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Ethical Leadership Behaviour and Employee Satisfaction

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Publication details: Kooskora, M. and Mägi, P. 2010. Ethical Leadership Behaviour and Employee
Job Satisfaction, In: M. Siltaoja, A-M. Lämsä and J.Kujala (eds), Proceedings of the 11th EBEN
Research Conference “From Theory to Practice– How Does Business Ethics Matter?” University of
Jyväskylä Press, 112 - 126. ISBN: 978-951-39-3876-5.

Ethical Leadership Behaviour and Employee Satisfaction

Mari Kooskora, Priit Mägi

Estonian Business School
Mari Kooskora, PhD, is an Associate Professor at Estonian Business School (EBS). She is also
Director of the EBS Ethics Centre and editor-in-chief of the EBS Review. Her main research interests
are business ethics, corporate social responsibility and ethics and women in leadership. She is member
of EBEN and several other international networks. E-mail: mari.kooskora@ebs.ee
Priit Mägi, graduate student at Estonian Business School. Priit has worked in real-estate agency where
ethical behaviour was often forgotten in the name of profit. He discovered that brokers seemed to
reflect leader's (un)ethical behaviour to their customers as well as become shallower and ignorant as
their superiors acted unethically. That was a good impulse to conduct a research in this field. E-mail:
priitmagi@hot.ee

Abstract
In our modern business world corporations have significantly broadened their role in the society and
this role impacts many both inside and outside the organization. There is much evidence of the growing
demand for businesses to conduct themselves with a greater regard for moral and ethical considerations
(e.g. Werhane and Freeman, 1999; Paine 1997; 2003; Freeman, 2000; Goodpaster, 2004; Gini, 2004,
etc) and the responsibility to respond to these growing demands has largely been put on the
organizational leaders (Mendonca and Kanungo, 2007). The behaviour of organizational leaders has
strong impact on others and it is strongest on the employees. It is indicated that there is a direct relation
between ethical leadership behaviour and employee job satisfaction and outcomes (Zhu et al, 2004);
however empirical research in this field is still lacking (Toor and Ofori, 2009).
Our study investigates the association between ethical leadership behaviour and employee satisfaction.
The attempt is made to explore the impact of ethical leadership behaviour on employee satisfaction
expressed in the dimensions such as employee trust, loyalty towards organization and leaders, pride
about the company, organizational commitment, workplace environment and organizational climate,
employee recognition and empowerment, awareness of the organizational activities, and participation
in decision-making.
A total of 175 employees from Estonian financial and telecommunication companies took part in the
study. The results indicated a strong relation between the components of ethical leadership and the
components of employees’ job satisfaction. However it was found that the relation of ethical leadership
between employee trust, loyalty, pride and commitment was slightly weaker among male respondents
than among female respondents, whereas the association of pride about the organization and
participation in decision-making was not revealed among female respondents. Clear differences were
found in the answers of respondents from different age groups, for example, young employees (under
25 years) did not value recognition and awareness of the organizational activities as highly as other

1
groups, however they considered the importance of participation in decision making higher than
employees from other age groups. The results of this study further strengthen the argument about
positive impact of ethical leadership behaviour on employee satisfaction. Differences in respondents’
answers from different age groups and gender indicate to the need for further studies in this area.
Keywords: ethical leadership behaviour, employee satisfaction, Estonia, survey, financial and
telecommunication companies
Introduction
In our modern business world corporations have significantly broadened their role in the society and
this role impacts many both inside and outside the organisation. There is much evidence of the growing
demand for businesses to conduct themselves with a greater regard for moral and ethical considerations
(e.g. Werhane and Freeman, 1999; Paine 1997; 2003; Freeman, 2000; Goodpaster, 2004; Gini, 2004,
etc), and today increasingly more businessmen are tending to show a deeper interest in the issues of
morality and ethics in business. Ethics is fundamentally concerned with the impact of an individual's
action on others (Zhu et al, 2004).
Edward Aronson (2001) finds ethical behaviour a necessary condition for the establishment of an
ethical organisation, but claims this alone is not to sufficient, since ethical leadership is required. Toor
and Ofori (2009) go even further stating that leadership which lacks ethical conduct can be dangerous,
destructive and even toxic.
