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The final version of this paper was published in: Tang, T. L. P., Chen, Y.J., Sutarso, T. (2008). Bad Apples in Bad (Business) Barrels: The Love of Money, Machiavellianism, Risk Tolerance, and Unethical Behavior. Management Decision, 46 (2), 243-263.

Bad apples in bad (business) barrels

The love of money, Machiavellianism, risk tolerance, and unethical behavior Thomas Li-Ping Tang Yuh-Jia Chen Toto Sutarso

Abstract Purpose: In this study, we attempt to use several variables measured at Time 1 to predict cluster membership (bad apples vs. good apples) measured at Time 2 and investigate possible differences between business and psychology students in unethical behavior. Design: We measured business and psychology students propensity to engage in unethical behavior (PUB), the love of money, Machiavellianism, and risk tolerance at Time 1 and propensity to engage in unethical behavior at Time 2 (four weeks later). We used cluster analysis to analyze Time 2 data and identified bad apples (Cluster 1, high propensity to engage in unethical behavior) and good apples (Cluster 2, low propensity to engage in unethical behavior). We then used all the variables measured at Time 1 to predict cluster membership (bad apples vs. good apples) measured at Time 2. Findings: In three discriminant analyses, we found that variables at Time 1 predicted cluster membership at Time 2 for the whole sample and the business sample, but not for the psychology sample. The differences between bad apples and good apples were significant for business students, but not significant for psychology students. Correlation data showed that the love of money was significantly correlated with Machiavellianism and risk tolerance. Research limitations/implications: Students are not assigned randomly to business and psychology courses. We measure students behavioral intention, not actual unethical behavior. Can professors change peoples love of money, Machiavellianism, risk tolerance, and the propensity to engage in unethical behavior and enhance students and future managers ethical decision making? This issue deserves critical attention in future research. Practical implications: It is plausible that corruptions and scandals are caused not by lack of intelligence, but lack of wisdom, or virtue. Professors and researchers may have to focus on ethics training, in general, and the bad apples in bad (business) barrels (mostly male business students), in particular, identify the most critical time and methods in teaching business ethics, enhance learning based on students own experiences, and promote ethical values in schools, universities, and organizations. Originality/value: This research shows the importance of incorporating propensity to engage in unethical behavior (PUB), the love of money, Machiavellianism, and risk tolerance in identifying bad apples vs. good apples across majors. -----------------Keywords: Propensity to Engage in Unethical Behavior, the Love of Money, Risk Tolerance, Machiavellianism, University Students, Business, Psychology, United States of America Paper type: Research paper

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Introduction Recently, many scandals and corruptions in large corporations have appeared in the news media. In the post-Enron era, many researchers and executives have serious concerns regarding the reasons behind these scandals, corruptions, and white-collar crime (Etzioni, 2002). Whitecollar crime is defined as crime committed by a person of respectability and high social status in the course of his/her occupation. Literature suggests that federal prosecutors charged 8,766 defendants with white-collar crime in 2000. It resulted in 6,876 convictions (78% of the cases). Further, 46 percent of those convicted were sentenced to prison with an average jail time of 16 months (Ivancevich, Konopaske, & Matteson, 2005). Former Enron Corporation Chief Financial Officer (CFO), Andrew Fastow, and former CEO, Jeffrey Skilling, have received their training at the best business schools in the USA (Merritt, 2002). Educators and researchers face the ethics crisis that is not only a challenge for business organizations but also an opportunity to strengthen business education (Ethics Education in Business Schools, 2004). On one hand, recent empirical study shows that private universities and universities with more selective programs and religious affiliations have more ethics coursework in their curricula than their counterparts (Evans, Trevio, & Weaver, 2006). On the other hand, very little evidence supports the notion that students who take ethics courses will make ethical decisions (e.g., Evans et al., 2006; Ritter, 2006; Weber, 1990). Some argue, however, that corruptions and scandals are caused not by lack of intelligence, but lack of wisdom (Feiner, 2004), or virtue (Giacalone, 2004) (Tang & Chen, in press). We attempt to dig deeper into this issue. One of the real root causes of the corporate scandals is the overemphasis American corporations have been forced to give in recent years to maximizing shareholder value without regard for the effect of their actions on other stakeholders (Kochan, 2002: 139). Many corporations have profit-sharing programs that are intended to align management interests with owners value maximization goals. Profit-based mechanisms create a huge amount of pressure and opportunity for individual managers and may have some serious flaws. Enrons executives were provided with substantial bonuses in the form of stock options. Due to the perverse incentives, some corporate executives deceptively manipulate accounting procedures by cooking the books and intentionally engage in unethical behaviors. Recent research supports the notion that the love of money is a root of all kinds of evil (Tang & Chiu, 2003; Tang et al., 2007a; Vitell, Paolillo, & Singh, 2006, 2007). There is a dearth of empirical research on the love of money and evil (unethical behavior) because many lay people and scholars may have great reluctance to study these issues and consider that as taboo (Furnham, 1984; Tang & Chiu, 2003). We assert that the love of money and deceptive manipulations may be related to unethical behavior. Derek Bok (1993), former president of Harvard University, asserts: The lucrative rewards of Wall Street and the high compensation paid to top executives act as a magnet to attract many people to the business field. In fact, 89,390 bachelors degrees in business administration and management were awarded in 1992-1993, making it the most popular undergraduate major in college. It is reasonable to expect that many students enter business schools due to their preexisting dispositional values (Staw, Bell, Clausen, 1986), i.e., the value of being financially well off (McCabe, Butterfield, & Trevio, 2006: 295), or the love of money (Cunningham, Frauman, Ivy, & Perry, 2004; Tang et al., 2006) and maintain these values over time. Through the process of the Attraction-Selection-Attrition (ASA, Chatman, 1989; Schaubroeck, Ganster, & Jones, 1998) and mutual influences, business students may have certain dispositional values

