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Page 1: [IEEE 2009 International Conference on Management and Service Science (MASS) - Beijing, China (2009.09.20-2009.09.22)] 2009 International Conference on Management and Service Science

The Authentic Leadership and Its Relationship with CSR Behaviors

Luo Dongxia1,2 1. School of Management

Graduate University of Chinese Academy of Sciences Beijing, China

2. Business School, Hubei University Wuhan, Hubei, China [email protected]

Shi Kan 1. School of Management

Graduate University of Chinese Academy of Sciences Beijing, China

[email protected]

Abstract—This paper probed into the authentic leadership development and its relationship with CSR (Corporate Social Responsibility) behaviors. Three models clarified the antecedents, moderators and mediators of authentic leadership to CSR behaviors respectively. The relationship between the moral psychological capital and authentic leadership was analyzed in model 1. The moderating effect of legal constraints between the authentic leadership and CSR behaviors was discussed in model 2. The mediating effect of organizational values between authentic leadership and CSR behaviors was discussed in model 3.

Keywords-authentic leadership; CSR; moral psychological capital; legal constraints

I. INTRODUCTION Although the corporate efficiency is highly elevated in

modern world, its social responsibility behaviors are not increased correspondingly. A series of corporate scandals, from American Enron Corporation to Chinese Sanlu Milk Corporation, shocked the public. Scholars began to think about the authenticity of corporate leaders. Corporate authentic leader is regarded as the person who can bear the organizational ethical responsibility. How the authentic leadership affects the CSR (Corporate Social Responsibility) behaviors. Although some literature discussed the relationship between transformational leadership and CSR behaviors, the researches on authentic leadership and CSR behaviors are scarce.

Can the authentic leadership be developed? Empirical research revealed that the positive psychological capital can significantly influence the authentic leadership(Jensen,2006) [1]. As the samples in Jensen’s research were only entrepreneurs, whether the research result can be inferred from entrepreneurs to all kinds of leaders? Further empirical research should be conducted.

After the Wenchuan Earthquake in 2008, many Chinese corporations donated money. A private company (Jiaduobao ) donated a hundred million RMB, but a famous listed company (Wanke Real Estate) only donated two million. The leader of Wanke Company insisted that it’s appropriate to donate two hundred million, because the donated amount cannot excel the

authority limit of shareholders meeting. Although the leader of Wanke Company set an authentic image to the public previously, the authenticity of the leader and Wanke Company was doubted after this accident. Private company and the listed company bear different legal responsibilities to shareholders. So, in different levels of legal constraints of company leaders, how the relationship between the authentic leadership and CSR behaviors changes?

From the organizational behavior’s perspective, authentic leadership is the variable of individual or group level, but the CSR behavior is the variable of the organization level. The core of authentic leadership is the authentic values. Only the leader’s authentic values are transferred into corporate authentic values, the sustainable CSR behaviors can be achieved. Whether the organizational value is the mediator between organizational values and the CSR behaviors needs to be tested.

II. DEFINITION OF AUTHENTIC LEADERSHIP AND CSR

A. Authentic Leadership Luthans and Avolio(2003) initially defined authentic

leadership as “a process that draws from both positive psychological capacities and a highly developed organizational context, which results in both greater self-awareness and self-regulated positive behaviors on the part of leaders and associates, fostering positive self-development”[2]. Drawing on the Kernis’s (2003) conception of authenticity, Ilies et al.(2005) proposed a more focused four-component model of authentic leadership that included self-awareness, unbiased processing, authentic behavior/acting, and authentic relational orientation[3]. Shamir and Eilam(2005) described authentic leaders as people who have the following attributes: (a) “the role of the leader is a central component of their self-concept, (b) they have achieved a high level of self-resolution or self-concept clarity, (c) their goals are self-concordant, and (d) their behavior is self-expressive”[4]. Avolio and Gardner(2005)[5], Luthans and Avolio(2003)[2], and May et al.(2003)[6] have argued that authentic leadership includes a

