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Journal of Education for Business
ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Using a Corporate Code of Ethics to Assess
Students' Ethicality: Implications for Business
Education
Obeua Persons
To cite this article: Obeua Persons (2009) Using a Corporate Code of Ethics to Assess Students' Ethicality: Implications for Business Education, Journal of Education for Business, 84:6,
357-366, DOI: 10.3200/JOEB.84.6.357-366
To link to this article: http://dx.doi.org/10.3200/JOEB.84.6.357-366
Published online: 07 Aug 2010.
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ccountingdebaclesduetohighly unethicalconductbytopexecu-tives of well-known corporations such asEnron,WorldCom,andTycohaveled tothepublicoutcryforbetterbusiness ethics. In response to this outcry, the U.S. Congress and President George W.BushenactedintolawtheSarbanes-OxleyActof2002(2002),Section406,
thatrequirespubliclytradedcompanies to disclose whether they have adopted a code of ethics that applies to front-line employees and senior executives. IncompliancewiththeSarbanes-Oxley Actof2002,in2003theNYSE(2009) and the NASDAQ (2009) issued new corporategovernancerulesthatrequire theirlistedcompaniestoadoptanddis-close a code of business conduct and ethics. These regulations also require public companies to have enforcement mechanisms for the code in place and areupdatedannually.
Therefore,itisimportantthatbusiness students are familiar with a corporate code of ethics, because they will soon enter the business world and become ourfuturebusinessleaders.Forbusiness schools to effectively expose students toacorporatecodeofethics,educators need to be aware of business students’ behavioral intentions, which may be in violation of such code. The present study aimed to assess such students’ behavioralintentionusinganumberof scenariosdirectlylinkedtoacorporate code of ethics. In the present study, the termbehavioral intention refers to whether the person would behave in a
certain ethical or unethical manner. I usedadichotomousvariableinthepres-ent article because, from a corporation viewpoint,anemployee’sconductisin compliancewiththecode(beingethical) orinviolationofthecode(beingunethi-cal).Ifocusedonbehavioralintention, asopposedtoethicalperceptionorjudg-ment (a personal conclusion about the ethicality of an act), because intention ismoredirectlylinkedtoanactionthat studentswouldlikelytakewhenfacing anethicaldilemma.Inotherwords,the capabilityofethicalperceptiondoesnot guaranteeanethicalaction.
In addition, the present study inves-tigatedeightfactorsthatcanpotentially affect such intention. These factors are gender, accounting major, culture, full-time work experience, part-full-time work experience,accountingworkexperience, thenumberofethicscoursestaken,and the number of workplace ethics train-ings.Manypriorstudieshaveexamined the effects of gender, major, and cul-ture on ethical judgment and behavior-al intention. Only a handful of studies have investigated the effects of work experience,thenumberofethicscourses taken,andthenumberofworkplaceeth-ics trainings. In particular, Su (2006) called for future studies to examine the effectsofworkexperienceandeducation onethicaldecision-making.Priorstudies also examined each individual ethics-influencing factor separately, whereas the present study is the first to investi-gatethesefactorssimultaneouslyusinga logisticregressionanalysis.
UsingaCorporateCodeofEthicsto
AssessStudents’Ethicality:Implicationsfor
BusinessEducation
OBEUAPERSONS RIDERUNIVERSITY
LAWRENCEVILLE,NEWJERSEY
A
ABSTRACT.Theauthorusedacorporatecodeofethicsasaroadmaptocreate18 scenariosforassessingbusinessstudents’ ethicalityasmeasuredbytheirbehavioral intention.Usingalogisticregressionanaly-sis,theauthoralsoexamined8factorsthat couldpotentiallyinfluencestudents’ethi-cality.Resultsindicate6scenariosrelated to5areasofthecodethatdeservespecial attentionandincreasingcoursecoverage. These5areasofconcernare(a)failureto reportunethicalbehavior,(b)improperuse ofcompanyassets,(c)conflictofinterest, (d)inaccurateaccountingrecordsbywayof channelstuffing(offeringadeepdiscount tocustomerstooverbuy),and(e)trading oninsideinformation.Regressionanalysis resultssuggestthatfemalegender,account-ingmajor,full-timeworkexperience,and thenumberofworkplaceethicstrainings haveapositiveinfluenceonstudents’ethi-cality.Theseresultsshouldhelpeducators andcorporateethicstrainersdirectmore attentiontostudentsorentry-levelperson-nelwiththesecharacteristics.
Keywords:corporatecodeofethics,ethics courses,ethicstraining,students’ethicality, workexperience
Copyright©2009HeldrefPublications
The findings of the present study should provide insight to educators regarding specific areas of a corporate codeofethicsthatdeservespecialatten-tion and higher course coverage. The findings should also help educators to direct their attention to students with specifictraitsorcharacteristicstoeffec-tively improve students’ ethicality. In linewitheducators,corporationscould usethesefindingstoimprovetheireth-ics-training program by placing more emphasisonissueswithahighpercent-ageofstudents’unethicalresponses.
CorporateCodeofEthicsand QuestionnaireDevelopment
No study has investigated students’ behavioral intention using a real-world corporatecodeofethicsasaroadmap for developing questions or scenarios. Given the strong emphasis of the Sar-banes-Oxley Act of 2002 (2002) on improving corporate ethics disclosure andenforcement,itiscrucialtoexpose businessstudentstoacorporatecodeof ethic,andtousethecodetohelpcreate scenarios for assessing students’ ethi-cality.A corporate code of ethics typi-callycoversnineareas.1Theseareasare
inaccordancewiththeSarbanes-Oxley Actof2002andtheNYSE(2009)and the NASDAQ (2009) ethics require-ments.2Ipresentshortethicsscenarios
that I created, each with a question requiring ayesorno answer, for each area of the code. These scenarios are based on accounting issues presented in textbooks, suggested by accounting alumniwhoareCPAsorcertifiedinter-nalauditors,oradaptedfromreal-world articles published in business periodi- cals(allofwhicharebasedontheGen-erallyAcceptedAccountingPrinciples). Thereareatotalof18scenariosforthe following9areas.