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(e.g., the love of money, Machiavellianism, risk taking, and ethical values) and behavioral tendencies that are different from students in other fields, students in psychology, for example. Further, after taking a single semester of introductory economics, for example, students show a significant decline in honesty and increase in self-interest (Frank, Gilovich, & Regan, 1993). Recent research suggests that business students are more willing than nonbusiness students to self-report cheating because they see cheating as more acceptable or necessary in order to get ahead (McCabe et al., 2006: 300). Business students education, training, experience, and environment may also shape their attitudes and behaviors in the process. We provide the following rationale for the present study: (1) corruptions and unethical behaviors are not limited to only executives and managers in large corporations in the USA, (2) most business executives and managers have been trained in colleges and universities and in business schools, in particular (Merritt, 2002), (3) for unethical behavior, people usually start out something small early in their lives (Perotin, 2002), then, inch by inch, they dig deeper and deeper into a hole of which they can not get out (Burton, 2004), (4) the best predictor of future performance is past performance, (5) students (business students, in particular) may become future managers and executives in organizations, and (6) students do bring dispositional values to the university and maintain these values over time (Staw et al., 1986). We argue that students unethical behavior may help educators and researchers understand future managers and executives unethical behavior in organizations. This study will examine these issues and fill the void. More specifically, this study examines business and psychology students (1) propensity to engage in unethical behavior (PUB, Chen & Tang, 2006; Luna-Arocas & Tang, 2004; Tang & Chiu, 2003), measured at both Time 1 and Time 2, (2) ones deeply-rooted money attitudes (Furnham & Argyle, 1999; Mitchell & Mickel, 1999), the Love of Money (LOM, Du & Tang, 2005; Tang & Chiu, 2003; Tang et al., 2006), (3) manipulative personality, tactics, and strategies, Machiavellianism (the Mach IV, Christie & Geis, 1970), and (4) financial risk tolerance, the Risk Tolerance Questionnaire (RTQ, Corter & Chen, 2006; Opdyke, 2000), measured at Time 1. We ask the following research questions: Can researchers use cluster analysis and identify individuals who have high propensity to engage in unethical behavior (bad apples) vs. low propensity to engage in unethical behavior (good apples) based on their propensity to engage in unethical behavior at Time 2 (cf. Trevio & Youngblood, 1990)? Can we use peoples propensity to engage in unethical behavior, the love of money, Machiavellianism, and risk tolerance measured at Time 1 to predict their cluster membership (bad apples vs. good apples) at Time 2? Are there differences between business students and psychology students? Theory and Hypotheses Attitude and Behavior Intention According to the theory of reasoned action, behavior is a function of behavior intention that, in turn, is determined by attitude toward the act and social norms (Ajzen & Fishbein, 1980). On the basis of this theory, we assert that the propensity to engage in unethical behavior, the love of money, Machiavellianism, and risk tolerance all measured at Time 1 (attitudes) predict people who have high (low) propensity to engage in unethical behavior at Time 2 (behavior intention). It is very difficult and almost impossible to observe peoples unethical behaviors that are done mostly in private. The literature suggests, however, that individuals are more willing to provide accurate information answering an anonymous paper-and-pencil survey or computeradministered questionnaires than in a face-to-face interview (Richman, Kiesler, Weisband, &

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Drasgow, 1999). Behavioral intentions are an adequate surrogate measure of actual unethical behavior (Jones & Kavanagh, 1996). There are significant differences between the two, and this study examines only behavioral intentions of unethical behavior. We turn to the propensity to engage in unethical behavior first. Unethical Behavior Researchers have examined constructs of unethical behavior (e.g., Trevio & Youngblood, 1990), theft (Greenberg, 2002), workplace deviance (Robinson & Bennett, 1993), counterproductive behavior (Cohen-Charash & Spector, 2001), corruption (Anand, Ashforth, & Joshi, 2004; Luo, 2005), and organizational misbehavior (e.g., Vardi & Weitz, 2004). Ivancevich et al. (2005) have identified 23 behavioral constructs of misbehavior at work: arson, blackmail, bribery, bullying, cheating, discrimination, dishonesty, espionage, fraud, incivility, intimidation, kickbacks, lying, misinformation, privacy violations, revenge, sabotage, sexual harassment, substance abuse, theft, threats, whistle blowing, and withholding information (concealment). It is beyond the scope of this study to examine all different aspects of organizational misbehavior or unethical behavior mentioned above. Among many measures of unethical behavior or misbehavior, we adopt a short multidimensional 15-item, 5-factor measure, PUB (e.g., Chen & Tang, 2006; Luna-Arocas & Tang, 2004; Tang & Chiu, 2003) because it reflects (1) ones propensity to engage in unethical behavior in the financial domain, (2) some of the scandals and corruptions reported in the media, and (3) white-collar crime. We focus on the propensity to engage in unethical behavior (PUB) using the following five sub-constructs (cf. Chen & Tang, 2006; Tang & Chiu, 2003): Resources Abuse (Ivancevich et al., 2005), Not Whistle Blowing, Theft (Greenberg, 2002), Corruption (Anand et al., 2004; Luo, 2005), and Deception (Ivancevich et al., 2005; Schein, 2004). Next, we identify additional variables that may predict peoples propensity to engage in unethical behavior: i.e., the love of money, Machiavellianism, and risk tolerance. We turn to money attitudes and the Love of Money (LOM) first. Money Attitudes There are many studies on money and money attitudes in the literature (e.g., Diener & Seligman, 2004; Furnham & Argyle, 1999; Mitchell & Mickel, 1999; Opsahl & Dunnette, 1966; Srivastava, Locke, & Bartol, 2001; Tang, 1992; Vohs, Mead, & Goode, 2006; Wernimont & Fitzpatrick, 1972). Money attitudes are also similar to but not exactly the same as other constructs examined in the literature such as materialism (e.g., Belk, 1985). Among many money related measures, the Money Ethic Scale (MES, Tang, 1992) or the Love of Money Scale (LOM, a subset of the MES, Tang & Chiu, 2003; Tang et al., 2006) has been considered as one of the most well-developed and systematically used measures of money attitude in the literature (Lea & Webley, 2006; Mitchell & Mickel, 1999). Researchers have defined the love of money as (1) ones attitudes toward money, (2) ones meaning of money, (3) ones desires and aspirations for money, (4) not ones need, greed (Sloan, 2002), or materialism (Belk, 1985), (5) a multi-dimensional individual difference variable, and (6) the combined notion of several sub-constructs or factors. The measurement and functional equivalence, reliability, and validity of the LOM have been very well established, cited, and published in Chinese, English, French, Italian, Spanish, Romanian, Russian, and many other languages (Luna-Arocas & Tang, 2004; Tang, Luna-Arocas, & Sutarso, 2005; Tang, Kim, & Tang, 2000).

