Does Ethical Climate Influence Unethical Practices and Work Behaviour

http://jhv.sagepub.comJournal of Human Values

DOI: 10.1177/097168580401000103 2004; 10; 11 Journal of Human Values

Damodar Suar and Rooplekha Khuntia Does Ethical Climate Influence Unethical Practices and Work Behaviour?

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Does Ethical Climate Influence UnethicalPractices and Work Behaviour?

DAMODAR SUARROOPLEKHA KHUNTIA

Damodar Suar is Associated Professor and Rooplekha Khuntia is Research Scholar, Department of Humanities and Social Sciences,Indian Institute of Technology Kharagpur, Kharagpur 721 302.

This study examines whether ethical climate influences managers unethical practices and work behaviour.The sample comprised of 340 middle-level executives from twa private and two public sector companies.Irrespective of the nature of the organization and the age of the managers, while a caring and professionalclimate reduced only the manipulative behaviour of managers, an individual-centred climate consistentlyfostered unethical practices of manipulation, cheating and violation of organizational norms. On workbehaviour, a caring and professional climate was conducive for increasing managers performance,involvement, affective commitment, predominant intrinsic job satisfaction, extrinsic job satisfaction andtaking initiative; while an individual-centred climate was unfavourable for continuance commitment tothe organization.

Introduction

Few attempts have been made to identify a varietyof individual and organizational factors that mightinfluence ethical decision making. Comparisonof different models of ethical decision makingrecognizes the influence of the socio-moral cli-mate of the organization on employees behav-iour. An important factor that may influence theemployees ethical behaviour is argued to be theethical climate of an organization. While work

climate has been defined as perceptions that arepsychologically meaningful molar descriptionsthat people can agree to characterize a systemspractices and procedures,2 the ethical climate ofan organization is the shared understanding aboutwhat is correct behaviour.3 The ethical content ofprevailing organizational practices and proceduresconstitutes ethical climate. This climate sets thetone for decision making at managerial levels andprovides the criteria within which ethical issuesare identified, evaluated and resolved.


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Although there is no consensus on a particulartypology of ethical climate, Victor and Cullenintroduced the concept of ethical climate to ex-plain and predict ethical conduct in organiza-tions. They used a two-dimensional theoreticaltypology of ethical climate. The first dimensionrepresented the ethical criteria-egoism, benevo-lence and principles-on which organizationaldecision making was based. An egoistic criterionimplied that a consideration of what was in theindividuals best interest would dominate theethical reasoning process; a benevolent criterionsuggested that ethical decision making was basedon the consequences of the decision on others;and in principled reasoning decisions were guidedby universal standards of right and wrong. Thesecond dimension represented the locus ofanalysis used in ethical decisions-individual,group (or local) and societal (or cosmopolitan)level. At the individual level, the ethical climateof an organization supported an individual sourcefor normative standards regarding ethical reason-ing. The local level was supported by groupnorms favouring ethical reasoning within anorganization. The cosmopolitan level was sup-ported by norms favouring external sources forethical reasoning.

Cross-tabulation of the three ethical criteriawith the three loci of analysis resulted in nine the-oretical dimensions. By factor analysing thescores on nine ethical climate types, five climatedimensions emerged: (a) caring; (b) law and code;(c) rules; (d) instrumental; and (e) independence.A caring climate put emphasis on the interestsand welfare of others. Organizations guided bylaw and codes accommodated external standardsand principles in decision making, and a rule-oriented climate referred to internal principles indecision making. In an instrumental climate, self-interest was the norm, and in an independentclimate individual standard of moral judgementprovided the criteria for decision making.

Studies have found a relationship between theethical climate and the ethical behaviour of em-ployees.5 Because individuals often search out-side themselves for guidance in ethical dilemmas,organizations can moderate individual cognitionby institutionalizing ethics. Through institu-tionalized norms, policies and procedures, anorganization signals its employees in decidingwhat is just, right and fair behaviour. Thus, thecontext perceived by organizational members islikely to influence their response to ethical issues.

