The Mediating Role of Leadership Relationship in Building Organisational Trust on Ethical Culture of an Organisation

IntroductionTrust is important for individual well-being (Solomon and Flores, 2001), organisational performance (Connell et al., 2003; Jones and George, 1998; McAllister, 1995; Whitener et al., 1998; Wicks and Berman, 2004; Wicks et al., 1999) and socio-economic development of the country (Fukuyama, 1995; Putnam, 1993; Uslaner, 2002). From an organisational perspective, trust is critical for minimizing uncertainty, risks and operating costs, enhancing employees' commitment and productivity, facilitating organisational learning, knowledge sharing and creation, organisational innovativeness and innovation (Chung and Jackson, 2011; Ellonen et al., 2008; Perry, 2004; Tschannen-Moran, 2001; Zanini, 2007). Trust becomes an acute issue when it is missing. To compensate lack of trust, organisations implement monitoring and control measures, individuals engage in self- protective behaviours, get distracted from task performance, which accounts for increased workload and diminished efficiency at both individual and organisational levels (Mayer and Gavin, 2005; Colquitt et al., 2011). At societal level, low trust and consequent uncertainty and risk are handled by developing coping strategies such as bribery, favouritism, excessive litigiousness etc. (Sztompka, 1999). Socialization of individuals in a low-trust societal context affects their attitudes and behaviour in the organisational context, which raise obstacles to organisational development and national competitiveness. Therefore, although in certain cases high trust may account for groupthink and eliminate competent "outsiders" from an organisation (Fukuyama, 1995; Granovetter, 1973), it is generally desirable.In this paper, we regard organisational trust as a positive attitude held by one organisational member towards the other as competent, honest and benevolent (cf. Mayer et al., 1995) and continuously acting by fair-play rules, ethical norms and common values (Fukuyama, 1995). Such behaviour signals to the trustor that the trustee will not take an advantage of her vulnerability and dependence in a risky situation (Das and Teng, 1998; Lewis and Weigert, 1985; Six, 2007). Abilities and integrity provide rational reasons to trust and account for development of the so-called cognitive trust, and perceived benevolence as well as compliance with the same ethical norms and values constitutes the background for enhancement of emotional trust (Colquitt et al., 2011; McAllister, 1995; McAllister et al., 2006). In this light, organisational trust is an issue in post-soviet context where sociohistorical processes conditioned a rather flexible attitude to norms and standards, lack of integrity, professional negligence among society members, which resulted in low trust (Ees and Bachmann, 2006; Ivanauskas, 2006; Pucetaite and Lamsa, 2008a; Rees and Miazhevich, 2008; Vasiljeviene and Freitakiene, 2002; Ziliukaite et al., 2006). Therefore, building organisational trust is a practical challenge that calls for theoretically sound and contextsensitive models (Doney et al., 1998; Lamsa and Pucetaite, 2006; Li, 2012; Wicks and Berman, 2004). However, there is little research from post-soviet context highlighting antecedents of organisational trust. Prior research in this context (Pucetaite et al., 2010a) found organisational trust to depend on human resource management (HRM) practices that are based on the principles of fairness and justice as well as employee participation in decisionmaking and open communication. Another study on the effects of ethics management tools such as ethics codes, ethics training, ethics auditing etc. in Lithuanian organisations (Pucetaite and Lamsa, 2008b; Pucetaite et al., 2010a) indicated that the explanatory power of ethics management tools in relation to organisational trust is weak. Besides, post-soviet societies are characterised by a tendency to take documented ethical norms as relativistic conventions (Ryan, 2006; Ungvari-Zrinyi, 2001; Vasiljeviene and Freitakiene, 2002). …