The Leadership Quarterly

The effects of authentic leadership on followers’ ethical
decision-making in the face of temptation: An
experimental study

Anna M. Cianci a,1,2, Sean T. Hannah a,1,3, Ross P. Roberts b,1,4, George T. Tsakumis c,⁎,1
a School of Business, Wake Forest University, Winston Salem, NC 27109, United States
b Earl N. Phillips School of Business, High Point University, High Point, NC 27262, United States
c Alfred Lerner College of Business and Economics, University of Delaware, Newark, DE 19716, United States

a r t i c l e i n f o a b s t r a c t
Article history:
Received 16 March 2013
Received in revised form 20 September 2013
Accepted 6 December 2013
Available online 18 January 2014
Handling Editor: Shelly Dionne
The present research investigates the impact of authentic leadership on followers’ morality,
operationalized as ethical decision-making, in the face of temptation. This experiment finds that
authentic leadership and temptation interacted to affect individuals’ ethical decision-making.
Specifically, authentic leadership significantly inhibited individuals’ from making unethical
decisions in the face of temptation, whereas followers of neutral or less authentic leaders were
more likely to succumb to temptation. Authentic leadership did not have a significant impact on
ethical decision-making when temptation was absent. Further, results showed a significant
moderated-mediated effectwhereby the interactive effect of authentic leadership and temptation
on individuals’ guilt appraisal was mediated through the nature of the ethical decision.
Theoretical and practical implications of these findings are discussed.
© 2013 Elsevier Inc. All rights reserved.
Keywords:
Authentic leadership
Temptation
Ethical decision making
Guilt

  1. Introduction
    Research on behavioral ethics in organizations has increased dramatically in the last two decades, with the majority of that
    research focused on aspects of ethical judgment/decision-making (Tenbrunsel & Smith-Crowe, 2008; Treviño, Weaver, &
    Reynolds, 2006). From this research, we know that moral processing is influenced not just by individual differences (good and
    bad apples) but the context in which individuals are embedded, such as culture, climate and other organizational phenomena
    (good and bad barrels) (Treviño & Youngblood, 1990; Kish-Gephart, Harrison, & Treviño, 2010). However, surprisingly little
    empirical research has examined how exemplary leadership (e.g., authentic and ethical leadership) – a potentially important
    contextual factor – relates to followers’ (un)ethical decisions and behaviors (Brown & Mitchell, 2010). Some research, while
    limited, has shown that leaders have effects on follower ethical processing. For example, leaders’ levels of cognitive moral
    development, through role modeling and social learning, can affect that of followers (Dukerich, Nichols, Elm, & Vollrath, 1990);
    leadership style can influence which ethical frameworks followers’ use to process ethical dilemmas (Schminke & Wells, 1999;
    Schminke, Wells, Peyrefitte, & Sebora, 2002); and ethical leadership is positively related to followers’ organizational citizenship
    behaviors (Avey, Palanski, & Walumbwa, 2011; Brown, Treviño, & Harrison, 2005; Walumbwa & Schaubroeck, 2009). Further,
    ethical leadership has positive influences on followers’ ethical thoughts and behaviors, both directly as well as indirectly, through
    the positive influences ethical leaders have on building ethical cultures across multiple levels in organizations (Schaubroeck et al.,
    The Leadership Quarterly 25 (2014) 581–594
    ⁎ Corresponding author. Tel.: +1 302 831 7583; fax: +1 302 831 4676.
    E-mail addresses: [email protected] (A.M. Cianci), [email protected] (S.T. Hannah), [email protected] (R.P. Roberts), [email protected] (G.T. Tsakumis).
    1 All authors contributed equally to this project.
    2 Tel.: +1 336 758 4297; fax: +1 336 758 6133.
    3 Tel.: +1 336 758 5412; fax: +1 336 758 6133.
    4 Tel.: +1 336 841 4562; fax: +1 336 888 6380.
    1048-9843/$ – see front matter © 2013 Elsevier Inc. All rights reserved.
    http://dx.doi.org/10.1016/j.leaqua.2013.12.001

Authentic leadership, in particular, has been positively related to followers’ levels of moral courage, and through that mechanism, their ethical behavior (Hannah, Avolio, & Walumbwa, 2011). There is a void of experiments, however, testing the effects of leader behaviors on follower ethical decision-making. To build upon this literature, we formulate and test a model assessing the influence of authentic leadership, as a potentially important contextual factor, on followers’ ethical decision-making under varying conditions of moral temptation.
Dynamic organizational contexts expose followers to numerous temptations, requiring the inner fortitude to restrain oneself from taking “ethical shortcuts” or pursuing self-gain over the good of the larger collective (Monin, Pizarro, & Beer, 2007). For example, high pressure organization contexts that prioritize performance over other values tend to have higher rates of unethical behavior (e.g., Robertson & Rymon, 2001). We propose that through displaying moral perspective, transparency and other aspects of authenticity that authentic leaders will activate followers’ moral perspectives and thereby reduce their inclinations to make unethical decisions in the face of temptations as suggested by Hannah, Lester, and Vogelgesang (2005). By moral perspective, we refer to the activation of identity-based structures (e.g., values) and self-regulatory structures that promote ethical decisions and behaviors.
Authentic leadership is defined 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”
(Walumbwa, Avolio, Gardner, Wernsing, & Peterson, 2008, p. 94; for a recent comprehensive review, please see Gardner, Cogliser, Davis, & Dickens, 2011). We chose to focus on authentic leadership because from its early theoretical development the construct was conceptualized with the assumption that such leaders would raise the moral perspective of followers (Avolio, Gardner,
Walumbwa, Luthans, & May, 2004; Gardner, Avolio, Luthans, May, & Walumbwa, 2005; Hannah et al., 2005). Yet this premise has not to our knowledge been directly tested, at least not in an experimental design. Yet, Brown and Mitchell (2010) proposed that because of its “strong emphasis on the ethical dimension of leaders, future research linking authentic leadership to important
ethics-related outcomes is promising” (p. 586).
Finally, we assess how authentic leadership, through its effects on followers’ ethical decisions in the face of temptation, influences followers’ guilt appraisals. Guilt appraisal entails the process whereby an individual determines the extent of guilt they experience for contemplating or performing a given unethical act, based on the way the individual construes and interprets the act and evaluates their behavioral response, such as their motivations for and level of causal agency in the act (Roseman, 1984;
Roseman, Spindel, & Jose, 1990; Scherer, 1988). Left unfettered, individuals who make unethical choices tend to morally disengage from those choices (Bandura, 1999). Moral disengagement occurs when individuals use strategies to rationalize, justify, or downplay their causal role or the negative consequences or immorality of their unethical choices (Bandura, Barbaranelli,
Caprara, & Pastorelli, 1996). Importantly, when individuals discount or justify an unethical choice or their personal agency in the act through using moral disengagement strategies, they are in turn less likely to experience guilt related to that action (Bandura et al., 1996; Roseman et al., 1990). As described above, we expect that the followers of more as opposed to less authentic leaders will tend to make more ethical decisions, and thus will have little reason to employ moral disengagement strategies. When both
groups (i.e., those that chose the ethical and unethical actions) are appraising the level of guilt they would experience for committing the particular unethical act in question, we therefore expect them to report different levels of guilt. Specifically, those
who previously made the unethical choice will be more likely to have morally disengaged and will thus report lower levels of appraised guilt as compared to those that previously made the ethical choice, when the latter appraises the guilt they would experience if they too were to make the same unethical choice. This suggests that the moderated effects of authentic leadership on appraised guilt are mediated through its effects on followers’ ethical choices. Understanding this process is important as self-sanctions such as guilt are critical for controlling future ethical behavior (Bandura, 1999; Tangney, Stuewig, & Mashek, 2007;
Tenbrusel & Messick, 2004), and are related to unethical phenomena such as cheating, theft, and unethical negotiation behavior
(Cohen, 2010; Cohen, Wolf, Panter, & Insko, 2011).
In summary, as shown in Fig. 1, we propose that exposure to temptation is positively related to followers’ unethical decision-making, but that this main effect is moderated by the level of authentic leadership, such that at higher levels of authentic leadership the effect of temptation on unethical decisions is significantly reduced. Further, we test a moderated-mediated effect whereby the interactive effect of authenticity and temptation on appraised guilt is partially mediated through the nature of the ethical decision. Specifically, we propose that when authentic leadership is low, the negative effect of temptation on guilt is mediated through making an unethical decision. That is, when authentic leadership is low, followers will be more likely to make

