a person from being an outstanding leader) to 7 (contributes greatly to a person being an outstanding leader). nn po0.01. ......................................................................................................................................

a multivariate analysis of variance to determine whether there was an overall difference in the degree of endorsement across the four dimensions across the middle managers from the United States and Germany. The results indicated that overall the respondents differed in their degree of endorsement (Wilks l 5 0.833, F 5 20.23, po0.01, Z2 5 0.09). Next, we conducted four one-way analysis of variance (ANOVA) tests to determine whether differences existed in each of the four dimensions. We followed each ANOVA with a series of Tukey’s HSD tests, in which we conducted pairwise comparisons of the mean-level scores for each society to determine whether they differed to a statistically significant degree. The results of the ANOVAs once again indicated that middle managers differed in their level of endorsement of each dimension. In addition, Tukey’s pairwise comparisons indicated that middle managers from the United States endorsed each dimension to a significantly different degree than middle managers from both the former West and the former East Germany. Interestingly, the level of endorsement among middle managers from the former West and East Germany did not differ significantly, and a comparison of the mean

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levels of endorsement indicated that the scores were nearly identical for each dimension. The similarity of the scores for the old and the new La¨nder reflects a pattern that was also established much more broadly by the GLOBE study regarding implicit leadership beliefs and also societal culture practices and values (see Brodbeck et al. 2002, Brodbeck & Frese 2007). The results of the ANOVA and Tukey’s HSD tests are summarized in Tables 4 and 5, respectively. We now review the results for each dimension more closely. As can be seen from Table 4, the largest differences were found for the Altruism dimension (F 5 62.74, po0.01), with society membership accounting for approximately 13% of the variability in the endorsement scores. The mean level of endorsement among middle managers from the former West Germany (M 5 4.09) and the former East Germany (M 5 4.24) was slightly lower than the mean level among middle managers from the United States (M 5 4.74). The next largest differences were found for the Collective Motivation dimension, where society membership accounted for approximately 9% of the variability in the endorsement scores (F 5 43.09, po0.01). The mean level of endorsement among middle managers from the former West Germany (M 5 5.99) r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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Table 5: Mean differences in the endorsement of ethical leadership across countries Country

Compared to:

Germany – former West

Germany US Germany US Germany Germany

Germany – former East US

– former East – former West – former East – former West

Character/ Integrity 0.02 0.39n 0.02 0.40n 0.40n 0.39n

Altruism 0.14 0.65n 0.14 0.51n 0.51n 0.65n

Encouragement 0.16 0.22n 0.16 0.37n 0.37n 0.22n

Collective Motivation 0.07n 0.33 0.07 0.40n 0.40n 0.33n

Tukey’s HSD tests. n po0.05. ......................................................................................................................................

and the former East Germany (M 5 5.91) was again somewhat lower than the mean level among middle managers from the United States (M 5 6.32). Respondents also differed in their endorsement of the Character/Integrity dimension (F 5 31.59, po0.01), with society membership accounting for 7% of the variability in scores. The mean level of endorsement among middle managers from the former West and East Germany was nearly identical (M 5 6.1) and slightly lower than the mean level of endorsement among US middle managers (M 5 6.51). Finally, respondents differed in the endorsement of the Encouragement dimension to a statistically significant degree (F 5 62.74, po0.01), although the size of the effect (R2 5 0.03) and the differences in the mean levels of endorsement were small and of little practical significance. In summary, the quantitative analyses provide evidence of both convergence and divergence between the United States and Germany in terms of beliefs about ethical leadership. Focusing first on the Q-sort exercise, the majority of Q-sort respondents from Germany identified the attributes constituting the Character/Integrity and Encouragement dimensions as indicative of ethical leadership. However, divergence was found between German and US Q-sort respondents for several of the attributes comprising the Altruism and Collective Motivation dimensions. Examination of middle managers’ responses from the GLOBE dataset indicated divergence in the degree of endorsement of each of the four ethical leadership dimensions. In the next section, we use a qualitative approach to examine these findings r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

within the socio-cultural and business context of the United States and Germany.

