The Role of Salience and Group Identity in the Effectiveness of Codes of Ethics

Fraud and Forensic Accounting Education ConferenceSavannah, GAMay 17, 2012

Brett Hunkins

Todd Thomas

DeVos Graduate School of Management at Northwood University

Origin of the Idea

Anecdotal classroom observations

Varied experiences

Need for multi-disciplinary study

Codes of Ethics Research

Codes per se

Individual beliefs of those bound by code

Organizational factors

Codes of Ethics Per Se

Critical considerations (Schwartz, 2002; Orlitzky, 2003; Vershoor, 1998)

Code content

Process of code creation

Implementation plan

Administration plan

Code content (Schwartz, 2004)

Examples

Tone

Length

Relevance

Realis(m)

Process of Code Creation

Employee involvement and engagement

Implementation Plan

Support of senior management

Training

Reinforcement

Administration Plan

Company abides by the code

Violations are reported

Anonymous phone lines

Violations are communicated

Enforcement is consistent

Codes of Ethics Research

Codes per se

Individual beliefs of those bound by code

Organizational factors

Individual beliefs

Individual Engagement

Variable interpretation across organization (Hall, Bowen, Ferris, Royle and Fitzgibbons (2007

Subjective experience and felt accountability may stifle codes’ efforts to address individuals uniformly

Individual Engagement (cont’d)

Variation of identification and accountability can help explain different responses to uniform context (Frink and Kilmoski, 1998)

Individual Engagement (concluded)

Behavior is best understood by looking at aspects that directly affect subjectiveinterpretation and experience of personal responsibility (Hall, 2007)

Group Norms

Codes attempt to specify organizational norms, though…

Individuals’ moderation of behavior and feeling of accountability influenced by identity and belonging. (e.g. Charness, Rigotti and Rustichini, 2007; Terry 1996).

Organizational Context

Ethical context is defined by relationship of:

Corporate ethical values

Organizational commitment (individual to organization)

Person-Organization fit (employee owns company values and prefers to help the firm)

Individual Beliefs (summarized)

The more congruence between individual self-identity and behaviors exhibited by the organization, the greater commitment and likelihood to behave in alignment with the norms of that organization.

Codes of Ethics Research

Codes per se

Individual beliefs of those bound by code

Organizational factors

Organizational factors

Ethical Climate

Variability of ethical values and behaviors across departments (Victor and Cullen, 1988; Meglino, Ravlin, Adkins, 1989)

Variability Across Departments

Departmental task and stakeholder relationships (Weber, 1995)

Organizational structure (e.g. Mintzberg, 1983)

Managerial style (e.g. Morgan, 1986)

Corporate strategy (e.g. Nystrom, 1990)

Relevance of individual –organizational match?

Individual – Department/Division Match?

Social identity theory related to self concept, i.e. personal and social identity (Tajfel and Turner, 1985)

Organizational identity is a unique type of social identity (Ashforth and Mael, 1996)

Members identify with what they perceive the organization represents (Kreiner and Ashforth, 2004)

Individual – Department/Division Match? (concluded)

Identity salience influences role performance (Stryker, 1987)

Individuals choose behavior through relative salience in a conflict of group expectations (Verbos, Gerard, Forshey, Harding, Miller, 2007)

Behavior guided by most salient identity (Haslam, Postmes, Ellemer, 2003)

And So . . . .

Would Codes of Ethics be strengthened by addition of function-specific codes?

If so, would a more salient code further engrain ethics into the organization’s DNA?

And if so, would a more salient code develop a greater sense of identity because of a more immediate obligation?

And if so, how might Code-related training be modified?

Empirical design

Organizational surveys

Individual surveys

Organizational Surveys

Finance-specific codes (SOX)

Overall codes

Function-specific codes (but not Finance)

Which employees bound by either?

Organizational SurveysYES NO

Our organization has a code of ethics for all employees

Our organization has a separate, specific code of ethics for Senior Finance Executives

If Yes, please briefly describe the levels of the finance function covered by that specific code:

Our organization has a separate, specific code of ethics for functions other than Finance

If Yes, please briefly describe which functions, and the levels of the function covered by that specific code:

Our organization trains employees on the corporate code alone

If a separate code exists for functional areas, our organization trains employees on the function-specific code

Organizations Surveyed

Publicly held

Private (but SOX-like)

Private

Not-for-profit

Preliminary Results

No non-finance functional codes

No finance-specific codes for non-public entities

Private (but SOX-based) entities lack finance-specific code

Next Steps

Continually expanding organizational surveys

Develop employee survey

Evaluate results

Publish

Questions?

THANKS!!

Brett Hunkins (bhunkins@northwood.edu; 989.837.4486)

Todd Thomas (thomasl@northwood.edu; 989.837.4272)