Temptation
Authentic
Leadership
Ethical
Decision
Guilt
Appraisal

Fig. 1. Theoretical model

an unethical decision and through disengagement appraise less guilt associated with that action. High authentic leadership,
however, strengthens followers to withstand temptation, making them less likely to disengage and thus more inclined to make an
ethical decision. Followers of more authentic leaders therefore would have greater guilt appraisal associated with that same
unethical act. We test our expectations in a laboratory experimental design.

  1. Theoretical framework
    2.1. The influence of temptation on unethical decisions
    Temptation has been defined as “enticement to do wrong by promise of pleasure or gain” (Tenbrunsel, 1998). More specifically,
    temptations are incentives that may influence the decision to behave unethically to obtain goals or rewards (Fischbach & Shah, 2006;
    Fischbach, Friedman, & Kruglanski, 2003; Freitas, Liberman, & Higgins, 2002; Tenbrunsel, 1998; Treviño & Youngblood, 1990; Trope &
    Fishbach, 2000). The decision to behave unethically often requires the consideration of two opposing goals:maximizing self-interest
    and maintaining a positive moral self-image and public image (Ariely, 2012). In the current study, our conceptualization of
    temptation is derived fromagency theory (Eisenhardt, 1989). Under the agency framework, one party (the principal) delegateswork
    to another party (the agent). The principal’s interests are assumed to be in linewith those of the firm(i.e., profitmaximization),while
    the agent’s interests may or may not be in line with the interests of the firm. The presence of two conditions, incentive and
    opportunity to act to maximize self-interest, describes a situation in which the agent will be tempted to neglect the firm’s interests in
    favor of his or her own. For example, all else being equal, if a projectmanager (agent) has an incentive tomaximize his or her personal
    gain, s/he is expected to be more likely to make decisions that are consistentwith his/her self-interest even though such actions may
    conflict with the profit-maximizing interests of senior management (principal). However, in order to achieve this objective, the
    manager also needs the opportunity to actuallymake such decisions and do sowith some adequate level of belief that theywill not be
    caught or punished. Thus, the presence of temptation (i.e., both incentive and opportunity) can influence individuals to behave
    unethically and make unethical decisions to serve their self-interests, in conflict with the firm’s interests.
    Along these lines, several experimental studies in the field of accounting have considered agency explanations for managers’
    unethical project continuation decisions (Booth & Schulz, 2004; Harrison & Harrell, 1993; Harrell & Harrison, 1994; Rutledge &
    Karim, 1999). This stream of research examines whether temptation (i.e., both incentive and opportunity) increases the
    likelihood that a manager exhibits unethical behavior. Specifically, these studies show that if a project manager’s career,
    promotion, or reward prospects are dependent on managing only profitable projects (i.e., incentive) and his/her superiors do not
    have enough information to properly evaluate the project’s profitability (i.e., opportunity), then these managers exhibit a greater
    tendency to continue unprofitable projects even though it’s against the best interests of the organization. Based on the
    accumulated research on the effects of temptation, we expect that when faced (not faced) with temptation, individuals will be
    generally more (less) likely to make unethical decisions. This main effect, however, is not only intuitive, but is over-simplified. We
    propose that authentic leadership moderates the effects of temptation on unethical decision-making by raising followers’ moral
    perspective and thus limiting tendencies to morally disengage and act unethically (Bandura, 1999; Bandura et al., 1996).

2.2. The effects of authentic leadership in strengthening followers against temptation
Prior theorizing suggests that authentic leadership behaviors raise the moral perspective of followers (Avolio et al., 2004;
Gardner et al., 2005; Hannah et al., 2005), and that the four dimensions of authentic leadership (self-awareness, internalized
moral perspective, balanced processing, and relational transparency) promote ethical follower behavior (Hannah, Avolio, &
Walumbwa, 2011; Walumbwa et al., 2008). We provide a brief overview of how each dimension of leader authenticity can
contribute to ethical follower decision-making and behavior.
Internalized moral perspective denotes that the leader has a well-developed moral constitution which allows him or her to
regulate decision-making based on internalized morals and standards, as opposed to external pressures such as temptation
(Hannah et al., 2005). In this way, the leader serves as a moral exemplar (Walker & Henning, 2004) and an example is set for
followers to resist temptation by adapting the authentic leader’s moral standards as the norm. In addition to having moral
perspective, authentic leaders are highly self-aware and have a clear understanding of their values and beliefs and how these
values can be enacted and positively impact others in the workplace (Campbell et al., 1996; Gardner et al., 2005). Authentic
leaders also enact relational transparency, making their ideals, values, and standards clear to others and “walk their talk” to ensure
their actions are in line with the values they espouse. This enhances the authentic leader’s ability to serve as a moral exemplar and
increases the clarity with which expected behaviors and standards are communicated to followers. Finally, using balanced
processing, authentic leaders set the example of objectively analyzing all relevant data – including information that does not favor
their own or their followers’ preferred circumstances or self-interests – and model to others a willingness to adjust their thinking
accordingly to act in line with the collective good (Gardner et al., 2005; Hannah et al., 2005). Through processing relevant
information in a richer and more deliberate manner, authentic leaders and their followers would be more likely to consider a
larger breadth of implications of their potential choices and be less likely to impulsively respond to temptations (Monin et al.,
2007). Research has shown that the four dimensions of authentic leadership represent an overall higher-order construct that
combines to influence outcomes (e.g., Hannah, Avolio, & Walumbwa, 2011; Walumbwa et al., 2008). Together, the leader’s
demonstration of the dimensions of authenticity can activate followers’ moral perspective and thus ability to resist temptations
and make more ethical decisions.

