Culture and Ethics Management

Special ISSWOV Article on Work Ethics

CCM

International Journal of

2007 Vol 7(1): 5–28

Cross Cultural Management

Culture and Ethics Management Whistle-blowing and Internal Reporting within a NAFTA Country Context Brent MacNab

Joan MacLean

The University of Sydney, Australia

Simon Fraser University, Canada

Richard Brislin

Gustavo Munoz Aguilera

University of Hawaii, USA

Universidad Autonoma de Baja California, Mexico

Reg Worthley

Elizabeth Ravlin


University of South Carolina, USA

Bella L. Galperin

James H. Tiessen

University of Tampa, USA

McMaster University, Canada

Steve Jenner

Dave Bess

California State University, Dominguez Hills, USA


Terri R. Lituchy

Marie-France Turcotte

Concordia University, Canada

The University of Quebec at Montreal, Canada

This article examines the relation of culture to the propensity for, and potential effectiveness of, both internal reporting and whistle-blowing as ethics management tools within a North American context. Samples from a total of 10 regions in the US, Canada and Mexico increased the accuracy and meaningfulness of the findings. Hofstede’s cultural dimensions uncertainty avoidance and power distance had the most consistent and significant relationship to propensity for both whistle-blowing and internal reporting, while collectivism was not found to be significantly related to either ethics management tool. Managers who better understand the cultural links to ethics management are more likely to

ABSTRACT

Copyright © 2007 SAGE Publications www.sagepublications.com DOI: 10.1177/1470595807075167

6

International Journal of Cross Cultural Management 7(1) craft the most effective organizational ethics strategies. Researchers can gain from increased insight, allowing departure from assumptions to an empirically based examination of how cultural dimensions might influence ethics management instruments. KEY WORDS

• culture • ethics management • Hofstede • Sarbanes-Oxley • whistle-blowing

This research project examines the potential influence of culture on specific aspects of ethics management, combining the team efforts of 12 collaborators from 10 regions of the US, Canada and Mexico. The study gathered quantitative and qualitative information in each region with special emphasis on culture and ethics management. Our team defines ethics management as the artifacts, tools, activities and concepts that people use to influence the moral climate or direction of their organization. Ethics are the collective cognitions and values a society uses to establish that which is right or wrong behavior (Donaldson and Dunfee, 1999; Weaver, 2001). In this regard, the intended dependent variables of this study, internal reporting and whistle-blowing, represent specific subcategories under the larger ethics management umbrella. Ethics management efforts operate within the larger social parameters and values determining that which is right or wrong behavior. For example, examination of how subjects will respond to the establishment of a telephone hotline for reporting misconduct is an ethics management study. Examination of whether subjects believe bribery is a morally acceptable practice is focused on ethics. Ethics management and ethics are related, but the distinction is important because even if there are universal elements of ethics (Donaldson and Dunfee, 1999), developing effective management tools appropriate for the cultural context still remains relevant (Weaver, 2001). Comprehensive, theoretical and philosophical examinations of the general ethics topic have been developed (Becker and Becker, 1992; Broad, 1959; Moore, 1903; Sidgwick, 1907; Singer, 1991, 1994), with a notable representation of the topic in specific busi-

ness contexts (Donaldson and Dunfee, 1999; Enderle and Werhane, 1997; Reidenbach and Robin, 1991; Robin, 2000) and in the North American Free Trade Agreement (NAFTA) nations (Arruda, 1997; Di Norcia, 1997; Dunfee and Werhane, 1997; Elehee et al., 2002; Pasquero, 1997; Ulshofer, 2000). However, there has been comparatively less focus on empirical research for aspects of ethics management. Although such research is by no means absent from the literature (Allen, 1995; Gray, 1996; Hian and El’fred, 2001; Jakubowski et al., 2002; Kaptein and Wempe, 1998; Miceli and Near, 1994; Schwartz, 2001; Yeh-Yun Lin, 1999), there is a need for better understanding of the topic within the NAFTA context (Hood and Logsdon, 2002). Aspects of western hemisphere trade continue to be negotiated and confronted (Hakim, 2004). NAFTA trade expansion is predicted to continue over the next decade. As cross cultural activity increases in this context, questions surface regarding effective ethics management. Are ethics management approaches of one culture appropriate in another? How culture-free are ethics management tools like whistle-blowing and internal reporting? Can such tools be appropriately adjusted for increased cross cultural effectiveness? Solomon (1992) provides a summary by stating that important aspects of ethics management are contextual and one of the problems with theories that attempt to develop culture-free approaches is that they try to transcend context and end up with vacuity. Arguably one way of resolving this issue is by embedding context and culture within theory. The following sections of this work: (1) suggest a clear distinction between whistleblowing and internal reporting; (2) differ-

MacNab et al.: Culture and Ethics Management

entiate internal whistle-blowing from internal reporting; (3) develop a theoretical link between culture, individuals and the ethics management tools of whistle-blowing and internal reporting; (4) construct hypotheses based on previous research relating specific cultural dimensions to both whistle-blowing and internal reporting; and (5) discuss methods and results.