Ethical climate is likely to influence em-ployees work bahaviour. The more marketersperceived their companies as showing concernfor ethics, acting ethically and rewarding ethicalbehaviour, the more positive was the resultinginfluence on their commitment to organizations.Victor and Cullen also speculated that incongru-ence between dominant ethical climate andemployees ethics might lead to a greater likeli-hood of turnover, job dissatisfaction and decreasedorganizational co~rnmitment.8 It has also beenfound that in a caring climate employees weremore satisfied, more committed and less likelyto quif.9 While a caring climate increased commit-ment and supervisory satisfaction, an instrumentalclimate decreased overall satisfaction.10 Thus,varied dimensions of ethical climate are likely toinfluence work behaviour differently.

This study focuses on middle-level managers.Top management policies and strategies areconcretized for action at the middle level, andcorresponding actions are realized throughbottom-line managers and workmen. Middle-level managers deal with breakdown in normalflow of work and ensure smooth functioning ofthe organization. Their perception and behaviourare crucial for the effective functioning of theorganization.The type of the organization (private vs public)

and age of employees are found to have a positiveinfluence on unethical practices and work


13

behaviour. Public sector organizations derivepower from state or political bodies and meet thelong-range interests and needs of the public. Theyoperate in an environment of red-tapism andbureaucratic nepotism. Contrarily, private sectorcompanies have a constant drive to meet thedemands of the consumers. They operate in anintense competitive environment and try to beattheir competitors. Their survival depends on re-tention of market share along with profit maxim-ization. They are sensitive and respond quicklyto the changing business environment.&dquo; Studieson the work culture in private (including a fertil-izer cooperative) and public sector companies inIndia revealed two distinct cultures. 12 In the softwork culture and pliant management of the publicsector, employees engaged in non-work activities,social-personal interests, did not work hard, didnot have a positive influence on work and maxim-ized personal gains. Managerial policies, prac-tices and philosophy were more liberal. Theopposite existed in the private sector, a synergeticwork culture with assertive and people-orientedmanagement. Given these findings, the unethicalpractices of employees are likely to be less andwork attitudes more favourable in private thanpublic sector companies.As age increases, employees become more

ethical.3 Younger employees tend to have a moreliberal view and older ones a more adamant viewon unethical practices. 14 Older employees, byvirtue of their longer tenure are more exposed tonorms in the organization and are aware of theadverse consequences of unethical practices thatreinforce them to be ethical. Because they havefinancial security and are settled in jobs, they areless likely to engage in unethical practices thatcould jeopardize their security. I Older employeeswere found to be better performers, more com-mitted and more satisfied with their jobs than theyounger employees.&dquo; Based on this discussion,we intend to control the confounding effects of

type of organization and age of managers on un-ethical practices and work behaviour and proposethe following hypothesis:

Different dimensions of ethical climate influ-ence unethical practices and work behaviourdifferently.

Method

SamplePermission to collect data was sought from theauthorities of two public sector and two privatesector manufacturing industries located in easternIndia. Four hundred middle-level managers fromthe rank of assistant/junior managers were select-ed randomly for the study. They were approachedindividually and briefed about the purpose of thestudy. They were given the questionnaires, as-sured complete anonymity of their responses, andrequested to return the filled-in questionnaireswithin a fortnight. The questionnaires were col-lected personally. It resulted in the return of 340(85 per cent) completed questionnaires. Therewere female executives in such organizations, butthey were excluded to avoid contamination ofresults by sex differences.The sample comprised of 152 middle-level

managers from two private sector and 188middle-level managers from two public sectorcompanies (Table 1). Almost all had nuclearfamilies. Barring three widowers and two un-married persons in the private sector companies,and 15 unmarried persons in public sector, therest were married. The private sector managerswere little older than their counterparts in thepublic sector and had higher basic salaries, buthad less years of formal education than the man-agers in public sector companies. However, man-agers from both the sectors had similar durationof service in their present organizations.


