This article is contributed by Dr. Martha Andrews, Professor of Management within the Cameron School of Business.

Corporate scandals and workplace distrust have placed ethics back at the forefront of leadership discussions. Yet even as organizations emphasize integrity and accountability, not all employees respond to ethical leadership in the same way. A new study published in the Leadership & Organization Development Journal, “Internals vs. Externals: Who Is Impacted by Ethical Leadership?”, by Dr. Martha Andrews, professor in the Cameron School of Business, explores how individual psychology—specifically, an employee’s locus of control—influences whether ethical leadership reduces cynicism and fosters trust during times of change.

Ethical Leadership and the Trust Factor

Ethical leadership goes beyond compliance or morality; it reflects fairness, honesty, and consistency in decision-making. Decades of research show that ethical leaders inspire commitment, loyalty, and “organizational citizenship behaviors”—the small, voluntary acts that strengthen teams and culture. They also reduce counterproductive behaviors such as deviance, theft, or incivility.

However, this study points out that context and personality matter. When leaders act ethically, employees are more likely to respond with trust and positive behavior—provided they believe their actions can influence outcomes.

Trust, in this context, is a cornerstone. Ethical leaders build trust through transparency and reliability, giving employees confidence that management will act in their best interest. This trust, the study finds, mediates the relationship between ethical leadership and employee cynicism about organizational change (CAOC)—a pessimistic belief that change efforts will fail because management is unmotivated or incompetent.

The data show that ethical leadership reduces cynicism primarily through the trust it generates. Employees who trust their leaders are more optimistic about change, more adaptable, and more engaged in problem-solving.

Enter Locus of Control: Internals vs. Externals

The research’s key insight lies in how locus of control (LOC) shapes these dynamics. LOC describes whether individuals attribute outcomes to their own efforts (internal) or external forces such as luck, fate, or other people (external).

People with an internal locus of control believe they can influence their environment through their own decisions and actions. Those with an external locus of control see their lives as shaped by circumstances beyond their control.

In management settings, this difference profoundly affects how employees interpret leadership behaviors. Internals tend to feel empowered by ethical leaders and respond with greater trust and commitment. Externals, however, may remain skeptical, assuming that leadership actions or promises are outside of their ability to affect—no matter how ethical the manager may be.

Inside the Study

The researchers tested these ideas using surveys from 349 public employees and 55 supervisors in a southern U.S. city’s Department of Transportation. The study employed a two-stage survey process over six weeks, measuring perceptions of ethical leadership, trust, locus of control, and cynicism about change.

The results confirmed two key hypotheses:

1. Trust mediates the link between ethical leadership and cynicism. Employees were less cynical about organizational change when they trusted their supervisors.
2. Locus of control moderates this effect. Internals benefited more strongly from ethical leadership and trust than externals.

In other words, while ethical leadership builds trust across the board, its power to reduce cynicism depends on whether employees believe they can personally influence their work environment.

Implications for Business Leaders

For executives and managers, especially those navigating change initiatives, the study carries practical lessons:

1. Ethics alone aren’t enough—trust must be intentional. Ethical behavior builds credibility, but without consistent communication and relationship-building, employees may not feel genuine trust.
2. Recognize psychological diversity in teams. Employees vary in how much control they feel over outcomes. Internals respond well to autonomy and participative decision-making. Externals may need more structured reassurance and visible follow-through from leadership.
3. Tailor leadership development and communication styles. Managers can strengthen ethical influence by aligning their approach with employees’ mindsets. For example, internal employees may thrive on empowerment and initiative-taking, while externals benefit from clear expectations and accountability frameworks.
4. Rebuild trust during organizational change. Whether in corporate mergers or municipal restructuring, change breeds uncertainty. Leaders who act ethically and transparently can mitigate resistance—but only if they foster a culture of shared control and participation.
5. Measure and manage cynicism. Cynicism isn’t just negativity—it’s a signal of broken trust. Organizations should monitor employee attitudes during change and address the underlying trust gaps that cause disengagement.

Why This Matters for Regional Businesses

For businesses in Greater Wilmington and the Carolinas, where many organizations are managing workforce transitions, technological adoption, or generational shifts, these findings hit close to home. Local industries—from logistics and public utilities to higher education—depend on employee buy-in during times of change. Ethical leadership and open communication can reduce resistance, but leaders must also understand their teams’ psychological profiles.

A workforce filled with “externals” may need more visible leadership and frequent feedback. By contrast, teams with many “internals” benefit from autonomy and opportunities to shape change processes directly. Recognizing this difference can spell the difference between a smooth transition and an employee exodus.

Looking Ahead

The study concludes that the “one-size-fits-all” model of leadership is outdated. Leadership success hinges on both ethics and empathy—understanding not only what is right, but how different people interpret and react to right behavior.

Ethical leadership builds trust, but trust is filtered through each employee’s sense of control. Managers who grasp this interplay can better guide their organizations through change, preserving morale, and commitment along the way. These findings underscore that “leaders don’t just manage systems—they manage perceptions.” In an era when trust in leadership is fragile, the ability to connect ethical conduct with employee mindset may define the next generation of effective management.