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In this study, we select Factors Rich, Motivator, and Important from the LOM (Tang et al., 2006). Factor rich is the affective component of LOM. Most people love money and want to be rich. Children from poor economic background tend to overestimate the size of a coin (Lea & Webley, 2006). People with financial hardship are obsessed with money (Lim & Teo, 1997). Money is a motivator (behavioral component) for many people (e.g., Harpaz, 1990). On the positive side, no other incentive or motivational technique comes even close to money regarding improving performance in organizations, (Locke, Feren, McCaleb, Shaw, & Denny, 1980: 381). On the negative side, in response to a bonus plan that paid people for finding insect parts in a food process plant, innovative employees brought insect parts from home to add to the peas just before they removed them and collected the bonus (Milkovich & Newman, 2008: xiii). The emphasis on the importance of money (Mitchell & Mickel, 1999: 569) is the most consistent thread of the money attitude research. Thus, money is important (cognitive component). Past research suggests that among professional Hong Kong employees, the love of money is directly related to unethical behavior and is also indirectly related to unethical behavior through pay dissatisfaction (Tang & Chiu, 2003). Tang et al. (2006) investigated the measurement equivalence of a 9-item-3-factor Love of Money Scale (LOMS) and the 4-item pay level sub-scale of the Pay Satisfaction Questionnaire (PSQ) across 29 samples in six continents (N = 5,973). More recently, Tang et al. (2007a) examined the relationship between love of money and unethical behavior across three levels of economic development (based on GDP per Capita) and found that among full-time managers, the love of money is significantly related to unethical behavior for the high GDP group (income > $20,000, n = 1,756) and median GDP group ($5,000-$20,000, n = 2,371), but not for the low GDP group (income < $5,000, n = 1,954). After applying equality constraints using a structural equation model (SEM), the final etic model (N = 6,081) shows that the love of money is positively related to unethical behavior for all GDP groups. Thus, the love of money will be related to unethical behavior, in general. Machiavellianism Niccolo Machiavelli (1469-1527) wrote The Prince to ingratiate himself with the new ruler. The author of The Prince advised others on how to acquire and stay in power. It was based entirely on expediency and was devoid of the traditional virtues of trust, honor, and decency. Christie and Geis (1970) were considered as the first psychologists to study Machiavellianism. Machiavellianism can be defined as a strategy of social conduct that involves manipulating others for personal gain, often against the others self-interest. Machiavellians tend to have the following characteristics: (1) a relative lack of affect in interpersonal relationships, (2) a lack of concern with conventional morality, (3) a lack of gross psychopathology, and (4) low ideological commitment. Christie and Geis (1970) widely used Machiavellianism measure, the Mach IV, has items related to tactics, views of human nature, and abstract morality. A Machiavellian administrator is an individual who employs aggressive, manipulative, exploitive, and devious methods to achieve goals without regard for feelings, rights, and needs of other people. This study adopts the Mach IV measure because some corporate executives (e.g., Enron) deceptively manipulate accounting procedures by cooking the books and intentionally engage in unethical behaviors. We assert that people who employ aggressive, manipulative, exploitive, and devious methods to achieve goals will have a high propensity to engage in unethical behavior.

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Risk Tolerance Most people are risk averse (Kahneman & Tversky, 1979). Wealthier investors are more willing to incur more risk than less wealthy ones. Optimal asset allocation in an investment portfolio must consider the tradeoff between expected return and risk (Yook & Everett, 2003). Investors risk preferences may affect this optimization (Hallahan, Faff, & McKenzie, 2004). Risk-taking propensity is a multidimensional construct. Investment risk tolerance has four components: propensity, attitude, capacity, and knowledge. People with high sensation seeking tendencies showed greater risk-taking tendencies in financial decisions (Wong & Carducci, 1991). Others disagreed (Kogan & Wallach, 1964). Risk Tolerance Questionnaire (RTQ) measures investors risk taking behavior (Corter & Chen, 2006; Opdyke, 2000). RTQ scores are significantly correlated with investment risk measures and respondents actual investment portfolios, but not correlated with sensationseeking tendencies (Corter & Chen, 2006). People with more investment experience have higher RTQ scores and also risk-tolerant investment behavior than those without. We adopt RTQ in this study because people with high RTQ scores are interested in taking risks in the financial domain. Most of the unethical behaviors examined in this study many involve some personal and financial gains and also risks. Although both investors investment behaviors and peoples unethical behaviors involve some risks, these risks are different and in different domains. Most people are risk averse and do not want to engage in unethical behavior. We speculate that those who have high risk tolerance may be more likely to engage in unethical behavior. Since very little research has been done in this area, we will test this hypothesis on an exploratory basis. Hypothesis 1: The propensity to engage in unethical behavior, the love of money, Machiavellianism, and risk tolerance measured at Time 1 predict cluster membership (bad apples vs. good apples) at Time 2. College Major Business student. For the past several decades, more students have entered business schools due to their preexisting money attitudes (e.g., Cunningham et al., 2004; McCabe et al., 2006; Tang at al., 2005). Some become managers and executives, years later. MBA is considered as the worlds most popular degree, according to Fernandes (2005), President and Chief Executive Office of the Association to Advance Collegiate School of Business, AACSB International. American business schools award about 85 percent of the worlds business degrees. Business education is big business. No form of education is more commercialized than management education (Economist, 2004: 81). According to a McKinsey-Harvard report in 1995, non-degree executive education generated around $3.3 billion and was growing at rate of 10 percent to 12 percent annually (Crainer & Dearlove, 1999: 6). The individual economic return of the college education is different for people in different disciplines and majors (Bok, 1993). Between mid-1970s and mid-1980s, the major distribution moved away from education and social science (e.g., psychology) and toward business and engineering (U.S. Department of Education, 1989). That is, the proportion of males (females) graduating in education and social science fell from 27 percent (42 %) to 18 percent (27%), and the proportion of males (females) graduating in business and engineering increased from 34 percent (9 %) to 49 percent (27 %). Business students expect to yield a great economic payoff in the labor market. Students major in business have higher love-of-money orientation than those in other majors (i.e., recreation and leisure services) (Cunningham et al., 2004). Business professors have

