The effect of ethical leadership on ethical decision making and organizational performance: Focusing on the Effect of Adjustment of Organizational Atmosphere in Financial Institutions
Authors:   Asia-Europe Perspective Association, Hyun Chang-Ik , Lee Dong-Myung , Seo Cheol-seung 
Published: April 2019

Since the advent of Neo-liberalism, bank management paradigm which focused on the profitability in the financial fields are now posing the issues in ethical management. The recent series of events such as the bank’s recruitment corruption and interest rate control fail to meet social expectation and social level. Such events make people doubt whether the financial field’s intention to practice ethical management is reliable. However, ethical management and organizational performance are not always related. A company’s unethical decision-making will damage its reputation, weaken the competitiveness, and constrict the main elements for organizational development in the era of limitless competition, creativity and innovative activity. Thus, this study focused on those facts and analyzed the influence of ethical leadership on ethical decision-making and organizational performance and the adjustment effect of organizational atmosphere in ethical leadership and ethical decision-making. For the research, this study conducted a survey on 320 workers at domestic financial institutions.
The analysis results were as follows. First, among the superior’s ethical leadership, a fortitude had a positive (+) influence on the worker’s ethical decision-making. In contrary, prudence, temperance, and justice had no significant influence on the worker’s ethical decision-making. Therefore, this study implied that the virtue of fortitude should be strengthened as the internal capability of ethical leaders and that the systemic ethical education and leadership education should be promoted continuously.
Secondly, in relation between the worker’s ethical decision making and organizational performance, the path for the organizational trust of ethical decision-making was insignificant while the path for the organizational citizenship behavior was significant. Such result implied that it is necessary to promote the organizational performance by enhancing ethical decision-making and ethical practice through declaration and practice of ethical management and settlement of ethical management system within the organizations.
Third, among the ethical leadership’s direct influences on the organizational trust, the temperance had statistically significant influence. Furthermore, among the ethical leadership’s direct influence on organizational citizenship behavior, the prudence had statistically significant influence. Therefore, this study implied that the leader should exclude the personal emotions or prejudices thoroughly and protect the system for the stable operation of the ethical management system in the organization.
Fourth, this study verified that the principle-oriented atmosphere had adjustment effect. However, the principle-oriented atmosphere had greater effect in the lower groups. Also, the generous atmosphere and selfish atmosphere did not show adjustment effect implying that the individual tendency is excluded due to systemization of works, settlement of ethical management, and operation of internal control system. Thus, for the desirable ethical decision-making within the organizations, it is important to create a principle-oriented ethical atmosphere.
Thus, this study is expected to suggest the direction of ethical management and ethical education to the policy makers and person in charge at the financial institutions and overall industries.