Corporate Governance and Ethical Leadership in Multinational Corporations

Abstract

MNCs operate in an environment where good corporate governance and ethical leadership are key to their operations and effectiveness. Research on the interaction between ethical leadership and corporate governance remains scarce, and there is room for theoretical contributions in this area. This study sought to investigate the association between corporate governance, ethical leadership, and organizational performance in MNCs, as well as how sectoral and cross-country factors affect these interactions. Mixed methods were used to collect survey responses and archival data from 350 executives, managers, and board members. Interviews with 25 participants were conducted. The stratified sampling technique was used to ensure representation across sectors and countries. Descriptive statistics, correlation, and structural equation modeling (SEM) were used to establish relationships among constructs using quantitative data, whereas interview data were analyzed using thematic coding. It was found that board diversity is positively related to ethical leadership (r ≈ = 0.52), and ethical leadership is strongly positively related to organizational performance (r ≈ = 0.61). The technology and energy sectors had the highest scores on ethical leadership (mean ≈ 4.44-4.45) and performance index (mean ≈ 88-89). From SEM analysis, it is clear that ethical leadership serves as an intermediary in the relationship between governance mechanisms and performance outcomes. A combination of effective governance and ethical leadership increases the organization's resilience, competitiveness, and stakeholder confidence. It is therefore recommended for managers to establish board diversity programs and provide ethics training. Policy makers should also assist MNCs to operate in culturally diverse regulatory environments.