Qualitative comparison Among the four ethical leadership dimensions in the current study, the greatest differences between German and US Q-sort respondents existed for the Collective Motivation dimension. While German middle managers endorsed this dimension to a strong, but somewhat lower extent than US middle managers, a smaller percentage of the German Q-sort respondents indicated that three of the four attributes characterizing this dimension – communicative, group orientation and team builder – represented ethical leadership. Collective Motivation may, therefore, be less central to an understanding of ethical leadership in Germany than in the United States. Both countries have been classified by previous cross-cultural research as individualistic, with Hofstede’s (1980) study positioning the United States as the most individualistic of all sampled countries. However, when we look at the profile of Germany and the United States on the GLOBE societal culture dimension Institutional Collectivism for practices, the scores suggest higher levels of individualism in both parts of Germany than the United States. More comparable levels of individualism exist between the United States and West Germany for In-group Collectivism; East Germany has slightly higher scores on this dimension (see Table 2). In addition, the GLOBE study revealed that German middle managers

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have a stronger endorsement of autonomous leadership and a weaker endorsement of teamoriented leadership than their US counterparts (Dorfman et al. 2004); such findings are compatible with higher levels of societal individualism. Relative to the other sampled societies in the GLOBE study, it is clear that both the United States and Germany are individualistic societies; however, how this individualism is enacted in terms of beliefs about ethical leadership differs. In the United States, leaders are set apart from the group in a position of authority and become the focal point for the group’s actions and decisions. On the one hand, leaders are expected to clearly demonstrate honesty and integrity in their actions to gain the trust of their staff. On the other, Jackson (2001) has suggested that in individualistic societies people tend to view behavior that involves an ‘egalitarian commitment’ to their relationships with the group as ethical. An ‘egalitarian commitment’ involves putting aside self-interests and working toward the group’s welfare. An emphasis on bringing about the greatest good for the greatest number of people is again indicative of utilitarianism, which is the dominant ethical tradition in the United States. As a result, ethical leaders in the United States are expected to use their power to bring about the best results for the group and to motivate staff to work together toward the group’s goals. This may be observed in the strong endorsement by the US Q-sort respondents of all the attributes constituting Collective Motivation. The robust endorsement of autonomous leadership in Germany contrasts with the principles of teamwork embedded in Collective Motivation – i.e. team builder and group-oriented – and is more compatible with the weaker principles of participation. German business has been built on a foundation of institutionalized participation emphasizing social partnerships between management and employees, which achieves both individual and group goals, while also providing a means of controlling the power held by leaders (Szabo et al. 2001). This institutionalized participation coexists with wider spans of control among German managers, which means more autonomy for employees (Maurice et al. 1980, Lane 1989, Warner &

