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Research Report Presented To Fuming Jiang By Annie-Pierre Fortier - 16795884 25 th of October 2013 Dynamics of International Strategy

Research Paper- The Effects of Corporate Social Responsibility on Employees

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Page 1: Research Paper- The Effects of Corporate Social Responsibility on Employees

Research Report

Presented

To Fuming Jiang

By Annie-Pierre Fortier - 16795884

25th of October 2013 Dynamics of International Strategy

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Page | 2

Curtin University

The Effects of Corporate Social

Responsibility on Employees’ Job

Satisfaction: An Empirical Study with Cross-

Cultural Dimensions

Annie-Pierre Fortier

Curtin University

Abstract

This empirical study investigates the effects of the perception of employees on their company’s corporate social responsibility and their job satisfaction. The study adopts a cross-cultural perspective to extend the application to international business. In this perspective, I analysed the impact of two moderating variables: the power distance level and the collectivism values of an individual on the relationship between perceived CSR and job satisfaction. I argued that the perceived CSR of an employee influences his job satisfaction. I also thought that a high power distance increases that relationship and that strong individualistic values decrease the relationship. The data have been collected from a questionnaire conducted among 79 employees of an oil and gas firm in Australia. The findings of the research suggest that there is a strong positive relationship between the perceived CSR and the job satisfaction. It also reveals that individualistic employees tend to have a stronger relationship between the perceived CSR and their job satisfaction.

Keywords: Perceived CSR, job satisfaction, power distance, collectivism versus individualism

1. Introduction

Corporate Social Responsibility (CSR) is a relatively new concept. Bowen (1953) was one

of the first to write about this topic and he defined CSR as an obligation for businesses to

pursue goals that were following the values of the society. Since that time, many different

theories emerged and evolved (Ratnayake 2013). The social responsibility of

businessman elaborated by Bowen became the three domains approach described by

Schwartz and Carroll (2003). Nowadays, according to the Canadian foreign affairs

department: “Corporate Social Responsibility is defined as the voluntary activities

undertaken by a company to operate in an economic, social and environmentally

sustainable manner” (Corporate Social Responsibility 2013). Even if the concept is recent,

extensive amounts of research and studies have been conducted on the topic. As a matter

of fact, there is a minimum of 79,000,000 articles and books on this field in Google Scholar.

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Some scholars have studied the impact of CSR activities on many variables while others

have focused on variables that can influence CSR activities.

This paper will concentrate on the first option by analysing what has been published on

this topic and identifying what has not been published. The question that guides this

literature review is: On which factors can CSR have an impact? The first step is to identify

which factors have been already studied to find a gap in the literature. This paper starts

with the literature review and ends with the description of the gap, with hypothesis for

future research.

2. Literature review

This literature review is non-exhaustive. It focuses only on articles and books studying

CSR as an independent variable. For the purpose of this work, the dependant variables

will be separated in four distinct categories: the effect of CSR on executives, the effects

of CSR on employees, the effects of CSR on the customers and the effects of CSR on

the firm. It is important to mention that the literature review below is non-exhaustive.

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The first category about executives is probably the least developed topic in this area. CSR

affects the managers for some elements such as their salary. Ye Cai and Pan (2011)

used a large sample of American firms to conclude that the increase of CSR is followed

by a decrease of 2.78% in cash compensation for managers. Other studies proved the

opposite. Considering the salary, bonus and stock option, Mahorney and Thorn (2006)

found that there is a positive relation between CSR and the manager’s compensation.

For the second category, a firm’s social responsibility activities can have some impacts

on the employees but this area remains unexplored (Lee, Park et Lee 2013). Mueller and

his colleagues (2012) have conducted a study in 17 countries with a sample of 3047

employees to establish a relation between CSR and affective commitment. According to

their empirical study, there is a positive relation between CSR and affective organizational

commitment. Furthermore, CSR can also have an effect on the employee turnover. The

findings of the empirical study of Galbreath (2007) show that CSR reduces employee

turnover.

The third category is about the relationship between CSR and any variable related to the

consumer. The empirical study of Galbreath (2007) concludes that CSR has a positive

and significant impact on customers’ satisfaction. There are also many studies conducted

on the consumer perception of CSR. Murphy and his colleagues (2013) confirmed that

CSR has an impact on consumers' attitudes, purchase intentions, loyalty, and satisfaction.