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a much higher level of the love of money than those in other colleges (Tang et al., 2005). Similar to business faculty, business student may have a much stronger concern for making money, the bottom line, performance standards and quotas, and a much higher probability to face issues regarding unethical behavior than psychology students. Psychology student. Psychology students, on the other hand, have a strong helping orientation and are in a service-oriented profession, are not in it for the money, and may have high moral standards. It is possible that psychology students in the helping profession are emotionally incapable of hurting others, will not exploit others (Wilson, Near, & Miller, 1996: 288), use Machiavellianism as an impression management tactic (Bolino & Turnley, 2003), and may not engage in unethical behavior. If there is a poor fit between the person and the environment, then, individuals may quit voluntarily or involuntarily either in the specific university programs or in business organizations according to the Attraction-Selection-Attrition (ASA) process (Chatman, 1989; Schaubroeck et al., 1998). Business vs. psychology. The differences between business and psychology students may reflect the dispositional values students bring to the university (Staw et al., 1986) and their educational and work experiences on campus and in society (Frank et al., 1993; McCabe et al., 2006). We assert that people with some specific value orientations, attitudes, and ethics may enter a specific major in the university setting. At the time of our data collection, students have similar exposures to the issue of unethical behavior, scandals, corruptions in the media (e.g., Enron, WorldCom, Martha Stewart, HealthSouth, etc.), and the socialization process on campus, i.e., both formal learning in courses and informal learning and discussion of current events on campus. In this study, we examine only undergraduate business and psychology students. Hypothesis 2: There are differences in business and psychology students when we use the love of money, Machiavellianism, and risk tolerance measured at Time 1 to predict cluster membership measured at Time 2. Method Participants Students at a regional state university located in the southeastern USA participated voluntarily in this study. They completed two research projects: a 6-page survey at Time 1 and, then, a 4-page survey at Time 2, four weeks later. The four-week time lag was chosen based on researchers convenience that served several purposes. These two separate research projects provided a psychological separation (e.g., Podsakoff, MacKenzie, Lee, & Podsakoff, 2003) and avoided the possible impacts of fatigue, mood, memory, and response format for the predictors and the criteria. We obtained data from business students (n = 198, male = 128 (64.6%), female = 70 (35.4%)) and psychology students (n = 101, male = 37 (36.6%), female = 63 (62.4%)). There were 165 male (55%) and 133 female (45%) students. The students were 22.84 years old. They had 15.11 years of education, an annual income of $16,741.62, and 5.96 years of work experience. Measures We adopted scales with good measurement properties and selected specific items and constructs for this study: the 15-item, 5-factor Propensity to engage in Unethical Behavior (PUB, Chen & Tang, 2006; Luna-Arocas & Tang, 2004; Tang & Chiu, 2003), the 9-item, 3-factor Love of Money Scale (LOM, Tang & Chiu, 2003; Tang et al., 2006), the 4-item Mach IV measure (Christie & Geis, 1970), the 20-item Risk Tolerance Questionnaire (RTQ, Corter & Chen, 2006;

