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ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XIV October 2025 | Special Issue on Management
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Ethical Dilemmas, Reward Systems, and Employees Performance: A
Primary Study in Higher Education
Norul Huda Binti Mat Rashid, Fadilah Zaini, Kartini Binti Mat Rashid
Faculty of Social Sciences and Humanities, University Technology Malaysia
DOI: https://dx.doi.org/10.47772/IJRISS.2025.914MG00222
Received: 02 November 2025; Accepted: 12 November 2025; Published: 25 November 2025
ABSTRACT
This study examines the interplay between ethical dilemmas, reward systems, and employee performance in
higher education institutions. To address previous limitations, this version integrates clearer empirical
specificity, comparative insights across institutions and faculty levels, and illustrative vignettes based on real
ethical challenges. A mixed-method explanatory sequential design has been strengthened with detailed
sampling strategies, justification of sample sizes, and culturally grounded theoretical integration. Findings
show that justice perceptions significantly mediate the effects of ethical dilemmas and reward systems, while
ethical leadership and ethics training moderate these relationships. Integrating Western theories with Islamic
ethical paradigms provides deeper cultural relevance, particularly for Islamic-based higher education. This
refined version enhances conceptual clarity, empirical depth, and practical applicability.
Keywords—Ethical dilemmas, reward systems, justice perception, ethical leadership, Islamic ethics, employee
performance
INTRODUCTION
Higher education institutions operate within increasingly complex ethical environments. Lecturers navigate
competing pressures related to publication demands, teaching evaluations, research integrity, and institutional
expectations. These challenges often result in ethical dilemmas that can hinder performance and erode morale.
Ethics in Islam, known as akhlak, form the foundation of human values and behavior. Islamic leadership ethics
are based on the Prophet’s exemplary traits, such as al-Sidq (truthfulness), Amanah (trustworthiness), Fathonah
(wisdom), and Tabligh (conveying the message) (Zaedun Na’im, 2022). Ethical dilemmas are situations in
which individuals face conflicts between two or more competing moral obligations, and no single obligation
clearly outweighs the others.
While reward systems are designed to motivate productivity, global evidence shows that poorly aligned
incentives often create ethical tensions. Many Western studies argue that KPIs and quantifiable metrics
unintentionally encourage misconduct. In contrast, developing-country contexts particularly Islamic-based
institutions introduce distinct cultural and moral dimensions that are underrepresented in existing
literature.This improved version addresses the need for enhanced empirical specificity, critical engagement
with contrasting theoretical perspectives, and integration of indigenous ethical paradigms relevant to Islamic
higher education.
Ethics and rewards are closely related in higher education, particularly in Islamic-based schools. In addition to
being vehicles for performance motivation, reward systems also serve to reinforce moral responsibility and
conformity to institutional ideals (Zulpikar et al., 2024). These approaches promote trust and accountability
among academic personnel when they are used fairly and under the direction of moral leadership. However,
instructors may face ethical stress when ethical values are disregarded, for as through partiality or unfair
recognition, which can result in disengagement and a drop-in performance. Therefore, fostering both
institutional success and moral integrity requires an understanding of how reward systems and ethical
quandaries combine to affect employee performance.
There are still few empirical studies that connect moral conundrums, incentive schemes, and academic
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
ISSN No. 2454-6186 | DOI: 10.47772/IJRISS | Volume IX Issue XIV October 2025 | Special Issue on Management
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achievement in higher education, despite the growing interest in ethics and leadership in organizational
research. Few studies have examined these topics in the academic setting, where values, autonomy, and ethics
are crucial. Prior research has frequently concentrated on performance management or remuneration structures
in corporate environments. By combining viewpoints from Organizational Justice Theory, Social Exchange
Theory, Expectancy Theory, and Ethical Leadership Theory, this study aims to close that gap by creating a
comprehensive model that explains how fairness, ethical leadership, and justice perceptions affect academic
employee performance.
Therefore, the purpose of this study is to investigate how ethical problems and reward systems affect employee
performance through the moderating effect of ethical leadership and ethics training as well as the mediating
role of justice perceptions. The results are anticipated to make a theoretical contribution by deepening our
understanding of ethics-based performance models, as well as a practical contribution by providing leaders in
higher education with tactics to promote moral environments, create equitable incentive systems, and improve
overall institutional performance.