Whistle-blowing and Internal Reporting Whistle-blowing and internal reporting are two different ethics management tools available to individuals and groups operating in relation to organizations. Rusbult et al. (1988) developed the dimension of voice as a concept that we suggest is useful for simultaneous examination of both whistle-blowing and internal reporting (as opposed to categorizing both internal reporting and whistleblowing as simply ‘whistle-blowing’). Voice is communication of organizational problems internally and/or seeking help from outside agencies. The concept of voice provides a good general platform for research that does not require separation of the two concepts. Some research does not clearly delineate between internal reporting and whistle-blowing (Hearn, 1999; Kaplan and Kleiner, 2000; Patel, 2003), while other studies have made a more clear distinction (King, 2000). Tavakolian (1994) distinguished between whistle-blowing and internal whistle-blowing, while others made special reference to external whistleblowing (Kaptein, 2002; Rothschild and Miethe, 1999; Sims and Keenan, 1998). Throughout this article we use the term whistle-blowing to mean the external variety. There are meaningful differences in distinguishing nuances of both internal reporting and whistle-blowing. For example, effective sanctioned internal reporting systems have been argued as a potential protective mechanism against whistle-blowing (Barnett, 1992; Keenan and Krueger, 1992; Rothschild

and Miethe, 1999; Singer, 1996). Internal reporting mechanisms tend to protect organizations from whistle-blowing activity. Compared to keeping matters internal, whistleblowing is often viewed as potentially more risky for the target organization in terms of legal costs, legal sentencing, decreased sales, negative publicity and goodwill fallout (Keenan and Krueger, 1992; Vinten, 1992). Comparing the different reporting varieties, the result and potential cost to the target organization are different. Whistle-blowing Some researchers have supported longitudinal benefits to the target organization, such as overall operational improvement, born from instances of whistle-blowing (Brief and Motowidlo, 1986; Ferrell et al., 1998; Hooks et al., 1994). While the immediate impact on the organization may be challenging, the long-term correction can eventually prove beneficial. Definitions of whistle-blowing often include the following elements1 (Jubb, 1999; Miceli and Near, 1992; Tavakoli et al., 2003): 1 communication or information sharing that is unauthorized by the target organization; 2 often voluntary (related to the message sender); 3 current or former association with the target organization; 4 focused on potentially illegal, unethical or improper acts; 5 communication to an empowered entity; 6 communication external to the target organization (e.g. a government regulatory body); 7 potential or desired corrective outcome or consequence. Although the above seven elements provide good detail, a straightforward definition has been proposed as the unauthorized and voluntary reporting of illegal or improper acts within an organization to authorities

7

8

International Journal of Cross Cultural Management 7(1)

outside the organization (Courtemanche, 1988). It may be further clarified that whistleblowing is not limited to media contact or direct communication; it can include communication to non-media entities such as government regulatory bodies.2 Whistleblowing does not need to constitute direct communication; it can include a ‘leaked’ communication in the form of a notorious memo. As is sometimes the nature of leaked information, it can be difficult to pin the initiation of the leak onto any one individual. Subcategories of whistle-blowing can include varieties initiated from an unidentifiable individual or even a group. That is, depending on the circumstance, whistle-blowing (and internal reporting) may or may not be anonymous. Internal Reporting In relation to the seven parameters of whistle-blowing outlined earlier, internal reporting can be compared and contrasted. The main differences are that internal reporting is markedly different with respect to items numbered one and six (described earlier). Internal reporting is communication or information sharing authorized by the target organization (as opposed to unauthorized) and the reporting is to an empowered entity internal to the target organization (as opposed to external). Internal reporting may or may not be voluntary. Some organizations require that specific activity be reported. Any of the other areas outlined in the seven parameters of whistle-blowing can also be shared with internal reporting, which is probably why they are often conceptualized, perhaps confused, as the same construct. Despite the areas of similarity, the differences are arguably important enough to warrant conceptual separation and quantitative investigation as such. Developing further support for the conceptual separation of whistle-blowing and internal types of reporting, reviews have been conducted examining these as separate