Ethical characteristics of leadership have been widely acknowledged by several authors (Bass, 1999;
Kanungo and Mendonca 1996; Trevino 1986; Kouzes and Posner 1990; 1992; Ciulla, 1995). More
recently, Brown et al (2005) find the combination of integrity, ethical standards and fair treatment of
employees to be the cornerstones of ethical leadership, Knapp (2007) believes that trust, and its
dimensions of credibility, respect, and fairness are those which lead to ethical leadership, and
Verschoor (2008) adds here pride and camaraderie.
Zhu and others (2004) indicate direct relations between ethical leadership with employee performance,
commitment and satisfaction within the organization and Trevino and colleagues (2000) suggest that
ethical leadership behaviour plays dividends in employee pride, commitment and loyalty. Several
authors have drawn connections between leadership behaviour and employee outcomes (Trevino and
Brown, 2004; Avolio and Gardner, 2005; De Hoogh and Den Dartog, 2008). However according to
Toor and Ofori (2009) ethical leadership and its impact on employee outcome, though well discussed in
the literature, has still been tested empirically as a construct in very few studies.
Our study investigates the association between ethical leadership behaviour and employee satisfaction.
We attempt to explore the impact of ethical leadership behaviour on employee satisfaction expressed in
the dimensions such as employee trust, loyalty towards organization and leaders, pride about the
company, organizational commitment, workplace environment and organizational climate, employee
recognition and empowerment, awareness of the organizational activities, and participation in decision-
making. A total of 175 employees from Estonian financial and telecommunication companies took part
in the study.
In the following sections we discuss about the need for ethical leadership behaviour in our
organizations, define ethical leadership and present most well-known leadership approaches that have
been related to ethical leadership. This will be followed by the brief overview of the methodology and
main results of our empirical study.
The Need for Ethical Leadership Behaviour
We can argue that the need for effective leadership has become one of the challenges of the 21st
2
Century, and a growing number of academics and senior managers have come to recognize the
importance of a new leadership paradigm (e.g. Ciulla, 2005; Mendonca and Kanungo, 2007). It is
believed that in order to be able to succeed in this constantly changing environment, managers need to
realize that companies are increasingly being judged, not just from a technical or financial point of
view, but also from the moral point of view (Paine, 2003). The society demands and expects greater
accountability from business organizations and the managerial leaders are those who bear the primary
responsibility to respond to these demands (Mendonca and Kanungo, 2007).
A leader plays a critical role in establishing and maintaining the ethical culture within his/her
organization (Trevino, 1986; Victor and Cullen, 1988; Brown et al, 2005), however too often the
emphasis in our organizations has been put primarily on the manager’s expertise, technique, power,
knowledge and strategic choices, at the expense of the his or her moral character (Petrick and Scherer,
2003). Mendonca (2001) has stated that true and effective leadership is when a leader’s behaviour and
the fulfilment of his or her leadership role is consistent with ethical and moral values. According to
Ciulla (1995), good leadership refers not only to competence but also to ethics and therefore leadership
excellence cannot be evaluated without an assessment of the leader’s character, moral vision, integrity,
values and caring for others and taking responsibility (Badaracco, 1997; Paine, 1994).
Ethical behaviour and effective leadership are strongly intertwined and inseparable (Ciulla, 2001).
Meaningful leadership, leadership that in the long run counts for something, cannot be accompanied by
moral collapse. The leader’s role is to create the circumstances where people can act according to
ethical norms and with their own behaviour they are role models, they are being watched and followed.
Toor and Ofori (2009) believe that leadership which lacks ethical conduct can be dangerous,
destructive and even toxic. Thus, we can say that leadership is one of the many areas of human life and
social relationships in which moral character matters most and both the character and behaviour of
people in positions of leadership have a great impact on others. It may not be correct to say that ‘the
leader who acts ethically will ultimately succeed’, but reality has proven that the leader who lacks an
ethical foundation will ultimately fail, maybe not immediately, but in the long run.