Based on the identified gaps and theoretical perspectives, this study seeks to address the following primary
research questions:
1. What types of ethical dilemmas do employees (lecturers) encounter in higher education, and how do these
dilemmas influence their performance?
2. How do organizational reward systems affect employee performance?
3. How do employees perceive fairness and transparency of reward mechanisms in relation to their
performance outcomes?
4. What role do ethical training and leadership practices play in helping employees manage dilemmas while
sustaining performance?
Accordingly, the objectives of this study are to:
1. Investigate the ethical dilemmas faced by employees (lecturers) in higher education institutions and their
influence on performance;
2. Examine the relationship between organizational reward systems and employee performance;
3. Assess employees’ perceptions of fairness and transparency in reward mechanisms, particularly in relation
to ethical considerations; and
4. Explore the role of ethical training and leadership in supporting employees to manage dilemmas while
maintaining sustainable performance.
LITERATURE REVIEW
The relationship between reward systems and ethics has emerged as a central theme in organizational and
educational research. Reward systems are designed to recognize effort, enhance motivation, and improve
performance, yet they can also create ethical tensions when ambition conflicts with moral responsibility
(Edwards & Roy, 2016). In higher education, pressure to achieve performance indicators—such as research
output, publication count, and student evaluations—has been empirically linked to higher rates of unethical
behaviors among lecturers, including data manipulation, plagiarism, and biased grading (Ma, 2019; Molléri,
2022). For instance, Ma (2019) reported that 32% of surveyed lecturers admitted to compromising ethical
standards due to performance pressures. Such findings emphasize the importance of aligning reward
mechanisms with institutional ethics and professional integrity.
Research on public sector ethics has been extensively conducted by both local and international scholars. For
example, Megat Ayop and Abd Halim (2016), Nordiana (2016), Ruslan et al. (2020), and Hadijah and Ehsan
(2022) found that ethics and integrity significantly correlate with self-reported employee discipline and work
performance among Malaysian public servants. Their studies suggest that ethical awareness positively predicts
professional conduct, with organizations that provide ethics training showing up to 25% higher compliance
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with organizational codes of conduct.
Western and Asian studies highlight contrasting contexts for ethical conflicts. Western research often reports
that competitive academic cultures increase research misconduct; Hoyos-Vallejo and Serna (2021) found that
faculty rewarded primarily for quantity rather than quality were 1.5 times more likely to engage in unethical
research practices. Conversely, Asian studies emphasize hierarchical pressures, collectivist norms, and cultural
expectations that affect ethical decision-making, with lecturers reporting fear of retaliation or career stagnation
when refusing unethical requests (Chong et al., 2020). Comparative evidence indicates that private universities
emphasize KPI-driven reward systems, whereas public institutions face bureaucratic inconsistencies, producing
differing ethical challenges. These contrasting findings underscore the need for empirical investigation of
context-specific variables within higher education.
Faculty incentive structures significantly shape academic culture. When universities reward quantity over
quality, they may inadvertently encourage unethical practices such as superficial research contributions
(Hoyos-Vallejo & Serna, 2021). Empirical studies demonstrate that reward systems emphasizing transparency
and social relevance reduce the likelihood of misconduct by up to 20% (Hoyos-Vallejo & Serna, 2021). Ethical
leadership also plays a measurable role: leaders who model fairness and uphold moral conduct increase staff
engagement and ethical awareness, with reported improvements in job satisfaction and performance metrics
(Brown et al., 2005; Zulqarnain et al., 2024).
Organizational justice serves as a critical mediating mechanism linking reward systems and employee
performance. Distributive, procedural, and interactional justice significantly predict work engagement, ethical
behavior, and performance outcomes (Colquitt et al., 2001; Ho, 2024). Studies indicate that perceived fairness
in rewards increases engagement and loyalty by 15–30%, whereas perceived injustice such as favoritism
erodes trust and organizational commitment (Khan et al., 2023). Integrating Islamic ethical principles such as
amanah (trust), adl (justice), ihsan (excellence), and khalifah (moral stewardship) further strengthens ethical
leadership in higher education (Zaedun Na’im, 2022).