phenomena (Kaptein, 2002; Kaptein and Wempe, 1998; Morf et al., 1999; Singer, 1996; Trevino et al., 1999; Weiss, 1994). Finally, the Sarbanes-Oxley Act of 2002 requires that organizations have some mechanism for internally reporting potential violations related to financial fraud activity, and that corporate officers provide evaluation of the effectiveness of such mechanisms (Title III, Section 302 of the Sarbanes-Oxley Act). Because of this legislation we expect to see increased awareness of, and activity relating to, internal reporting systems within organizations (particularly in the US). With the Sarbanes-Oxley requirements, we view a detailed understanding of the distinctiveness between whistle-blowing and internal reporting as increasingly important. Several areas of clarification are worthwhile at this stage of development for the separation of internal reporting and whistleblowing. First, it would not be entirely surprising for whistle blowers to first have attempted or engaged in some form of internal reporting (Miceli and Near, 1992). For example, Sharron Watkins, the now infamous whistle blower related to the Enron scandal, reported the incident first to her boss. However, this does not logically require or practically suggest that whistle-blowing and internal reporting should therefore be considered the same phenomenon. Whistle blowers sometimes report directly to outside authorities first, or prior to any retaliation, as in the current case of Duke Energy v. Barron Stone (Ebeling, 2003). The Sarbanes-Oxley Act of 2002 explicitly provides protection not only to people who report internally but also to those who choose to report externally to specific authorities3 (see Sarbanes-Oxley Act 2002, Title VIII, Section 806). Second, we suggest that further clarity can be developed by making a distinction between internal reporting and what has been referred to as ‘internal whistle-blowing’ in some literature (Tavakolian, 1994). Reporting activity internal to an organiza-

MacNab et al.: Culture and Ethics Management Table 1

Basic varieties of ethics management reporting

Ethics management reporting

Primary distinguishing feature(s)

Example

A. External whistleblowing*

1. Unauthorized by target organization. 2. Reported externally in relation to target organization. 3. Organizationally passive (ethics management passive/reactive).

An employee communicates the improper organizational accounting practices directly to the SEC or other government regulatory body.

B. Internal whistleblowing

1. Unauthorized by target organization. 2. Reported within target organization. 3. Organizationally passive (ethics management passive/reactive).

An employee unexpectedly announces the improper organizational accounting practices during a board of directors meeting.

C. External reporting

1. Authorized by the target organization. 2. Reported externally in relation to the target organization. 3. Organizationally proactive (ethics management proactive/responsive).

An employee reports the improper organizational accounting practices to an organizationally endorsed, third party such as an external auditor or ethics consultant.

D. Internal reporting

1. Authorized by target organization. 2. Reported within the target organization. 3. Organizationally proactive (ethics management proactive/responsive).

An employee reports the improper organizational accounting practices via an established ethics hotline or to an established, internal ombudsman.

*Within the body of this manuscript authors use the general term “whistle-blowing” for this category. Note: Varieties “A” and “D” are the focus of this current study.

tion can be either authorized by the target organization or unauthorized. Use of the term ‘whistle-blowing’ suggests reporting activity unauthorized by normal organizational processes. Such internal unauthorized reporting is certainly plausible within some organizations and, in such circumstances, using the phrase ‘internal whistle-blowing’ is appropriate. If the inside reporting activity is somehow sanctioned or encouraged by the organization, as in types of reporting hotlines or in requirements under Title III of the Sarbanes-Oxley Act of 2002, we recommend referring to the activity as ‘internal reporting’, which is our meaning in the body of this

study. While some statutes provide protection to employees who report internally (Sarbanes Oxley Act of 2002, Title VIII) this does not require that internal reporting and whistle-blowing be considered the same phenomena for detailed management research (see Table 1), as there are potentially important distinctions to be made. The varieties of ethics management reporting listed in Table 1 are meant to be representative of basic types and not comprehensive (e.g. there are sub-categorical varieties possible for each of those listed). One common western example of an internal reporting mechanism is the ethics

9

10


hotline, with more than half of the largest 1000 US organizations having such a mechanism (Weaver et al., 1999). Although hotlines have become common in western cultures (Hearn, 1999), little research has been conducted that examines how compatible different cultures are with these internal reporting practices. Other internal reporting instruments can include internal ethics audits (Allen, 1995; Gray, 1996; Hill et al., 1992; Schaefer and Zaller, 1999); ethics help desks; line or departmental management responsibility (Kaptein, 2002); outsourced, but internally controlled, hotlines (Trevino et al., 1999); ethics officers and ethics commissions (Ethics Officer Association, 2001); and internal ethics ombudsmen (McDonald and Zepp, 1989; Richardson, 1991). All of these internal avenues and tools are normally sanctioned by the organization.

Theoretical Links: Culture, Whistle-blowing and Internal Reporting A cultural system can be defined as people sharing similar beliefs, customs, norms and ‘mental programming’ (Brislin, 2002; Hofstede, 1997). Most definitions of culture share the following: (1) human-made elements; (2) shared through communication; (3) increase the probability for survival; and (4) result in greater satisfaction for those in the community. Culture is to a society or group what personality is to an individual, and includes symbols, heroes, rituals, values and practices (Hofstede, 2001). Socialization and cultural influences on values and beliefs have been well established (Brislin, 1981). Trevino (1992) advocated that the intention of business ethics research is not to determine what is ethical or unethical, but to assess how variables like culture might influence those perceptions and tools used to manage ethics. In this regard we build a theoretical link between culture and the tools of ethics management, which include internal reporting and whistle-