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Measures

The questionnaire included measures of ethicalclimate, unethical practices, performance, in-volvement, commitment, job satisfaction andinitiative, along with the socio-demographic vari-ables on age, education, length of service, salary,number of promotions and family members.

Ethical Climate

The ethical climate measure contained 10 itemsfrom Victor and Cullens ethical climate question-naire (ECQ).)8 The response categories againsteach item were given on a 6-point Likert-typescale-completely false (1), mostly false (2),somewhat false (3), somewhat true (4), mostlytrue (5) and completely true (6). All the itemswere keyed positively. When the scores on thecurrent sample were factor analysed and rotatedthrough the varimax procedure, two factorsemerged that explained 50.74 per cent of totalvariance (see Appendix). The first factor, namedcaring and professional climate (CPC), loadedsignificantly on seven items and explained34.58 per cent of total variance. This factor alsoincluded one item each from law and code, instru-mental and rules dimensions of ECQ. The secondfactor loaded significantly on three items and ex-plained 16.16 per cent of variance. It was named

individual-centred climate (ICC). It includedtwo items from independent climate and one itemfrom instrumental climate of ECQ. The alpha re-liability for CPC was 0.82 and for ICC was 0.57.

Unethical Practices

Fourteen items were taken from Newstorm andRuch, and Jones scales,)9 and three items weredeveloped to assess unfair and wrong practices.Response categories against each item were on a6-point Likert-type scale ranging from not at allacceptable (1) to always acceptable (6). Thescores on the items were factor analysed usingthe principal component method and rotatedthrough the varimax procedure. Three factorswere extracted that explained 56.85 per cent oftotal variance. The first factor loaded significantlyon nine items and was manipulative and expedientbehaviour. Sample items included, giving/accept-ing gifts in exchange for preferential treatmentand falsifying time/quality reports. The secondfactor, containing five items, was cheating in per-formance and misuse of finance. Sample itemsincluded, taking longer time than necessary todo a job and padding an expense account. Thethird factor, containing three negatively keyeditems, was violation of organizational norms.Sample items included, being very secretiveabout organizations sensitive information and


15

sticking to organizations rules and policies. Thealpha reliability for manipulative and expedientbehaviour was 0.89, for cheating in performanceand misuse of financial resource 0.82, and forviolation of organizational norms 0.51. Highscores indicated high value for each variable.

Job Performance

Job perfonnance was measured through sevenitems-taking decisions, meeting deadlines,producing satisfactory quality of work, producingsatisfactory quantity of work, planning and organ-izing work, facing conflict situations and feelingconfident enough to handle the job-fromAbrainis job performance scale .20 The responsecategories against each item were given on a 5-point Likert-type scale-very poor (1), poor (2),neither poor nor well (3), well (4), very well (5).When scores on the items were factor analysedusing the principal component method, one factoremerged that explained 49.77 per cent of totalvariance. The alpha reliability of the scale was0.82. High scores indicated high performance.

Job Involvement

Six items were taken from Lodhal and Kejnersjob involvement scale.2 Response descriptionsagainst each item were given on a 4-point Likert-type scale ranging from strongly disagree (1)to strongly agree (4). All the items were posi-tively keyed. Sample items included, most of myinterests are centred around my job and I liketo be absorbed in my job most of the time. Whenscores on the items were factor analysed usingthe principal component method, one factoremerged that explained 46.16 per cent of totalvariance. The alpha reliability of the scale was0.76. High scores indicated more involvement.