Ethical Leadership
Edward Aronson (2001) finds ethical behaviour a necessary condition for the establishment of an
ethical organisation, but claims this alone is not to sufficient, since ethical leadership is required. Rost
(1991) has said that the leadership process is ethical if the people in the relationship (the leaders and
followers) freely agree that the intended changes fairly reflect their mutual purposes. According to
Brown and his colleagues (2005) ethical leadership is ’the demonstration of normatively appropriate
conduct through personal actions and interpersonal relationships, and the promotion of such conduct to
followers through two-way communication, reinforcement and decision-making’ (p.120).
Bass and Steidlmeier (1999) believe that ethics of leadership rests upon three pillars: 1) the moral
character of the leader; 2) the ethical legitimacy of the values embedded in the leaders vision,
articulation, and program, which followers either embrace or reject; and 3) the morality of the
processes of social ethical choice and action that leaders and followers engage in and collectively
pursue. Such ethical characteristics of leadership have been widely acknowledged by several authors
(Kanungo and Mendonca 1996; Trevino 1986; Kouzes and Posner 1990, 1992). Thus, ethical
leadership combines ethical decision-making and ethical behaviour, and occurs in both individual and
organizational context.
According to Burns (1978), the leadership process occurs in one of two ways, either transformational
or transactional, whereas the theory of transforming leadership rests on a set of moral assumptions
about the relationship between leaders and followers. Bass and others (1987) argue that
transformational leaders have been characterized by four separate components. These four factors
3
include idealized influence, inspirational motivation, intellectual stimulation and individualized
consideration. Transformational leadership integrates creative insight, persistence and energy, intuition
and sensitivity to the needs of others to forge the strategy (Bass and Avolio, 1993).
The fact that transformational leadership places a strong emphasis on followers’ needs, values, and
morals, and involves the attempts to move followers to higher standards and moral responsibility sets it
apart from most other approaches to leadership, because it clearly states that leadership has a moral
dimension (see Bass and Steidlmeier, 1999; Northouse, 2009). However the transformational leaders
can be virtuous or villainous depending on their values. Bass and Steidlmeier (1999) make a distinction
between two types of transformational leadership calling the leadership behaviour which is consistent
with moral values authentic and state that absence of such a moral foundation leads to
pseudotransformational leadership.
Another leadership approach which is firmly grounded on ethical principles is servant leadership
(Greenleaf, 1978). The core focus of servant leadership is embedded in the concept that supervising has
less to do with directing other people and more to do with serving them (see Dannhauser, 2007, 19).
The approach is related to the concept of transformational leadership and other ’ethical perspectives’ on
leadership (Northouse, 2001).
More recently Maak and Pless (2006) have turned their attention to responsible leadership, highlighting
values, emotions and mutual recognition in building and sustaining morally sound relationships with all
relevant stakeholders of an organization.
Ciulla (2001) believes that the difference between the morality of leaders and everyone else is that the
ethical failures and successes of leaders are magnified by their role, visibility, power, and the impact of
their actions and behaviour on others. The individual’s mental model is a critical factor that influences
his or her ability to make quality decisions, in addition to creating a framework for the beliefs and
values that ultimately determine his / her ethical framework (Caldwell et al, 2002). The practice of
leadership is to guide and look after the interests of people, organizations, countries, or causes and to
put the mission of the organization or the good of one’s constituents first––to take the responsibility.
We believe that ethical leadership that is composed of the combination of vision and values-based
management is the best approach. Therefore the combination of integrity, ethical standards and fair
treatment of employees are the cornerstones of ethical leadership (Brown et al, 2005), Knapp (2007)
puts emphasis on trust, and its dimensions of credibility, respect, and fairness, and Verschoor (2008)
adds here pride and camaraderie. Ethics is about values and about values-based management,
leadership is about vision: having one, sharing one and ethical leadership is a combination of righteous
goals and righteous behavior, righteous ends and righteous means, righteous policy and righteous
administration (see Branscome, 2008). In our work we have approached ethical leadership using the
dimensions of vision, integrity, trust, respect, loyalty, authenticity, fairness, pride, commitment and
recognition.