blowing, using Vygotsky’s activity theory. Furthermore, we couple the Vygotsky link of culture to instrument and individual using Hofstede’s cultural dimensions to parameterize culture and create hypotheses. Vygotsky’s Activity Theory Aside from the previously mentioned body of research that advocates the link and petitions for more research between culture and ethics management, a theoretical link can be strengthened using Vygotsky’s activity theory (Ratner, 2001; Vygotsky, 1978). Activity theory suggests that human activity is driven by certain needs, and by people wishing to achieve a purpose or goal (e.g. running an ethical organization). This activity is mediated by instruments and tools (e.g. internal reporting), all of which are affected by culture. With activity theory, poor culture-toinstrument fit will result in poor subject-toinstrument interaction or mediation. In this regard, the effectiveness of an instrument is related to the individual, and the individual related to culture. Culturally inappropriate instruments exhibit a lack of legitimacy, potentially generating serious negative effects (Weaver, 2001) and a likely lack of propensity for subject use. Directly related to the focus of our research, these instruments can specifically include mechanisms for the enforcement of norms (Bannon and Bodker, 1991). It can be argued that effective whistle-blowing and internal reporting mediate the compliance and enforcement of norms within organizations (Miceli and Near, 2002). In this regard, we theorize that culture might influence individual propensities to internally report and whistle blow. Cultural Constructs In order to parameterize culture in activity theory it was necessary to draw from established cross cultural theory as well. Hofstede (1980, 2001) developed a set of cultural dimensions that we will utilize for this pur-


pose (uncertainty avoidance, power distance, individualism/collectivism and femininity/ masculinity4). In addition, research both advocates and examines the meaningfulness of national-level Hofstede cultural dimensions on aspects of ethics management (Brody et al., 1999; Hood and Logsdon, 2002; Tavakoli et al., 2003), providing a suitable fit to both activity theory and the purpose of this study. The Hofstede dimensions are used for our study with the realization that there are other cultural frameworks with valuable components that could also be incorporated (Fiske, 1992; Schwartz, 1990; Triandis, 1982– 83; Triandis et al., 1995; Trompenaars, 1993, 1998). Our research effort directly measures our cultural constructs as suggested by Schaffer and Riordan (2003), as apposed to automatically relying on the 1980 rankings from the original Hofstede study. Hofstede (2001: 12) emphasizes that external influences on culture, such as economic and trade, can eventually shift cultural perspectives. Between the subject nations of our study, it could certainly be argued that important socioeconomic shifts (e.g. NAFTA) have taken place since the original Hofstede study, justifying current measures. Also, we suggest that culture exists in the psychology of individuals, and therefore the examination of such phenomena through individual measurement, aggregated to the group level, is appropriate.

Hypothesis Development Uncertainty Avoidance Uncertainty avoidance refers to the degree that a culture has acclimated to the acceptance of risk. For instance, some societies like to operate with formalized rules and regulations, preferring that business be clearly regulated with little left to interpretation. More precisely, this dimension indicates how threatened a society will be by ambiguous contexts, and the degree to which it will

attempt to avoid these situations (not tolerating deviant ideas or behaviors, a belief in absolute truths, and a lack of comfort with vague rules or procedures). These elements may create greater overall anxiety and a heightened work ethic (Hofstede, 1980). Researchers have proposed a higher propensity for specific types of ethics reporting with increasing levels of uncertainty avoidance (Tavakoli et al., 2003). Indeed, Hofstede supports that people in such cultures seek structure in their organizations, making events clearly interpretable and predictable (Hofstede, 1997). It is arguable that people in such cultures will want to maintain established reporting structures and abide by them. Not adhering to organizational policy and failing to report rule-breaking activity in a high uncertainty avoiding context would cause stress. An organization that is engaging in activity that is not approved of by the society it operates within could create heightened levels of cognitive dissonance and discomfort for employees enculturated in a high uncertainty avoiding, rule-oriented context. Although whistle-blowing is not within the established reporting system, we expect the pressure to report the activity to appropriate outside parties will be stronger in a high uncertainty avoiding culture. The uncertainty avoidance dimension suggests that such cultures will be more likely to perceive an unethical violation as severe (Tavakoli et al., 2003), and therefore are expected to have higher propensities to both internally report and whistle blow (Sims and Keenan, 1999). Formal reporting structures and avenues (either internal or external to the organization) will placate high uncertainty avoidance societies (Weaver, 2001). In this manner we propose: Hypothesis 1a: Uncertainty avoidance will be positively related to propensity for internal reporting. Hypothesis 1b: Uncertainty avoidance will be positively related to propensity for whistleblowing.