AccurateAccountingRecords
All business records must be clear, truthful,andaccurate.Thisincludessuch dataasquality,safety,personnel,andall financial records. Misrepresenting facts orfalsifyingcompanyrecordsisaserious offense.Thefollowingarescenarios:
Scenario 1: Will you honor your boss’s request to sign and submit a company purchaseorderforacomputergame(cost, $19.95)thathewantstogivetohisson?
Scenario 2: Will you honor your boss’s requesttosignandsubmitacompanypur-chaseorderforacomputer(cost,$1,995) thathewantstogivetohisson?
Scenario3:YouaretheCEOofafirmthat usesfreeon-boardshipping-pointtermfor all sales contracts. This means sales can be properly recorded when products are loadedontodeliverytrucks.Totalsalesjust onedaybeforetheDecember31year-end are 3% below the target sales. There are two large customer orders which amount to5%ofthetargetsales.Theseordersare scheduledforshipmentonJanuary2next year.Willyoutrytorecordsalesofthese orders in the current year by asking the warehousemanagertofulfilltheseorders byDecember31(i.e.,loadingproductsper these orders onto deliver trucks by mid-nightofDecember31)?
Scenario4:AstheCEOofacompany,you areconcernedthatsalesthisyearmaybe muchbelowthetargetsales.Willyouoffer your wholesale customers an unusually big discount to induce them to buy more productsthantheycanpromptlyresell?
ConflictofInterest
Employeesmustmakebusinessdeci-sions and actions on the basis of the best interests of the company and its stakeholdersandmustnotbemotivated by personal considerations or relation-ships. For example, relationships with prospective or existing suppliers, con-tractors, customers, competitors, or regulators must not affect employees’ independent and sound judgment. The followingisascenario:
Exceptin connection with the per-formance of their duties,employees areprohibitedfromdisclosingorusing confidential or proprietary information outside the company, during or after
employment,withoutcompanyauthori-for all deliveries to his customers. Will youprovideyoursisterwiththenameand addressofcustomersofhercompetitor?
ProperUseofCompanyAssets
Protecting company assets against loss,theft,andmisuseiseveryemploy-ee’sresponsibility.
Company’s equipment, vehicles, tools, and supplies are to be used for conducting company business. They may not be used for personal benefit. Thefollowingarescenarios:
Scenario 1: After work hours or during lunch break, will you use your employ-er’scomputerforpersonalpurposes(e.g., sendingpersonale-mailorsearchingfor thebestdealforyourfamilyvacation)?
Scenario2:Duringworkhours,willyou use your employer’s computer for per-sonalpurposes?
Scenario 3: Will you use your employer’s copymachinetocopyyourpersonalitems?
Scenario 4: Your company gave you a corporatecreditcardtopayforbusiness lunch or dinner with the company’s cli-ents.Willyouuseyourcompany’scredit cardtopayforyourfamilydinner?
ComplianceWithLaws
Employees must comply with laws and regulations wherever a company doesbusiness.
ForeignCorruptPracticesAct(1977) prohibits U.S. firms and their workers oragentsfrombribingforeignofficials. Thefollowingarescenarios:
Scenario1:Yourcompanyrelocatedyou toacountrywhereitiscommontobribea policemanforjust$10toavoidtheticket for a minor traffic law violation such as speedingorrunningthelight.Theticket must be paid in person at a local police station and the whole process can take morethan1hr.Youareinahurrytogo toabusinessmeetingwhenapoliceman stopsyouforspeeding.Willyoumakea $10briberytothepoliceman?
Scenario 2:You are a partner to a joint venturewithaChinesebusinessman.The jointventureisabouttobeauditedbythe Chinese tax authority and may have to payafewmilliondollarintaxunderpay-mentandpenalty.YourChinesebusiness partnersuggests$1,000briberytothetax auditortoavoidbeingaudited.Hestates
thatitisnotuncommoninChinatobribe ataxauthorityandthatheusedtodoitin hispreviousjointventure.Willyouagree tomakethe$1,000bribery?
CompetitionandFairDealing
Employees must not use any illegal orunethicalmethodstogathercompeti-tiveinformation.
The Federal Trade Commission Act (1914) prohibits misrepresentations of allsortsthataremadeinconnectionwith salesincludingfalseormisleadingadver-tisement.Thefollowingisascenario:
Scenario1:YouaretheCEOofafirmthat makes and sells dinnerware. The dinner-wareisadvertisedas100%leadfree,and thisisthemainsellingfeatureoftheprod-uct.Itrecentlycametoyourattentionthat themostpopularlineofthedinnerwarehas a small trace of lead (within the required safetylevel).Willyourecalltheproduct?
TradingonInsideInformation
Using inside material information, which is not available to the public fortradingortippingotherstotradeis unethicalandillegal.Thefollowingare scenarios:
Scenario 1: You overhear your boss’s phone conversation that your com-pany will soon have to restate down-wardearningsinthepast3years.This restatement will likely lead to a big decline in the company’s stock price. Willyouimmediatelysellthecompany stock that you own before a release of thisnewstothepublic?
Scenario 2: Same situation as the afore-mentioned except that you do not own thecompanystock.Willyoutrytoprofit fromtheimminentdeclineinstockprice bybuyingaputoptiononthestockbefore areleaseofthisnewstothepublic?