Ethical Leadership and Employee Job Satisfaction
Job satisfaction is an attitude reflecting how well people like or dislike their job. Job satisfaction has
been defined as a pleasurable emotional state resulting from the appraisal of one’s job; an affective
reaction to one’s job (Koh and Boo, 2001). It is generally recognized as a multifaceted construct that
includes employee feelings about a variety of both intrinsic and extrinsic job elements. Employees
expect their job to provide an accumulation of features (e.g., pay, promotion, autonomy) for which the
employee has certain preferential values. The range and importance of these values vary across
individuals, but when the accumulation of unmet expectations becomes sufficiently large, job
satisfaction is lower, and there is a greater probability of withdrawal behaviour (Pearson, 1991).
4
Several authors have drawn connections between leadership behaviour and employee outcomes
(Trevino and Brown, 2004; Avolio and Gardner, 2005; De Hoogh and Den Dartog, 2008). Zhu and
others (2004) indicate direct relations between ethical leadership with employee performance,
commitment and satisfaction within the organization and Trevino and colleagues (2000) suggest that
ethical leadership behaviour plays dividends in employee pride, commitment and loyalty (2000).
The results indicate that ethical leadership has both a direct and indirect influence on follower job
satisfaction and active commitment (see Neubert et al, 2009). Whereas the indirect effect of ethical
leadership involves shaping perceptions of ethical climate, which in turn, engender greater job
satisfaction and affective organizational outcome (ibid). According to Appelbaum and others (2004)
the relationship between leadership behaviour and job satisfaction has received a great deal of attention
in past research, however the findings have been mixed; furthermore Toor and Ofori (2009) maintain
that ethical leadership and its impact on employee outcome, though well discussed in the literature, has
still been tested empirically as a construct in very few studies.
In the following sections we will present the methodology as well as the main results of an empirical
study we conducted among Estonian financial and telecommunication companies. The purpose of our
study is to explore the impact of ethical leadership behaviour on employee satisfaction expressed in the
dimensions such as employee trust, loyalty towards organization and leaders, pride about the company,
organizational commitment, workplace environment and organizational climate, employee recognition
and empowerment, awareness of the organizational activities, and participation in decision-making.
Methodology of the Study
Propositions
In this study we investigate the association between ethical leadership behaviour and employee
satisfaction. It is expected to find a positive relationship between ethical leadership and employee job
satisfaction and in order to study this assumption from different dimensions the following propositions
is developed:
P1: Employees’ trust towards leaders is associated with ethical behaviour.
The importance of trust in determining the ethical behaviour of leadership has been emphasized by
several studies (e.g. Bennis and Goldsmith, 1997; Zhu et al, 2004). For example, (Lamb and McKee,
2004) find trust and confidence in top leadership as the single most reliable predictor of employee
satisfaction in an organization. Trust is considered as the essence of leadership. In an organization, a
leader that is not trusted by their subordinates in essences is not a true leader. Managers for example
may be ambitious and competent, but they will never be an effective leader without the trust of their
subordinates.
Good ethical leaders are those who build trust and loyalty in their organizations. Trust is important and
makes doing business with others much easier. ‘If you trust a person, you can do business with a
handshake. If you can’t trust someone, you have to try to get all the transactions and agreements down
on paper. When there is no trust in a society or organization, people substitute rules, contracts and
laws’ (Ciulla, 2000). Robert Solomon (1998) has observed that without trust, there can be no betrayal,
but more generally, without trust there can be no cooperation, no community, no commerce, no
conversation. In short there can be no interaction, no business at all.
P2: Employees’ loyalty is associated with their pride about the company
Ethical leadership pays dividends in employee pride, commitment and loyalty (Trevino et al, 2000). In
an organization, besides commitment, employers want loyalty and trust from their employees, but both
trust and loyalty are reciprocal concepts. Ciulla (2000) has noted that it is ironic that the less stability
5
and loyalty companies have to offer employees, the more commitment they demand from them. Good
ethical leaders are those who build trust and loyalty in their organizations.