Avolio et al. (2004) propose that authentic leadership promotes moral perspective in followers through expressing honesty
and integrity and through modeling moral standards and displaying ethical decision making and behavior transparently to
followers (cf. Kernis, 2003). Hannah et al. (2005) similarly propose that the effects of authentic leadership are largely driven by
emulation, which results in a higher level of moral activation and a lower likelihood of possessing unethical behavioral intentions.
They state that authentic leaders’ displays of “altruism and virtue during leadership episodes will enhance activation of a morally
laden working self-concept within followers” (Hannah et al., 2005, p. 68). That is, authentic leadership activates moral structures
(e.g., values, moral goals, and moral schemas) in the working self-concept (i.e., portion of the self-concept primed at a given
moment) of followers. Similarly, Lord and Brown (2004) describe how exemplary leader behaviors can prime value structures in
followers and activate identities more aligned with the collective than the self, resulting in more pro-social behaviors. These
various leader effects can thus raise followers’ moral perspectives.
The importance of authentic leadership in strengthening followers’ moral perspective lies in increasing their capacity to resist
morally disengaging and giving in to temptations. According to Bandura (1999), people behave in accordance with their moral
standards (e.g., values and ideals) through self-reactive processes which function to provide anticipatory negative and positive
self-sanctions for (un)ethical behavior. Yet, these self-reactive influences do not operate unless they are activated and individuals
can disengage these internal moral controls to protect their ego and self-esteem while acting unethically (Bandura et al., 1996).
These “self-sanctions can be disengaged by reconstructing the conduct, obscuring personal causal agency, misrepresenting or
disregarding the injurious consequences of one’s actions, and vilifying the recipients of maltreatment by blaming and devaluating
them” (Bandura et al., 1996, p. 364).
Beu and Buckley (2004) propose that leaders may “cognitively reconstrue” and “reframe” unethical acts in ways that influence
followers to morally disengage when confronted with ethical dilemmas, such as through statements that discount the
unethicality of conduct or its consequences or that discounts personal agency in the action. Conversely, through making ethicality
salient, authentic leadership activates higher levels of moral perspective and personal agency in followers (Ilies, Morgeson, &
Nahrgang, 2005; Kahn, 1990; Kernis & Goldman, 2005) which would increase the likelihood that they engage self-reactive control
processes and be less likely to morally disengage when faced with temptations. This is because, when highly activated, values and
other moral structures promote behavior that is concordant with those values, as any non-concordant behavior creates salient
discrepancies and cognitive disequilibrium (Verplanken & Holland, 2002). Inherent motives of discrepancy reduction should thus
limit individuals’ ability to disengage (Bandura, 1999).

Therefore, we expect authentic leadership to moderate the effects of temptation on ethical decision-making. When temptation
(i.e., incentive and opportunity) is present, authentic leadership serves to activate a higher moral perspective and thus attenuates
the generally negative effect of temptation on unethical decision-making. On the other hand, when temptation is low or absent,
followers have less motive to act unethically and the presence of an authentic leader should have much less or no impact, as
without temptation, followers should be more generally inclined to make an ethical decision regardless of the effects of
leadership. Therefore, we expect authentic leadership to moderate the temptation-decision relationship when temptation is
present but not when temptation is absent, as articulated in the following hypotheses:
Hypothesis 1. When temptation is present (absent), followers will be generally more (less) likely to make an unethical decision.
Hypothesis 2. There will be an interaction between temptation and authentic leadership such that when temptation is present,
followers with a more (less) authentic leader will be less (more) likely to succumb to temptation and thus more (less) likely to
make ethical decisions; when temptation is absent, followers (regardless of leader authenticity) will be equally likely to make
ethical decisions.

2.3. The moderated mediation effects of temptation on guilt appraisal
Guilt is a moral emotion5 and a form of emotional distress arising from the possibility that one may be wrong (Baumeister,
Stillwll, & Heatherton, 1994). Feelings of guilt can arise from some moral failure or the consideration of, or selection of, an unethical alternative (e.g., Marks & Mayo, 1991; Tangney & Dearing, 2002; Wolf, Cohen, Panter, & Insko, 2010). Thus, guilt can act
as an emotional barometer by providing immediate and salient feedback – i.e., the aversive feeling of guilt – when we sin,
transgress, or err; or consider such transgressions (Tangney et al., 2007). However, as demonstrated by Bandura et al. (1996), if
individuals morally disengage, they tend to experience less guilt when making unethical decisions. This may seem
counterintuitive, but as noted by Bandura et al. (1996), “there is little reason to engage in self-reproof for behavior that has
been rendered acceptable or for which one professes no responsibility” (p. 371). As described earlier, this is because those making
unethical choices in the face of temptation often morally disengage through justifying, rationalizing, or downplaying the severity
of their unethical decision. They are thus less likely to activate self-reactive moral sanctions when considering an unethical act for
which they have morally disengaged.
5 Moral emotions are emotions linked to the interests of other people or society as a whole and originate in relationships built on reciprocal evaluations and
judgments of the self and others (Haidt, 2003; Tangney & Fischer, 1995). In situations where ethical conflict arises, moral emotions are critical for deterring unethical
behavior and motivating people to act in accordance with accepted standards of right and wrong (e.g., Eisenberg, 2000; Haidt, 2003; Haidt & Kesebir, 2010;
Ketelaar, 2004; Tangney & Dearing, 2002; Tangney et al., 2007). Indeed, Tangney (2003, p. 386) notes that, “moral emotions provide themotivational force – the power
and energy – to do good and to avoid doing bad.”