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positive moral perspective characterized by high ethical standards that guide decision making and behavior. Avolio, Gardner, and colleagues’ (Avolio &Gardner, 2005[5]; Gardner,Avolio,Luthans, et al.,2005[7]; Ilies et al.’s, 2005[3]) consolidation and conceptualizations of the authentic leadership construct are popular for three reasons. Firstly, it is firmly rooted in the extant social psychological theory and researches on authenticity, in contrast to those of other authentic leadership scholars who have taken a more inductive or philosophical approach to the theory development. Secondly, it explicitly recognizes and articulates the central role of an internalized moral perspective to authentic leadership and its development. Thirdly, it focuses explicitly on the development of authentic leaders and authentic followers, which make it statelike and ultimately something one can develop in leaders. Walumbwa et al.(2008) consider these features to be crucial requirements for authentic leadership development and define authentic leadership as a pattern of leader behavior that draws upon and promotes both positive psychological capacities and a positive ethical climate, to foster greater self-awareness, an internalized moral perspective, balanced processing of information, and relational transparency on the part of leaders working with followers, fostering positive self-development[9].

B. Corporate Social Responsibility Behavior Corporate Social Responsibility(CSR) is typically defined

as actions on the part of the firm that signal their willingness to advance the goals of identifiable stakeholder groups, such as employees, suppliers, the local community, non-governmental organizations, or broader social objectives (Waldman,2008) [10]. But what the CSR behaviors really mean? Carroll(1979) proposed the CSR pyramid which depicts the economic, legal, ethical and discretionary responsibilities[11]. Concepts of stakeholders and corporate citizenship were integrated into the pyramid. The base of the pyramid is economic responsibility ad it gives top priority to economic performance. In the four types of CSR, economic responsibility and the legal responsibility are required; the discretionary responsibility is voluntary philanthropy. While Carroll viewed a profit as required, he did not mean profit maximization. He argued that all four dimensions must be infused with morality.

In spite of the recognition that CSR are multidimensional construct, the diversity of CSR behaviors is only partially examined in existing empirical work.

III. MODEL 1: THE MORAL PSYCHOLOGICAL CAPITAL AND THE AUTHENTIC LEADERSHIP

Psychological Capital originates from the Positive Organizational Behavior (POB). Many scholars such as Luthans have defined the concept and considered it as “a kind of positive attitude that is shown consistently in the individual’s performance during his growing up and development”. Specifically it is indicated in the following situations: firstly, the willingness to pay necessary efforts while

with confidence (self-efficacy) faced with the challengeable work; secondly, the positive attribution to the success currently or in future (optimism); thirdly, the perseverance shown in the goal pursuing, and the ability to adjust the method for achieving success when necessary (hope); fourthly, the rapid recoverability and the ability to surpass as well as the perseverance when being troubled with hard situation or problems. From the Luthans' definition it can be understood that psychological capital is a higher level positive construct consisting of self-efficacy/ confidence, optimism, hope and resilience.

May(2003) proposed that moral self-efficacy, the moral courage and the moral resiliency would affect the authentic leadership [6]. According to May’s research, the moral self-efficacy is the foundation of moral courage and the moral resiliency. Moral self-efficacy affects the moral courage and moral resiliency, ultimately affects the authentic leadership. Moral resiliency and the moral courage influence the four dimensions of the authentic leadership (self-awareness, internalized moral perspective, balanced information processing, and the relational transparency), and its effects on different dimensions of authentic leadership are different. On account of the same moral attribute, moral resiliency and the moral courage has the strongest effect on the dimension of internalized moral perspective, and has the slightest effect on the self-awareness.

Fig.1 Model 1: Antecedent of Authentic Leadership

According to model 1, the following hypotheses are proposed.

Hypothesis 1: the more the leader’s moral self-efficacy, the more the leader’s moral resiliency.

Hypothesis 2: the more the leader’s moral self-efficacy, the more the leader’s moral courage.

Hypothesis 3: the more the leader’s moral resiliency, the more the leadership is inclined to authentic leadership.