P3: Employees’ work effort is related to their recognition
Here we assume that ethical leaders consider carefully developmental needs of their employees
(Kouzes and Posner, 1992) and appoint them to the positions which are most suitable and where the
employees’ job satisfaction is the highest (Zhu et al, 2004). Ethical leaders treat the employees with
respect and as more than just resource for achieving organizational goals (Kooskora, 2005). Respectful
treatment increases the feeling that their work is meaningful as there is a match between personal and
organizational purposes. The best leaders guide their organizations and the people in them to new
levels of learning and performance, transforming the present into reaching towards potential.
Leadership thus becomes a process of learning, risking and changing lives.
P4: Employees’ commitment depends on the awareness of the organizational activities
Commitment (also often referred to as ‘engagement’ or ‘loyalty’) can be seen as a measure of
alignment between the employee’s motivations and the organization’s mission. Organizational
commitment is an individual’s attachment to his or her organization, and is reflected in the relative
strength of the individual’s identification and involvement with it (see Ponnu and Tennakoon, 2009).
Employees come to identify with the goals and values of the organization and desirous of maintaining
membership is termed as attitudinal commitment whereas, commitment as the process by which an
individual’s past behaviour serves to bind him or her to the organization is termed as behavioural
commitment.
Employee commitment encumbers three main factors such as (ibid, 23): (1) A strong belief in and
acceptance of the organization’s goals and values. (2) A willingness to exert considerable effort on
behalf of the organization. (3) A strong desire to maintain membership in the organization. We assume
here that being informed and aware of the organizational activities raises the degree of commitment
among employees and they feel that their leader really values the work they do.
P5: Employees’ pride is related to their involvement in decision-making
Here we approach this issue from the view that employees have the need to feel being involved in
organizational development. Employees, who feel that they have impact on organization’s development
and are able to participate in decision-making, have stronger connection with the organization and are
more willing to collaborate. Ethical leaders enable others to lead by sharing information, by fostering a
sense of community, and by creating a consistent system of rewards, structure, process, and
communication. They are committed to a principle of opportunity, giving all followers the chance to
contribute to the organization and this increases level of pride employees feel about the organization
and their work (see Batt and Appelbaum, 1995).
P6: Ethical leadership is positively associated with employees’ trust towards their leaders, employees’
loyalty, pride of the organization and employees’ commitment
Here we try to summarize characteristics of ethical leadership and opposing it to the dimensions of
employee job satisfaction. Ethical leaders do not seek to fulfil their own self-interest (psychological
egoism) at the expense of others, but look after the group's interest at a minimum (utilitarianism).
Ideally, such leaders base their behaviours on moral principles that respect the rights of associates and
treat them fairly. Ethical leaders involve their employees in decision-making within their firms to
enhance the procedural justice and autonomy over their work lives the employees' experience (see Zhu
et al, 2004). Furthermore, such involvement facilitates the well-being and potential growth of the
employees.

6
To conclude we can say that in an organization, besides commitment, employers want loyalty and trust
from their employees, but both trust and loyalty are reciprocal concepts. ’The leadership challenge as
we embark on the rough and fast-paced world of the twenty-first century is to get things done
expeditiously and profitably, and to do so in a way that shows high integrity, trust and honesty’
(London, 1999).
Sampling
Survey data was collected among the biggest financial and telecommunication organizations in Estonia.
We targeted especially these organizations due to the existence of several management levels in these
companies. A total of 175 employees took part in this survey. We wanted to include members from all
the target organizations, but within the company participation was random, without any limitations to
the sample, and all organizational members had an equal chance to take part in the survey. The
questionnaire as well as data gathering was anonymous. The employees of the companies were reached
via their managers and managerial board members. Participating companies showed their interest in our
study and we offered them an opportunity to be informed about the results. One company, biggest bank
in Estonia Swedbank refused to take part in the survey, as their HR policy forbids all external surveys
within the organization.
Data Collecting Tools and Methods
A structured survey method, a questionnaire was used as a tool for collecting the data. The
questionnaire contained Likert-scale, asking respondents to measure the strength of their reactions to 41
statements, which were randomly listed. Presented with a statement, respondents had to choose
between a 7-scale range of responses from strong disagreement, to strong agreement.
