The Role Of Ethical Behaviours In The Relations Between Leadership Styles And Job Performance Goh Yuan Sheng Victor, Geoffrey N. Soutar, University of Western Australia Abstract This study builds on the research undertaken by Edward Aronson (2001). He suggested that transformational leadership appeared to be closely connected to deontology, while transactional leadership seemed to be related more to the teleological ethics. The study builds on Edward Aronson’s (2001) research by proposing a structural equations model of leadership styles, ethical behaviours and job performance. The model was also used to test empirically the extent to which leaders make ethical judgments based on a combination of deontological and teleological values. While the original study considered ethical value orientation as an independent construct, the study examined this construct for its mediating role. Job performance, which was not examined in the earlier study, was included in this study to obtain a fuller understanding of the effects of ethical leaders on performance of subordinates. The results of this study will further our understanding of leadership, the linkages between organisational leadership and business ethics, thereby making a contribution toward increasing the quality of organizational life which may have a positive influence on both members of the organization and the wider community. Keywords: transformational leadership, transactional leadership, deontology, teleology, job performance Background We are living in a time when technology breakthroughs are providing new and better products and services, when improved communications are transforming the world into a global village and when increased international economic activity has globalised markets. These changes have increased the pace of organizational life, often affecting the human side of corporations and impacting on ethical behaviour. Headlines talk about stories of deceptive advertising, questionable product design decisions that sacrifice quality in an effort to save costs, industrial spying, top executives making fraudulent decisions that artificially inflate profits to increase compensation and the recent scandals in former leading businesses, such as Enron, Arthur Anderson and WorldCom. Leaders failed ethically for a variety of reasons, including pressures to achieve, perform and win, a bottom-line mentality and a "win at all costs" philosophy that suggests financial success is the only factor to be considered. Too often, leaders see their work as separate from their lives. They expect moral values and ideas in their private lives, but often do not extend them to the workplace (Kanungo and Mendonca, 1996). Another motivator of unethical behaviour is personal gain (Gellerman, 1986; Siguaw et al., 1998). Leadership is a critical component of an organization’s culture as leaders can create, maintain, or change culture (Schein, 1985) and is important in establishing an ethically oriented culture (Sims, 1992, 2000). Ethics must indeed begin at the top. Leaders cannot shrink from their obligations to set a moral example for those they lead. Soutar et al. (1994) found that the institutionalisation of ethics by such formal means as codes of ethics have little chance of success unless the ethical actions and behaviours of top management are consistent with the written words. The behaviour of top management sets the ethical tone for an organization and draws a line between the push for higher profits and actions antagonistic ANZMAC 2005 Conference: Corporate Responsibility 24