AntinepotismPolicy
To reduce favoritism or the appear- anceoffavoritismandtopreventfam-ily conflict from affecting the work-place, an employee’s relative is not permittedtoworkasasupervisorora subordinate of the employee.The fol-lowingisascenario:
Scenario 1:Your niece (with a different last name from yours) applied for an internalauditorposition.Shehas5years of work experience in internal auditing.
Theothercandidatehas10yearsofinter- nalauditingexperienceandthesameedu-cation background as your niece.As the director of the internal auditing depart-ment,willyouhireyournieceinsteadof theothercandidate?
ReportingIllegalandUnethical Behavior
Employees have a duty to promptly reportviolationsofacorporatecodeof ethics by way of an anonymous phone hotline or to an appropriate company representative (e.g., chief compliance officerorchairpersonofanauditcom-mittee).Inaddition,acompanyusually requires employees to certify that they have complied with all areas of the code.Thefollowingarescenarios:
Scenario1:Yourclosefriendandcowork-er confided with you that it is the first timethatheusedthecompanycreditcard to pay for his family dinner because he forgot his personal credit card.You are the only one who knows this. Will you reportyourfriendtothecompanybyway oftheanonymousphonehotline?
Scenario2:Yourclosefriendandcowork-er confided with you that he has been usingthecompanycreditcardtopayfor
According to a corporate code of ethics, ano answer would be ethical for all scenarios except for the com-petition and fair dealing scenario, and the reporting-illegal-and-unethical-behaviorscenarios,whereayesanswer would be ethical.A questionnaire also included nine demographic questions and one cultural-screening question. The accounting department’s advisory board members, who were corporate executivesorpartnersofpublicaccount-ingfirms,reviewedthequestionnaire.I have incorporated their comments into thequestionnaire.
LiteratureReviewand HypothesisDevelopment
The present study has nine hypoth-eses.Thefirsteighthypothesesarefor
the eight factors potentially affecting students’ behavioral intention toward ethics issues covered by a corporate codeofethics.Theninthhypothesisis fortestingamoral-intensityeffect.
Gender
The gender socialization approach (Kohlberg, 1984) assumed that men andwomenhavedistinctivelydifferent valuesandtraits,therebycreatingdif-ferentmoralorientationsthatresultin different decisions and practices. Gil-ligan(1982)positedthatwomenframe moral questions as problems of care, involving empathy and compassion, whereasmenframemoralquestionsas problemsofjustice,rights,andfairness. Betz,O’Connell,andShepherd(1989) posited that men are more concerned with money and advancement, and womenaremoreinterestedinrelation-ships and helping people. The gender socialization approach suggested that men and women respond differently to the same set of conditions (Kohl-berg). Men tend to seek competitive success and are more likely to break rules.Womenaremorelikelytoadhere to rules, because they are concerned aboutdoingtaskswellandhavinghar-moniousrelationships.Therehavebeen many studies on gender differences regarding college students’ ethicality. Althoughsomestudieshavenotdetect-ed any gender differences among stu-dents (e.g., McCuddy & Peery, 1996; Sikula & Costa, 1994; Stanga & Tur-pen,1991),themajorityofstudieshave shown that female students are more ethical than are male students (e.g., Albaum & Peterson, 2006; Ameen, Guffey,&McMillan,1996;Betzetal.; Cohen,Pant,&Sharp,1998;Libby& Agnello, 2000; Malinowski & Berger, 1996; Ruegger & King, 1992). This gender difference is also documented among students in foreign countries suchasUkraine(Roxas&Stoneback, 2004), New Zealand (Okleshen & Hoyt, 1996), and England (Whipple &Swords,1992).Therefore,Ipropose the following hypothesis, which rep-resents my review of the literature on gendersocialization:
Hypothesis1(H1):Femalestudentsare moreethicalthanmalestudents.
Major
Studentsmayself-selectintoanaca-demic major on the basis of their per-sonalitytypes.Accountingmajorsseem tobemorewillingtoadheretorulesand havestrongerdesirestobeaccuratethan dootherbusinessmajors.Manley,Rus-sell,andBuckley(2001)suggestedthat accountingmajorsmaybemoreethical thanotherbusinessmajorsbecausethe publicandtheregulatorssuchastheSEC demand that the accounting profession abidebyrulesandstandards,particular-ly the Generalabidebyrulesandstandards,particular-ly Accepted Accounting Principles, which are the backbone of an accounting curriculum. Fulmer and Cargile(1987)reportedthataccounting majors had higher ethical perception thandidotherbusinessmajors.Cohenet al.(1998)foundthataccountingmajors were less likely to perform question-able actions than were other majors. ArlowandUlrich(1983)attributedthe higher ethicality of accounting majors to accounting majors receiving addi-tional trainings in accounting ethics in theaccountingcurriculum.Therefore,I proposethefollowinghypothesis:
H2:Accountingmajorsaremoreethical thanotherbusinessmajors.
Culture
Carroll (1996) stated that “ethics is the set of moral principles that drive behavior. . . . Values are the individu-al’s concepts of the relative worth, util-ity or importance of certain ideas. . . . One’svalues,therefore,shapeone’seth-ics” (pp. 133–134). To the extent that culture affects the individual’s values, researchersmightexpectthatdifferences in actions and motivations in identical settingswouldvarybytheculturalback-groundoftheindividual.Ahmed,Chung, and Eichenseher (2003), Goodwin and Goodwin(1999),PhauandKea(2007), and Su (2006) reported significant dif-ferencesinethicalbeliefsandtolerances for unethical behavior among their col-lege-student participants with different cultural backgrounds. However, there is no conclusive evidence on whether American students are always more or less ethical than those from other cul- tures.Thisdiscussionleadstothefollow-inghypothesis:
H3:Americanstudentsandinternational students respond differently to the samebusinessethicsscenarios.