Hypothesis 4: the more the leader’s moral courage, the more the leadership is inclined to authentic leadership.

Hypothesis 5: the effect of moral resiliency on internalized moral perspective dimension is higher than its effect on other dimensions of authentic leadership.

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Hypothesis 6: the effect of moral courage on internalized moral perspective dimension is higher than its effect on other dimensions of authentic leadership.

IV. MODEL 2: THE MODERATION EFFECT OF LEGAL CONSTRAINTS

As the leaders of different types of organizations bear different legal responsibilities to shareholders, the effect of authentic leadership on CSR behavior is not the same in different legal situations. According to the Company Law of the PRC(Article 150), “where any director, supervisor or senior manager violates laws, administrative regulations or the articles of association during the course of performing his duties, if any loss is caused to the company, he shall make compensation”. The company leaders are responsible for the company’s interests, ultimately responsible for the interests of shareholders. As Wanke is a publicly listed company, while Jiaduobao is a private company, the two companies bear different responsibilities to shareholders. The legal constraint of the leaders of publicly listed company is strictest, and that of private company is vice versa.

If the leader’s moral perspective is internalized into leader’s values, he/she is more inclined to bear the ethical responsibility in decision making. As the ethical CSR behavior is mainly influenced by the ethical values, the authentic leadership whose main components are internalized moral/ethical perspective and self-awareness has the strongest effect on ethical CSR behavior and weakest effect on economical CSR behavior.

Fig.2 Model 2: Moderation Effect of legal constrains

between authentic leadership and CSR behaviors

The moderation effect is depicted in model 2. The corresponding hypotheses are proposed.

Hypothesis 1: legal constraints can moderate the relationship between authentic leadership and CSR behaviors.

Hypothesis 1-1: the lower the legal constraints, the stronger the relationship between authentic leadership and CSR behaviors.

Hypothesis 1-2: the higher the legal constraints, the weaker the relationship between authentic leadership and CSR behaviors.

Hypothesis 2: in low level of legal constraints, the effect of authentic leadership on ethical behavior is higher than its effect on other dimensions of CSR behaviors.

V. MODEL 3: THE MEDIATION EFFECT OF ORGANIZATIONAL VALUES

The path of authentic leadership (the individual/group level variable) affecting CSR behaviors(the organizational level variable) needs to be explored. The core of authentic leadership is self-awareness and internalized moral perspective. Self-awareness is the foundation of values, and the internalized moral perspective is the main component of values. So the leader’s values which are based on the self-awareness and internalized moral perspective can be called the leader’s authentic values. Value Based Leadership theory proposed by House(1996) mentioned that the VBL-based leadership can lead to subordinates’ strong recognition and commitment [12]. A series of researches conducted by Wu Weiku and Fu Pingping revealed that the VBL-based leadership theory is also applicable in Chinese situation.

Although the empirical researches support the VBL leadership theory, scholars have different opinions about the relationship between leadership and the organizational values/culture. Ciulla(1999) thought that leadership is the main affecting factor of organizational values [13], but the contingency theory support the opinion that there isn’t apparent relationship between leadership and values, because the leader’s ability of constructing and innovating organizational values/culture is constrained by the situations. When and why decoupling between CEO leadership and organizational values/culture may occur? Tsui et al.(2006) conducted two survey studies and an interview study to unpack the nature of the relationship [14]. The findings offered insights on both leadership and institutional factors that may account for the decoupling between CEO leadership behavior and organizational cultural values. There are more incidences of congruence than incongruence or decoupling between CEO leadership and organizational values/culture. Decoupling of CEO leadership and organizational values/culture will occur more frequently in state-owned firms. According to Tsui’s research, if the institutional factor is controlled, the leadership have significant impact on the organizational values/culture. Combined with VBL theory and Tsui et al’s empirical research, we can make the following conclusion that the leader’s authentic values affect the authentic organizational values, ultimately affect the CSR behaviors. Based on the previous analysis on the relationship between authentic leadership and ethical behavior, the effect of authentic leadership on ethical behavior should be higher than its effects on other dimensions of CSR behaviors, through the mediator of organizational values.