Based on this reasoning, we propose that individuals who succumb to temptation and make unethical choices will appraise a
lesser degree of guilt associated with the act, as compared to those who make ethical choices when faced with the same
temptation, when the latter is appraising the level of guilt they would experience if they were to perform the same unethical act.
For example, if a salesperson “pads” their expense report to make some extra money and disengages using strategies proposed by
Bandura (1999) such as advantageous comparison (e.g., “I am not taking as much as Bob”) or social consensus (e.g., “everyone
else is doing it”), they would be less likely to enact self-sanctions and be more likely to give in to their temptation. If such
individuals were later asked to appraise the level of guilt that they would experience for padding expense reports, they would be
more likely to report lower levels of appraised guilt, as compared to individuals who did not enact such moral disengagement. As
guilt appraisals serve an important self-regulatory function when considering future ethical choices (Tangney et al., 2007), this
reduction of guilt could over time lead to a “slippery slope” effect.
To be clear, in the current study we assess guilt appraisal, not experienced guilt (Roseman, 1984; Roseman et al., 1990; Scherer,
1988). It would be theoretically uninteresting to compare the relative level of guilt experienced by individuals who acted ethically
as compared to those that acted unethically based on their respective choices, particularly as the former have no reason to
experience guilt. In fact, the literature suggests that those acting ethically would instead experience positive versus negative moral
emotions, such as pride (Bandura et al., 1996; Haidt, 2003; Tangney et al., 2007). Further, it would not inform us of whether moral
disengagement relative to the same (versus alternate) action was occurring based on the nature of one’s prior choices (i.e., ethical
versus unethical). To address our hypothesis related to moral disengagement, we focus not on individuals’ own choices, but on
appraisals of the unethical act itself, comparing the two groups’ guilt appraisals relative to the same unethical act. This is because
emotion appraisal theorists “claim that evaluations and interpretations of events, rather than the events per se, determine whether
an emotion will be felt and which emotion it will be…[and]…two individuals with different appraisals…will feel different
emotions” (Roseman et al., 1990, p. 899). Specifically, the appraisal process is influenced by the idiosyncratic manner in which
different individuals interpret and frame the same event. Central to guilt appraisals is how individuals frame and interpret their
level of personal responsibility/agency for the action, their motives, the compatibility of the act with their personal standards, and
similar factors (Roseman, 1984; Roseman et al., 1990; Scherer, 1988), all of which can be skewed through moral disengagement
strategies (Bandura, 1999; Bandura et al., 1996). In summary, we expect that the nature of one’s prior decisions will influence the
level of appraised guilt they report for the same action in the future—i.e., those that previously acted unethically will tend to
appraise lower guilt toward the action as compared to those who previously acted ethically when faced with the same ethical issue.
Finally, we suggest that the indirect effect of temptation on appraised guilt through decision-making is complex. Based on our
logic presented to support Hypothesis 2, we propose that authentic leadership will activate followers’ moral perspective and limit
their moral disengagement, thereby creating a moderated mediation effect. Specifically, when followers have a less authentic
leader, temptation would be more likely to promote unethical decisions, and through the associated deactivation of self-reactive
moral sanctions (Bandura et al., 1996), lower appraised guilt relative to the unethical action. However, when faced with the same
temptation, followers of more authentic leaders would be more likely to make ethical decisions, thus promoting the activation of
moral self-sanctions. With authentic leadership strengthening followers’ ethical decision-making in this way, we do not expect to
find an effect of temptation on reducing appraised guilt through the nature of followers’ ethical choices as we find with followers
of less authentic leaders. Consistent with this logic, we propose:
Hypothesis 3. Ethical decision-making will partially mediate the interaction of temptation and authentic leadership on appraised
guilt; the indirect effect of temptation on reducing guilt through one’s ethical decision will be significant when authentic
leadership is low but not when it is high.

  1. Method

We used a 3 × 2 between-subjects design to investigate the influence of authentic leadership (high vs. neutral vs. low) and
temptation (present vs. absent) on individuals’ ethical decision-making and guilt appraisals when faced with an ethically-charged
project continuation decision.
3.1. Participants
One hundred eighteen graduate business students enrolled in part-time and full-time MBA programs at two universities (one
in the Northeast United States and one in the Southeast United States),6 voluntarily agreed to take part in an “accounting study”
and completed an experimental packet. Of the 118 participants, 110 had a bachelor’s degree, 7 had a master’s degree, and 1 had a
doctorate degree. Further, participants reported their current job title/description as manager (25%), accounting/finance/IT/sales
(25%), or engineer/project manager/R & D/supply chain (50%). The average age of participants was approximately 32 and ranged
from 21 to 53. Participants worked for an average of 9.20 years (SD = 8.7), reported an average of 4.25 years (SD = 4.97)
worked in their current position, and 50% of the sample was female.
6 When a categorical variable representing university membership is added to our analyses, the findings are unchanged.

3.2. Procedure
Participants were asked to complete an experimental task adapted from Harrell and Harrison (1994). The task instructed
participants to assume the role of a project manager who had (4 years ago) initiated a project with an estimated 7-year life cycle.
When initiated, the 7-year cash flow projections for the project were profitable, and the actual cash flows for the first 4 years had
exceeded projections. However, the projections for the remaining 3 years indicate a sharp decline that will ultimately render the
project unprofitable. Participants were also randomly provided with one of three scripts (see Appendix A) depicting the behaviors
of their immediate supervisor in detail. These scripts were designed to reflect three leadership conditions: high, neutral (i.e., a
condition with no information regarding the follower’s immediate supervisor—designed to elicit responses in the absence of
authentic leadership), or low authentic leadership. Additionally, participants were randomly provided with a second script (see
Appendix B) exposing (not exposing) them to temptation by the concurrent manipulation of both incentive and opportunity.
Given the above scripts, participants were then asked to decide whether to continue or discontinue the project, with the ethically
correct decision being to discontinue the project and thereby avoid the losses to the company, but by doing so, put their
reputation at risk. After making their decision, participants then reported the level of guilt appraised for the act of continuing an
unprofitable project. Participants then completed a post-experimental questionnaire that included demographic questions and
manipulation checks. We thus used a six condition experimental design: 3 (high vs. neutral vs. low authentic leadership) × 2
(high vs. low temptation).