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Opdyke, 2000), sex, age, years of education, current job experience, and total work experience in years, major (business vs. psychology), annual income, and filler items. All were measured at Time 1. We measured participants Propensity to engage in Unethical Behavior at both Time 1 and Time 2 with the following instructions: There are several hypothetical vignettes at work. Some vignettes may not be applicable to your situation. If you were in that situation, what is the probability that you would take action as it is suggested in this vignette? Please use the fivepoint scale with very low probability (1), low (2), average (3), high (4), and very high probability (5) as anchors. Results Table 1 shows the mean, standard deviation, and correlations of variables for the whole sample. The love of money was associated with sex (male), Propensity at Time 1 (four factors), Propensity at Time 2 (one factor), Mach IV, and risk tolerance (RTQ). Mach IV was related to sex (male), Propensity at Time 1 (five factors), Propensity at Time 2 (two factors), and the love of money. Risk tolerance (RTQ) was significantly related to age, sex (male), education level, work experience, major (Business), Resources Abuse, Theft, Deception (Propensity at Time 1), and also the love of money. We examined the differences in propensity to engage in unethical behavior (PUB) at Time 2 between business and psychology students in a multivariate analysis of variance (MANOVA). Business students were not significantly different from psychology students: F (5, 292) = 2.09, p = .076, Wilks Lambda = .967, partial eta squared = .033). The Cronbachs alphas for Resources Abuse, Not Whistle Blowing, Theft, Corruption, and Deception were listed as follows: PUB at Time 1 (.74, .97, .89, .85, and .92) and PUB at Time 2 (.73, .94, .89, .74, and .90). Step 1: Cluster Analysis We applied cluster analysis using five factors of PUB at Time 2 for the whole sample and identified two clusters (Table 2). There were 25 bad apples (8.4%) in Cluster 1 (high propensity to engage in unethical behavior) and 273 good apples in Cluster 2 (low propensity to engage in unethical behavior) (cf. Trevio & Youngblood, 1990). Among the five factors of PUB, Factor Deception was the most power factor in separating bad apples from good apples (F 1, 296) = 425.74, p < .001), followed by Factors Corruption (F 1, 296) = 294.32, p < .001), Theft (F 1, 296) = 182.49, p < .001), Not Whistle Blowing (F 1, 296) = 120.49, p < .001), and Resources Abuse (F 1, 296) = 28.51, p < .001). Bad apples had a higher propensity to engage in unethical behavior than good apples. Next, with the combination of Cluster (1 vs. 2) and Major (business vs. psychology), we created a new variable with four groups (i.e., Cluster 1/business, Cluster 2/business, Cluster 1/psychology, and Cluster 2/psychology). Results of MANOVA regarding the five factors of PUB at Time 2 across four groups showed significant results (F (15, 800) = 29.28, p < .001, Wilks Lambda = .299, partial eta squared = .331). Tests of between-subjects effects showed that the differences among these four groups were significant for all five factors of propensity at Time 2. Tukey-HSD results revealed that bad apples had a higher propensity to engage in Deception and Not Whistle Blowing than good apples (p < .05). Business students in Cluster 1 had a higher propensity to engage in theft and corruption then psychology students in Cluster 1 who, in turn, had a higher propensity than students in Cluster 2 (business and psychology combined). In short, among bad apples, business students were significantly worse than

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psychology students regarding theft and corruption. We turned to discriminant analysis to test our hypotheses. Step 2: Discriminant Analysis The whole sample. We used the propensity to engage in unethical behavior, the love of money, Machiavellianism, and risk tolerance measured at Time 1 to predict cluster membership (bad apples vs. good apples) in a discriminant analysis (2(8) = 72.92, p < .001,Wilks Lambda = .778, Canonical Correlation = .471). Function 1 separated bad apples from good apples (group centroids: 1.75 vs. -.16) (Table 2). Deception (pooled within-group correlations = .979), Theft (.826), Corruption (.744), Not Whistle Blowing (.550), Resources Abuse (.327), Mach IV (.306), the Love of Money (.190), and risk tolerance (.112) predicted these two clusters. In a cross validation, each case is classified by the functions derived from all cases other than that case. Results of cross validation showed that 87.2 percent of cross-validated grouped cases were correctly classified. Business vs. psychology. Variables at Time 1 predicted the cluster membership (bad apples vs. good apples) for the business sample (2(8) = 74.63, p < .001,Wilks Lambda = .678, Canonical Correlation = .567), but not for the psychology sample (2(8) = 8.66, p > .05,Wilks Lambda = .911, Canonical Correlation = .298) (see Table 2). Further, 88.4 percent and 76.8 percent of cross-validated grouped cases were correctly classified for business and psychology students, respectively. Step 3: MANOVA The whole sample. We used the results of cluster analysis at Time 2 as the classification variable and investigated the propensity to engage in unethical behavior, the love of money, Mach IV, and risk tolerance scores (all measured at Time 1) in a MANOVA. Bad apples were significantly different from good apples (F (8, 265) = 11.00, p < .001, Wilks Lambda = .751, partial eta squared = .249). Tests of between-subjects effects showed that bad apples were significantly different from good apples in all five factors of PUB and Mach IV. Measures collected at Time 1 were different for those in Cluster 1 and in Cluster 2. Business vs. psychology. First, for business students, bad apples (n = 17, 13 males and 4 females, 8.6% of the business sample) were significantly different form good apples (n = 181) (MANOVA: F (8, 176) = 10.47, p < .001, Wilks Lambda = .678, partial eta squared = .322). More specifically, with the exception of risk tolerance, all differences between bad apples and good apples were significant (Table 2). Second, for psychology students, bad apples (n = 8, 4 males and 4 females, 8% of the psychology sample) were not significantly different good apples (n = 92) (MANOVA: F (8, 80) = 1.52, p > .05, Wilks Lambda = .868, partial eta squared = .132). Thereby, bad apples were not significantly different from good apples for measures at Time 1. Discussion We list theoretical, empirical, and practical contributions below: First, on the basis of propensity to engage in unethical behavior (PUB) at Time 2, we found that bad apples (Cluster 1, high propensity to engage in unethical behavior) account for only about 8.4 percent of the whole sample. More specifically, 8.6 percent of the business sample and 8 percent of the psychology sample are bad apples (Trevio & Youngblood, 1990). Moreover, business students in Cluster 1 (n = 17, 13 males and 4 females) have a much higher propensity to engage in theft and