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Campbell 1993 cited in Glunk et al. 1997). Subordinates expect to be consulted about decisions, thereby underpinning the aims of consensus and participation, but once the leader makes the decision, they wish to carry it out to the best of their ability. Herein lies a certain duality, which sees a focus on greater individual autonomy alongside a belief that decisions lie with the moral community. It is neatly encapsulated in the term ‘Gemeinschaftsindividualismus’ (Lo¨hnert 1998), which translates as community-oriented individualism. Unlike in the United States, moral positions are less closely linked to individual persons. Instead, managers are likely to ‘check their moral preferences with the opinion of significant others and won’t transfer their preference into a moral decision until they have explicitly taken into account the economic and legal implications of such a decision as well as the long term interests of all those concerned’ (van Luijk 1990: 542). It is through a shared understanding of the company’s responsibilities (Vogel 1993) and through the quality of the decision-making process that greater individual autonomy can be enacted. In the United States, in the tradition of liberal individualism, each member of society is viewed as being personally responsible for his or her own decisions along with the resulting outcomes: ‘morality in the US is about matters that are individually decidable’ (Van Luijk 1990: 542). Drawing on utilitarianism, the ethicality of a decision in the United States is more likely to be judged by its impact as opposed to the quality of the decision-making process. The focus on autonomy in Germany and the lingering influence of Kantian ethics may also help us to understand why the communication of ethical expectations and norms in German organizations remains more informal than in US organizations, which rely much more heavily on formal policies or codes of ethics (Palazzo 2002). Furthermore, as Palazzo (2002: 205) explains, a formal and explicit transmission of ethical expectations and norms in a German company would signal to employees a lack of confidence in their ability to make an ethical decision independently. Compared with the more prescriptive US approach to regulation, the German preference is for greater self-regulation. This is also reflected in r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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the greater scope for self-regulation afforded by the recent Deutscher Corporate Governance Kodex when juxtaposed with the Sarbanes-Oxley legislation of 2002. In this context, it is also important to note that the US, compared with Germany, is more culturally heterogeneous (Hoppe & Bhagat 2007). The diversity of ethnic, religious and social backgrounds makes it unlikely that US citizens share a consistent set of moral or ethical values. Formal ethical norms and codes to guide employees are a means of compensating for the diversity of values among employees (Ciulla 1991). In Germany, relationships between managers and workers are more trusting and confident, perhaps explaining why 100% of the German Q-sort respondents identified confidence builder as an attribute of ethical leadership. As mentioned earlier, by telling employees what kind of ethical attitude is expected of them (i.e. in a code of ethics), superiors could be perceived as not having faith in their employees’ ability to make an ethically responsible decision independently (Palazzo 2002). As a result, there has been less reliance in Germany on management for ethical guidance, because ethics are, in effect, a private matter, thereby reflecting differing cultural assumptions about the size of public and private spheres in the two countries (Lo¨hnert 1998, Palazzo 2002). In the United States, Palazzo (2002: 201) argues, the fact that only a few things are viewed as strictly private means that ‘Americans are more willing to see, e.g., a Code of Ethics issued by their employer as the specific rules of conduct valid for them during their working hours’. This was neatly summarized by a former vice-president of an American firm, quoted by Jackall (1988: 6) as saying, ‘What is right in the corporation is not what is right in a man’s home or in his church. What is right in the corporation is what the guy above you wants from you’. The Encouragement dimension was strongly endorsed by US and German middle managers. Interestingly, US and German middle managers award the highest score on the societal culture dimension Performance Orientation (see Table 2) for values when juxtaposed with the scores on the other eight cultural dimensions, suggesting the r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

centrality of the performance ideal in US and German society. The strong focus on performance is compatible with the attributes that constitute Encouragement. The findings suggest that by acting in a manner that is encouraging and empowering, ethical leaders in both societies enable their followers to achieve a sense of personal competence, which constitutes the basis of greater selfsufficiency (Gini 1997, Bass & Steidlmeier 1999). They also resonate with the espousal of much lower levels of Power Distance in German and US society (see Table 2). The strong endorsement of Encouragement by US and German middle managers could imply that the performance ideal will drive a degree of convergence between the two countries for this dimension. Character/Integrity is clearly endorsed as a dimension of ethical leadership by both US and German middle managers, although we find that the level of endorsement is stronger in the United States. The current findings are consistent with previous research that has indicated an emphasis within the United States on character, integrity and trustworthiness as important traits of effective business leaders (e.g. Posner & Schmidt 1984, Locke 1999) as well as with popular press accounts of the preferences for political leadership among the US electorate (e.g. Bishin et al. 2002). In addition, the strong endorsement of the Character/Integrity dimension among US middle managers is consistent with themes identified by Trevin˜o et al.’s (2003) interviews with US executives about their beliefs regarding ethical leadership. They found that personal morality, credibility and trustworthiness were among the most common attributes identified. In addition, Locke (1999) contended that integrity is a core motive of effective leaders. Given the individualistic nature of US culture, demonstrating integrity provides an indication that a leader is not motivated purely by personal gain, which Bass & Avolio (1993) contend is essential for a non-leader to accept a leader’s vision and goals. With reference to Germany, one explanation for the positive endorsement of integrity is that it can help to ensure that the power given to a leader is not misused. In Ulrich et al.’s (1996: 167) survey of German and Swiss organizations, one of their

