Rethinking Organizational Crisis Management: How Financial Insecurity Inhibits Ethical Leadership

Recently, a research paper entitled “Financially secure and less ethical: Understanding why and when financial security inhibits ethical leadership,” written by Yuanmei (Elly) Qu (Rowan University), Mayowa T Babalola (Royal Melbourne Polytechnic University), Chidiebere Ogbonnaya (Kent University), Shuang Ren (Queen’s University Belfast), Lu Chen (University of Electronic Science and Technology of China), and Mengxi Yang ( University of Chinese Academy of Sciences), was published online in the journal Human Relations. Today, on behalf of the research team, Mayowa T Babalola, Yuanmei Qu, and Lu Chen, answer some questions about their paper. Their answers appear just below the paper’s abstract.

What motivated us to pursue the research?

Times are getting more challenging nowadays. Many workers across the globe are experiencing financial insecurity (i.e., a situation whereby individuals perceive themselves to have insufficient financial resources to achieve their goals) amidst recession fears, interest rate hikes, mortgage crises, and increasing cost of living. People who occupy leadership positions (e.g., front-line supervisors) are included. Ethical leadership can effectively improve subordinate well-being and performance by demonstrating and promoting normatively appropriate conduct through personal and interpersonal relationships. Thus, organizations call for ethical leadership in a crisis. This leads to a question, does financial insecurity promote or inhibit ethical leadership?

In what way is your research innovative, and how do you think it will impact the field?

Our new research paper shows that being financially insecure creates anxiety in leaders, ultimately inhibiting ethical leadership behaviors. Fortunately, we found that leaders who perceive their pay as fair were less susceptible to the anxiety resulting from financial insecurity. In other words, organizational pay fairness helped mitigate the negative impact of financial insecurity. We advise organizations to reinforce their commitment to pay fairness this year and beyond, as doing so can help forestall potential damage financial/economic insecurity may cause in their organizations.