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corruption than psychology students in Cluster 1 (n = 8, 4 males and 4 females). Due to the small sample size for students in Cluster 1, a caution is warranted regarding the significant differences examined in this study. Although the number of people in Cluster 1 is relatively small among students and the two sub-samples, however, a few bad apples can create big scandals in organizations. Second, we use the propensity to engage in unethical behavior, the love of money, Machiavellianism, and risk tolerance, all measured at Time 1 to predict cluster membership. Results of discriminant analysis show that these variables (measured at Time 1) do predict cluster membership (measured at Time 2) for the whole sample and the business sample, but not for the psychology sample. Moreover, business students in Cluster 1 had a higher propensity to engage in unethical behavior, the love of money, and Machiavellianism than those in Cluster 2. For psychology students, there were no significantly differences. In the business sample, the bad apples are significantly worse than the good apples. In the psychology sample, the bad apples are not significantly different from the good apples. We speculate that only business students in Cluster 1 are the real bad apples, whereas psychology students in Cluster 1 are not. Most of business students in Cluster 1 are males (76.5%). There are no significant differences between those in Cluster 1 and Cluster 2 regarding risk tolerance for the whole sample, the business sample, and the psychology sample. Thus, investors risk taking behavior is not strongly related to unethical behavior for the student sample in this study. It is also very likely that most students go to school and work part-time. Due to their limited income and the lack of experiences in financial investment, risk tolerance may not be related to their life style, investment, and behaviors. Future research may want to examine these issues directly among investors and managers in financial institutions and test these hypotheses directly. People bring dispositional values (Staw et al., 1986) to the university and to the work setting and maintain these values over time. Students in this study should have learned values and ethics before they reached college. Our results reflect the virtue of the students. Business students in Cluster 1 have a higher propensity to engage in unethical behavior than psychology students in Cluster 1. Students attend business or psychology courses due to their personal values, self-selection, and the Attraction-Selection-Attrition (ASA) or the socialization process (Chatman, 1989; Schaubroeck et al., 1998). A poor fit between the individuals and the culture of the environment may lead them to quit voluntary or involuntary in college. Our results also support the notion that the best predictor of future performance is past performance. It is plausible that students in the present sample, business students, in particular, may become future managers and executives in organizations. Students may bring these dispositional values (the love of money and the propensity to engage in unethical behavior) to business organizations and maintain these values over time. Therefore, business students unethical behavior in college may be a good predictor of future unethical behavior in organizations. As mentioned, regarding unethical behavior, people usually start out something small early in their lives (Perotin, 2002), then, inch by inch, they dig deeper and deeper into a hole of which they can not get out (Burton, 2004). Since there is a very short time lag between our Time 1 and Time 2 measures, it is easier and more accurate to predict Time 2 data (four weeks later) than a longer time lag. These results show the who, where, and when aspects of our theoretical model. We hope professors and business executives may take actions, offer ethics training, strengthen corporate ethical values, break the chain of events, and prevent business students from becoming tomorrows criminals in the society. We provide our rationale below.

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Tang and his associates have examined the love of money construct in a series of studies. As mentioned, Tang et al. (2007a) examined a theoretical model of unethical behavior involving two antecedents (the love of money and corporate ethical values) and two outcomes (job stress and life satisfaction) based on managers of 29 geopolitical entities in three GDP groups (i.e., 7 in the high, 12 in the median, and 10 in the low GDP groups) across six continents around the world (N = 6,081). In that study, high corporate ethical values and low love of money are related to high ethical behavior that is related to low job stress that, in turn, is related to high life satisfaction. Corporate ethical values have a positive double-whammy effect: increasing ethical behavior and reducing job stress. Moreover, the relationships between corporate ethical values and ethical behavior and between low love of money and ethical behavior exist for the high and median GDP groups, but not for the low GDP group. The high GDP group has the lowest unethical behavior, as expected, whereas the median GDP group has the lowest corporate ethical values, the highest unethical behavior, the highest percentage of bad apples, the highest job stress, and the strongest relationship between love of money and unethical behavior. The results of cluster analyses suggest that 29.39 percent of the managers in the whole sample are bad apples (Trevio & Youngblood, 1990). Furthermore, 28.30 percent of the managers in the high GDP group, 66.55 percent of the median GDP group, and 29.74 percent of the low GDP group are bad apples. It appears that there are more bad apples in the median GDP group (66.55%) than the other GDP groups. In the median GDP group, organizations are in extreme competition and the profit margins are narrow enough to put shareholder value and firm survival at risk, thereby, the incentive to cut corners and act in unethical ways may increase (engage in corruption, compromise product safety and quality, and cheat customers) (Campbell, 2007). Managers may experience the most substantial changes and economic developments in emerging markets, have greater pressure to meet economic expectations of the organization/society, and have a better opportunity to make money than those in other GDP groups, therefore, bad apples vicious streak will come out when they are given a chance, in bad barrels (Christie & Geis, 1970). That study points out also that strong corporate ethical values may deter unethical behavior (Baker, Hunt, & Andrews, 2006) because most people do look to the social context or culture to determine what is ethically right and wrong (Bandura, 1977), obey authority figures (Milgram, 1974), and do what is rewarded (Skinner, 1972) in organizations. An organizations ethical values convey a sense of identity to its members, enhance the stability of its social system, direct managers attention to important issues, and guide subsequent decisions by managers. Thus, the importance of ethical values or cultures at the university and corporate levels can not be ignored. Strong ethical values, cultures, or codes of ethics should be emphasized and implemented properly. In a recent study investigating the relationship between the love of money and pay level satisfaction across three levels of economic development using data from 8 entities in the high, 12 entities in the median, and 10 entities in the low GDP groups in six continents around the world (N = 6,285), Tang et al. (2007b) found a negative relationship between the love of money and pay level satisfaction in the high and median GDP groups, but a positive relationship in the low GDP group. Overall, people with high income are less likely to engage in unethical behavior because they are satisfied with their pay. Perceptions of pay equity and justice are very important in organizations. Low salaries force public servants to supplement their incomes illicitly, while high salaries mean higher losses if a public servant gets caught. Countries in the low GDP group

