Business Ethics

• Networking, Corruption, and Subversion

  2015-09-14 03:00:00 AM

  Abstract

  This paper explores the ethics of networking as a means of competition, specifically networking to improve one’s prospects of prevailing in formal competitive processes for jobs or university placements. There are broadly two ways that networking might be used to influence the outcome of some such process: through the “exchange of affect” between networker and selector, and through the demonstration of merit by networker to selector. Both raise ethical problems that have been overlooked but need to be addressed.
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• Formation of Stakeholder Trust in Business and the Role of Personal Values

  2015-09-09 03:00:00 AM

  Abstract

  Declining levels of stakeholder trust in business are of concern to business executives and scholars for legitimacy- and performance-related effects. Research in the area of stakeholder trust in business is nascent; therefore, the trust formation process has been rarely examined at the stakeholder level. Furthermore, the role of personal values as one significant influence in trust formation has been under-researched. In this paper, we develop a contingency model for stakeholder trust formation based on the effects of stakeholder-specific vulnerability and personal values of the trustor. Using a factorial vignette methodology, we find that Schwartz’s (J Soc Issues 50:19–45, 1994) value set interacts with stakeholder roles so that trustworthiness signals of competence and character play differing roles during trust formation. These results inform stakeholder trust research, organizational trust research, and research in personal values. The research also informs managers tasked with rebuilding stakeholder trust in business.
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• Media Bias and the Persistence of the Expectation Gap: An Analysis of Press Articles on Corporate Fraud

  2015-09-09 03:00:00 AM

  Abstract

  Prior research has documented the continued existence of an expectation gap, defined as the divergence between the public’s and the profession’s conceptions of auditor’s duties, despite the auditing profession’s attempt to adopt standards and practices to close this gap. In this paper, we consider one potential explanation for the persistence of the expectation gap: the role of media bias in shaping public opinion and views. We analyze press articles covering 40 U.S. corporate fraud cases discovered between 1992 and 2011. We compare the auditor’s duties, described by the auditing standards, with the description of the fraud cases as found in the press articles. We draw upon prior research to identify three sources of the expectation gap: deficient performance, deficient standards, and unreasonable expectations. The results of our analysis provide evidence that (1) the performance gap can be reduced by strengthening auditor’s willingness and ability to apply existing auditing standards concerning fraud detection; (2) the standards gap can be narrowed by improving existing auditing standards; and (3) unreasonable expectations, however, involve elements beyond the profession’s sphere of control. As a result, the expectation gap is unlikely to disappear given the media’s tendency to bias, with an overemphasis of unreasonable expectations in their coverage of frauds and press articles tending to reinforce the view that the auditor should take more responsibility for detecting fraud, irrespective of whether this is feasible at a reasonable cost. In addition to the primary role of the press in perpetuating the expectation gap, a second reason for continuation of the expectation gap is that the rational auditor will have difficulty in assessing subjective components of fraudulent behavior.
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• Special Issue on Corporate Social Responsibility and Sustainability: An Introduction

  2015-09-08 03:00:00 AM

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• The Impact of Stakeholder Identities on Value Creation in Issue-Based Stakeholder Networks

  2015-09-08 03:00:00 AM

  Abstract

  In this conceptual paper, we draw on social identity theory as a means to bridge individuals’ memberships in social groups with value creation in stakeholder networks defined by a socio-economic issue. To address recent calls for microfoundations of stakeholder theory, we introduce a reconceptualization of stakeholders as social groups to examine how value is defined and interpreted in intergroup processes embedded in an issue-based stakeholder network. We establish a theoretical model of value creation that links individuals’ identification with stakeholder groups to intergroup trust, co-operation, and value creation. Specifically, we argue that the salience of preexisting social identities causes harmful tensions in stakeholder relationships that negatively impact value creation. We then propose that the development of a more inclusive stakeholder identity overcomes these negative intergroup consequences in multistakeholder settings. We discuss the impact on value creation of four stakeholder identity representations based on the salience of specific and superordinate stakeholder groups. The paper concludes with implications of our theoretical model for both research and practice related to value creation in issue-based stakeholder networks.
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• Beyond the Particular and Universal: Dependence, Independence, and Interdependence of Context, Justice, and Ethics