Generally, a bad perception of the firm’s CSR will conduct a negative attitude towards the

firm. However, the study confirms that a good perception does not necessarily leads to

more purchase intentions (Öberseder, Schlegelmilch et Murphy 2013). Some scholars

studied those variables in one specific country such as India (Dutta et Singh 2013). The

results of the study of Dutta and Singh (2013) show that companies with a high range of

CSR activities project a better image for customers and, consequently, have an

advantage over competitors.

The last category is focusing on the effects of CSR on many aspects of the firm. As most

literature papers in this field take a management perspective (Öberseder, Schlegelmilch

et Murphy 2013), this category is definitely the most explored. Literature already contains

a large number of studies on the financial and non-financial benefits of CSR on the firm.

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If we start by analysing what has been done on the financial aspect of the firm in relation

with CSR, we can find many studies. The main topic is the relationship between social

responsibility of a firm and its financial performance (Jean B. McGuire 1988). The second

variable examined in many studies is the value of the firm to the stakeholders. Sarveas

and Tamayo (2013) wrote that CSR activities can add value to the firm only under certain

conditions such as high public awareness and a high level of advertisement. Another

empirical study examines the relationship of those two variables and concluded that a

firm with CSR engagement has a higher value (Jo et Harjoto 2011). Furthermore, Jin and

Drozdenko (2010) indicate that a significant direct link exists between the two variables.

The conclusions of the different papers on CSR and the firm’s value are controversial and

remains unclear (Margolis and Walsh 2003).

For the non-financial variables, the reputation of the organization can be related to CSR

(Gottschalk 2011). The firm’s success is also a variable that has been studied (Galbreath,

2007). The general firm performance is also a hot topic studied by many scholars

(Galbreath & Shum, 2009). Some authors have conducted an empirical study in a cultural

context such as China (Zu 2009). Published in 2003, the literature review of Margolis and

Walsh (2003) examined the empirical relations between CSR and a firm’s performance

in 120 different studies. Finally, innovation of a firm can be influenced by the type of CSR

(Bocquet, et al. 2012). This article is original as it brings a new variable that few

researchers have focused on.

3. The gap of this literature field

This literature review shows that many scholars have established a relation between CSR

as an independent variable and a dependant variable related to employees, executives,

customers and the firm. These topics have been explored and, consequently, refers to

what has been done in the literature.

“Most of the studies in this area assume direct linear relationship which is ‘’naïve’’ as

many potential factors are likely to moderate or mediate the link” (Rowley & Berman, 2000,

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p.397). This leads us to what has not been done which is what this future research will

focus on.

The principal gap identified is the lack of cross-cultural dimension. Some scholars, such

as: Galbreath (2007) even identified that deficiency and suggested that further research

should consider the international dimension. He mentioned in the conclusion of the article

that ‘’Future studies should explore the degree to which CSR impacts on non-financial

benefits such as … reputation across countries.’’ (p.1). It would be false to affirm that no

studies consider the cross-cultural contexts. Only recent studies examine this cultural

environment (Gjolberg 2009) as a bilateral relation but only few have added that variable

to moderate two others.

According to Hofstede, there are 5 cultural dimensions: power distance (PDI),

individualism versus collectivism (IDV), masculinity versus femininity (MAS), uncertainty

avoidance (UAI) and long-term versus short-term orientation (LTO) (Hofstede 2013).

Recently, Mueller and his colleagues considered power distance, human orientation and

institutional collectivism as moderating variables between CSR and the employee’s

commitment (Mueller, et al. 2012). However, almost no other scholars have used the

cultural dimensions to moderate their results. This is where this research will concentrate

to investigate what can be done.

4. Conceptual framework and Hypotheses

Figure 1: Conceptual Framework

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The future study will consider the individualism versus collectivism dimension and the

power distance as two moderating variables between the employee’s job satisfaction and

the perceived CSR of the firm. According to the literature review above, the employee’s

job satisfaction has not been studied in depth. Moreover, the cultural dimension is lacking

in this field. I will briefly explain my variables but further details will be available in the next

assignment.