11

12


Power Distance Power distance refers to the degree to which a culture recognizes the importance of position and other inherent dimensions that might separate one socially from another member of society. Power distance addresses how acceptable it is for a society to have unequal levels of power. In a low power distance society, for example, it is often more acceptable to address a high ranking manager by their first name; the opposite would be true in a high power distance context (Cushner and Brislin, 1996; Hofstede, 1980). High power distance has been related to lower propensities for both internal reporting and whistle-blowing, because of the expectation or fear of retaliation (Tavakoli et al., 2003). Additionally, Miceli and Near (1992) examined higher rates of whistle-blowing in cultures that favor less authoritarian and more participatory leadership styles. Decentralization of authority, by its nature, counters authoritarian structures that are more naturally related to high power distance contexts. Vandekerckhove and Commers (2004) suggest that as decentralization of authority occurs there will be an increased propensity for internal reporting. Related studies show that ethics management initiatives that allow lower-level employees to report, or even bypass, the chain of command will violate the norms of higher power distance societies, and are contrary to hierarchical relationships (Weaver, 2001). The idea of vertical self and horizontal self (Markus and Kitayama, 1991) has been positively, and respectively, correlated to the Hofstede dimension of high and low power distance (Thomas and Au, 2002). Although verticality and horizontality are often examined in relation to collectivism and individualism (Triandis, 1995), the concept, because of its correlation, was also theoretically helpful in the development of our specific hypotheses for power distance. Because both whistleblowing and types of internal reporting are

sometimes viewed as disruptive to the organization or in-group harmony (King, 2000; Vandekerckhove and Commers, 2004), these acts can be discouraged, to the point of retaliation, by the organization’s authority figures (Keenan, 1988; Miceli and Near, 1994). People enculturated in higher vertical (high power distance) contexts are more sensitive to cues coming from authority. One can also theorize that higher vertical contexts will be relatively more authoritarian and discouraging of the type of participation that comes with effective internal reporting, and certainly with whistle-blowing, which bypasses the established power structure altogether. ‘Moreover, elites are likely to reject and undermine any programs aimed at encouraging subordinates to engage in that type of questioning’ (Weaver, 2001: 7). Suspicion of hierarchy, typical of low power distance, reflects a relative egalitarianism (horizontalness) required for both of the ethics management tools in this examination. We therefore propose: Hypothesis 2a: Power distance will be negatively related to propensity for internal reporting. Hypothesis 2b: Power distance will be negatively related to propensity for whistle-blowing.

Individualism and Collectivism Individualism is typical of loose-knit social frameworks in which people are expected to watch out for themselves, and where ingroup/out-group5 distinctions are less of a focus. Collective societies are organized by tight social frameworks with high degrees of loyalty and in-group/out-group distinction. In relation to both whistle-blowing and certain types of internal reporting, it has been suggested that collectivism is potentially related to lower propensities for engaging in these activities (Patel, 2003; Sims and Keenan, 1999). Collectivistic cultures would be more prone to cover up the flaws of others in order to ‘save face’ and protect group harmony (Cohen et al., 1992). For an organization operating within a collective context,


employees look out for their in-group interests. It has been argued that because collectivists embrace social behaviors that are highly influenced by norms, duties or obligations (Bontempo and Rivero, 1992), they are less likely to exhibit non-conforming or disruptive behavior (Thomas and Au, 2002). As mentioned previously, Rusbult et al. (1988) developed the concept of voice, in part as communication of organizational problems internally and/or seeking help from outside agencies. This concept has clear links with our ethics management tools of internal reporting and whistle-blowing. It is suggested that by definition, voice, and therefore internal reporting and whistle-blowing, is assertive and nonconformist in that it is a change-oriented (Le Pine and Van Dyne, 1998; Thomas and Au, 2002) activity that collectivist subjects are prone to avoid. Finally, collectivism has been linked to stronger propensity for organizational loyalty (Kim et al., 1994). Although loyalty is often viewed as conditional (Corvino, 2002), some have suggested that both internal reporting and whistle-blowing directly violate the obligations of loyalty to individuals, ingroups and organization (Duska, 1997). In this manner we investigate: Hypothesis 3a: Collectivism will be negatively related to propensity for internal reporting. Hypothesis 3b: Collectivism will be negatively related to propensity for whistle-blowing.

Our research and our development of hypotheses are geared to examining the likelihood of internal reporting and whistle-blowing as predictive of those types of activities (Keenan, 1995).

Methodology Our research effort gathered samples from Canada, the US and Mexico during 2003. Samples were collected in multiple regions of each subject nation in an attempt to recognize the potential for regional diversity.