  2015-09-08 03:00:00 AM

  Abstract

  This article reflects on context effects in the study of behavioral ethics and organizational justice. After a general overview, we review three key challenges confronting research in these two domains. First, we consider social scientific versus normative approaches to inquiry. The former aims for a scientific description, while the latter aims to provide prescriptive advice for moral conduct. We argue that the social scientific view can be enriched by considering normative paradigms. The next challenge we consider, involves the duality of morally upright versus morally inappropriate behavior. We observe that there is a long tradition of categorizing behavior dichotomously (e.g., good vs. bad) rather than continuously. We conclude by observing that more research is needed to compare the dichotomous versus continuous perspectives. Third, we examine the role of “cold” cognitions and “hot” affect in making judgments of ethicality. Historically speaking, research has empathized cognition, though recent work has begun to add greater balance to affective reactions. We argue that both cognition and affect are important, but more research is needed to determine how they work together. After considering these three challenges, we then turn to our special issue, providing short reviews of each contribution and how they help in better addressing the three challenges we have identified.
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• European Green Mutual Fund Performance: A Comparative Analysis with their Conventional and Black Peers

  2015-09-07 03:00:00 AM

  Abstract

  We conduct the first comparative analysis of the financial performance of European green, black (fossil energy and natural resource) and conventional mutual funds. Based on a unique dataset of 175 green, 259 black and 976 conventional mutual funds, the investigation contrasts the financial performance of the three dissimilar investment orientations over the 1991–2014 period. Over the full sample period, green mutual funds significantly underperform relative to conventional funds, while no significant risk-adjusted performance differences between green and black mutual funds could be established during the same period. Environmentally friendly investment vehicles display a significant exposure to small cap and growth stocks, while black funds are more exposed to value stocks. Remarkably, the green funds’ risk-adjusted return profile progressively improves over time until no difference in the performance of the green and the conventional classes could be discerned. Further evidence suggests that the green funds are beginning to significantly outperform their black peers, especially over the 2012–2014 investment window.
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• Toward Moral Responsibility Theories of Corporate Sustainability and Sustainable Supply Chain

  2015-09-07 03:00:00 AM

  Abstract

  In the quest to build truly sustainable corporations and supply chains, we propose (a) the moral responsibility theory of corporate sustainability and (b) the moral responsibility theory of sustainable supply chain. Built from morality literature in philosophy, the view of corporations as moral agents in law, and analyses of corporate hypocrisy and its role in an organization’s and its members’ behaviors, our theories show how a truly sustainable corporation and its external supply chain could emerge. At the core, we believe that without a sense of moral responsibility businesses throughout the supply chain will not be truly sustainable. In today’s highly globalized and fragmented business environments, corporations do businesses with external supply chain partners, and without the truly sustainable supply chain partners, they may not be able to achieve sustainability goals. Moreover, for such a supply chain to be truly sustainable, each member of the supply chain must also be truly sustainable. For each member of the supply chain to be truly sustainable, the individuals who work in a corporation must be truly sustainable as well. That is, a truly sustainable supply chain cannot be established without its member corporations’ and employees’ commitment to and successes in sustainability. This paper shows how business moral responsibility and corporate sustainability are closely intertwined. How these theories could be applied in the corporate and supply chain settings are discussed, and future research opportunities are presented.
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• Socioemotional Wealth and Corporate Social Responsibility: A Critical Analysis

  2015-09-05 03:00:00 AM

  Abstract

  This theoretical paper is offered in the spirit of advancing the debate on the socioemotional wealth (SEW) construct and its impact on how family firms conceptualize and practise corporate social responsibility (CSR). The study builds on Kellermanns et al.’s (Entrep Theory Pract 36(6):1175–1182, 2012) claim that the SEW dimensions can be positively and negatively valenced as well as makes a distinction between the selective and instrumental approach to CSR and the holistic and normative one. Drawing on these considerations, it provides a theoretical underpinning in favour of the view that SEW has ambivalent nature and therefore can produce detrimental outcomes for stakeholders of family companies. In this way, the study challenges the implicit assumption prevalent in the literature that SEW is “a prosocial and positive stimulus”. Crucially, it expands on the SEW construct by arguing that, given its ambivalent nature, SEW, as such, is at odds with the “strategic, whole-business view of responsibility”. Consequently, it posits that family firms—because of their concern with SEW—may be more likely to adopt the instrumental and selective rather than strategic (holistic) and normative approach. Hence, it also makes the case for regarding the latter as a reference point to investigate the family company’s attitude towards social responsibility. It concludes by summarising the argument and offering future research avenues.
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• The Diffusion of Voluntary Environmental Programs: The Case of ISO 14001 in Korea, 1996–2011