The independent variable is the perceived Corporate Social Responsibility. Many

definitions are available for CSR (Dahlsrud 2008) and they all refer to 5 dimensions:

environmental, social, economic, stakeholders and voluntariness. The study will use the

perception of the employees on the CSR activities of the firm. The dependant variable is

the employee’s job satisfaction. The moderating variables are two dimensions given by

Hofstede: collectivism versus individualism and power distance.

Hypothesis 1: The employee’s job satisfaction is positively related to the

perceived CSR activities of the firm.

The job satisfaction of an employee refers to the feeling of satisfaction of dissatisfaction

of this person related to different facets such as his colleagues, salary, job conditions,

supervision, tasks and benefits (Williams 2004). The perceived CSR can have an impact

on the satisfaction of the employees as it is part of the management (supervision). We

believe that a good perception of the CSR activities means that the employee is satisfied

with the type of management and, as a result, has a higher general satisfaction in his job.

Obviously, there are other factors involved in the general satisfaction but we think that the

governance has a high importance.

Hypothesis 2: The relationship between the employee’s job satisfaction and the

perceived CSR activities of the firm is weaker for an employee with individualism

culture values.

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Hofstede has established five cultural dimensions to compare countries. Those

dimensions can also be used to compare individual among the same culture. In general,

Australia is classified as an individualistic country (Hofstede 2013). Briefly, individualistic

cultures tend to accord more importance to personal achievements and are generally

more competitive. It does not necessarily means that all Australians are individualistic.

There are differences in each culture as well. Individualism versus collectivism is part of

the culture orientation. This moderating variable has been added to identify if this

dimension has an impact on the relationship between the independent and dependent

variables. We believe that employees with high individualistic values will have a weaker

relationship between his perceived CSR and his job satisfaction.

Hypothesis 3: The relationship between the employee’s job satisfaction and the

perceived CSR activities of the firm is stronger for an employee with a high power

distance.

Australia is known to be a low power distance culture. Once again, it does not mean that

all Australian have low power distance values. In business, this dimension refers the

hierarchy between employees and managers. In a low power distance context, there are

less authoritarian hierarchy. We believe that an individual with a high level of power

distance will have a stronger relationship between their perceived CSR and their job

satisfaction.

5. Research Methodology

5.1 Sample and data collection

As most studies conducted in this field are empirical, I used this type of research to

investigate these variables. I sent questionnaires to employees of a multinational firm in

Australia. The firm chosen is an international oil and gas company, located in Perth, with

a diverse workforce. The questionnaire has been sent to 250 employees and 79 people

responded to it.

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5.2 Measurements

The questionnaire is available in the appendix of the article, on page 19. To measure the

four different variables, the questionnaire included 45 items with a typical five point Likert

scale from strongly disagree to strongly agree.

Job satisfaction

The job satisfaction of the employees has been measured with one template offered by

Scott Smith (Smith 2013). The scale includes 15 items such as “My job makes good use

of my skills and abilities”. For this variable, 1 means that the employee has a poor job

satisfaction while 5 means that the employee is highly satisfied.

Perceived CSR

The perceived CSR of the company measurement is inspired from the CSR scale used

by Mueller and his colleagues in their previous study (2008) based on the five dimensions

of CSR of Dalshrud (2008). The scale includes five statements such as “My company

does enough towards protecting the environment”. For this variable, having 1 means that

the employee perceived that the company has a low CSR and vice versa.

Power distance

The measurement of the level of power distance of the employee is based on an eight-

item measure developed by Kirkman et al (2009) (“Managers who let their employees

participate in decisions lose power”). The statements marked as 1 means that the

employee has a low power distance while 5 means a high power distance.

Culture orientation

Finally, the culture orientation has been measured with the 16-item scale designed by

Kirkman et al (2009). For half of those statements, 5 means high individualistic values (“It

is important that I do my job better than others”). For the other half, 5 means high

collectivism values (“To me, pleasure is spending time with others”).

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5.3 Control variables

The position title, the age, the number of years of employment in the organization and the

gender were asked in the questionnaire to all respondents. However, due to the time

limitation, those variables have not been considered and controlled. In a further research,

they could be include in the analyses to decrease the number of bias.