One initial and diligent goal of our research effort was to achieve the development of a cultural measurement instrument that both captured some of the multidimensionality of the Hofstede constructs, and that could also measure propensity for internal reporting and whistle-blowing. In this aspect of our research effort, we were only partially successful. While we were able to develop acceptable measurement scales for important cultural constructs, our effort at gaining a multidimensional approach was not achieved. This was particularly evident with the femininity/masculinity scale, which proved most problematic in our second phase of validity testing and was therefore not included in this research effort. Useful scales for exogenous items, uncertainty avoidance, power distance and collectivism, did emerge. Additionally, scales for endogenous items, internal reporting and whistle-blowing, also proved acceptable and useful. It is recognized that individual characteristics will have a potentially important impact on whistle-blowing and types of internal reporting (Keenan, 2002; McLain and Keenan, 1999; MacNab and Worthley, 2007; Miceli and Near, 1992; Sims and Keenan, 1998). Our instrument does not ignore such parameters, but in order to maintain appropriate scope we have focused on the national, cultural level analysis for this study and plan to examine more idiocentric and sub-regional elements in future work. There are generally two avenues for cross cultural research in relation to using individual responses for generating societal or national-level analysis: 1 Construct measures from concepts using data at the individual level. These individual level responses are then examined and analyzed to determine if they show enough consistency within societies and differences between societies for use in study at the aggregate level. 2 Aggregate each item to the national level,

13

14

International Journal of Cross Cultural Management 7(1) Table 2

Subject demographic breakdown by nation

Subject category Male Female With management experience Without management experience Average work experience Average age

US

Canada

Mexico

Total

57% 43% 60% 40% 9.78 years 31.4 years

60% 40% 60% 40% 8.10 years 30.2 years

60% 40% 47% 53% 8.4 years 29.8 years

59% 41% 57% 43% 8.83 years 30.58 years

then evaluate the measurement structure at that level (see Peterson, 2004). Our study examines aggregated responses for measures examining societal level values as demonstrated in Appendix 1. Participants and Procedures A total of 1187 participants, adults engaged in executive development programs and education, were sampled for this study. Samples were collected in Canada (n = 476), the US (n = 463) and Mexico (n = 248). The average age of our sample was 30.6 years and the average level of work experience was 8.8 years, with 41% of the participants being female (see Table 2). For all respondents, the survey was administered by a university research collaborator who instructed participants that the survey was examining aspects of cross cultural management. Participants were asked to complete a questionnaire that also included demographic information and a research participant agreement form. All the quantitative questions were measured using a 7-point, Likert-scale format that also included descriptive anchors. All aspects of the survey, including the descriptive anchors for the Likert scale, were carefully backtranslated as suggested by Brislin (1986). The instrument was developed in English for US and some Canadian participants, in Spanish for Mexican participants, and in French for Canadian participants in Quebec.

Because a nation’s cultural diversity can be profound (McDonald, 2000; Sarwono and Armstrong, 2001; Schaffer and Riordan, 2003) our research has endeavored to take care in gathering current samples from multiple regions of each subject nation. For Canada, samples were collected in Vancouver, British Columbia; Hamilton, Ontario; Quebec City, Quebec; Montreal, Quebec and Halifax, Nova Scotia. For the US, samples were collected in Honolulu, Hawaii; Los Angeles, California; Columbia, South Carolina and Winter Park, Florida. For Mexico, samples were collected in Tijuana, Baja California Norte and Mexico City, DF. We realize that our sample regions for each nation are not exhaustive of the total potentially meaningful regions of cultural influence (e.g. for neither the US nor Canada did the research take a sample from plains areas). However, we believe there has been enough care regarding regional recognition to provide a national indication, and having explicitly identified the sample regions, the reader can actually selfdetermine the level of national applicability. Instrument Development Our instrument was initially developed using a two-phase validity process. In phase one, university students (n = 97) were sampled and the instrument evaluated using factor analysis. Based on these initial results, adjustments were made to the instrument and a phase two validity test took place using a separate hold-


out sample (n = 141) of participants from California (not used in later analysis). Phase one analysis for culture included all four Hofstede cultural constructs (femininity/masculinity, power distance, uncertainty avoidance, collectivism/individualism), plus the additional construct of Confucian dynamism, but did not include aspects of ethics management for internal reporting or whistleblowing. In phase one validity testing, our instrument indicated confounding relations between Confucian dynamism and the collectivism/individualism construct. For parsimony the emergent instrument was constructed around the four original Hofstede indicators in preparation for additional scrutiny. Phase two, in addition to further examination of cultural dimensions, also examined the development of internal reporting and whistle-blowing scales. The final latent constructs, for cultural exogenous variables, and ethics management endogenous variables, created three manifest measurements for each construct (see Appendix 1). The BIC specification search in AMOS was used to generate the specific scale items with the following results. All of the scales resulted in excellent fit statistics: collectivism (χ2 = 2.23, p = .14, GFI = .99, CFI = .96), power distance (χ2 = 0.45, p = .50, GFI = .99, CFI = .99), uncertainty avoidance (χ2 = 5.07, p = .02, GFI = .97, CFI = .92), internal reporting (χ2 = 1.17, p = .28, GFI = .99, CFI = .99), and whistle-blowing (χ2 = 0.02, p = .89, GFI = .99, CFI = .99). Final reliabilities of the scales were as follows: collectivism, alpha = .56; power distance, alpha = .51; uncertainty avoidance, alpha = .64; internal reporting, alpha = .80; and whistle-blowing, alpha = .69. While two alphas are less than ideal, three of the scales demonstrated acceptable levels of reliability with coefficients in excess of .60 (Hatcher, 1994). Because of the multicultural reality of the study, and complexities related to cultural measures (e.g. back-translation) there is some support for acceptance

of lower alpha coefficients in the measurement of cultural dimensions that attempt to achieve bandwidth6 (Sue-Chan and Ong, 2002; Thomas and Au, 2002; Triandis et al., 1995). The measures of this study went beyond replication of the same variety of question for culture, and therefore an argument for higher bandwidth can be made.