  2015-09-05 03:00:00 AM

  Abstract

  This paper examines the adoption of ISO 14001, which is known as the most famous voluntary environmental program. The data of this paper pertain to Korean [Throughout this paper, Korea refers to the Republic of Korea (South Korea)] firms in manufacturing industries from 1996 to 2011. Event-history modeling to examine firms’ adoption of ISO 14001 finds that both resource-based factors and institutional factors have influenced the diffusion of ISO 14001 in Korea. By exploring time-related effects, I also find that while resource-based factors are important in the early periods of the diffusion, institutional factors become important in the later periods of the diffusion. This confirms the findings of previous studies that a firm’s motivation to adopt organizational policies varies according to different diffusion periods. The paper concludes with a brief discussion of what this study tells us about the institutional context of ISO 14001 in Korea and Asia more broadly.
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• Machiavellianism, Moral Orientation, Social Desirability Response Bias, and Anti-intellectualism: A Profile of Canadian Accountants

  2015-09-04 03:00:00 AM

  Abstract

  Prior research has demonstrated that accountants differ from the general population on many personality traits. Understanding accountants’ personality traits is important when these characteristics may impact professional behavior or ability to work with members of the business community. Our study investigates the relationship between Machiavellianism, ethical orientation (idealism, relativism), anti-intellectualism, and social desirability response bias in Canadian accountants. We find that Canadian accountants score much higher on the Machiavellianism scale than U.S. accountants. Additionally, our results show a significant relationship between Machiavellianism and relativism, idealism, anti-intellectualism, and social desirability response bias. Our results indicate that professional Canadian accountants may not share the same personality characteristics as U.S. accountants. We extend previous research investigating Canadian accountants, by explicitly recognizing the impact of social desirability response bias, and by including anti-intellectualism.
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• Beyond Environmental Regulations: Exploring the Potential of “Eco-Islam” in Boosting Environmental Ethics Within SMEs in Arab Markets

  2015-09-04 03:00:00 AM

  Abstract

  The recent global increase in environmental regulation does not necessarily signal improvement in firms’ ecological imprints. Like many markets, the Arab world is struggling to implement environmental compliance measures among local firms. For Arab countries, the reliance solely on formal policies to improve local firms’ ecological footprints may be risky given the evident institutional challenges to enforce environmental regulations, specially post the Arab Spring. Drawing from the literature highlighting the merits of combining formal and informal controls to ensure successful implementation of a strategy, we argue that the emphasis for regulation must be accompanied by an emphasis for developing environmental ethics of individuals, who are the expected implementers of any environmental policy. In that light, we propose that the Eco-Islam phenomenon can serve as an influential and effective foundation for building organizational cultures with stronger environmental ethics among local small and medium enterprises (SMEs). We explain the underlying maxims of Eco-Islam then conduct qualitative research among experts preaching or practicing the concept to gain better insights into the potential of leveraging it in Muslim-majority Arab countries. Finally, we conclude with insightful implications for local SMEs in the region.
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• In Pursuit of a ‘Single Source of Truth’: from Threatened Legitimacy to Integrated Reporting

  2015-09-04 03:00:00 AM

  Abstract

  This paper explores one organisation’s journey into non-financial reporting, initially motivated by a crisis in public confidence that threatened the organisation’s legitimacy to the present with the organisation embracing integrated reporting. The organisation’s journey is framed through a legitimation lens and is illustrated by aligning internal reflections with external outputs guided by predominant paradigms of good practice, such as the GRI guidelines and more recently integrated reporting 〈IR〉. We find that the organisation’s relationship with external guidelines has evolved from pragmatic adoption as a means of seeking external legitimation to the present position where those that prepare external reports are informed by the organisation’s strategic positioning and not constrained by the promulgation of voluntary guidelines. From the case study, we suggest that the International Integrated Reporting Council (IIRC) may face two hurdles: First, organisations may define social norms based on a broader definition of stakeholders than the definition currently published by the IIRC. The second hurdle is to convince report preparers that adopting integrated reporting 〈IR〉 will positively impact on capital flows.
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• Paradoxical Relationships Between Cultural Norms of Particularism and Attitudes Toward Relational Favoritism: A Cultural Reflectivity Perspective