The responses were assigned ordinal numbers, which made possible analytical methods such as
comparison on narrow issues, correlation between issues, and individual or group tallies that revealed
information about larger blocks of attitudes and behaviour. Information about respondent’s gender and
age was gathered as demographic variables.
We gave two options for conducting the survey to the managers of the organizations, they were able to
use the web-based questionnaire and a printed out questionnaire. All managers preferred the web-based
version and thus they were sent a link to the web-site accompanied by a letter which explained the
essence and purpose of the study and asked the managers to help with conducting this survey. The
feedback was positive and we got back 175 fully filled in questionnaires.
Data Analysis
The dimensions such as ethical leadership, employee trust towards their leaders, employee loyalty,
pride about the company, organizational commitment, employee recognition awareness of the
organizational activities, and participation in decision-making are characterized by using the means and
modes. The highest means and modes, the closest to 7, enables to state that these dimensions exist
within our sample.
The propositions are evaluated by using the regression analysis in Microsoft Excel, dependency
correlation shows the positive or negative relation in the range -1 +1 and the level of that correlation,
random coefficient p is calculated and it remains less than 5% (p<0,05), the internal consistency, or
Cronbach’s Alpha coefficient, is between .70 and .90 for all scales, thus we can say that these
responses are reliable and valid.
Overview of the Main Results and Discussion
Our study was conducted in spring 2009. A total of 175 employees took part in the survey. The data

7
was collected via electronic formulas. The average respondent was male (63% of the total sample), and
between 25-35 years old (49% of the total sample) According to the age characteristics of our sample,
we considered reasonable to divide the respondents into 3 bigger groups, less than 25 years old (20%);
from 25-34 and over 35 (31%), no big differences in respondents answers were not found within each
of these age groups. The relatively young age of all respondents can be considered characteristic of the
specific field under our investigation.
In the beginning we calculated means and modes in order to find and characterize the general trends
and attitudes. The analysis of the entire sample indicated strong relation between the components of
ethical leadership and the components of employee job satisfaction. Relatively high scores were found
for the dimensions of trust towards the managers, ethical leadership, employee loyalty, and pride about
the organization, work effort, employee recognition and involvement in decision-making. Weaker
results were found regarding the employee commitment and awareness about the organization’s
activities. The scores were relatively even and no big extremes were found. Thus, we can say that the
results of our study provide empirical support for the theorized notion that ethical leadership is
positively associated with employee job satisfaction.
A more detailed analysis revealed us that although the leaders do not criticize employees without
reasons, they do not support and stand for their employees. Managers show respect towards the
employees, but do not recognize their good work very often. Employees feel pride of their organization
and working environments are good, however not all the managers pay attention to the good work the
employees do. The lowest scores were given to fair salaries, communication and sharing information
and according to the employees’ perception managerial boards do not consider employees’ opinions.
All propositions found positive support; statistically the highest scores were given to
P5: Employees’ pride is related to their involvement in decision-making and
P6: Ethical leadership is positively associated with employees’ trust towards their leaders, employees’
loyalty, pride of the organization and employees’ commitment
The lowest correlation was found in P4: Employees’ commitment depends on the awareness of the
organizational activities.
Further analysis regarding the gender and age variables showed that female employees do not see
relation in employees’ pride and their involvement in decision-making. We may speculate here that
male employees may feel stronger need to be the leaders and decision-makers, while for female
employees the pride about the organization depends more on other factors. It was also revealed that
male employees do not see relation between pride of the organization and employee commitment with
ethical leadership. This result may refer to the higher material values among male employees compared
to preferring the social values by female employees. Female employees tend to trust their managers
more and feel to be valued, their good work recognized than the male employees.
When looking at the results among employees of different age groups, we found that the youngest
group, employees younger than 25 years, do not relate their loyalty to the pride of the organization.
Here we may speculate that younger employees do not yet feel close relations with the company, work
and study at the same time and regard the work place as temporary.
Further it was revealed that commitment among the youngest age group was not related to the
awareness of the organizational activities and their work effort with recognition. At the same time their
pride related to involvement in decision-making may refer to their need to feel important. Analyzing
the relations between ethical leadership and employee trust towards the managers, employee loyalty,
employee pride about the organization and employee commitment revealed that within the youngest

8
group employee loyalty and pride about the organization are not related to the ethical leadership.