3.3. Manipulations
3.3.1. Authentic leadership
The authentic leadership manipulation, presented in Appendix A, was developed for this study and was manipulated as high,
neutral, or low. The scripts provided to all participants first inform them that their immediate supervisor, like most typical
managers, is concerned with meeting targets for increasing profits and market share. As shown in Appendix A, in the high
authentic leadership condition, the description of the immediate supervisor’s then goes on to describe their behavior in ways
consistent with the four authentic leadership dimensions outlined by Walumbwa et al. (2008). In the low authentic leadership
condition, the description of the behaviors of the immediate supervisor depicts that they rarely enact the four authentic
leadership dimensions outlined by Walumbwa et al. (2008). As shown, the neutral authentic leadership condition doesn’t include
any references to the authentic leadership behaviors outlined by Walumbwa et al. (2008) and only includes the general
description provided in each condition that, like most typical managers, Jamie is concerned with meeting targets for increasing
profits and market share.
3.3.2. Temptation (present vs. absent)
Our temptation manipulation, presented in Appendix B, concurrently manipulates both incentive and opportunity and was
adapted from Harrell and Harrison (1994) and Rutledge and Karim (1999). All participants were assigned the role of a junior
project manager with a growing reputation for completing profitable projects. For the temptation present condition, the scenario
indicated that they had recently received an informal job offer from another company for a promotion and substantial salary
increase (i.e., incentive). It was also stated that the project’s unprofitable performance was known only to the project manager
and would not be known by others for the three years remaining until its completion (i.e., opportunity). For the temptation absent
manipulation, participants again were cast as a junior project manager with a solid industry reputation for project management
gained over a number of years. Participants were further informed that a single failed project would not damage their
well-established reputation (i.e., no incentive). Additionally, it was stated that information about the project’s unprofitable future
performance was widely known to others in the firm and industry (i.e., no opportunity to hide the pending loss). Thus, there was
neither incentive nor opportunity to act against the best interests of the organization.
3.4. Dependent variables
For the ethical decision variable, we utilized a decision task that has been employed in prior literature (e.g., Booth & Schulz,
2004; Harrell & Harrison, 1994; Harrison & Harrell, 1993; Rutledge & Karim, 1999) in which participants’ responded whether they
would continue or discontinue the unprofitable project. Specifically, the decision was made on a 10-point scale numbered from 1
to 10. The scale endpoint 1 is labeled as “Definitely Continue”, and the endpoint 10 is labeled “Definitely Discontinue”. Therefore,
the higher (lower) the score reported, the greater the likelihood that a subject will discontinue (continue) the project, resulting in
a more ethical (unethical) decision.
To assess guilt appraisals, after making their project continuation decision participants responded to the following question on
a 7-point scale (where 1 = “Disagree strongly” and 7 = “Agree strongly”): “I would feel guilty for choosing Option 1 (Continuing
the project).” This question prompted both those who chose and did not choose the unethical action to express the level of guilt
that they appraise for making such an unethical decision. Following the methods of other researchers (e.g., Choe & Minn, 2011;
Marks & Mayo, 1991; Steenhaut & Van Kenhove, 2005), guilt appraisal was assessed post-decision (versus ex-ante) because we
were interested in the post-decision effects of moral disengagement on subsequent guilt appraisals.

3.5. Covariates
Prior research suggests that age and personality characteristics may potentially influence leadership and ethical decisionmaking
processes and outcomes (Bass, 2008; Lee, Ashton, Morrison, Cordery, & Dunlop, 2008; Pinto, Leana, & Pil, 2008; Rest,
Narvaez, Bebeau, & Thoma, 1999). To control for these potential effects, followers’ age and the HEXACO Personality Inventory’s
Honesty–Humility factor (α = .67) were controlled for in our data analysis as covariates. Honesty–Humility was measured
before the experimental manipulations using the same 10 items used in Lee et al. (2008). The Honesty–Humility factor has
demonstrated sound psychometric properties (e.g., Ashton et al., 2004; Ashton & Lee, 2008; Lee & Ashton, 2004). We controlled
for Honesty–Humility as it has been positively associated with individuals’ integrity, ethical decision-making, and ethical
behavior; and has been negatively associated with deviant behaviors (e.g., Lee et al., 2008; Oh, Lee, Ashton, & de Vries, 2011).7
3.6. Manipulation checks
3.6.1. Authentic leadership check
To assess the authentic leadership manipulation, after responding to the dependent variable, participants were asked to rate
the leader’s behavior in their assigned script based on the 16-item Authentic Leadership Questionnaire (α = .97). The items were
slightly adapted to reference the specific immediate supervisor (“Jamie”) used in the scenario (Walumbwa et al., 2008). A sample
item reads “Jamie makes difficult decisions based on high standards of ethical conduct.” Participants rated each item using a
5-point scale ranging from 0 (Not at all) to 4 (Frequently, if not always). We calculated a mean score for the 16 responses and used
this variable in a manipulation check ANCOVA for our 3 (high vs. neutral vs. low authentic leadership) × 2 (high vs. low
temptation) 3 × 2 experimental design. Untabulated mean scores for participants in the high authentic leadership condition
(M = 3.10, SD = .67) are higher than those in both the neutral (M = 2.17, SD = .65) and low authentic leadership conditions
(M = 1.10, SD = .78). In addition, the main effect for authentic leadership was significant (F (2, 110) = 84.13, p = 0.0001),
suggesting that the authentic leadership manipulation was successful. In addition, it is important to note that the main effect of
temptation was not significant (F (1, 110) = .94, p = .336), suggesting that the two manipulations were orthogonal to each
other.
3.6.2. Temptation check
As discussed above, our temptation manipulation concurrently manipulates incentive and opportunity. To check the incentive
aspect of the temptation manipulation we asked participants whether information on a failed project would have little to no effect
or a damaging effect on their reputation, job security and marketability. The opportunity aspect of the temptation manipulation
was checked by asking participants whether the information on projected cash flows and expected future performance for the
project was known only by him/her or widely known to others in the firm. An evaluation of participant responses reveals that, out
of 118 participants, five incorrectly responded to the opportunity aspect of the manipulation check and five incorrectly responded
to the incentive aspect of the manipulation check, for a manipulation pass rate of 91.50%. Removing these participants from our
analyses does not significantly affect the results presented or change any of the inferences drawn. Therefore, reported results are
based on the full sample.

  1. Results
    The correlations among the study variables are presented in Table 1.
    4.1. Hypotheses tests
    Hypotheses 1 and 2 are tested using a 3 × 2 ANCOVA (authentic leadership by temptation) with participants’ age and HEXACO
    Honesty–Humility factor scores used as covariates, and their project continuation decision serving as the dependent variable. Cell
    means and ANCOVA results are presented in Table 2. Hypothesis 3 is tested using moderated mediation tests using the PROCESS
    program (Hayes, 2012)
    Hypothesis 1. Hypothesis 1 predicts that when temptation is present (absent), followers will be more (less) likely to make
    an unethical decision (i.e., choosing to continue an unprofitable project). Table 2 reports results consistent with
    expectations. Specifically, participants were significantly more likely to make an unethical decision when temptation was
    present (F (1, 110) = 19.03, p = 0.0001; M = 5.75, SD = 2.59) than when it was absent (M = 7.31, SD = 2.20).
    Hypothesis 2. Hypothesis 2 predicts an interaction between temptation and authentic leadership, such that, when temptation is
    present, followers with a more (less) authentic leader will be less (more) likely to succumb to temptation and thus more (less)
    likely tomake ethical decisions; when temptation is absent, followers (regardless of leader authenticity) will be equally likely to
    make more ethical decisions. Table 2 reports a significant and directionally consistent interaction between temptation and
    7 A chi-square analysis confirms that the presence of both males and females in each cell occurs with equal frequency. In addition, we reran our analyses both with
    and without gender, age, and HEXACO and our conclusions remain the same. Additionally, there are no differences across conditions for both age and HEXACO.

