Abstract

The literature focuses on the positive attributes of leadership, while limited research has explored the negative attributes of leaders, such as despotic leadership. Thus, there is a need to examine this serious organizational issue because a lot of employees’ performance becomes weaker due to despotic leadership style. Drawing on the Conservation of Resource (COR) theory, this research explores how despotic leadership negatively impacts employee performance in the pharmaceutical industry. We examined the underlying role of emotional exhaustion in associating despotic leadership with employee performance. Further, the positive boundary condition of ethical climate is also explored. This research collected data from three-wave online surveys of 312 pharmaceutical industry frontline employees. The findings show that despotic leadership significantly impacts employee performance. Emotional exhaustion mediates the negative relationship between despotic leadership and employee performance. In addition, ethical climate directly and indirectly moderates the significant relationship between despotic leadership and employee performance through emotional exhaustion. This novel paper contributes to theory and practice in organizational behavior and the pharmaceutical industry and helps to understand the nexus between despotic leadership and employee performance. In addition, this research improves employee performance by understanding the failure factors through which despotic leadership and its tactics distort employees' feelings. Further, this research addresses how top management and decision-makers should engage their leaders in special training programs to mitigate despotic leadership's negative impact on employee performance.