Organizational CommitmentEight items were taken from the Mowday et al.scale to measure organizational commitment.22

Response categories against each item were on a5-point Likert-type scale ranging from stronglydisagree (1 ) to strongly agree (5). When scoreson the items were factor analysed using theprincipal component method and rotated throughthe varimax procedure, two extracted factorsexplained 48.60 per cent of total variance. Thefirst factor, affective commitment, containedfive items and its alpha reliability was 0.66.Sample items were, I am proud to say that I ama part of this organization and I really care aboutthe fate of this organization. The second factorcontaining three negatively keyed items was

continuance commitment with alpha reliability0.53. Sample items included, there is not toomuch to be gained by sticking with this organ-ization indefinitely and deciding to work for thisorganization was a definite mistake on my part.High scores indicated more affective and con-tinued commitment.

Job Satisfaction

Job satisfaction was measured using a 14-itemquestionnaire of Kanungo, Misra and Dayal. 21The responses against each item were given on a5-point scale ranging from highly dissatisfied(1) to highly satisfied (5). When the scores onthese items were factor analysed using the prin-cipal component method and rotated through thevarimax procedure, two factors were extractedthat explained 49.87 per cent of total variance.The first factor that loaded significantly on eightitems was predominant intrinsic satisfaction.Sample items included, to what extent are yousatisfied or dissatisfied with ... responsibility andadvancement. The second factor loaded signifi-cantly on six items was extrinsic satisfaction.Sample items were, to what extent are you satis-fied or dissatisfied with ... basic salary andworking hours. The alpha reliability of pre-dominant intrinsic satisfaction was 0.86 and ofextrinsic satisfaction 0.74. High scores indicatedmore intrinsic and extrinsic job satisfaction.


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Taking Initiative

Initiative taking was measured drawing elevenitems from the checklist provided by Kelly andCaplan.24 The response descriptions against eachitem were given on a 5-point Likert-type scaleranging from never (1) to almost always (5).When the scores of the items on the currentsample were factor analysed using the principalcomponent method, one factor was extracted thatexplained 43.86 per cent of total variance. Sampleitems included, I do more than I am asked to doand I look for other interesting projects to workon when my present work gets closer to the finishline. The alpha reliability was 0.87. Higherscores indicated taking more initiative.

Results

Control Variable

Middle-level managers in the public sector vio-lated the organizations norms more than man-agers in the private sector. Managers in bothsectors endorsed manipulation and cheating inperformance and misuse of finance to the sameextent. Managers in the private sector had higherperformance, job involvement, affective commit-ment, predominant intrinsic job satisfaction andinitiative than managers in the public sector. Byand large, middle-level managers in the privatesector were less unethical and had more favour-able work behaviour than managers in the publicsector (Table 2).

Table 2Unethical Practices and Work Behaviour Against Sector and Age


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Middle-level managers belonging to differentage groups differed on dimensions of unethicalpractices except violation of organizationalnorms. Post-hoc analysis using Tukeys testfurther confirmed that cheating in performanceand misuse of finance were more acceptable tomiddle-level managers in the age group of46-60 years than the same cadre in the age groupof 24-35 years and 36-45 years. On work behav-iour, middle-level managers in the age group of46-60 years had significantly higher involvement,affective commitment, predominant intrinsicsatisfaction, extrinsic satisfaction and initiativethan the age group 24-35 years. In all the vari-ables of work behaviour except extrinsic satis-faction, the managers in the age group of 36-45years had significantly more positive attitudestowards work than managers in the age group of24-35 years (Table 2). In Indian culture, withpermanent jobs and corruption 21 older managerswere more unethical towards the fag end of theircareer to amass wealth, false reputation andhappiness, but had more positive work behaviourthan younger managers. These findings con-finned our assertion that the nature of the organ-ization and age of the managers influencedunethical practices and work behaviour.

