Chinese insurance agents in “bad barrels”: a multilevel analysis of the relationship between ethical leadership, ethical climate and business ethical sensitivity

BACKGROUND: The moral hazards and poor public image of the insurance industry, arising from insurance agents’ unethical behavior, affect both the normal operation of an insurance company and decrease applicants’ confidence in the company. Contrarily, these scandals may demonstrate that the organizations were “bad barrels” in which insurance agents’ unethical decisions were supported or encouraged by the organization’s leadership or climate. OBJECTIVE: The present study brings two organization-level factors (ethical leadership and ethical climate) together and explores the role of ethical climate on the relationship between the ethical leadership and business ethical sensitivity of Chinese insurance agents. RESULTS: Through the multilevel analysis of 502 insurance agents from 56 organizations, it is found that organizational ethical leadership is positively related to the organizational ethical climate; organizational ethical climate is positively related to business ethical sensitivity, and organizational ethical climate fully mediates the relationship between organizational ethical leadership and business ethical sensitivity. CONCLUSIONS: Organizational ethical climate plays a completely mediating role in the relationship between organizational ethical leadership and business ethical sensitivity. The integrated model of ethical leadership, ethical climate and business ethical sensitivity makes several contributions to ethics theory, research and management.