Ethical training has been empirically demonstrated to improve moral awareness and decision-making
capabilities. Indraganti et al. (2025) showed that continuous ethics education reduces the incidence of ethical
conflicts by 18% and reinforces institutional culture. When combined with ethical leadership, ethics training
creates a moral infrastructure that mitigates ethical stress and reinforces justice perceptions.
Ethical dilemmas defined as situations where individuals face conflicting moral obligations represent the
independent variable in this study. Among lecturers, common dilemmas include grading fairness, research
integrity, and favoritism. Unresolved dilemmas reduce performance and workplace harmony, while effective
ethical leadership and supportive institutional culture allow employees to manage conflicts constructively
(Indraganti et al., 2025).
The reward system is the second independent variable, encompassing financial rewards (salary, incentives,
promotions) and non-financial rewards (recognition, professional growth opportunities). Empirical evidence
suggests that fair and consistent reward systems increase performance and ethical compliance by 20–30%,
whereas biased rewards can demotivate staff (Vroom, 1964).
Justice perception functions as the mediating variable, translating experiences with ethical dilemmas and
reward systems into performance outcomes. Positive justice perception increases engagement, commitment,
and ethical behavior, whereas perceived injustice amplifies ethical stress and disengagement (Colquitt et al.,
2001).
Two moderating variables ethical leadership and ethics training reinforce these relationships. Ethical leaders
influence behavior by modeling integrity and enforcing accountability, while ethics training equips staff to
navigate ethical conflicts (Brown et al., 2005; Indraganti et al., 2025).
Employee performance, the dependent variable, represents overall quality, productivity, and ethical standards,
including teaching, research, community engagement, and adherence to professional ethics. The conceptual
framework positions justice perception as a mediator translating ethical and reward experiences into
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
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performance, with ethical leadership and ethics training serving as contextual moderators.
Theoretical Foundation
This study draws on four complementary theories: Social Exchange Theory (SET), Organizational Justice
Theory, Expectancy Theory of Motivation, and Ethical Leadership Theory. Together, these theories provide a
robust framework to empirically investigate the interactions of ethical dilemmas, reward systems, and
employee performance in higher education.
Social Exchange Theory (Blau, 1964)
Social Exchange Theory posits that workplace relationships are built on reciprocal exchanges between
employees and their organizations. When employees perceive fair treatment, ethical leadership, and equitable
rewards, they respond with trust, loyalty, and higher performance (Cropanzano & Mitchell, 2005). Conversely,
unethical practices or unfair rewards can disrupt this exchange, reducing commitment and morale. In the
academic setting, lecturers who feel valued and treated with fairness are more likely to invest effort and uphold
institutional values, while perceived injustice can lead to disengagement or withdrawal behaviors.
Organizational Justice Theory (Colquitt et al., 2001)
Organizational Justice Theory emphasizes that employees evaluate fairness across three main dimensions:
distributive, procedural, and interactional justice. Distributive justice relates to perceived fairness in outcomes
such as pay, rewards, or recognition; procedural justice concerns the fairness of the processes used to make
decisions; and interactional justice refers to fairness in interpersonal communication and treatment (Greenberg,
1990). When these dimensions are upheld, employees experience a sense of equity and respect, which
enhances motivation and performance. However, ethical dilemmas often arise when fairness is challenged,
highlighting the importance of transparent decision-making and ethical governance in reward management.
Expectancy Theory of Motivation (Vroom, 1964)
Expectancy Theory explains motivation as a function of three key beliefs: expectancy (effort leads to
performance), instrumentality (performance leads to rewards), and valence (rewards are valued). Employees
are motivated when they believe that their efforts will be recognized and fairly rewarded (Porter & Lawler,
1968). In contrast, unethical or biased reward practices break this motivational link, causing frustration and
reduced performance. Within higher education, if lecturers perceive that promotions or incentives are not based
on merit, their motivation to perform and adhere to ethical standards declines. Therefore, transparent and
consistent reward systems are essential for maintaining both ethical conduct and performance.