Results Means, standard deviations, and inter-correlations of the latent variables are shown in Table 3. Figure 1 shows the structural model used in this study, with both ethical reporting constructs (whistle-blowing and internal reporting) related to the three cultural constructs (uncertainty avoidance, power distance and individualism/collectivism), while Figure 2 displays the standardized regression weights for all structural paths per nation. Whistle-blowing and Internal Reporting Separation Of particular note is the absence of a covariance path between the two ethical reporting constructs, whistle-blowing and internal reporting. The implication is that these two ethical reporting dimensions are separate enough that no covariance path is required to link them (see the section titled ‘Whistle-blowing and Internal Reporting’ for the theoretical position). This position is quantitatively enforced in our model by the low correlations reported between the whistle-blowing (WB) and internal reporting (IR) latent constructs in all three subject nations (IR < > WB, US = .094; IR < > WB, Canada = .235; IR < > WB, Mexico = .408), lending support to the separation and demonstrating no substantive relation between the two constructs. Also, as will be discussed later in the results, different directional relations of whistle-blowing compared to internal reporting to specific cultural dimensions provide further evidence of the proposed separation.

15

16

International Journal of Cross Cultural Management 7(1) Table 3

Correlations for manifest items

All Mean SD ic1 ic2 ic3 pd1 pd2 pd3 ua1 ua2 ua3 Ir1 Ir2 Ir3 wb1 wb2 wb3

4.29 4.36 4.78 2.58 2.38 2.72 5.29 5.82 5.37 4.47 3.99 3.97 3.56 3.68 3.42

ic1

ic2

ic3

pd1 pd2

pd3 ua1 ua2

ua3

ir1

ir2

ir3 wb1 wb2

1.54 1.60 0.28 1.64 0.38 0.26 1.54 –0.02 0.00 –0.08 1.62 –0.02 –0.06 –0.04 0.11 1.36 0.00 0.04 –0.07 0.29 0.17 1.55 0.08 0.05 0.08 –0.02 0.03 –0.04 1.24 0.06 –0.01 0.00 –0.11 –0.07 –0.13 0.25 1.42 0.12 0.12 0.11 0.05 0.07 0.02 0.37 0.21 1.56 0.07 0.00 0.08 –0.04 –0.01 –0.06 0.17 0.09 0.12 1.60 0.05 –0.05 0.02 –0.08 –0.06 –0.07 0.10 0.05 0.01 0.42 1.57 0.03 0.01 0.10 –0.02 –0.04 –0.10 0.13 0.02 0.06 0.41 0.46 1.69 0.00 0.07 0.04 0.06 0.03 0.07 0.08 0.00 0.08 0.06 0.01 0.04 1.67 0.01 0.05 0.04 0.01 0.02 –0.03 0.09 –0.04 0.07 0.19 0.10 0.18 0.34 1.67 0.03 0.04 0.02 0.05 0.11 0.06 0.09 –0.01 0.09 0.08 0.05 0.09 0.32 0.33

Culture, Whistle-blowing and Internal Reporting Hypotheses concerning relationships between the cultural dimensions and propensity to internally report or whistle blow are addressed in Tables 4 and 5. Table 4 shows the results of fitting a series of hierarchical models that reveal very good fit measures (RMSEA ≥ .025, GFI > .95, AGFI > .9, CFI > .9 for all models). In Table 4, Model 2.0 compared to Model 1.0 reveals that we cannot assume that factor loadings are fully invariant across all these loadings. However, Model 2.2 does establish factorial invariance with respect to the two dimensions of internal reporting and whistle-blowing. The combination of Model 1 and Model 2.2 implies that the ethical reporting items load on the same constructs (three items on each construct), and that the factor loadings are not significantly different for the items across the three nations. This is also strong support for separating the two ethical reporting constructs. Model 2.2 establishes partial factorial invariance by allowing one factor loading for each cultural construct to vary for Mexico only. Factor loadings are completely identical for all constructs in the