Full-TimeWorkExperience
Studiesconcerningarelationbetween years of work experience and ethical behaviorreportedmixedresults.Callan (1992), Dubinsky and Ingram (1984), Reiss and Mitra (1998), and Serwinek (1992) have found no significant rela-tion between length of employment and ethical behavior in an organiza-tion. Alternatively, Kidwell, Stevens, and Bethke (1987) reported a positive relation between years of employment and ethical beliefs. Ruegger and King (1992) found through class discussion thatstudentswhohadworkedforlong periodsoftimeappearedtobemoreeth- icalthanthosewithlimitedworkexpe-rience.Weeks,Moore,andLongnecker (1999) found that practitioners in later career stages displayed higher ethical judgments than those in earlier careers stages,whichsupportsthepositiverela-tion between years of full-time work experienceandtheindividual’sethical-ity.Inanabsenceofanegativerelation, Iproposethefollowinghypothesis:
H4: Students with more full-time work experiencearemoreethicalthanthose withlessfull-timeworkexperience.
AccountingWorkExperience
In addition to a corporate code of ethics, anaccountingprofessionisgov-erned by its own code of professional ethics. The ethicality of the profession has received more attention from the public and regulators because of the accountingfailuresatEnronandWorld-Com.Therefore,Iproposeahypothesis similartoH4:
H5:Studentswithmoreaccountingwork experiencearemoreethicalthanthose withlessaccountingexperience.
Part-TimeWorkExperience
Virtually all college students now haveoroncehadpart-timeemployment. Therefore, it is worthwhile to exam-ine a relation between part-time work experience and students’ ethicality. In an absence of a study that examines
sucharelation,Iproposethefollowing hypothesis,whichissimilartoH4:
H6: Students with more part-time work experiencearemoreethicalthanthose withlesspart-timeworkexperience.
College-LevelEthicsCourses
Many critics have suggested that a lackofethicaleducationinbusinesscur-ricula may be responsible for turning out managers with little ethics values and that education can be a powerful toolinshapingstudents’judgmentabout whatisrightorwrong(Kohlberg,1984; Rest, 1988). In response, theAmerican AssemblyofCollegiateSchoolsofBusi-ness(AACSB)hassuggestedthatethics be taught in business schools. Others have argued that by the time an indi-vidual reaches adolescence, his or her ethicalityhasbeenformedandcannotbe changed by education (Rohatyn, 1988). Arlow (1991), Borkowski and Ugras (1992), Davis and Welton (1991), and Martin(1981,1982)havesupportedthis viewpoint that ethics education does not significantly affect students’ abil-ity to correctly assess ethical scenarios. Alternatively, Luthar, DiBattista, and Gautschi (1997), Rest (1988), Salmans (1987),andSteven,Harris,andWilliam-son (1993) have documented a positive influenceofethicseducationonstudents’ ethicality. In addition, Weber’s (1990) literature review concluded that there was an improvement in students’ ethi-calawarenessandreasoningskillsright after taking an ethics course (Arlow & Ulrich, 1983; Boyd, 1981, 1982; Stead & Miller, 1988), but this improvement disappearedwhenmeasured4yearslater (Arlow & Ulrich, 1985). In an absence ofafindingthatethicseducationlowers students’ethicality,Iproposethefollow-inghypothesis:
H7:Studentswhotookmorecollege-level ethicscoursesaremoreethicalthanstu-dentswhotookfewerethicscourses.
WorkplaceEthicsTraining
Beu, Buckley, and Harvey (2003) stated that training could be used to increase cognitive moral development anddecreaseinappropriatecompetitive desire to win at any cost as a means of enhancing self-worth feelings, with
attendantorientationsofmanipulation, aggressiveness, and deceit of others. Because of the enactment of the Sar-banes-OxleyActof2002(2002),most corporationshaveprovidedethicstrain-ing to their employees. For example, Raytheon (Waltham, MA) makes eth-ics training a requirement for every employee, even the CEO. Regardless of the rapidly increasing popularity of workplace ethics training, an assess-mentoftheeffectivenessofworkplace ethics training has received only lim-ited research attention, most of which is descriptive and focuses on specific casestudiesoranecdotes.Delaneyand Sockell’s (1992) exceptional large-scale survey suggested that workplace ethics training has a positive effect on managers because the training edu-cates managers on how to react when confronted with workplace dilemmas. Myers(2003)suggestedthatcompanies schedule regular refresher ethics train-ing courses for all employees, imply-ing that ethics trainimply-ing is perishable because people tend to forget and that thepositiveeffectismoreevidentwhen apersonhasmorefrequentethicstrain- ing.Thisdiscussionleadstothefollow-inghypothesis:
H8 :Studentswithmoreworkplaceeth-ics training are more ethical than thosewithlesstraining.
MoralIntensity
Jones (1991) suggested that charac-teristics of the moral issue itself (moral intensity) are important determinants of ethical decision-making and behavior. Moral intensity is increased if the con-sequences of an action create greater harmorgreaterbenefit.Beuetal.(2003), Singer and Singer (1997), and Morris andMcDonald(1995)foundthatmoral intensity of an ethics issue affects stu-dents’ethicalperception.Scenariossuch asthoseaboutaccurateaccounting(Sce-nario 1), proper use of company assets (Scenario1),compliancewithlaws(Sce-nario 1), trading on inside information (scenario 1), and reporting illegal and unethical behavior (Scenario 1) reflect low moral intensity, whereas scenarios suchasaccurateaccounting(Scenario2), properuseofcompanyassets(Scenario 2), compliance with laws (Scenario 2),
trading on inside information (Scenario 2), and reporting illegal and unethical behavior(Scenario2)reflecthighmoral intensity. The following hypothesis is usefulfortestingmoralintensity:
H9:Studentsrespondmoreethicallyto the high-moral-intensity questions scenarios than to the low-moral-intensityscenarios.