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respondents noted: As much as I am of the view that, nowadays, moral integrity is one of the demands placed on leaders, I am equally sure that we cannot depend on this. Rather the potential immorality of the individual must be offset by the structure and culture of the organization.1

The observation highlights the centrality of individual leader integrity, but, equally, reinforces the importance of institutional safeguards to ensure that leaders behave ethically. It may also help to explain why honest, just and sincere are endorsed by a lower percentage of the German Q-sort respondents: there is a belief, albeit one that has been shaken, that the system should protect against misdoing. Interestingly, of the four attributes constituting the Character/Integrity dimension of ethical leadership, trustworthy is identified by German Qsort respondents as particularly important. The corporate scandals of the past decade have demonstrated some of the limitations of institutionalized participation as an effective safeguard against abuse of power and also undermined the mutual trust on which such institutionalized systems are based. With this comes the suggestion that corporate leaders will, in the future, have to lead by example in dealing with corruption and see this as one of their strategic objectives. Such a development represents a possible move away from the de-personalized model of leadership, which has existed in Germany since the post-war period (Mu¨ller 1995, Brodbeck & Frese 2007). By contrast, American management lauds leaders for ‘single-handedly turning around a company’s fortunes’ (Stewart et al. 1994: 187) and holds them individually responsible for their decisions. According to Noer (1994: 9): We want a person to praise or blame. Problems can be ‘fixed’ and that is why we have leaders. They represent us, and if they can’t do the job, we will get someone else. [. . .] Top leaders are granted either god-like or goat-like status as they are paraded across our pages and screens. (cited in Hoppe & Bhagat 2007: 498).

Thus, when things go wrong, managers in the United States are perceived as the villains due to

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the dispersed system of ownership, whereas, by contrast, in Germany, management seeks explanations in the systems and structures (Coffee 2005). Interestingly, in the United States, there may be a change in this focus on the individual leader. As Hoppe & Bhagat (2007: 498) observe, ‘leadership theory and practice are beginning to move away from their overemphasis on the individual leader and to broaden their understanding of leadership as a process and organizational capacity that allows people to engage together to create and realize their shared sense of purpose as well as to express their democratic responsibility and will’. Altruism received more neutral endorsement by both US and German middle managers. In fact, it is ranked by German middle managers considerably lower than their US counterparts. Additionally, a lower percentage of the German Q-sort respondents indicated that two of the attributes characterizing Altruism, namely modest and fraternal, were indicative of ethical leadership. The results from German respondents correspond to the much weaker endorsement of humane leadership by German middle managers identified in the GLOBE study (Dorfman et al. 2004) and lower levels of Humane Orientation culture practices (see Table 2). In fact, the GLOBE data show West Germany as having the lowest ranking of all 62 sampled societies for practices on this dimension (Kabaskal & Bodur 2004). German business practices reveal a preference for the institutionalized handling of social relationships. German middle managers espouse high levels of performance and task orientation, in other words, ‘feelings take second place to task’ (Stewart et al. 1994: 185). However, this does not necessarily denote an eschewal of human relations, rather ‘[i]t merely constitutes a different approach to motivating workers’ (Stewart et al. 1994: 185). Brodbeck et al. (2002) speculate that low interpersonal compassion at work can produce higher levels of conflict: yet, ‘if a minimum of mutual trust is given (granted in Germany by the institutionalized cooperative capital–labour relationships), conflict is likely to result in high quality and efficiency at work’ (2002: 22). Bearing in mind Brodbeck et al.’s (2002) reference to low interpersonal compassion at r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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work, it is interesting to observe that two of the attributes comprising the Altruism dimension of ethical leadership, namely compassion and generous, are ranked highly by the German Q-sort respondents. The fact that the Q-sort data were collected some 10 years after the GLOBE data and that the GLOBE findings show German middle managers to espouse much higher levels of Humane Orientation values as opposed to practices (see Table 2) could point to a desire to move away from the approach described by Brodbeck & Frese (2007) as ‘tough on the issue and tough on the person’. Brodbeck et al. (2002) have discussed the consequences of neglecting the relational side of management and an overemphasis on task orientation at a time when ‘softer’ interpersonal skills are becoming critical in international business. They suggest that the German approach may need to remain tough on the issue, but become ‘soft on the person’ (2002: 28). In the United States, scores for Humane Orientation cultural practices and values are slightly higher than among German middle managers. A focus on the interpersonal competence of leaders emerged with the human relationship movement of the 1950s and 1960s: managers became aware of the importance of demonstrating consideration for the wants and needs of their staff (see Bass 1990). Moreover, Trevin˜o et al. (2003) found that the majority of executives interviewed in their study indicated that an important characteristic of ethical leadership is treating people well. The findings seem to suggest that, while treating staff well is important for leading ethically in the United States, it is viewed as somewhat less important for leading effectively.