So, we have the following hypotheses.

Hypothesis 1: the higher the authentic leadership, the organizational values are more inclined to authentic organizational values.

Hypothesis 2: the organizational values are more inclined to authentic organizational values, the more the CSR behaviors.

Hypothesis 3: Organizational value is the mediator between the authentic leadership and CSR behaviors.

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Fig.3 Model 3: the mediating effect of the organizational values between authentic leadership and CSR behaviors

Hypotheses 4: the effect of authentic organizational values on ethical behavior is higher than its effects on other dimensions of CSR behaviors.

Organizational values are the shared and internalized regulations, and the CSR behaviors ultimately embody every employee’s CSR behaviors. Through the leaders’ positive modeling and relevant human resources management policies, the leaders’ authentic values gradually are converted into the organizational authentic values, and then are internalized as every employee’s authentic values. At last, every employee has CSR behaviors (caring for customers, conforming to law, donate, et al.) in their working positions.

REFERENCES [1] S.M. Jensen, and F. Luthans, “Relationship between entrepreneurs’

psychological capital and their authentic leadership,” Journal of Managerial Issues, vol. 18, pp. 254-273, 2006.

[2] Luthans,F , and Avolio, B J. Authentic leadership development[A]. In K.S.Cameron, J.E.Dutton, and R.E.Quinn(Eds.). Positive organizational scholarship[C]. San Francisco: Berrett-Koehler, 2003:243

[3] R. Ilies, F.P. Morgeson, and J.D. Nahrgang, “Authentic leadership and eudaemonic well-being: Understanding leader-follower outcomes,” Leadership Quarterly, vol. 16, pp.373-394, 2005.

[4] B. Shamir, and G. Eilam, “What’s your story? A life-stories approach to authentic leadership development,” Leadership Quarterly, vol. 16, pp. 395-417, 2005.

[5] B.J. Avolio, and W.L. Gardner, “Authentic leadership development: Getting to the root of positive forms of leadership,” Leadership Quarterly, vol. 16, pp. 315-338, 2005.

[6] D.R. May, A. Chan, T. Hodges, and B.J. Avolio, “Developing the moral component of authentic leadership,” Organizational Dynamics, vol. 32, pp. 247-260, 2003.

[7] W.L. Gardner, B.J. Avolio, F. Luthans, D.R. May, and F.O. Walumbwa, “Can you see the real me? A self-based model of authentic leader and follower development,” Leadership Quarterly, vol. 16, pp. 343-372, 2005.

[8] R. Ilies, F.P. Morgeson, and J.D. Nahrgang, “Authentic leadership and eudaemonic well-being: Understanding leader-follower outcomes,” Leadership Quarterly, vol. 16, pp.373-394, 2005.

[9] F.O. Walumbwa, B.J. Avolio, W.L. Gardner, T.S. Wernsing, and S.J. Peterson, “Authentic leadership: Development and validation of a theory-based measure,” Journal of Management, vol. 34(1), pp. 89-126, 2008.

[10] D. A. Waldman ad D. Siegal, “Defining the Socially Responsible Leader”, the Leadership Quarterly vol.19, pp.117-131, 2008.

[11] A.B.Carroll, “A three-dimensional conceptual model of corporate performance”. The Academy of Management Review, 4(4): 497-505, 1979.

[12] R.J. House, A. Delbecq, & T.W. Taris, “Value Based Leadership: A Integrated Theory and a Empirical Test”, Working Paper, 1996.

[13] J.B. Ciulla, “The importance of leadership in shaping business values”. Long Range Planning, 32(2): 166-172, 1999.

[14] A.S. Tsui, Z.X. Zhang, H. Wang, K.R. Xin, J.B. Wu, “Unpacking the relationship between CEO leadership behavior and organizational culture”. The Leadership Quarterly, 17: 113-137, 2006.