METHOD
Participants
Participantswerebusinessstudents at a private mid-Atlantic university. Business students were the focus because they would soon enter the business world and collectively com-prisethefuturecorporateleaderswho regularly face a number of ethical dilemmas. Participants included day-timeandeveningstudents.Participants completed scenario questionnaires during regular class periods with a business professor in the classroom toprovideinstructionsregardingtheir rights, which included completely voluntary participation and complete anonymity. There were 244 student participants who provided completed andusablequestionnaires.
Ofthese244participants,103(42.2%) were female students, and 141 (57.8%) were male students. In all, 98 students (40.2%) were accounting majors, and 146 students (59.8%) were other busi-ness majors.An overwhelming majority of 214 students (87.7%) had an Ameri-can cultural background. Full-time work experiencerangedfrom0to30yearswith amedianof0yearsandameanof1.72 years. Part-time work experience ranged from 0 to 13 years with a median of 5 each student, I added coded responses to the18questionnairescenariostodetermine the students’ overall ethicality. Logistic regressionisappropriatewhenthedepen-dentvariableisadichotomousorordinal variable(asinthepresentstudy).Itested
H1 thruH8 simultaneously using the fol-lowing ordered-logistic regression model withtheeightexplanatoryvariables: ETHIC=a+b1GENDER+b2MAJOR
+ b3CULTURE + b4FTWORK + b5ACCWRK + b6PTWORK + b7ETHICEDU+b8ETHICTRAIN.
ETHIC refers to student’s overall ethicality (the total number of ethical responses to the 18 scenarios). GEN-DERrefersto1forfemalestudentand 0formalestudent.MAJORrefersto1 for an accounting major and 0 other-wise.CULTURE refers to 0 if student was born in the United States or came totheUnitedStatesbefore10yearsof age, and 0 otherwise.FTWORKrefers to years of full-time work experience.
ACCWRK refers to years of account-ing work experience.PTWORK refers to years of part-time work experience.
ETHICEDU refers to the number of college-levelethicscoursestaken.ETH- ICTRAINreferstothenumberofwork-placeethicstrainings.
I expected all variables to have a positive coefficient except for CUL-TURE,forwhichthepresentstudyhad noexpectationregardingthesignofits coefficient.Ialsousedasimilarlogistic regression model to examine students’ responsestoeachofthe18scenarios.I testedH9 (moral intensity) by compar-ingthepercentageofethicalresponses ofahigh-moral-intensityscenariowith that of a low-moral-intensity scenario foreachofthefivepairsofscenarios.
RESULTS
Table1presentsstudents’responses to the 18 scenarios grouped by the nine areas of corporate code of eth-ics. For accurate accounting records, anoverwhelmingmajorityofstudents (93.4%) would not honor a boss’s requesttosignandsubmitapurchase
TABLE1.Students’ResponsestoEthicsScenariosFromAreasofCorporateCodesofEthicsandSignificant ExplanatoryVariablesforEachScenario
Ethical Unethical
Areaofcorporatecodeofethics
Responseitem n % n % Significantvariables
Accurateaccountingrecords
Willyouhonoryourboss’srequestofyoutosignand 202 82.8 42.0 17.2 FTWORK*,GENDER†
submitapurchaseorderforhisson’s$19.95gift?
Willyouhonoryourboss’srequestofyoutosignand 228 93.4 16.0 6.6 GENDER†,CULTURE†
submitapurchaseorderforhisson’s$1,995gift?
Willyoutrytorecordsalesinthecurrentyearby 184 75.4 60.0 24.6 (PTWORK*),ETHICTRAIN*
askingthewarehousemanagertopromptlyfulfill FTWORK†,ACCWRK†
next-yearordersinordertomeetthisyear’stargetsales?
Willyouofferyourwholesalecustomersanunusuallybig 128 52.5 116.0 47.5 MAJOR*,FTWORK†
discounttoinducethemtobuymoreproductsthanthey canpromptlyresell?
Conflictofinterest
Asapurchasingdepartmentdirector,will 96 39.3 148.0 60.7 MAJOR**,GENDER**
youacceptasupplier’slunchinvitation? (PTWORK*),FTWORK†,
ETHICEDU†
Confidentialinformation
Willyouprovideyoursisterwiththenameand 198 81.1 46.0 18.9 MAJOR**,(ETHICEDU*)
addressofcustomersofhercompetitor? ETHICTRAIN*
Properuseofcompanyassets
Afterworkhoursorduringlunchbreak,willyouuse 77 31.6 167.0 68.4 FTWORK*,(ETHICEDU**)
youremployer’scomputerforpersonalpurposes?
Duringworkhours,willyouuseyouremployer’s 145 59.4 99.0 40.6 GENDER*,(ETHICEDU†)
computerforpersonalpurposes? Willyouuseyouremployer’scopymachinetocopy 124 50.8 120.0 49.2 GENDER**
yourpersonalitems? Willyouuseyourcompany’screditcardtopayfor 238 97.5 6.0 2.5 (PTWORK†)
yourfamilydinner?
Compliancewithlaws
Willyoumake$10briberytothepolicemaninaforeign 140 57.4 104.0 42.6 PTWORK†
countrywherebribingapolicemanisverycommon?