US and Canada. Model 2.2, compared to Model 3.3, becomes the basis for whether the regression slopes are invariant for all three countries, while Model 3.3, alone, is used for testing Hypotheses 1a through 3b. The chi square value of 26.48 with 12 degrees of freedom yields a p value of .009, indicating that differences of some kind exist between countries. Model 3.1 tests whether uncertainty avoidance has the same regression weight for each of the three countries, and this hypothesis is accepted with a chi square value of 2.56 with 4 df, which yields a nonsignificant p value. Models 3.2 and 3.3 test, in turn, whether one of the constructs of power distance or individualism/collectivism could be added to the uncertainty avoidance construct and have the hypothesis of equal regression weights be acceptable. In neither case was this true, since both models show significant lack of fit, with p values of .001 and .007 respectively. The last model that was tested allowed the coefficients for power distance and collectivism to vary for Mexico only. Model 3.3 yields a chi square of 3.83 with 8 df, yielding a non-significant disagreement with those relationships specified. Model 3.3

wbe3 1 wb3

wbe2 1

is a very acceptable model (chi square = 3.83, 8 df), which shows no significant difference when compared to the acceptable Model of 2.2, and assumes that all three countries have identical slopes (regression weights) between uncertainty avoidance and both ethical reporting constructs, and that the US and Canada also have identical slopes for both power distance and collectivism in relation to the two ethical reporting constructs. The slopes for Mexico are different for those latter two cultural constructs. These tests establish partial factorial invariance and reveal that the United States and Canada have equal regression weights for all relationships, and also that for uncertainty avoidance the regression weights on both ethical reporting constructs are equal for the United States and Canada. None of the tests however address whether the relationships between the cultural dimensions to internal reporting and whistle-blowing are significant. Table 5 shows the unstandardized factor loadings and slopes for Model 3.3 (see Figure 2 and Table 6 for standardized factor loadings).

Whistle-blowing

1 e2

Individualism/ Collectivism

Structural model

ic3

Figure 1

1 icE3

ic2 1 icE2

ic1 1 icE1

pd3 pdE3

1

pd2 pdE2

1

pd1 pdE1

1

ua3 uaE3

1

ua2 1 uaE2

uaE1

1

ua1

1

1

1

Uncertainty Avoidance

Power Distance

e1

1

Internal Reporting

1

1

wb2

wbe1 wb1

1

ire3 1 ir3

ir2

1

ir1

1

ire1

ire2


Uncertainty Avoidance A definite positive relationship is established between uncertainty avoidance and both internal reporting and whistle-blowing that is invariant across all three countries in our study, thereby fully supporting Hypotheses 1a and 1b. The regression weights (unstandardized) are equal to .23 (standard error = .06) and .21 (standard error = .07) for internal reporting and whistle-blowing, respectively. Both are statistically significant at a level less than .001. Power Distance The hypothesized negative relationship Hypothesis 2a, between power distance and internal reporting, is supported for the US and Canada but does not hold in Mexico. The regression weight of power distance on internal reporting for the US and Canada is

17

18

International Journal of Cross Cultural Management 7(1) ← 0.197 (US) 0.218 (CN) 0.147 (MX)

← 0.167 (US) 0.197 (CN) 0.124 (MX)

U.A.

Internal R.

P.D.

← –0.203 (US) –0.180 (CN) 1.27 (MX) ← 0.128 (US) 0.120 (CN) 1.43 (MX)

Whistle B. ← 0.021 (US) 0.019 (CN) 1.29 (MX)

C

* All relations were found to be significant. ** All relations were found to be significant in the US and Canada. *** Findings would have been significant in the US and Canada had a positive path been hypothesized. **** No significant relations were found.

Figure 2

← 0.052 (US) 0.050 (CN) 1.19 (MX)

Standardized regression weights for US, Canada and Mexico

equal to .225 (SE = .067), which is significant at less than the .001 level. The coefficient for Mexico was positive but not significant. Hypothesis 2b, relating power distance and whistle-blowing, is not supported since all three countries have a positive relationship. The regression weight of power distance on whistle-blowing is equal to .213 (SE = .067), which is in opposite direction to our original stated Hypothesis 2b and much of the established theory. Individualism/Collectivism Hypotheses 3a and 3b, relating collectivism to the two ethical reporting constructs, were

not supported by the analysis. None of the regression coefficients were significant at the .05 level. Demographic Considerations Similar models were run including the two demographic variables of gender and age, yielding much the same results. Neither variable was significantly related to either ethical reporting construct in any of the three countries under study, except for the relationship between age and whistle-blowing in Canada which had a coefficient of –.02 (SE = .008), which was significant at the .012 level. The models in Table 4 were almost the same

MacNab et al.: Culture and Ethics Management Table 4 weights No.

Summary of models and goodness-of fit tests for testing equality of regression

χ2

Df

∆χ2

∆df

P-value

420.92 460.12 432.10 441.42 467.90 443.98 467.18 462.67 445.26

243 263 251 260 272 264 268 268 268

— 39.20 11.18 20.50 26.48 2.56 25.76 21.25 3.83

— 20 8 17 12 4 8 8 8

—