6. Analysis and Findings

6.1 Descriptive statistics and correlations

The descriptive statistics and Pearson correlations between independent, dependent and

moderating variables are reported in table 3. The table shows a significant correlation

between the independent and dependent variable. Indeed, the correlation coefficient

between the perceived CSR and the job satisfaction is 0.752 with a high significance. Any

correlation coefficient above 0.6 is considered as high (Churchill 1991). Consequently,

the hypothesis 1 is confirmed. The employee’s job satisfaction is positively related to the

perceived CSR activities of the firm. The other correlations are below 0.6 and insignificant.

Table 1 Descriptive statistics and Pearson correlations (n=79) _____________________________________________________________________________________

Mean Standard Deviation

1 2 3 4

1.Perceived CSR 3.694 1.147 1 2.Job Satisfaction 3.633 1.074 0.752** 1 3.Power Distance 2.796 1.173 0.144 0.262* 1 4.Culture Orientation 2.818 1.090 0.012 -0.09 0.029 1

_____________________________________________________________________________________ ** Correlation is significant at the 0.01 level *Correlation is significant at the 0.05 level

6.2 Hypothesis tests results

We performed hierarchical moderated multiple regression to test the impact of the

moderating variables on the relationship of perceived CSR and job satisfaction. The

results are presented in Table 2.

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The perceived CSR explains 0.560 of the job satisfaction (model 1). The Beta coefficient

shows that it is a positive relationship. The significance of this relationship is 0.000.

According to the results, the culture orientation has an impact on the relationship between

the employee’s job satisfaction and the perceived CSR activities of the firm. This

moderating variable explains 0.564 of the relationship between the independent and

dependent variable (model 2). However, the beta coefficient shows that it is a negative

relationship. We do not have enough significance to confirm that the power distance has

an impact on the relationship between the independent and dependent variables.

Table 2 Regression of Perceived CSR and standard coefficients

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6

Perceived CSR

0.752*** 0.753***

0.718***

0.729***

0.735***

0.714***

Culture Orientation

-0.099 -0.104

-0.094

Power Distance

0.157* 0.152*

0.115

Perceived CSR*Culture Orientation

-0.234** -0.243**

Perceived CSR*Power distance

0.030 0.088

N 79 79 79 79 79 79 R2 0.565 0.575 0.628 0.589 0.590 0.652 Adj- R2 0.560 0.564 0.614 0.579 0.574 0.628 F value 100.158*** 51.432*** 42.288*** 54.552*** 36.016*** 27.312***

†: P<.10; *: p<.05; **:p<.01; ***: p<.001

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Fig. 1. Interaction effect between the culture orientation and the relationship of perceived CSR on the job

satisfaction.

Fig. 2. Interaction effect between the power distance Interaction and the relationship of perceived CSR on

the job satisfaction.

The hypothesis 1 has been proved. It means that the relationship between the perceived

CSR of his company is positively related with his job satisfaction. For example, an

employee would have a better job satisfaction if he considers that his company is socially

responsible.

1

1,5

2

2,5

3

3,5

4

4,5

5

Low Perceived CSR High Perceived CSR

Low

Individualism

High

Individualism

1

1,5

2

2,5

3

3,5

4

4,5

5

Low Perceived CSR High Perceived CSR

Low Power

distance

High Power

distance

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The hypothesis 2 has been supported. The beta is negative which means that an

employee with a high level of individualism has a weaker relationship between the

perceived CSR and the job satisfaction. In this perspective, we can think that an employee

with high collectivism values will have a stronger relationship between the perceived CSR

and his job satisfaction. Further research would be necessary to confirm this hypothesis.

While he two first hypothesis have been supported, there is no sufficient evidence to

support hypothesis 3. However, the direction was correct as the coefficient is positive.

7. Discussion

The objective of the research is to analyze the impact of the perception of the employees

on the CSR activities of their firm on the job satisfaction. The existing research on

corporate social responsibility discusses the effects of it on the executives, the firm itself

and the consumers. Some studies have also already been conducted on the effects of

CSR on the employees. Mueller and his colleagues (2012) conducted a study about the

impact of CSR on the affective commitment of the employees. The findings of the

empirical study of Galbreath (2007) show that CSR reduces employee turnover.

Employee turnover is strongly related to employees’ satisfaction (Johnston, et al. 1988).

