Ethical leadership of supervisors and internal social capital in a financial institution

Abstract

Purpose: The aim of this paper is to test empirically if the supervisor’s ethical leadership contributes to the creation of internal social capital. Design/Methodology/Approach: A survey was administered with 158 rank and file employees from 31 Manila branches of a financial institution. Based on factor analysis, reputation of ethical leadership characterized as a moral person and a moral manager emerged as new constructs. Partial least squares structural equation modelling (PLS-SEM) was used. Findings: Findings show that supervisor characterized as being a moral person results to higher willingness of employees to share information and resources in their personal dyadic relationships with supervisor and among employees (structural dimension); increase in employee trust in the long-run fairness of their relationship with the organization and co-employees (relational dimension); and intensification of employees’ identification with the firm (cognitive dimension). An ethical supervisor characterized as a moral manager significantly influences the cognitive and structural dimensions of internal social capital. Practical Implications: The results can give practitioners an idea of the ethical leadership traits observed by rank and file employees. This can have implications for human resource management, particularly superior-subordinate matching and for the process of socialization. In a company and economy that is constantly seeking change-makers and role models, empirical contributions are significant. This study is relevant in proposing strategies that can help management in the creation of social capital as well as contribute to social capital literature and field of business ethics. Originality/Value: The paper contributes to the existing literature by using financial institutions’ employees and in Philippine setting. Previous studies had tested ethical leadership as a whole but this time, the researchers deductively used characteristics of an ethical leader as a moral person and a moral leader.