  2015-09-04 03:00:00 AM

  Abstract

  We examined how the cultural dimension of universalism–particularism influences managers’ attitudes toward relational favoritism (such as favoring friends or relatives in HR decisions). Paradoxically, we found in a survey study that Brazilian and Chinese managers perceived more negative consequences of relational favoritism than did American managers—even though the Brazilians and the Chinese perceived stronger particularistic cultural norms in their countries than Americans did in the United States. We attribute this pattern of results to “cultural reflexivity”—the ability of people from transforming economies to be culturally self-critical during a period of dramatic societal change. This pattern of results also emerged in a scenario study in which we asked these same Brazilian, Chinese, and American participants to assess managerial succession decisions made by a General Manager. We varied the scenarios so that the promoted manager was either a colleague with no pre-existing relation with the GM or a colleague who was a relative, a close friend, from the same town, or from the same school. Consistent with the results of the survey study, we found that perceived cultural norms of particularism were negatively related to perceptions of fairness. In other words, Brazilians and Chinese, even while living in more particularistic cultures, were more harsh in judging relational favoritism. We conclude with a discussion on the implications of these paradoxical relationships.
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• What Do Stakeholders Care About? Investigating Corporate Social and Environmental Disclosure in China

  2015-09-04 03:00:00 AM

  Abstract

  This study investigates the social and environmental disclosure practices of socially responsible Chinese listed firms as displayed in their annual reports and corporate social responsibility (CSR) reports from the perspective of stakeholders. A stakeholder-driven, three-dimensional social and environmental disclosure index that integrates the quantity and two aspects of the quality of disclosure perceived by stakeholders is constructed to assess the social and environmental disclosures in firm annual reports and CSR reports. The study results indicate that stakeholders perceive different disclosure types and disclosure items as important to differing degrees. CSR reports provide more stakeholder-relevant social and environmental disclosure than annual reports.
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• Religiosity and the Volatility of Stock Prices: A Cross-Country Analysis

  2015-09-04 03:00:00 AM

  Abstract

  Prior research argues that religiosity increases the ethical behavior and levels of risk aversion of firm managers. To the extent that this is true, more religious countries might exhibit more stability in stock prices. This study tests this assertion by determining whether religiosity in countries is negatively associated with volatility in financial markets. Using a unique empirical design, we account for the possibility that the structure of financial markets is endogenously related to a country’s religiosity by examining the volatility of American Depositary Receipts (ADRs) while conditioning on a number of home country variables capturing religiosity. We also control for the possibility of endogeneity bias by identifying an appropriate instrumental variable. Interestingly, our tests show that religious affiliation and, to a lesser extent, religious adherence and religious beliefs negatively affect the level of ADR volatility.
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• How Servant Leadership Influences Organizational Citizenship Behavior: The Roles of LMX, Empowerment, and Proactive Personality

  2015-09-03 03:00:00 AM

  Abstract

  While the link between servant leadership and organizational citizenship behavior (OCB) has been established, the individual-level mechanisms underlying this relationship and its boundary conditions remain poorly understood. In this study, we investigate the salience of the mediating mechanisms of leader–member exchange (LMX) and psychological empowerment in explaining the process by which servant leaders elicit discretionary OCB among followers. We also examine the role of followers’ proactive personality in moderating the indirect effects of servant leadership on OCB through LMX and psychological empowerment. Analysis of survey data collected from 446 supervisor–subordinate dyads in a large Chinese state-owned enterprise suggests that while servant leadership is positively related to subordinate OCB through LMX, psychological empowerment does not explain any additional variance in OCB above that accounted for by LMX. Moderated mediation tests confirm the moderating effect of proactive personality through LMX. By providing a nuanced understanding of how and when servant leadership leads followers to go above and beyond their job role, our study assists organizations in deciding how to develop and utilize servant leaders in their organizations.
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• The Effect of Cognitive Moral Development on Honesty in Managerial Reporting