Ethical Climate, UnethicalPractices and Work Behaviour

CPC was more prevalent in the private (M =31.74, SD = 5.14) than public sector (M = 27.29,SD = 5.85; t (338) = 7.45, p < 0.001). However,ICC was equally prevalent in private (M= 10.51,SD = 2.80) and public (M = 10.12, SD = 2.74)sector companies. To control the confoundingeffects of sector and age on unethical practicesand work behaviour, sector as a dummy variable(private = 1, public = 0) and age of managerswere entered in the first step of regression ana-lysis. CPC and ICC did not correlate significantly,

r = 0.04, The correlation was low and we did notsuspect multi-collinearity of the two climatedimensions. The two climate dimensions wereentered simultaneously in the second step ofregression analysis. When the effects of sectorand age were partialled out, the perceived CPCdeterred only manipulative bahaviour, whereasthe perceived ICC reinforced manipulation,cheating and violation of organizational norms.Indeed, perceived ICC increased unethical prac-tices of middle-level executives.CPC boosts performance, job involvement,

affective commitment, predominant intrinsic jobsatisfaction, extrinsic job satisfaction and takinginitiative. ICC decreased the commitment ofmiddle-level managers in continuing their servicein the same organization. Supporting the hypo-thesis, CPC enhanced work behaviour and ICCreinforced unethical practices of middle-levelmanagers (Table 3).

Discussion

Ethical climate dimensions have significantlypredicted unethical practices and work behaviour.Irrespective of the nature of the organization andage of managers, a caring and professional cli-mate was favourable for increasing managersperformance, involvement, affective commit-ment, predominant intrinsic job satisfaction,extrinsic job satisfaction and taking initiative. Onthe other hand, an individual centred climatereinforced unethical practices and decreased thecommitment of middle-level managers.

Empirical studies had shown that the dimen-sions of ethical climate varied in different organ-izations.26 Victor and Cullen contended thatdifferent types of ethical climate could exist evenin different departments of an organization. 21Climate perception was influenced by organiza-tional values and culture. In Indian organizations,employees prefer to maintain a personal rather


18


19

than a professional relationship with theirsuperiors, and, hence, readily surrender to theirauthority and demands. They depend on theirsuperiors for support, advice, guidance and help.They are used to a lifestyle filled with ample restand relaxation, and tend to portray themselvesas superior to others.&dquo; In such a set-up, CPCemerged to be the dominant climate in privatesector companies. CPC was characterized byefficiency, concern for others good, fairness tothe customer and public, cost control, compliancewith organizational norms, and obedience to lawand professional standards. Such a climate calledfor managerial accountability and created anatmosphere that was conducive for better perfor-mance, involvement, affective commitment, jobsatisfaction and taking initiative, and aversive tomanipulative practices.An ICC was perceived as the absence of re-

strictions, rules and regulations. Such a climatefostered a focus on self-interest and nurturedunethical practices. Indians favour a hierarchicalsystem of administration. They exercise littlediscretion and are conditioned to depend on theirsuperiors.&dquo; Breaking away from such traditions,ICC encourages the employees to follow theirown judgements- and standards in deciding whatis right or wrong. Discussion during data col-lection revealed that the studied organizationswere undergoing restructuring. Job insecurities

loomed large among managers. Individual goalstook precedence over organizational goals. Man-agers adopted unscrupulous means to serve theirinterests.

This study focuses on unethical practices andwork behaviour. Unethical behaviour may some-times pay off, but ethical behaviour is the bestlong-term business strategy.3 Work behaviourof managers can ensure current performanceand organizational effectiveness. The gist thatemerges is that the two dimensions of ethicalclimate are determinants of unethical practicesand work behaviour. Organizations can dis-courage unethical practices by dismantling anindividual-centred approach held by its membersand promote work behaviour by encouraging acaring and professional climate.The study has certain limitations that must be

acknowledged. First, data has been procuredthrough self-reported inventories that are likelyto be tainted with a social desirability effect.Qualitative research needs to be carried out toascertain the external validity of the results.Second, the findings were obtained after studyingfour manufacturing units only. Caution must beexercised in generalizing the findings to otherorganizations. Notwithstanding the limitations,we generated empirical evidence on the import-ance of an ICC that reinforced unethical practicesand a CPC that facilitated work behaviour.