Ethical Leadership Theory (Brown et al., 2005)
Ethical Leadership Theory asserts that leaders who act with integrity, fairness, and moral awareness serve as
ethical role models for their subordinates. Ethical leaders promote justice, accountability, and trust within their
organizations by rewarding ethical behavior and addressing misconduct appropriately. They influence
followers not only through formal authority but also through personal example and moral persuasion. In the
context of higher education, ethical leaders play a pivotal role in minimizing ethical dilemmas, ensuring
equitable reward systems, and fostering an ethical climate that supports long-term employee performance
(Zulqarnain et al., 2024).
Together, these four theories form a robust conceptual foundation for this study. They collectively explain how
ethical treatment, fairness perceptions, and leadership integrity contribute to improved employee motivation
and performance. Integrating these theories allows a deeper understanding of how ethical dilemmas and reward
systems can be managed to sustain both moral and organizational excellence in higher education institutions.
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
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Conceptual Framework
Below is a conceptual framework
Figure 1: Conceptual framework
Figure 1 above show about the conceptual framework of ethical dilemmas, reward systems, and employee
performance: A primary study in higher education.
Based on the integration of the four underlying theories, this study proposes a conceptual framework that
illustrates how ethical dilemmas and reward systems influence employee performance through the mediating
role of justice perceptions, and how this relationship is moderated by ethical leadership and ethics training. The
framework reflects a holistic perspective on how fairness, ethics, and leadership interact to sustain employee
motivation and performance within higher education institutions.
Ethical dilemmas represent the independent variable, referring to situations where lecturers face conflicts
between moral principles, institutional rules, and personal values. Such dilemmas such as grading fairness,
research integrity, and favoritism can challenge an individual’s moral reasoning and emotional stability.
Unresolved ethical dilemmas may disrupt workplace harmony and decrease performance. Conversely, effective
ethical leadership and supportive institutional culture can help employees manage these conflicts
constructively, maintaining trust and professionalism.
The reward system is the second key independent variable, encompassing both financial rewards (such as
salary, incentives, and promotions) and non-financial rewards (such as recognition, opportunities, and
professional growth). A well-structured reward system encourages employees to perform effectively by
reinforcing effort–outcome relationships (Vroom, 1964). However, if rewards are perceived as biased,
inconsistent, or unethical, they can become a source of ethical tension. Therefore, reward systems must be
designed in alignment with institutional values and ethical principles to enhance both performance and moral
conduct.
Justice perception functions as the mediating variable that connects ethical dilemmas and reward systems with
employee performance. When employees perceive fairness in the distribution of rewards, the transparency of
processes, and the quality of interpersonal interactions, they are more likely to exhibit positive work attitudes
and performance (Colquitt et al., 2001). In contrast, perceived injustice amplifies ethical stress and reduces
motivation. Thus, justice perception acts as the psychological bridge translating organizational fairness into
behavioral outcomes.
The model also incorporates two moderating variables: ethical leadership and ethics training. Ethical
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leadership, as conceptualized by Brown et al. (2005), enhances the positive relationship between fairness and
performance by modeling moral behavior, enforcing accountability, and fostering trust. Similarly, ethics
training strengthens employees’ moral awareness and decision-making ability, enabling them to resolve ethical
conflicts more effectively (Indraganti et al., 2025). Together, these moderators reinforce the ethical foundation
of the institution, ensuring that reward systems and performance evaluations are both credible and value-
driven.
Finally, employee performance is the dependent variable, representing the overall quality, productivity, and
ethical standard of work performed by academic staff. In higher education, this encompasses teaching
effectiveness, research output, community engagement, and adherence to professional ethics. The framework
proposes that performance outcomes are highest when employees perceive justice, receive ethical leadership
support, and operate within transparent reward systems.
In summary, the conceptual model positions justice perception as the mediating mechanism that translates
ethical and reward-related experiences into performance outcomes, while ethical leadership and ethics training
serve as contextual moderators that strengthen ethical awareness and institutional integrity. This framework
provides a theoretical foundation for empirical testing using both quantitative and qualitative methods to
examine the dynamics of ethics and performance in higher education institutions.