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have low income and high corruption. It is plausible that managers in the low GDP group may have incorporated bribery, kickbacks, and other tangible and intangible financial gains of unethical behavior into their thinking, thus, their high love of money is positively related to pay satisfaction in that study. The final culture-free (etic) model reveals a negative relationship between the love of money and pay level satisfaction. Pay dissatisfaction has numerous undesirable consequences, such as turnover (Tang et al. 2000), low commitment, counterproductive behavior (Cohen-Charash & Spector, 2001), and unethical behavior (e.g., Tang & Chen, in press; Tang & Chiu, 2003; Vitell, Paolillo, & Singh, 2006, 2007). We may conclude that the love of money may have important implications regarding employees attitudes and behaviors in organizations. It deserves attention in future research. There are several important points. As we compare the findings of these studies, it is important to realize that we have a much smaller percentage of bad apples in our student samples (8.4%) than those managers in the median GDP group (66.55%), the low GDP group (29.74%), and the high GDP group (28.30%) of a large cross-cultural study (Tang et al., 2007a). These university students in the USA may be significantly better than their counterparts in different parts of the world, in the low GDP group, in particular. Students in the present study do not have real and serious experiences as managers, do not face important financial challenges and consequences in organizations, and do not have important issues related to their income, job security, real tangible or intangible financial gains, therefore, they do not face the real push and pull to engage in unethical behavior. People with some specific value orientations, attitudes, and ethics may enter a specific major in the university setting (business and psychology) and different professions due to the dispositional values and their educational and work experiences on campus and in society (Frank et al., 1993; McCabe et al., 2006; Staw et al., 1986). We do not know for sure the actual process of transition from being university students to becoming employees, or managers in organizations, regarding the impact of the love of money and corporate ethical values on the propensity to engage in unethical behavior. It is possible that more people may engage in unethical behavior under severe pressure (push and pull) in organizations. Again, this proposition deserves attention in future longitudinal research. We argue that all social institutions (family, church, school, community) as well as business schools, CEOs and all managers attitudes and actions, corporate ethical culture (Hunt, Wood, & Chonko, 1989), and compensation systems (Honeycutt, Glassman, Zugelder, & Karande, 2001) have significant impacts on managers ethical behaviors. Business professors, for example, need to satisfy all stakeholders in our society (e.g., businesses, students, media, accrediting organizations (AACSB), and business schools) (Pfeffer & Fong, 2002; Trank & Rynes, 2003). Corporations need to satisfy all stakeholders also. Limitations. Our convenience samples are small and may not represent all university students and specific majors. We do not assign students randomly to business or psychology courses. We only measure behavioral intentions, but not the actual unethical behavior. Therefore, a caution is warranted to generalize our findings presented in this study to students in other majors, or schools (e.g., medical school, law school, engineering school, etc.), in other institutions, in other regions of the USA, and people in other cultures. Although many of our students do have part-time work experiences, they do not have real managerial experiences and do not have the power and authority to make critical financial decisions. Thus, they may not actually involve in theft, corruption, etc. Further, the time lag between these two measures is relatively short. Future researcher may consider using students Time 1 measures to predict their Time 2 measures several years later when students have become managers in organizations.

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Researchers and executives must consider this study as a preliminary pilot study and investigate this and other related issues in more depth in the future. Implications and future research. It appears that corruptions and scandals are caused not by lack of intelligence, but lack of wisdom, or virtue. Researchers argue that managers cant be created in a classroom. Professors cant teach management to people who arent managers. People should learn from their own experiences (Mintzberg & Gosling, 2002). Now some fulltime MBA students are required to visit the federal prisons and interview white-collar criminals who are paying their dues to society (Kercheval, 2004; Merritt, 2004). Some business schools seek the best balance between theory and practice by adopting more experiential approaches and involving students more deeply regarding ethics than other methods (e.g., Jurkiewicz, Giacalone, & Knouse, 2004). These are important tools. Future researcher and executives may want to test the effectiveness of these tools and approaches in empirical studies and ask the same question again: What is the efficacy of business ethics training in business schools? There is no simple answer to these questions. Professors have to focus on ethics training, in general, and the bad apples in bad (business) barrels (mostly male business students), in particular. There is a window of opportunity, probably early in ones life, for an individual to learn these basic values and ethics. Some argue that most people learn these values and ethics from their parents in the family. However, for the last decades, family, church, school, organizations, and the society may have provided a weak influence on ethics in the socialization process. Some may argue that colleges and universities cannot make vicious students virtuous or stupid students wise (Coloson, 1999). Can professors change students dispositional variables such as the love of money, Machiavellianism, risk tolerance, and the propensity to engage in unethical behavior? As mentioned, business students are different from psychology students. College major may reflect students values, self-selection, or Attraction-Selection-Attrition (ASA) process (Chatman, 1989; Schaubroeck, Ganster, & Jones, 1998). University professors may have very little or, nothing to do with students selection to major in business or in psychology. What courses (topics) will enhance students and future managers ethical decision making? It is important to re-focus on the efficacy of teaching business ethics (Etzioni, 2002). The extent to which professors can change students values and ethics remains to be seen (e.g., Evans et al., 2006; Ritter, 2006; Weber, 1990) and deserves critical attention in future research. In the post-Sarbanes-Oxley environment, a sea change of ethical social norms in schools, organizations, and society, or ethical community-building, is needed to promote ethical behavior. The combination of organizations strong vision, compensation, and ethical values may instill value, meaning, and purpose in life and help managers know they are not just cutting stones but building cathedrals. This will be an important yet slow process. We use the following example as an illustration for our point: It took 182 years (1163-1345) to build the Cathedral of Notre-Dame in Paris. A strong vision with goals and action plans is needed. Ultimately, the combination of head and heart will be the competitive advantage in the world market (Ashmos & Duchon, 2000): Productivity and profit are consistent with virtuous behavior (Waddock & Graves, 1987). We hope that this study provides some new insights and directions for future research.

