Influence of ethical leadership on employee engagement in commercial banks in Kenya

Abstract

Employee engagement has become a critical management issue that greatly influences the achievement of strategic goals and overall organizational success. Despite its importance, global engagement levels remain low worldwide as well as locally, which is contributing to high turnover levels in the banking sector. This study examined the influence of ethical leadership on employee engagement in commercial banks listed on the Nairobi Securities Exchange (NSE). Specifically, it investigated the effect of dimensions of ethical leadership, including character, technical skills, moral integrity, empowering behaviour, and psycho-emotive attributes, on employee engagement. The study was grounded in Ethical Leadership Theory and adopts a positivist philosophy with a descriptive correlational research design. The target population consisted of 33,008 employees drawn from nine listed commercial banks, from which a sample of 395 respondents was selected through stratified random sampling. Data was collected using a structured questionnaire and analysed through both descriptive and inferential statistics using the Statistical Package for the Social Sciences (SPSS version 25). The findings revealed that all five dimensions of ethical leadership had a positive and statistically significant influence on employee engagement. Correlation and regression analyses showed strong associations between ethical leadership and engagement, with the moral dimension emerging as the strongest predictor, followed by the psycho-emotive and technical dimensions. Character and empowerment behaviour dimensions also demonstrated significant positive effects, indicating that fairness, integrity, participation, and autonomy-enhancing practices play an important role in fostering employee engagement. Diagnostic tests confirmed that the data met the assumptions for parametric analysis, and the regression model explained a substantial proportion of variance in employee engagement. The study concludes that ethical leadership is a critical driver of employee engagement in commercial banks in Kenya. The findings imply that bank leadership and policymakers should institutionalize ethical leadership practices by strengthening moral integrity, emotional intelligence, technical competence, and empowerment-oriented management approaches. The study contributes to ethical leadership literature by empirically validating the multidimensional nature of ethical leadership and highlighting the relative strength of its dimensions in predicting employee engagement within a developing-country banking context. The results offer valuable insights for organizational leaders, policymakers, and scholars seeking to enhance employee engagement and organizational sustainability through ethical leadership practices.