Willyouagreetomakethe$1,000briberytotheChinesetax 204 83.6 40.0 16.4 GENDER†
authoritytoavoidbeingauditedperyourbusinesspartner’sadvice? Competitionandfairdealing
Willyourecallthemostpopularproduct,whichwas 195 79.9 49.0 20.1 CULTURE**,(PTWORK*)
advertisedas100%leadfree,buthasasmalltrace MAJOR*,GENDER*
ofleadwithintherequiredsafetylevel? Tradingoninsideinformation
Willyousellyourcompany’sstockthatyouownbeforea 134 54.9 110.0 45.1 ACCWRK†
releasetothepublicofthenegativenewsaboutthecompany?
Willyoutrytoprofitfromtheimminentdeclineinstock 197 80.7 47.0 19.3 ACCWRK**,
pricebybuyingaputoptiononthestockbeforeapublic GENDER*,CULTURE†
releaseofthisnews? Antinepotismpolicy
Willyouhireyournieceinsteadoftheothercandidate? 155 63.5 89.0 36.5 MAJOR**,GENDER*,
ETHICTRAIN*,FTWORK†
Reportingillegalandunethicalbehavior
Willyoureporttothecompanyyourclosefriendwhoused 34 13.9 210.0 86.1 ETHICTRAIN*
thecompanycreditcardtopayforhisfamilydinnerfor (ETHICEDU†)
thefirsttime?
Willyoureporttothecompanyyourclosefriendwhohas 159 65.2 85.0 34.8 GENDER**,
beenusingthecompanycreditcardtopayforhisfamily MAJOR†
dinnerwheneverheeatsout?
Note. Significantvariablesarepresentedintheorderoftheirsignificancelevels.Logisticalregressionanalysiswasused.Variablesinparentheses haveanegativeestimatedcoefficient.GENDER=1forfemale,0formale;MAJOR=1foranaccountingmajor,0otherwise;CULTURE=1 ifstudentwasborninUnitedStatesorcametoUnitedStatesbefore10yearsofage,0otherwise;FTWORK=thenumberofyearsoffull-time workexperience;ACCWRK=thenumberofyearsofaccountingworkexperience;PTWORK=thenumberofyearsofpart-timeworkexperi-ence;ETHICEDU=thenumberofcollege-levelethicscoursestaken;ETHICTRAIN=thenumberofwork-placeethicstrainings.
†p<.10.*p<.05.**p<.01.
order for a $1,995 gift for his or her son. This is larger than the 82.8% ethical responses to the request with a lower gift value of $19.95. There-fore, this pair of scenarios supports the moral-intensity hypothesis. For the other two scenarios, which are abouttryingtomeettargetsalesusing questionable tactics, 75.4% of stu-dentsprovidedanethicalresponseof notrecordingnext-yearordersasthis- yearsales,and52.5%ofstudentspro-videdanethicalresponseofnotusing channel stuffing or providing a deep discount to customers to overbuy. The scenario about channel stuffing isbasedontheSEC’sinvestigationof Bristol-Myers Squibb’s (BMS) chan-nel stuffing in the 1990s. In the end, BMS restated its earnings downward forseveralperiods,resultinginasub-stantialdeclineinitsstockpriceanda largecorporatedownsizing.Thatonly 52.5% of students responded ethical-ly to this channel-stuffing scenario should concern educators and cor-porate ethics trainers, because if the other47.5%ofstudentswhorespond-ed unethically should become future corporate leaders who condone chan-nelstuffing,theyandtheircompanies willbeintroublewithregulatorsand facemanyadverseconsequences.
Conflict of interest is an even big-ger concern because the majority of students(60.7%)respondedunethically tothescenario.Thesestudentsseemed tothinkthatasapurchasingdepartment director, accepting a nice lunch from a supplier would not create any con-flict of interest (i.e., a bias in favor of thesupplier).Theywerenotawarethat mostcompaniesprohibittheirpurchas-ing personnel from acceptmostcompaniesprohibittheirpurchas-ing gifts of anyformsfromanysuppliers,including alunchinvitation.
For confidential information, a majorityofstudents(81.1%)responded ethically.Properuseofcompanyassets also posed some concern, especially for the first three scenarios. In par-ticular,68.4%ofstudentswouldusean employer’s computer for personal pur-posesafterworkhoursorduringlunch break,and40.6%ofstudentswoulddo that during work hours. Students were notawarethatmanycompaniesmonitor theiremployees’computerusebecause
companies consider using computers for personal purposes as an improper use of company assets, which violates a corporate code of ethics. That more students provided ethical responses to high intensity than to low intensity supports the moral intensity hypoth-esis.Properuseofanemployer’scopy machine resulted in a split vote (i.e., 50.8%wouldnotusevs.49.2%would use an employer’s copy machine for personal purposes).Alternatively, good newswasthatanoverwhelmingmajori-split vote (i.e., 57.4% would not make vs. 42.6% would make a $10 bribery to a policeman in a foreign country). Briberytoaforeignofficial,regardless ofadollaramount,isinviolationofnot onlyacorporatecodeofethicsbutalso the Foreign Corrupt Practices Actof 1977.Alternatively,forthehigh-moral-intensityscenario,the$1,000briberyto theChinesetaxauthorityreceivedethi-calresponsesof83.6%,whichismuch higher than the 57.4% of the ethical responses for the low-moral-intensity scenario.Thishigherpercentageofethi-cal responses to the high-moral-inten-sityscenariomaybeattributabletothe larger dollar amount and a perceived more powerful tax authority compared with a traffic policeman, thereby sup-portingthemoral-intensityhypothesis.