Table 1
Means, standard deviations, and intercorrelations between study variables (N = 118).
Mean SD 1 2 3 4 5 6 7

  1. Ethical decision 6.52 2.52 –
    2.Temptationa manipulation 0.00 0.83 −.31** –
  2. Authentic leadershipb manipulation 0.00 1.00 .14 .00 –
  3. Age 31.83 8.68 .24* .15† −.07 –
  4. Honesty–humility 2.51 0.57 −.16† .04 .03 −.40** –
  5. Guilt appraisal 4.58 1.88 .24** .28** .09 .15 −.15 –
  6. Authentic leadership check 2.12 1.08 .01 .06 .76** −.08 .03 .04 –
    **p b .01, *p b .05, †p b .10, two-tailed.
    a Temptation was manipulated as either present (−1) or absent (1).
    b The high, neutral, and low authentic leadership conditions are coded as High = 1, Neutral = 0, Low = -1.

authentic leadership in predicting the ethical decision (F (2, 110) = 7.38, p = 0.001), providing support for H2. Non-tabulated
contrasts reveal that high authentic leadership (M = 7.30, SD = 2.16) results in ethical decisions that are significantly higher
than either neutral (M = 5.15, SD = 2.25) or low (M = 4.80, SD = 2.69) authentic leadership conditions when temptation is
present (F (2, 57) = 12.74, p = .001); but not when temptation is absent (F (2, 55) = 1.29, p = .261, M = 6.85, SD = 2.28,
M = 7.39, SD = 2.36, and M = 7.70, SD = 2.00 for the high, neutral, and low authentic leadership conditions, respectively).
Fig. 2 displays the interaction pattern. A slope test shows that the “temptation absent” slope is insignificant (t = −1.18, p = .240).
This finding reinforces our hypothesis that authentic leadership only influences ethical choices under conditions of temptation.
Hypothesis 3. Hypothesis 3 predicts a moderated mediation effect. We hypothesized that authentic leadership would strengthen
followers’ moral perspective making them less likely to morally disengage, and that they thus would report higher appraised guilt
related to the unethical act. Conversely, we proposed that followers of less authentic leaders would be more likely to make an
unethical decision (i.e., choose to continue the unprofitable project) when faced with temptation as they would be more likely to
have morally disengaged; and that the indirect effect of temptation, through its effect on ethical-decision, would reduce their
guilt appraisal related to such unethical acts. Therefore we hypothesized a moderated mediation effect.
To test Hypothesis 3, we first conducted a means test and determined that participants who made unethical decisions reported
significantly lower guilt appraisal (t (116) = −1.78, p = .078, two-tailed; M = 4.15, SD = 1.90) than those participants who

Table 2
ANCOVA results and cell means (SD).
Panel A: ANCOVAa
F-statistic p-Valueb
Overall model 6.84 0.0001
Covariates
Age 10.76 0.001
Honesty–humility .37 0.547
Independent variables
Temptation 19.03 0.0001
Authentic leadership 2.30 0.105
Interaction
Temptation × Authentic
leadership
7.37 0.001
Panel B: Cell means (SD)c
Authentic Leadership
Temptation Low Neutral High Overall
Absent Mean
(SD)
7.70
(2.00)
n = 20
7.39
(2.36)
n = 18
6.85
(2.28)
n = 20
7.31
(2.20)
n = 58
Present Mean
(SD)
4.80
(2.69)
n = 20
5.15
(2.25)
n = 20
7.30
(2.16)
n = 20
5.75
(2.59)
n = 60
Overall Mean
(SD)
6.25
(2.76)
n = 40
6.21
(2.54)
n = 38
7.07
(2.20)
n = 40
6.52
(2.52)
n = 118
a For variable definitions, see Table 1.
b All reported p-values are two-tailed.
c On a 10-point scale, participants indicated their likelihood to either continue or discontinue an unprofitable project. Lower values indicate a more unethical decision.

Table 3
Conditional indirect effect of temptation on guilt through ethical decision.
Independent variable Dependent variable Mediator Moderator
(Authentic leadership)
Indirect effect 95% bias corrected
bootstrap CI
Total effect
Temptation Guilt appraisal Ethical decision Low −.427* (−.800, −.173) .141
Neutral −.214* (−.427, −.083) .507
High −.002 (−.167, .154) .873*
Note: N = 118 *p b .05, two-tailed.

made ethical decisions (M = 4.79, SD = 1.85). Next, to test the interactive influence of leadership and temptation on guilt
appraisal through the ethical decision, we conducted moderated mediation tests using PROCESS (Hayes, 2012) in which guilt
appraisal was specified as a continuous dependent variable. Table 3 presents the results of testing the moderated mediation
model presented in Fig. 1. When the 95% bias-corrected confidence interval (“CI” for short) of the indirect effect (ab) excludes
zero, this denotes a statistically significant indirect effect. Results support Hypothesis 3.8 As shown, when authentic leadership is
low or neutral, the indirect effect of temptation on (reducing) guilt appraisal through the ethical decision was significant
(ab = −.48 CI = (−.97, −.18) and ab = −214 CI = (−427, −083) for the low and neutral conditions, respectively). In
contrast, the CI of this indirect effect was not significant when authentic leadership was high. Finally, the results for the direct
effect(s) suggest that the remaining unmediated effect of temptation on guilt was significant when authentic leadership was high,
suggesting other unmeasured mediators may be operating that need to be identified and tested in future research.

  1. Discussion
    Our study reports the results of a randomized experiment investigating the effect of temptation on individuals’ ethical decision
    making and guilt appraisals, as well as the role of authentic leadership in mitigating unethical decisions in the face of temptation.
    In a 3 × 2 design, we manipulated both temptation (absent and present) and authentic leadership (high, neutral, and low).
    Consistent with the expectations of Hypothesis 1, we found that individuals in general make more unethical decisions when
    temptation is present than when it is absent. We also found a significant interactive effect of authentic leadership and temptation
    on individuals’ ethical decision making. Consistent with Hypothesis 2, authentic leadership moderated the relationship between
    temptation and ethical decision-making when temptation is present by significantly reducing individuals’ likelihood of taking an
    unethical action. In contrast, authentic leadership did not have a significant moderating effect when temptation was absent,
    suggesting that authentic leadership only matters or matters most when decisions need to be made under temptation.
    Consistent with Hypothesis 3, we also found that when authentic leadership is neutral or low, the effect of temptation on guilt
    appraisals is mediated through making an unethical decision; but not when authentic leadership is high. These findings are
    consistent with our theorizing that less authentic leaders fail to raise followers’ moral perspectives and thus temptation
    influences (reduces) guilt through its deleterious effects on the moral disengagement associated with unethical decision-making.
    Conversely, authentic leaders deter their followers from morally disengaging and from making unethical decisions, which
    consistent with prior theorizing (Gardner et al., 2005; Avolio et al., 2004; Hannah et al., 2005), we propose occurs through
    increasing followers’ moral perspective; and thus we do not see the same reduction of guilt passing through the decision being
    made. Followers of authentic leaders therefore experience comparatively greater levels of guilt appraisal when considering
    8 To test for possible reverse causality, we reran our analyses with guilt as the mediator and these results do not hold (i.e., guilt does not mediate the interactive
    effect of AL × Temptation on ethical decision).

