The Impact of Ethical Climate on Organizational Trust and the Role of Business Performance: If Business Performance Increases, Does Ethical Climate Still Matter?

Abstract

The purpose of this study was to examine the relationship between ethical climate and organizational trust and to test whether increased business performance alters this relationship. Results indicate a positive relationship between three ethical climate types (caring, law, and rules) and organizational trust and indicate a negative relationship between one ethical climate type (instrumental) and organizational trust. Increased business performance did not moderate the ethical climate/organizational trust relationship, but post hoc analyses found ethical climate type to explain much more variance in overall organizational performance than for individual employee performance. For both organizational performance and individual employee performance, the ethical climate type of caring had the most explanatory power.