Conclusions This research begins to address the gap identified by Brown & Trevin˜o (2006) regarding the lack of empirical studies investigating the extent to which ethical leadership differs across cultures. We set out to examine evidence of convergence in respect of beliefs about ethical leadership and evidence of divergence based on differing cultural values between the United States and Germany. To r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

respond to Jackson’s (2001) criticism of the lack of a cultural explanation of national differences within the business literature, we pursued a qualitative within-culture investigation of leadership and business practices within Germany and the United States using the GLOBE study as a lens through which to explain cultural variation. In general, the quantitative and qualitative results suggest that within Germany, ethical leadership continues to be largely embedded within the organizational system, i.e. within a shared set of implicitly held expectations ‘of the nature and scope of the company’s responsibilities’ (Vogel 1993: 169). This shared understanding of the nature of the company’s responsibilities is, in turn, ‘shaped by the norms of the community’ (Vogel 1993: 169). At the same time, there is evidence that ethical behavior and the ability to lead ethically are embedded within the individual, who self-regulates and is trusted to do so as a member of the moral community. As such, leaders are expected to demonstrate trustworthiness, and to encourage, empower and build confidence in staff to work within the parameters of the system. In contrast, the focus of ethical leadership in the United States is on the actions of individuals as opposed to the characteristics of the social system. We concur with Vogel’s (1992: 46) assertion that ‘America’s individualism does not correspond to the social traditions of Europe’. Ethical leaders in the United States are held personally responsible for their decisions along with the resulting outcomes: ‘[. . .] morality in the US is about matters that are individually decidable’ (Van Luijk 1990: 542). While both countries are individualistic in their orientation, using a qualitative analysis has allowed us to explore how individualism impacts on perceptions of ethical leadership and how it is differently enacted in Germany and the United States. Recent reviews of the ethical leadership and behavioral ethics research have called for a better understanding of the universally supported and culturally specific expectations for ethics (see Brown & Trevin˜o 2006, Trevin˜o et al. 2006). Our findings contribute towards the theoretical understanding of ethical leadership: firstly, by indicating that both convergence and divergence exist in the expectations of ethical leaders in two