Among the employees age group 25-34 the relation between pride about the organization and ethical
leadership was not seen, however among the employees over 35 this relation was firmly supported.
Additionally we found that employee loyalty, pride about the organization, work effort and employee
recognition were significantly lower than among younger employees. They also evaluate the existence
of ethical leadership in their companies lower than younger employees. From here we may argue that
employees with longer working experience present higher ethical demands on their leaders, however at
the same time regard their work from a more practical view.
All the propositions we made within this study found support among the general sample of our study.
The analysis regarding differences in gender and age groups revealed some variations. The support for
proposition P1: Employees’ trust towards leaders is associated with ethical behaviour was found in all
samples. Support for proposition P2: Employees’ loyalty is associated with their pride about the
company; proposition P3: Employees’ work effort is related to their recognition; and proposition P4:
Employees’ commitment depends on the awareness of the organizational activities was found in
general sample and analysis based on gender, however within the youngest age group (less than 25 old
employees) these propositions were not supported.
Proposition P5: Employees’ pride is related to their involvement in decision-making found support
among general sample, but was overthrown among female employees and employees older than 25
years. Proposition P6: Ethical leadership is positively associated with employees’ trust towards their
leaders, employees’ loyalty, pride of the organization and employees’ commitment was supported
among general sample and female employees, but was partly overthrown among other demographic
groups.
Deriving from this study we may argue that the employee satisfaction among Estonian biggest financial
and telecommunication companies is strongly related to all components of ethical leadership. The
existence of some variations within different demographic groups points to the lack of flexibility and
communication skills of our managers to be able to establish and develop relationships with employees
of different gender and age groups. Our work clearly indicated that employee work effort, loyalty,
commitment and pride about the organization can be raised by enhancing leadership ethics. Although it
was revealed that employee loyalty and work effort among youngest employee group was not as
strongly related to components of ethical leadership, the relation to trust – bases for ethical leadership,
was as strong as among other groups. The highest level of job satisfaction was found among employees
of age range 25-34; job satisfaction was significantly lower among younger and employees over 35
years old. We may speculate here, is this result seen because of the current economic recession, or
manager’s disability to motivate younger and employees over 35 years old.
The limited amount of our sample involved in this study does not let us to draw more generalized
conclusions of the entire sample of Estonian employees and bring out any country specific contextual
features (see also Kooskora, 2008) moreover the survey method used here is not allowing to go deeper
in the analysis and study how and why questions related to ethical leadership behaviour and employee
satisfaction. Therefore it is recommended to enlarge the sample, make repetitive studies using the same
sample for providing information about changes in the employees’ perceptions. Adding open-ended
questions, and also conducting interviews with managers and employees for going deeper into these
topics and finding out how the relations are formed would allow to investigate what can be done in
order to increase the level of ethical leadership behaviour in the organizations. These activities have
been planned for the next phases of our research work.
Conclusion

9
This study was conducted to find the relations between ethical leadership behaviour and employee
satisfaction. We explored the impact of ethical leadership behaviour on employee satisfaction
expressed in the dimensions such as employee trust, loyalty towards organization and leaders, pride
about the company, organizational commitment, workplace environment and organizational climate,
employee recognition and empowerment, awareness of the organizational activities, and participation
in decision-making.
A total of 175 employees from Estonian financial and telecommunication companies took part in the
study. The data was collected by using the electronic formulas, and the managers helped in conducting
the survey within their companies. We got positive feedback about the idea of the study and
representatives of participating organizations showed their interest in the topic as well as the study
results.
The analysis of the entire sample indicated a strong relation between the components of ethical
leadership and the components of employees’ job satisfaction. All our propositions found firm support
among the general sample, however slight differences were revealed among respondents groups based
on gender and age. The results of this study further strengthen the argument about positive impact of
ethical leadership behaviour on employee satisfaction, whereas the differences in respondents’ answers
from different age groups and gender indicate to the need for further studies in this area.
To conclude we may argue that the results of our study provide empirical support for the theorized
notion that ethical leadership is positively associated with employee job satisfaction.

10
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