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AppendixUnrotated and Rotated Factor Loadings on Ethical Climate

NOTES AND REFERENCES

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4. Ibid.; B. Victor and J.B. Cullen, The OrganizationalBasis of Ethical Work Climates, AdministrativeScience Quarterly, 1988, 33(1), 101-25.

5. S.P. Deshpande, The Impact of Ethical Climate Typeson Facets of Job Satisfaction, Journal of Business

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6. L.K. Trevino, Ethical Decision Making in Organiza-tions : A Person-Situation Interactionist Model,Academy of Management Review, 1986, 11(3), 601-17.

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8. Victor and Cullen, The Organizational Basis of EthicalWork Climates (n. 4 above).

9. L. Rhoades, R. Eisenberger and S. Armeli, AffectiveCommitment to the Organization: The Contribution of


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13. S.P. Deshpande, Managers Perception of ProperEthical Conduct: The Effects of Sex, Age, and Level ofEducation, Journal ofBusiness Ethics, 1997, 16(1),79-85; P.E. Mudrack, Age-related Differences inMachiavellianism in Adult Sample, PsychologicalReport, 1989, 64(3), 1047-50.

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19. J.W. Newstorm and W.A. Ruch, The Ethics of Manage-ment and the Management of Ethics, MSU BusinessTopics, 1975, 23(2), 29-37; W.A. Jones, Jr. StudentViews of "Ethical" Issues: A Situational Analysis,Journal ofBusiness Ethics, 1990, 9(3), 201-5.

20. D.J. Abrainis, Job Stressors, Strain, Job Performance,Social Support and Social Conflict: Casual Relationshipin a Four-wave Longitudinal Panel Study, Unpublisheddoctoral dissertation, University of Michigan, 1985.

21. T.M. Lodhal and M. Kejner, The Definition andMeasurement of Job Involvement, Journal of AppliedPsychology, 1965, 49(1), 24-33.

22. R.T. Mowday, R.M. Steers and L.W. Porter, TheMeasure of Organizational Commitment, Journal ofVocational Behaviour, 1979, 14(2), 224-47.

23. R.N. Kanungo, S. Misra and I. Dayal, Relationship ofJob Involvement to Perceived Importance of Satis-faction of Employee Needs, International Review ofApplied Psychology, 1975, 24(1), 49-59.

24. R. Kelly and J. Caplan, How Bell Labs Creates StarPerformers, Harvard Business Review, 1991, 69(4),128-39.

25. See http://www.transparency.org.26. J. Agarwal and D.C. Malloy, Ethical Work Climate

Dimensions in a Not-for-Profit Organization: AnEmpirical Study, Journal of Business Ethics, 1999,20(1), 1-14; T. Barnett and V. Cheryl, The ModeratingEffect of Individuals Perceptions of Ethical WorkClimates on Ethical Judgements and BehavioralIntentions, Journal of Business Ethics, 2000, 27(4),351-62; S.P. Deshpande, E. George and J. Joseph,Ethical Climates and Managerial Success in RussianOrganizations, Journal of Business Ethics, 2000, 23(2),211-17; J.C. Wimbush, J.M. Shepard and S.J.Markham, An Examination of the RelationshipBetween Ethical Climate and Ethical Behaviour fromMultiple Levels of Analysis, Journal of BusinessEthics, 1997, 16(12), 1705-16.


28. J.B.P. Sinha and M. Sinha, Middle Class Values inOranizational Perspectives, Journal of Social andEconomic Studies, 1974,1(1),95-114.

29. Ibid.30. M.G. Velasquez, Business Ethics: Concepts and Cases

(New Delhi: Prentice-Hall of India, 2002), 5.


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Does Ethical Climate Influence Unethical Practices and Work Behaviour