HOW ETHICAL LEADERS CREATE LOYAL CUSTOMERS: THE CRITICAL ROLE OF FOLLOWER TRUST

Extending ethical leadership (EL) theory and research beyond the walls of the organization and across time, we propose a model wherein ethical leaders impact an objective measure of customer loyalty (i.e., repeat purchase... [ view full abstract ]

Extending ethical leadership (EL) theory and research beyond the walls of the organization and across time, we propose a model wherein ethical leaders impact an objective measure of customer loyalty (i.e., repeat purchase amount) by first establishing trusting relations with employees. We tested our model among 735 new employees with more than 8,000 repeat customer purchase transactions over a six month timespan. Results indicate that perceptions of EL operate through employees’ trust in the leader to affect customer purchase growth (i.e., loyalty), with accelerated growth over time. We conclude by considering theoretical and practical implications as they relate to EL and trust, as well as marketing and salesforce management.