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

Fraud and Forensic Accounting Education Conference
Savannah, GA
May 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 subjective
  interpretation 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 Surveys
                                                     YES           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)

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Salience and code of ethics savannah presentation

  • 1. The Role of Salience and Group Identity in the Effectiveness of Codes of Ethics Fraud and Forensic Accounting Education Conference Savannah, GA May 17, 2012 Brett Hunkins Todd Thomas DeVos Graduate School of Management at Northwood University
  • 2. Origin of the Idea  Anecdotal classroom observations  Varied experiences  Need for multi-disciplinary study
  • 3. Codes of Ethics Research  Codes per se  Individual beliefs of those bound by code  Organizational factors
  • 5. Critical considerations (Schwartz, 2002; Orlitzky, 2003; Vershoor, 1998)  Code content  Process of code creation  Implementation plan  Administration plan
  • 6. Code content (Schwartz, 2004)  Examples  Tone  Length  Relevance  Realis(m)
  • 7. Process of Code Creation  Employee involvement and engagement
  • 8. Implementation Plan  Support of senior management  Training  Reinforcement
  • 9. Administration Plan  Company abides by the code  Violations are reported  Anonymous phone lines  Violations are communicated  Enforcement is consistent
  • 10. Codes of Ethics Research  Codes per se  Individual beliefs of those bound by code  Organizational factors
  • 12. 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
  • 13. Individual Engagement (cont’d)  Variation of identification and accountability can help explain different responses to uniform context (Frink and Kilmoski, 1998)
  • 14. Individual Engagement (concluded)  Behavior is best understood by looking at aspects that directly affect subjective interpretation and experience of personal responsibility (Hall, 2007)
  • 15. 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).
  • 16. 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)
  • 17. 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.
  • 18. Codes of Ethics Research  Codes per se  Individual beliefs of those bound by code  Organizational factors
  • 20. Ethical Climate  Variability of ethical values and behaviors across departments (Victor and Cullen, 1988; Meglino, Ravlin, Adkins, 1989)
  • 21. 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)
  • 22. Relevance of individual – organizational match?
  • 23. 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)
  • 24. 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)
  • 25. 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?
  • 26. Empirical design  Organizational surveys  Individual surveys
  • 27. Organizational Surveys  Finance-specific codes (SOX)  Overall codes  Function-specific codes (but not Finance)  Which employees bound by either?
  • 28. Organizational Surveys YES 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
  • 29. Organizations Surveyed  Publicly held  Private (but SOX-like)  Private  Not-for-profit
  • 30. Preliminary Results  No non-finance functional codes  No finance-specific codes for non-public entities  Private (but SOX-based) entities lack finance-specific code
  • 31. Next Steps  Continually expanding organizational surveys  Develop employee survey  Evaluate results  Publish
  • 33. THANKS!!  Brett Hunkins (bhunkins@northwood.edu; 989.837.4486)  Todd Thomas (thomasl@northwood.edu; 989.837.4272)