Competition and fair dealing did not seem to prompt much concern because approximately 80% of students would recall the product, which does not con-form to what was advertised. Selling company’sstockbeforeapublicrelease of the negative news also resulted in a roughlysplitvotewith54.9%ofstudents answeringnotothesellingversus45.1% answeringyes.Suchasplitvoteshould greatlyconcerneducatorsandcorporate ethics trainers because it implies that students are not aware that trading on inside information is not only unethi-cal but also illegal. Some students may be aware of this fact but perceive that theyareentitledtoprotectingthemselves fromthefinanciallossandthattheywill
not get caught. Alternatively, the high-moral-intensity scenario involves mak-ingaprofitfromtheinsideinformation, which is deemed to be more unethical. Therefore,80.7%ofstudentswouldnot try to make the profit. This higher per- centageofethicalresponsestothehigh-moral-intensity scenario supported the moral-intensityhypothesis.
Although only 36.5% of students responded unethically to the antinepo-tism policy scenario (i.e., they would hire their niece instead of the other candidate), students should be aware that their actions could create unfair favoritism,whichmayresultinmorale problems among employees who are nottheboss’srelatives.
For reporting illegal and unethical behavior, it is not surprising that only 13.9%ofstudentswouldreporttheirclose friendwhousesthecompanycreditcard topayforhisfamilydinnerforthefirst time, whereas 65.2% of students would report the friend who has been using the company credit card to pay for his familydinnerwheneverheeatsout.This higher percentage of ethical responses to the high-moral-intensity scenario supports the moral-intensity hypothesis. However,thatalargepercentage(86.1%) ofstudentswouldnotreportthefriendin the low-moral-intensity scenario should concern educators and corporate ethics trainers because this first-time stealing ofmoneyfromthecompanybyacredit card may escalate into more frequent stealing as in the high-moral-intensity scenario for which 34.8% of students wouldcontinuetonotreportthefriend. Educators and corporate ethics trainers should thoroughly discuss appropriate actions concerning any friendship-sensitive issues with students or entry-levelpersonnel.
Table1alsoreportssignificantexplan-atoryvariablesfromlogisticregression analysis for each scenario.3 GENDER
ispositivelysignificantin10of18sce-nariosandsignificantforallnineareas of a corporate code of ethics except for confidential information. MAJOR ispositivelysignificantinsixscenarios and for all but three areas (proper use of company assets, compliance with laws, trading on inside information). FTWORKisalsopositivelysignificant insixscenariosbutsignificantforonly
fourofnineareas:accurateaccounting records,conflictofinterest,properuse of company assets, and antinepotism policy. Although PTWORK is signifi-cantinfivescenariosfromfivedifferent areas, it has a negative coefficient in four of five significant areas or sce-narios.Thismeansthatpart-timework experiencedoesnotseemtocontribute positivelytostudents’ethicality.Aplau- sibleexplanationisthatnotallcompa- niesprovideethicstrainingtotheirpart-timeemployees.Similarly,ETHICEDU issignificantinfivescenariosfromfour ethicsareas,withanegativecoefficient in four of five significant scenarios. These four scenarios, which deserve moreattentionandcoveragefromedu-catorsandcorporateethicstrainers,are whether to provide confidential infor-mation on a customer list to a rela-tive,touseanemployer’scomputerfor personalpurposesduringorafterwork hours,andtoreportafriendwhouseda companycreditcardtopayforafamily dinnerforthefirsttime.AlthoughETH-ICTRAIN was positively significant in only four scenarios from four differ-ent areas, it is the only variable with a significantly positive influence over students’ ethical responses to reporting a friend who used a company credit card to pay for a family dinner for the firsttime,whichhadthelowestethical response rate. This implies that work-place ethics training likely emphasizes reporting illegal or unethical behavior. CULTURE was positively significant in three scenarios from three differ-ent areas, with particularly high sig- nificancelevelinthewhether-to-recall-productscenario.Thisisconsistentwith theU.S.cultureofgreateremphasison productsafetyandconsumerprotection thanmanyothercultureshave,especial-lythoseofdevelopingcountrieswhere most international student participants were from. ACCWRK was positively significantinonlythreescenariosfrom twodifferentareas:accurateaccounting records and trading on inside informa-tion. In all, consistent with prior stud-ies,GENDERwasthemostfrequently significantvariable.
Table 2 presents ordered-logisti-calregressionresultsonthestudents’ overall ethicality, ETHIC, which has theminimumvalueof4,themeanand
themedianvaluesof12,andthemaxi-mumvalueof18.Itisgoodnewsthat 7students(6femalestudents,1male student)hadaperfectethicalityscore (18of18).Themeanandmedianval-ues of 12 of 18 also suggest that the majority of students are more ethical than not. Regression results in Table 2are for testingH1 throughH8. Four variableshaveasignificantlypositive coefficient,andarelistedintheorder oftheirstatisticalsignificance:GEN-DER, MAJOR, ETHICTRAIN, and FTWORK. These significant results supportH1,H2,H4, andH8. In other words, female students, accounting majors,studentswithmoreworkplace ethicstraining,andstudentswithmore full-time work experience are more ethicalthanmalestudents,otherbusi- nessmajors,studentswithlesswork-place ethics training, and those with less full-time work experience. The otherfourhypothesesarenotsupport-ed, suggesting that culture, account-ing work experience, part-time work experience, and college-level ethics coursesdonotsignificantlyinfluence
students’overallethicality.Theinsig-nificant result of college-level ethics courses(ETHICEDU)wasinlinewith Arlow and Ulrich’s (1985) findings that college-level ethics courses had no long-term positive influence on students’ethicality.