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countries and, secondly, by examining the culturally bound value systems that provide a basis for the divergent expectations. Mayer & Whittington (2002) observe that in the past the word versus has tended to separate convergence and divergence, which implies polarity. However, the relationship between the two concepts is more complex and does not preclude the possibility that divergence and convergence occur simultaneously. By offering both initial evidence of divergence and convergence between the United States and Germany, and by seeking to explain these findings in a within-culture context, our study contributes to the building of a framework to improve intercultural understanding. In fact, organizations and their leaders who operate across borders must endeavor to reconcile on an ongoing basis the tension between the pressures of globalization and the culturally distinct approaches to leading ethically. This kind of environment creates opportunities for exchange and diffusion and a move away from the ‘one way is better’ approach of mutually exclusive moral visions (Ciulla 1991). For multinational firms to maintain standards of ethical conduct globally, managers need to understand the culturally specific expectations for ethical behavior (Weaver 2006). For example, Morrison (2006) contends that leaders must have high levels of integrity to address effectively ethical dilemmas across cultures. Yet, our findings suggest that the importance of leader integrity across cultures may be more nuanced. Within the United States, expectations for ethical leadership focus on the integrity, honesty and sincerity of the individual leader. These characteristics are important for the leader to gain the trust and support of colleagues and subordinates when addressing ethically sensitive issues. Germans also expect integrity from their leaders but focus on how the leader behaves toward others. As a result, a leader’s actions toward other members of the organizational community, as well as the community of customers and supplier stakeholders, will serve as the basis for gaining trust and support from colleagues as an ethical leader. Thus, differences in the enactment of ethical leadership should be taken into consideration in programmes

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that prepare managers for expatriate assignments as well as for managers who regularly interact with team members, customers and suppliers across national boundaries. Different beliefs regarding ethical leadership may also pose challenges to business leaders in the context of parent–subsidiary relations. One example concerns the more prescriptive approach toward the regulation of ethical behavior in the United States and the preference for self-regulation in Germany. Thus, if an American manager were to seek to apply the same kind of approach within a German subsidiary, it could imply a lack of trust in the employees to regulate their own ethical behavior. Both countries have experienced recent largescale ethical controversies stemming from the actions – or inaction – of organizational leaders and have taken steps toward achieving greater transparency and ethical accountability within the business community, albeit in culturally distinct ways. At the same time, globalization continues to create larger companies with more diverse workforces. This, in turn, raises questions – particularly, where parent–subsidiary relationships are concerned – as to the relative strength of organizational and societal cultural identification among those who work in multinationals and, with this, the role of the organization as opposed to the societal cultural value system as ‘the moral agent’ (Ciulla 1991). The new operating environment of organizations is resulting in a reassessment on both sides of the Atlantic of how best to establish a framework for ethical behavior and how to lead effectively. Ulrich et al. (1996) point to recognition – albeit reluctant – of the need to move away from informal relational controls in Germany to the adoption of US-style codes of ethics. Our findings also suggest that the growing emphasis on the ‘softer’ dimensions (Brodbeck & Frese 2007), for example, compassion, is impacting on the attributes expected of German ethical leaders, thereby mirroring the pattern in the United States and in other Anglo cultures. At the same time, in the United States, as Hoppe & Bhagat (2007) have observed, there is a ‘reevaluation’ of the emphasis on the individual leader. Such observations, importantly, underline the dynamic nature of culture, which means that as r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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the environment changes, concepts of leadership and perceptions of effective leaders (Hoppe & Bhagat 2007: 482) and arguably, by extension, perceptions of ethical leadership, will adapt. The results of our study need to be examined more fully in future research. While the Q-sort findings suggest that three of the four ethical leadership dimensions are useful indicators of ethical leadership in both Germany and the United States, they are based on a small sample of respondents and, as such, should be interpreted cautiously. Furthermore, the respondents were confined to the attributes listed in the GLOBE study’s leadership scales, which were not originally designed to examine ethical leadership. It is possible that ethical organizational leaders are characterized by additional attributes not addressed by this scale. To gain a more complete view of beliefs about ethical leadership within each country, future research should examine the beliefs of a larger sample of participants and use methods that enable a deep-level understanding of the expectations of ethical leaders across these two countries by not restricting responses to a pre-defined list of attributes. To conduct business effectively and responsibly across national boundaries, leaders must understand culturally specific expectations for the enactment of ethical leadership. Our research provides an initial understanding of the expectations for ethical leadership within Germany and the United States and serves to underline the need to prepare managers for the challenges of leading ethically across cultures.

Note 1. Translation by authors.

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