However, the relationship between the perceived CSR and the job satisfaction has not

been studied recently. It constitutes a gap in this literature field. For the purpose of this

research, I extended the study by adding two dimensions from Hofstede as moderating

variables.

7.1 Main Arguments and Findings

The findings show that there is a strong positive relationship between the perceived CSR

and the job satisfaction of employees. The more an employee has a positive perception

on the CSR activities of its firm, the more he will be satisfied in his workplace. The results

of this study also show that the relationship between the employee’s job satisfaction and

the perceived CSR activities of the firm is weaker for an employee with individualism

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culture values. It means that an employee with low individualistic values has a stronger

relationship between his perceived CSR and his job satisfaction. Finally, the study did not

come to the conclusion that the level of power distance of an employee affects the

relationship between the employee’s job satisfaction and the perceived CSR activities of

the firm.

7.2 Research Implications

The conclusions of this study has implications for managers, in any type of businesses.

It can contributes to the development of CSR in organizations as employees are more

satisfied with their job when the company has a good corporate responsibility. From a

management point of view, this study suggests that firms should invest in CSR as it brings

a higher degree of satisfaction among the employees. It has been proved that employees

with a high job satisfaction are more effective (Arvey, et al. 1989). This research also

advance a new dimension to this relationship by bringing an individual cultural perspective.

It suggests that the culture orientation of an employee has an impact on the relationship

between the perceived CSR and the job satisfaction. In this perspective, a firm that

accords more importance to CSR should hire employees with high collectivism values. In

the same idea, firms with minimal CSR should consider hiring individuals with strong

individualistic values.

8. Limitation and Future Research Direction

Several limitations have been identified for this study. The time has been the biggest

constraint and created different limitations.

First of all, this study has limitations in terms of sampling. It took a long time to receive

the data, which consisted of 79 respondents out of 250. The sample comes from a specific

workplace which is an oil and gas company. Most of the respondents are from the same

level in the organization and all have similar positions. It does not allow the study to

determine the variations from different workplaces and employment titles.

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Secondly, like in most of the quantitative empirical research (Cui et Jiang 2012), this study

has limitations related to the significance of the relationships. As a consequence of the

first limitation, the reliability has not been tested which makes the study less credible. As

mentioned previously, with more time, I could have analysed the controllable variables

and tested the reliability of each variable which is important in any quantitative research.

Thirdly, this study has constraints in its measurement of variables. As an example, there

was only six items in the questionnaire about the perceived CSR. One statement was

about environment, two were about community investment, one was about social

responsibility towards the employees, one was about economy and one was a general

statement. With those six statements it is hard to actually find out if an employee has a

good perception of the CSR activities of the firm. For example, if a respondent strongly

disagrees with the environment statement but strongly agrees for the statements about

social responsibility, the results can be biased if, for this person, the environment is the

most important issue. The culture orientation has limitations as well. We decided to

conduct the study on the individualism level instead of collectivism. The statements were

measuring the level of individualism only. Answering the statements with 5 meant that the

respondent strongly agreed and, consequently, was individualistic. We can suppose that

answering 1 meant that the individual was collectivism. However, the questionnaire to

measure collectivism are slightly different that the one to measure individualism. In this

perspective, it would be interesting to conduct a similar study with statements measuring

the collectivism level.

Further research could be made with a bigger sample to have more significant results. It

would be important to analyse the reliability of each variable and analyse the control

variables. It could also be interesting to conduct a similar study in different workplaces to

see if the results are comparable. Indeed, this study has been conducted in an oil and

gas company. Perhaps different results would come up from employees in a bank or in a

school for examples. It is indeed too early to generalize our findings. Moreover, only two

dimensions of culture of Hofstede have been integrated to this research. It could be

interesting to investigate on the other dimensions such as masculinity versus femininity

or long-term versus short-term orientation.

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Acknowledgements

I am grateful for the help provided by professor Fuming Jiang. I also want to thanks the

oil and gas company located in Perth who agreed to send questionnaires to its employees.

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Appendix I

Questionnaire Presented by Annie-Pierre Fortier

Postgraduate Student in International Business at Curtin University

Important notice:

This questionnaire will be used for a course work assignment purpose only. It will not be published. All the information and data provided will be treated strictly confidential. No individual information will be identified from the report. The findings will be reported in an aggregated form.