making the same unethical choice. The moderated mediation tests did show, however, a significant total effect of temptation on
guilt appraisal when authentic leadership was high, but not when authentic leadership was neutral or low. This suggests that
authentic leaders engage other mechanisms in followers that explain the temptation–guilt relationship

5.1. Theoretical implications
This study responds to calls for research that helps us better understand how contextual factors influence ethical processing
(e.g., Treviño & Youngblood, 1990; Kish-Gephart et al., 2010) by highlighting the importance of authentic leadership in
influencing ethical choices. Relatively little is known about the effects of leadership on followers’ ethical choices (Tenbrunsel &
Smith-Crowe, 2008; Treviño et al., 2006).
Our findings suggest that authentic leaders reduce followers’ tendency to give in to temptation, which we theorized occurs
through strengthening followers’ moral perspective through activating values, identities, moral schemas, and other moral
structures; thereby influencing them to make more ethical choices. According to Bandura et al. (1996), self-regulatory processes
must be engaged in order for internal standards to have self-reactive influence. Consistent with this notion, we suggest that
authentic leaders provide a contextual influence that engages followers’ (or deter followers from disengaging their) moral
self-reactive processes through raising followers’ moral perspectives.
Our findings related to guilt also have important theoretical implications. Consistent with emotion appraisal theory (Roseman,
1984; Roseman et al., 1990; Scherer, 1988) and moral disengagement theory (Bandura, 1999; Bandura et al., 1996), we found that
followers who made unethical choices reported less guilt appraisal for such an act than did those who chose the ethical action
when they appraised the level of guilt they would feel if they made the same unethical choice. This is critical as guilt acts as a
self-regulatory mechanism to diminish unethical behavior (Tangney, 2003). By morally disengaging and thereby reducing the
level of guilt they appraise for a specific unethical act, those that made the unethical choice could therefore also be more prone to
making similar unethical choices in the future. This is consistent with the concepts of “ethical fading” or the “slippery slope”
(Tenbrusel & Messick, 2004). Our results thus highlight the importance of authentic leadership in engaging these self-sanctioning
mechanisms. Specifically, our results suggest that leaders have not only immediate effects on follower ethical decision-making,
but also on how followers interpret and frame future actions.

5.2. Practical implications
Modern organizations are morally complex environments where performance pressures and incentives can create
temptations that promote unethical behaviors. There is thus at least a common belief, if not reality, that the incidences of
unethical actions in organizations are escalating (George, 2007; Hunter, 2003). Therefore, researchers have called for a fuller
understanding of what promotes ethical behavior in the workplace (Treviño et al., 2006; Verschoor, 2003). As proposed by
George (2007) in his popular book, our results suggest that authentic leadership may serve to strengthen followers against the
temptations faced in organizational life, such as the project continuation decision in the current study.
Our results, coupled with those of Hannah, Avolio, andWalumbwa(2011)who linked authentic leadership to followermoral courage
and ethical behavior, suggest that the four components of authentic leadership should be developed in organizational leaders to increase
ethical behavior in organizations. Such leader development programs may include, for example, self-reflection exercises to increase
leaders’ self-awareness, ormoral judgment discussions and exercises to raise leaders’ moral perspectives (Bebeau, 2002; Hartwell, 1995).
Further, our results showed that followers of more authentic leaders experienced higher levels of guilt when appraising an
unethical action. This is important because in addition to promoting self-sanctions and ethical behavior, guilt also promotes
positive interpersonal relationships in organizations, because guilt generally motivates individuals to confess, apologize, and help
one’s victims in order to repair relationships (Hoffman, 1982; Lewis, 1971; Lewis, 1992). Further, as noted above, by influencing
followers to maintain higher guilt appraisals, authentic leadership may therefore potentially limit “ethical fading” or the “slippery
slope” over time (Tenbrusel & Messick, 2004).

5.3. Limitations and future research directions
The results of this study are noteworthy in that the effects were demonstrated from exposure to a scenario-based leadership
manipulation. These results suggest that the effects of exemplary authentic leaders can occur from a short duration exposure of a
follower to the leader. This is consistent with our logic describing how such leaders activate followers’ moral perspectives through
activating values, identities, moral schemas and other structures (Lord & Brown, 2004). Yet, our manipulation did not allow for an
“authentic relationship” to evolve between authentic leaders and their followers over time (Gardner et al., 2005). Such an
authentic relationship may augment the effects found here. Yet, the effects may also operate through other mechanisms. For
example, if the authentic leader raises the follower’s moral perspective over time they may become more self-sustaining in their
ethical processing and less dependent on the leader to activate self-sanctioning processes. Future longitudinal research should
investigate such developmental effects that may occur in ongoing leader–follower dyads.
Our manipulation check results strongly supported the efficacy of our authentic leadership manipulation. Yet all scenario-based
manipulations may have reduced ecological validity. The criterion for our manipulation check was the full Authentic Leadership
Questionnaire (ALQ,Walumbwa et al., 2008), which has been commonly used in field research. The results suggest that participants
were able to clearly identify and rate the leader in the scenario on the elements of authentic leadership as per the ALQ, thereby raising

our confidence in the ecological validity of themanipulation. However, othermethods such as training organizational leaders or using
trained actors or confederates should be used in future experimental research to further validate our results.
Our research design simultaneously manipulated all four dimensions of authentic leadership (internalized moral perspective,
balanced processing, self-awareness, and relational transparency) and thus does not allow for us to assess the relative effects of
each. It is possible, however, that various dimensions, alone or in combination, have varying effects on follower ethical
decision-making and guilt. Future research using alternate methods and designs should consider ways to tease out whether there
are differing effects of the various combinations of dimensions. Research to date in field settings, however, has shown that the
four dimensions of authentic leadership represent a higher-order construct that combines to influence outcomes (e.g., Hannah,
Avolio, & Walumbwa, 2011; Walumbwa et al., 2008). This suggests that the dimensions are interdependent. For example, a leader
with well-developed values (a component of moral perspective), but low self-awareness of their values, and that does not
transparently express those values to others would likely be less effective in influencing followers.
Further, we were not able to directly test the theorized processes linking authentic leadership to follower ethical
decision-making. We theorized that authentic leaders activate identities, values, and other moral structures in followers which
raise their moral perspective (Hannah et al., 2005; Lord & Brown, 2004). Such constructs could not be assessed in the current
design without confounding the manipulation. For example, the process itself of assessing which values are most salient in
followers would likely activate certain values while suppressing the activation of others. Future research should focus on testing
these theorized linkages. It is also possible that beyond strengthening followers’ moral perspectives, authentic leaders may
positively influence followers’ ethical decision-making processes through other mechanisms, such as through creating an
ethically-supportive context. Such additional contextual mechanisms should be considered in future research.
For this study, we used a project continuation scenario as has been employed in prior literature (e.g., Booth & Schulz, 2004;
Harrell & Harrison, 1994; Harrison & Harrell, 1993; Rutledge & Karim, 1999). It is possible that the framework employed in this
study could have different effects when other types of ethical temptations are considered, suggesting that the study should be
replicated over various other forms of temptations (involving temptations to lie, cheat, steal, etc.) and across other ethical choices
where temptation is more or less relevant.
We chose in this study to focus on leadership as the sole contextual factor. Future research should include other potential
contextual influences such as ethical organizational culture (Schaubroeck et al., 2012; Treviño & Youngblood, 1990) or the level of
moral intensity of the temptation being faced (Jones, 1991) which may have either additive or countervailing effects to those
found here. For example, followers may be more or less likely to enact self-reactive processes when faced with moral dilemmas
that have highly salient levels of moral intensity (e.g., someone can experience a great injustice or be injured or killed based on
one’s choices). Higher moral intensity, for example, may make it more difficult to morally disengage, which could somewhat
substitute for the effects of leadership; and therefore moderate the effects of authentic leadership on followers’ decision-making.
Further, by randomizing participants, we effectively controlled for most individual differences, and deliberately controlled for
some others (age and honesty–humility). Future work should directly measure and test various individual difference factors so
that we can gain a better understanding of how these factors influence ethical processing under various conditions of temptation
and authentic leadership. Individual differences that promote moral awareness, such as moral attentiveness (Reynolds, 2008);
and forms of moral agency, such as moral conation (Hannah, Avolio, & May, 2011) and moral identity (Aquino & Reed, 2002), for
example, may be highly relevant to self-reactive processes.