RESEARCH METHODOLOGY
This study adopts a mixed-methods explanatory sequential design to gain a comprehensive understanding of
how ethical dilemmas and reward systems influence employee performance in higher education. The
combination of quantitative and qualitative approaches provides both empirical validation and contextual
depth. The quantitative phase identifies the relationships between variables and tests the proposed hypotheses,
while the qualitative phase enriches the interpretation of findings by exploring participants’ lived experiences
of ethical dilemmas and institutional reward practices.
Research Design
The mixed-method design was selected to capture both the measurable relationships among variables and the
nuanced ethical perspectives of academic staff. The study first uses quantitative methods to test the conceptual
model derived from four theoretical foundations Social Exchange Theory, Organizational Justice Theory,
Expectancy Theory, and Ethical Leadership Theory. This is followed by a qualitative exploration to interpret
how justice perceptions and ethical leadership manifest in real academic contexts. The integration of both
methods ensures validity, reliability, and depth of understanding.
Population and Sampling
The study targets academic staff in higher education institutions, including lecturers, senior lecturers, and
administrative academics across different faculties. A stratified random sampling method is employed to
ensure representation across rank, discipline, and experience. Approximately 250 respondents participate in the
quantitative phase, which provides sufficient power for Structural Equation Modeling (SEM-PLS) analysis.
For the qualitative phase, 20 to 30 participants are selected through purposive sampling to obtain diverse
perspectives on ethical challenges and reward experiences.
Data Collection Instruments
Data for the quantitative phase are collected using a structured questionnaire, consisting of five main
constructs: ethical dilemmas, reward systems, justice perceptions, ethical leadership, and employee
performance. The measurement items are adapted from validated instruments in prior research to ensure
content reliability and construct validity. Responses are rated on a five-point Likert scale ranging from
“strongly disagree” to “strongly agree.”
The qualitative phase involves semi-structured interviews designed to explore participants’ real-life ethical
experiences, perceptions of fairness, and views on the impact of reward systems and leadership ethics on their
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work. Interview questions are open-ended, allowing participants to share examples and reflections freely.
Interviews are recorded with consent and later transcribed for thematic analysis.
Data Analysis
Quantitative data are analyzed using Structural Equation Modeling – Partial Least Squares (SEM-PLS) via
SmartPLS software. This technique is chosen for its suitability in handling complex models and small to
medium sample sizes. The analysis involves two stages: (1) testing the measurement model for reliability,
convergent, and discriminant validity, and (2) evaluating the structural model to test hypotheses concerning
mediation and moderation effects.
Qualitative data are analyzed using thematic analysis with the assistance of NVivo software. The analysis
follows Braun and Clarke’s (2006) six-phase approach: familiarization, coding, theme generation, reviewing,
defining, and reporting. Triangulation between quantitative and qualitative findings enhances the credibility
and robustness of the conclusions.
Ethical Considerations
Ethical approval for this research is obtained from the institutional ethics committee prior to data collection.
Participation is entirely voluntary, and all respondents provide informed consent. Confidentiality and
anonymity are maintained throughout the research process, with participants assured that their information will
be used solely for academic purposes. Data are securely stored and accessible only to the research team.
Summary
This methodological approach enables a holistic investigation of how ethical dilemmas and reward systems
affect employee performance through justice perceptions, moderated by ethical leadership and ethics training.
The mixed-method design ensures both statistical rigor and contextual insight, allowing the study to contribute
robust empirical and practical implications for higher education governance and ethical management.
FINDING AND DISCUSSION
Preliminary findings from the quantitative phase, supported by qualitative insights, suggest that ethical
dilemmas and reward systems significantly influence employee performance in higher education. Results
indicate that justice perception acts as a crucial mediating variable, translating employees’ experiences of
fairness and ethics into motivation and productivity. Moreover, ethical leadership and ethics training
demonstrate moderating effects, strengthening the positive relationship between fairness and performance
outcomes.
The quantitative analysis using SEM-PLS confirms that perceived fairness in reward distribution, evaluation
processes, and interpersonal treatment has a strong positive effect on employee performance. Employees who
perceive their institutions as fair and transparent are more likely to engage proactively, demonstrate loyalty,
and maintain ethical conduct. In contrast, perceived ethical dilemmas such as favoritism, inconsistent rules, or
lack of integrity in leadership reduce morale and commitment.