The respondents are completely voluntary for participating this survey for the purpose of completing an assignment. Respondents can withdraw their participation at any point of time.

Position Title:

No of year of employment in this organization:

Circle the accurate answer

Age 1. 20-25; 2. 26-30; 3. 30-35; 4. 36-40; 5. 41-45; 6. 46-50; 7. 51-55; 8. 56-60; 9. 61-65; 10. 66-over

Gender: 1. Male; 2. Female

For each statement listed below, circle the number

to the right that best represents your answers.

Use the rating scale to select the right number

Variables

Scale

Strongly Strongly

Disagree Agree

1. In most situations, managers should make decisions without consulting their subordinates

1 2 3 4 5

2. My company is maintaining a good reputation/positive image in public

1 2 3 4 5

3. Winning is everything 1 2 3 4 5

4. Family members should stick together, no matter what sacrifices are required.

1 2 3 4 5

5. I have the tools and resources to do my job well. 1 2 3 4 5

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6. My company does enough to support cultural and charitable initiatives and campaigns

1 2 3 4 5

7. A company’s rules should not be broken – not even when the employee thinks it is the company’s best interest

1 2 3 4 5

8. Parents and children must stay together as much as possible 1 2 3 4 5

9. To me, pleasure is spending time with others. 1 2 3 4 5

10. The well-being of my coworkers is important to me. 1 2 3 4 5

11. It is my duty to take care of my family, even when 1 have to sacrifice what I want.

1 2 3 4 5

12. My company is a fair market participant 1 2 3 4 5

13. Employees should not express disagreements with their managers

1 2 3 4 5

14. I feel encouraged to come up with new and better ways of doing things.

1 2 3 4 5

15. When a customer is dissatisfied, I can usually correct the problem to their satisfaction.

1 2 3 4 5

16. On my job, I have clearly defined quality goals. 1 2 3 4 5

17. Competition is the law of nature 1 2 3 4 5

18. My job makes good use of my skills and abilities. 1 2 3 4 5

19. It is important to me that I respect the decisions made by my groups.

1 2 3 4 5

20. It is important that I do my job better than others. 1 2 3 4 5

21. I feel good when I cooperate with others. 1 2 3 4 5

22. I rather depend on myself than others. 1 2 3 4 5

23. My company does enough towards protecting the environment

1 2 3 4 5

24. I understand why it is so important for my company to value diversity (to recognize and respect the value of differences in race, gender, age, etc.)

1 2 3 4 5

25. If a coworker gets a prize, I would feel proud. 1 2 3 4 5

26. I have the tools and resources to do my job well. 1 2 3 4 5

27. My personal identity, independent of others, is very important to me.

1 2 3 4 5

28. I rely on myself most of the time; I rarely rely on others. 1 2 3 4 5

29. I often do "my own thing." 1 2 3 4 5

30. My supervisor’s manager visibly demonstrates a commitment to quality.

1 2 3 4 5

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31. When another person does better than I do, I get tense and aroused.

1 2 3 4 5

32. My work gives me a feeling of personal accomplishment. 1 2 3 4 5

33. Once a top-level executive makes a decision, people working for the company should not question it

1 2 3 4 5

34. Employees who often question authority sometimes keep their managers from being effective

1 2 3 4 5

35. Senior managers visibly demonstrate a commitment to quality. 1 2 3 4 5

36. Employees should not express disagreements with their managers

1 2 3 4 5

37. The Company does an excellent job of keeping employees informed about matters affecting us.

1 2 3 4 5

38. In work-related matters, managers have a right to expect obedience from their subordinates

1 2 3 4 5

39. Managers should be able to make the right decisions without consulting with others

1 2 3 4 5

40. I am satisfied with the way my company is taking responsibility for its employees

1 2 3 4 5

41. I am satisfied with the opportunity to get a better job in this company 1 2 3 4 5

42. I am satisfied with the information I receive from management on what’s going on in the company

1 2 3 4 5

43. I am satisfied with the way my company manages social responsibility

1 2 3 4 5

44. I am satisfied with my involvement in decisions that affect your work

1 2 3 4 5

45. Considering everything, I am satisfied are you with my job 1 2 3 4 5

46. I am satisfied with the information I receive from management on what is going on in your division

1 2 3 4 5