  1. Conclusion
    Ethical decisions and behaviors are the result of a complex set of intrapersonal and interpersonal factors. We have highlighted
    the important role of authentic leadership as a critical interpersonal, contextual factor that morally strengthens followers and
    promotes them to make more ethical decisions when faced with temptation. These results should promote much needed research
    concerning the effects of exemplary leaders on followers’ moral processing.
    Acknowledgments
    We thank Shelley Dionne (editor), three anonymous reviewers, Chris Agoglia, Barbara Grein, Ta Quang Hai, Stacy Kline, David
    Little, Ann Peng, John Schaubroeck, Jonathan Ziegert, and participants at the 2013 American Accounting Association (AAA) Annual
    Meeting’s 18th Ethics Research Symposium and the 2013 AAA Accounting, Behavior and Organizations Section Midyear
    Conference for their helpful comments and assistance.
    Appendix A. Authentic leadership manipulation
    A.1. High authentic leadership
    Jamie, like most typical managers, is mostly concerned with meeting targets for increasing market share and profits. He also
    focuses on meeting earnings and growth projections while reiterating the need to meet such goals in order to be rewarded by the
    company. Jamie regularly seeks feedback from you, in order to improve the interactions between the two of you. When speaking
    of his own capabilities, Jamie is usually accurate in describing his strengths and weaknesses. He also speaks to you candidly and is
    able to admit when he makes a mistake. Jamie emphasizes the need for everyone on his team to speak their mind and frequently

displays his own true emotions. Jamie’s actions on the job are consistent with moral beliefs he has established as an individual and
as a result he makes decisions based on his core values and asks that you do the same. When making difficult decisions it is visible
that Jamie does so based on a high standard of ethical conduct. However, Jamie does solicit views from you and others that
challenge his positions. Jamie has a history of listening to different points of view and analyzing all relevant data before coming to
conclusions.
A.2. Low authentic leadership
Jamie, like most typical managers, is mostly concerned with meeting targets for increasing market share and profits. He also
focuses on meeting earnings and growth projections while reiterating the need to meet such goals in order to be rewarded by the
company. Jamie rarely seeks feedback from you, or looks to improve the interactions between the two of you. When speaking of
his own capabilities, Jamie is usually inaccurate in describing his strengths and weaknesses. He also finds it difficult to admit
when he makes a mistake. Jamie does not emphasize the need for everyone on his team to speak their mind and his true emotions
are difficult to read. Jamie’s actions on the job are inconsistent with moral beliefs he has established as an individual and as a
result he sometimes makes decisions that contradict his core values. When making difficult decisions it is hard to tell if Jamie does
so based on a high standard of ethical conduct. Jamie never solicits views that would challenge his positions. Jamie has a history of
ignoring different points of view and overlooking relevant data when coming to conclusions.
A.3. Neutral leadership
Jamie, like most typical managers, is mostly concerned with meeting targets for increasing market share and profits. He also
focuses on meeting earnings and growth projections while reiterating the need to meet such goals in order to be rewarded by the
company.
Appendix B. Temptation manipulation
Note: Parts of the scripts below are bolded or underlined to identify the incentive and opportunity aspects of the temptation
manipulation, respectively, for readers. These annotations were not included in the participant materials.
B.1. Temptation present
You are a junior project manager with the Williams Company. Project managers gain a reputation as being highly talented
when the projects they initiate and manage are successful. Highly talented project managers receive substantial economic and
other benefits, for the Williams Company is aware that an active market for highly talented project managers exists in your
industry. When a project that is managed by a junior project manager fails, this damages the individual’s project
management reputation, job security, and marketability. So far the projects which you have initiated and managed have
been successful. About a month ago, your growing reputation as a highly talented project manager stimulated another
firm, the Jones Corporation, to initiate confidential discussions about recruiting you to a more important position with a
substantially higher salary.
The project
At that time, with a discount rate of 16% Project B was predicted to have a Net Present Value of $108,100 over its full
seven-year life. Performance has been above expectations during the first four years, with annual net cash inflows of $320,000. As
project manager you possess information which indicates that Project B’s net cash inflows will sharply decline and be only
$50,000 each year for the remaining three years of its lifetime. This information is known only to you as project manager and is
NOT available to others in your company and industry.
B.2. Temptation absent
You are a senior project manager with the Williams Company. Project managers gain a reputation as being highly talented
when the projects they initiate and manage are successful. Highly talented project managers receive substantial economic and
other benefits, for the Williams Company is aware that an active market for highly talented project managers exists in your
industry. Over a period of ten years, nearly all of the projects you have initiated and managed have been successful. When,
however, a project under your control has been projected to be unprofitable, you have discontinued it to minimize losses.
As a result, you have gained a very solid industry-wide reputation as a highly talented project manager who also knows
how to minimize losses.
The project
At that time, with a discount rate of 16% Project B was predicted to have a Net Present Value of $108,100 over its full
seven-year life. Performance has been above expectations during the first four years, with annual net cash inflows of $320,000

The most recent projections indicate, however, that Project B’s net cash inflows will sharply decline and be only $50,000 each year
for the remaining three years of its lifetime. Williams Company’s policy is to make such information public. Several days ago,
Williams Company made information about Project B’s expected future performance widely known to others in your firm and
industry. This has had no effect on your very solid industry-wide reputation.
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