Do leaders condone unethical pro-organizational employee behaviors? The complex interplay between leader organizational identification and moral disengagement

Considering recent corporate scandals, organizations have increased their efforts to curb unethical employee behavior. However, little is known about whether leaders comply with these efforts and how they respond to unethical employee behavior, especially when unethical actions benefit the organization. By integrating arguments from social identity and moral disengagement theories, we develop and test a model to explain how leaders respond to unethical pro-organizational behavior (UPB) among employees. Results from one multi-wave, multi-source field study and one experiment showed that leader perceptions of employee UPB were positively related to leader trust in employees when leaders identified strongly with their organization or when they had a strong propensity to morally disengage. Moreover, the results revealed an important three-way interaction effect. Leaders put considerable trust into UPB-enacting employees when leaders both identified strongly with the organization and showed high levels of moral disengagement. In contrast, they put little trust into UPB-enacting employees when leaders identified weakly with the organization and reported low moral disengagement. Furthermore, results showed that leader trust ultimately translated into perceived leader justice toward employees. These findings provide new and important insights into when organizations can(not) rely on their leaders to manage unethical employee behaviors.