DISCUSSION
Thepresentstudyusedacorporate code of ethics as a road map to cre-ate 18 scenarios for assessing busi-ness students’ ethicality as measured by behavioral intention. The main motivation of the present study was to make educators become aware of students’ behavioral intention, which may violate the code. Such aware-nessshouldhelpeducatorseffectively exposestudentstothecorporatecode of ethics by placing special empha-sis on problem areas that the pres-ent study documented. In addition to tabulatingstudents’responsestothese scenarios,whichcorrespondedtonine areas of a corporate code of ethics, the study also used a logistic regres-sion analysis to investigate an influ-ence of eight variables on students’
TABLE2.Ordered-LogisticalRegressionResultsofExplanatory VariablesontheStudents’OverallEthicality(N=244)
Expected Estimated Probability Variable sign coefficient SE Z >Z
GENDER + 0.6483 0.2989 2.17 0.015*
MAJOR + 0.6268 0.3100 2.02 0.022*
CULTURE N/A –0.3993 0.4396 –0.91 0.364
FTWORK + 0.0451 0.0308 1.46 0.072†
ACCWRK + 0.0144 0.1658 0.09 0.466
PTWORK + 0.0168 0.0698 0.24 0.405
ETHICEDU + –0.1152 0.1285 –0.90 0.185
ETHICTRAIN + 0.1961 0.1111 1.77 0.039*
Note. GENDER = 1 for female, 0 for male; MAJOR = 1 for an accounting major, 0 otherwise; CULTURE = 1 if student was born in United States or came to United Statesbefore10yearsold,0otherwise;FTWORK=thenumberofyearsoffull-time work experience;ACCWRK = the number of years of accounting work experience; PTWORK=thenumberofyearsofpart-timeworkexperience;ETHICEDU=thenum-berofcollege-levelethicscoursestaken;ETHICTRAIN=thenumberofwork-place ethicstrainings.Waldχ2(235,N=244)=26.06,p<.001.
†p<.10.*p<.05.
ethicality. These variables were gen-der, accounting major, culture, full-timeworkexperience,part-timework experience, accounting work experi-ence, the number of ethics courses taken, and the number of workplace ethicstrainings.Iperformedthelogis-ticregressionanalysisforeachofthe 18 scenarios and for the overall ethi-cality, which was the sum of ethical responsestothe18scenarios.
Results of students’ responses to the 18 scenarios indicated six problem areasinwhichthemajorityorcloseto 50%ofstudentshadunethicalintention: (a) not reporting unethical behavior of a close friend who did it for the first time; (b) using a company computer for personal purposes; (c) accepting a lunch invitation from a supplier who may want a special favor; (d) using a company copy machine for person-al purposes; (e) channel stuffing (i.e., usingabigdiscounttoinducecustom-erstobuymorethantheycanpromptly reselltoreachthetargetsales);and(f) sellinganemployer’sstockonthebasis of inside information. Educators and corporate ethics trainers need to place more emphasis on these six problem areas to make students more aware of the potentially negative consequences ofunethicalbehavior.
The regression analysis for each of the18scenariosindicatedthatgenderis theleadingvariablewithasignificant-ly positive effect on students’ behav-ioral intention, preceding accounting major, length of full-time work expe-rience, and the number of workplace ethicstrainings.Theregressionanaly-sis on the students’ overall ethicality also indicated these four variables as having a significantly positive effect onstudents’ethicality.Thatis,female students, accounting majors, students with more workplace ethics training, andstudentswithmorefull-timework experiencearemoreethicalthanmale students, other business majors, and students with less workplace ethics training or less full-time work experi- ence.Thesefindingssuggestthatedu-catorsandcorporateethicstrainersmay want to allocate special attention to men,nonaccountingmajors,andthose withlessfull-timeworkexperienceor lessworkplaceethicstraining.
The present study had some limita-tions on generalizability, including a nonlargesamplefromonlyoneuniver-sity.Inaddition,Ididnotconsiderthe effects of other demographic factors, such as the student age. However, the age may be proxied by full-time work experience,whichwasexamined.Inall, the present study serves as a starting point for future researchers who may want to further explore an individual’s ethicalityusingacorporatecodeofeth-icsasaroadmapfordesigningasurvey instrument.Futurestudiesmaytrydif- ferentscenariosrelatedtotheninecom-monareasofacorporatecodeofethics because behavioral intention tends to bespecifictothescenario.Culturewas notasignificantvariableinthepresent study, most likely because only 12.3% of the present study’s participants had non-U.S. cultural backgrounds. There-fore, future researchers may want to increasethesamplesizeofinternational students or administer a questionnaire that is based on another country’s cor-porate code of ethics to students from thatforeigncountry.
NOTES
1.Theexplanationofeachofnineareascame from a corporate code of ethics of a real-world company.
2.Apubliclytradedcompanyhasthreeoptions tomakeitscodeofethicspubliclyavailable:(a) filingacopyofthecodeaspartoftheSecurities and Exchange Commission Form 10-K or 20-F, (b) posting the code on the firm’s Web site and statingintheannualreportandForm10-Kor20-FthatthecodeofethicsisavailableontheWeb site,and(c)statingintheannualreportandForm 10-Kor20-Fthatafreecopyofthecodewould beprovidedtoanypersononrequest.
3. The present study also examined correla-tions of the eight explanatory variables before conducting the regression analysis because high correlationscouldcreateamulticollinearityprob-lem, which likely makes estimated coefficients ofhighlycorrelatedvariablesdiffersubstantially
Obeua Persons is an associate professor of accounting with 18 years of teaching experi-ence in financial, managerial, and international accountingatundergraduateandgraduatelevels. Her research interests include business ethics, corporate governance, executive compensation, financial reporting, and international dimensions ofaccounting.
Correspondence concerning this article should be addressed to Obeua Persons, Rider Univer-sity,2083LawrencevilleRoad,Lawrenceville,NJ
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