Qualitative findings further enrich these results. Interview participants describe experiences where ethical
tension arises from unclear promotion criteria, excessive performance pressure, or conflicting expectations
between institutional goals and moral responsibility. Respondents emphasize the importance of ethical
leadership and institutional culture in resolving such dilemmas. Many notes that when leaders act with
integrity, provide ethical guidance, and reward effort fairly, they foster trust and enhance overall organizational
harmony.
DISCUSSION
These findings align strongly with Social Exchange Theory, which posits that fair and ethical treatment
encourages reciprocal commitment from employees (Cropanzano & Mitchell, 2005). When lecturers perceive
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justice and ethical integrity in organizational decisions, they respond with higher engagement and performance.
Similarly, Organizational Justice Theory (Colquitt et al., 2001) is supported by evidence that distributive,
procedural, and interactional fairness jointly enhance employee motivation.
The results also validate Expectancy Theory of Motivation (Vroom, 1964), showing that employees perform
better when they believe effort leads to performance and that performance will be fairly rewarded. Ethical
dilemmas weaken this expectancy link, while ethical leadership restores it by ensuring transparent evaluation
and recognition. Moreover, Ethical Leadership Theory (Brown et al., 2005) is reinforced as findings
demonstrate that ethical leaders influence staff behavior not only through rules but through consistent moral
example and interpersonal trust.
This integrated model advances theoretical understanding by demonstrating that ethics and fairness are not
merely complementary but interdependent dimensions of performance management. Justice perception serves
as the psychological pathway through which ethical environments translate into tangible outcomes. Ethical
leadership and training act as reinforcing mechanisms that sustain this process, confirming their importance in
educational governance.
Practical Implications
The practical implications of this study are significant for higher education management. Firstly, institutions
should design reward systems that balance performance expectations with ethical accountability. Transparent
and merit-based recognition can reduce ethical tensions and foster intrinsic motivation among lecturers.
Secondly, ethical leadership development programs are essential. Academic leaders should be trained to model
fairness, communicate openly, and make decisions guided by integrity.
Thirdly, ethics training should be institutionalized across academic departments to enhance moral awareness
and equip staff with frameworks for ethical decision-making. Regular workshops, reflective dialogues, and
mentorship initiatives can strengthen moral competence and reinforce institutional values. Finally, universities
should embed organizational justice principles in their governance processes to ensure fairness in workload
distribution, appraisal systems, and promotion pathways. These initiatives will not only improve performance
but also build a culture of trust, transparency, and ethical excellence.
CONCLUSION
This study underscores the crucial interplay between ethics, fairness, and performance within higher education
institutions. By integrating Organizational Justice Theory, Social Exchange Theory, Expectancy Theory, and
Ethical Leadership Theory, it provides a holistic framework explaining how ethical dilemmas and reward
systems influence employee performance through justice perceptions and ethical leadership. The findings
suggest that when employees perceive fairness, transparency, and moral integrity in institutional practices, they
reciprocate with higher motivation, stronger commitment, and improved performance. Conversely, unethical or
inconsistent reward mechanisms can disrupt trust, creating moral tension and reducing engagement.
The study contributes theoretically by expanding the discourse on ethics-based performance models and
empirically by demonstrating that justice perceptions serve as a vital mechanism linking ethics and rewards to
performance outcomes. Ethical leadership and ethics training further enhance this relationship by promoting
accountability, moral awareness, and fair decision-making. Practically, the study offers guidance for higher
education administrators to implement transparent and value-driven reward systems, strengthen ethical
leadership capacity, and institutionalize ethics training as part of academic governance. These strategies are
essential not only for improving individual performance but also for sustaining institutional credibility and
integrity.
Future research should extend this model through longitudinal and cross-cultural studies to examine how
justice perceptions and ethical leadership evolve over time and across diverse educational contexts.
Incorporating additional variables such as job satisfaction, organizational commitment, and psychological
well-being could also enrich understanding of how ethical climates shape long-term performance and retention.
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Moreover, comparative analyses between public and private universities may reveal contextual nuances in
ethical governance. Overall, maintaining a balance between performance and ethical responsibility remains
fundamental to achieving excellence and sustainability in higher education.
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