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Table 1 Mean, Standard Deviation, and Correlations of Major Variables _____________________________________________________________________________________________________________________________ ___________ Variable M SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 _____________________________________________________________________________________________________________________________ ___________ 1. Age 22.84 5.61 2. Sex .55 .50 -.02 3. Education 15.11 .99 .45** .10 4. Total Work 5.96 4.63 .78** .04 .30** 5. Income 16,741.62 16,515.96 .50* .13 .22* .46** 6. Major 1.34 .47 .15* -.24** -.26** .07 .05 7. Abuse (P1) 2.36 .95 -.01 .10 .04 -.00 .05 .06 8. Not Whistle 1.57 .98 .01 .22** -.04 .03 .10 .03 .26** 9. Theft 1.40 .79 -.09 .28** -.01 -.01 .09 -.05 .38** -.53** 10. Corruption 1.50 .81 -.10 .28** -.01 -.05 -.01 -.06 .45** -.53** .81** 11. Deception 1.39 .81 -.07 .28** -.00 -.00 .11 -.07 .36** .63** .85** .83** 12. Abuse (P2) 2.36 .97 -.03 -.00 -.03 -.03 .01 .09 .62** .22** .24** .29** .26** 13. Not Whistle 1.49 .95 .07 .08 .03 .03 .03 .13* .13** .33** .23** .23** .28** .19** 14. Theft 1.28 .64 -.04 .07 -.06 -.04 .02 .05 .15* .21** .49** .44** .47** .33** .40** 15. Corruption 1.48 .74 -.08 .14* -.06 -.08 -.00 .01 .30** .33** .46** .56** .52** .37** .45** .64** 16. Deception 1.33 .69 -.05 .10 -.03 -.05 -.01 .03 .20** .31** .45** .45** .55** .33** .43** .72** .80** 17. LOM 3.97 .66 -.02 .13* -.03 .00 .07 -.08 .22** .08 .12* .22** .16** .10 .05 .07 .15* .06 18. Mach IV 2.76 .69 .06 .19** .08 -.00 .00 -.04 .18** .24** .25** .31** .29** .06 .11 .16* .28** .20** .33** 19. RTQ 61.54 28.60 .18** .15* .15* .13* .28** -.18** .12* .07 .14* .10 .13* .09 .07 .06 .08 .03 .12* .09 _____________________________________________________________________________________________________________________________ __________ Note. Gender: Male =1, Female = 0; Major: Business =1, Psychology = 2; P1 = Propensity at Time 1. P2 = Propensity at Time 2. N = 299. *p < .05, **p < .01.

Tang, Chen, Sutarso 2008 Bad apples in bad (business) barrels Decision, 46 (2)

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Table 2 Cluster Analysis _______________________________________________________________________________ Cluster 1 Cluster 2 Standardized Within-Groups Variable M M F p Coefficients Correlations _______________________________________________________________________________ The Whole Sample: Time 2 Data (Cluster Analysis) Resources Abuse 3.28 2.29 28.51 .000 Not Whistle Blowing 3.12 1.36 120.49 .000 Theft 2.53 1.17 182.49 .000 Corruption 3.12 1.33 294.32 .000 Deception 3.01 1.17 425.74 .000 _______________________________________________________________________________ The Whole Sample: Time 1 data (Validation) Resources Abuse 2.91 2.30 9.14 .003 .021 .327 Not Whistle Blowing 2.47 1.46 26.58 .000 .066 .550 Theft 2.46 1.29 60.86 .000 .188 .826 Corruption 2.51 1.39 50.05 .000 -.236 .744 Deception 2.65 1.26 86.85 .000 .949 .979 Mach IV 3.12 2.72 7.39 .001 .091 .306 RTQ 59.47 53.80 1.57 .230 .060 .112 LOMS 4.20 3.95 3.18 .076 .068 .190 MANOVA: F (8, 265) = 11.00, p < .001, Wilks Lambda = .751, partial eta squared = .249. Discriminant Analysis: 2(8) = 72.92, p < .001,Wilks Lambda = .778, Canonical Correlation = .471. Business Sample: Time 1 Data Resources Abuse 3.02 2.24 11.07 .001 -.029 .350 Not Whistle Blowing 2.71 1.43 32.64 .000 .090 .603 Theft 2.63 1.32 49.00 .000 -.177 .736 Corruption 2.82 1.40 56.44 .000 .040 .795 Deception 2.98 1.28 82.52 .000 1.008 .971 Mach IV 3.25 2.73 9.62 .002 .097 .342 RTQ 62.76 56.34 1.49 .224 .106 .131 LOMS 4.33 3.98 4.56 .034 .123 .245 MANOVA: F (8, 176) = 10.47, p < .001, Wilks Lambda = .678, partial eta squared = .322. Discriminant Analysis: 2(8) = 74.63, p < .001,Wilks Lambda = .678, Canonical Correlation = .567. Psychology Sample: Time 1 Data Resources Abuse 2.61 2.41 .24 .625 .037 .142 Not Whistle Blowing 1.82 1.53 .53 .467 .031 .202 Theft 2.00 1.24 11.66 .001 1.139 .925 Corruption 1.61 1.37 .83 .366 -.497 .241 Deception 1.72 1.22 5.70 .019 .087 .637 Mach IV 2.76 2.70 .04 .840 .012 .074 RTQ 50.17 48.66 .03 .861 -.200 -.019 LOMS 3.83 3.87 .02 .883 .043 -.113 MANOVA: F (8, 80) = 1.52, p = .162, Wilks Lambda = .868, partial eta squared = .132. Discriminant Analysis: 2(8) = 8.66, p = .371,Wilks Lambda = .911, Canonical Correlation = .298. ___________________________________________________________________________________ Note. Cluster Analysis, ANOVA: df = 1, 296. Sample Size for Cluster 1 and Cluster 2: Whole Sample (25, 273), Business (17, 181), Psychology (8, 92).