  2015-09-03 03:00:00 AM

  Abstract

  This study examines whether truth-telling in the form of honest reporting is associated with cognitive moral development. Conventional agency theory assumes that people are self-interested and willing to tell a lie to increase their personal payoffs, while recent empirical evidence shows that some people give up monetary rewards to tell the truth (e.g., Evans et al., Account Rev 76:537–559, 2001). The social psychology literature suggests that cognitive moral development influences individuals’ ethical decisions. We carried out an experiment whereby participants submitted managerial reports in which truth-telling decreased their monetary payoff. Despite the fact that their decisions were not subject to monitoring, auditing, or reputation effects, some participants reported honestly or partially honestly. We find the relationship between honest reporting and cognitive moral development to be both positive and linear. Compared with those at lower stages of cognitive moral development, participants at higher stages of cognitive moral development were more likely to submit an honest report and give up potential monetary gains from lying. We further examine the economic impact of honest reporting on the firm’s profit. With the assumption of self-interest and profit maximization, Antle and Eppen (Manag Sci 31:163–174, 1985) suggest that a contract with a hurdle-rate feature reduces managers’ information rent. We find that in comparison with the expected outcome of a hurdle contract, the firm can yield higher profits with a trust contract by hiring managers with a P-score higher than 16.67.
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• Do Ethical Social Media Communities Pay Off? An Exploratory Study of the Ability of Facebook Ethical Communities to Strengthen Consumers’ Ethical Consumption Behavior

  2015-09-02 03:00:00 AM

  Abstract

  It has been proposed that the social networking site Facebook is suitable for building communities and strengthening customer relationships, and also many organizations that promote ethical consumption have established online communities there. However, because of the newness of ethical online communities, little is known about the extent to which consumer participation in them produces positive outcomes. The present study aims at exploring such outcomes: first, we identify consumer-perceived benefits from ethical community participation, and second, we explore whether these benefits influence the activity promoted (in this case, ethical consumption), as well as consumer loyalty toward the ethical Facebook community. The results of an online survey of ethical community participants reveal that informational benefits reinforce consumers’ ethical consumption behavior. Social and entertainment benefits, in turn, have a positive influence on loyalty to the community. The present study further reveals that the consumers’ prior commitment to ethical consumption influences the perceived benefits: the affective commitment to ethical consumption has a positive, and the continuance commitment a negative influence on the benefits. Thus, the more consumers feel they engage in ethical consumption because of an emotional attachment, the higher the perceived benefits from online community participation are. The more consumers perceive that their ethical consumption is driven by lack of choice, the fewer the benefits. Overall, the perceived benefits were at a relatively low level, which is somewhat alarming and highlights the need to manage the communities more efficiently.
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• Does an Embedded Wind Turbine Reduce a Company’s Electricity Bill? Case Study of a 300 kW Wind Turbine in Ireland

  2015-09-02 03:00:00 AM

  Abstract

  In recent years, a growing number of small-to-medium-enterprises are embracing wind turbine projects not only as part of their cost reduction strategy but also to actively play their part in the global fight against climate change. However, it would appear there are currently limited empirical studies carried out in this emerging industry. This case study analyses the cost effectiveness of one such wind turbine initiative by a company in the Republic of Ireland, who invested in a 300 kW embedded wind turbine project at the end of 2013. The research methodology which is primarily a case study analysis included comparing historical electricity utility bills which allowed the 2013 quantity of electrical energy units imported, i.e. the year before the turbine was installed to be compared with the 2014 value, i.e. the year after the turbine was installed. Numerous site visits were undertaken over a four-year period, during which electric meter readings were recorded and stored. The findings of this piece of research indicate that the installation of the embedded wind turbine had minimal positive effect on the annual electricity costs for the company. Indeed the turbine appears to have significant negative effects such as a need for an increased maximum import capacity and also it appeared to contribute to a deteriorating utility power factor. While the aesthetic nature of the on-site turbine seemed to create a positive image of the company, it would appear that caution should be exercised when business owners select alternative energy providers who claim to be experts in the energy field but may have limited knowledge in this area of wind energy, which as of yet has minimal robust research into all aspects of its benefits/attributes.
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