Factors Impacting Ethical Behavior in a Chinese State-Owned Steel Company

Author(s): Weihui Fu and Satish P. Deshpande

Source: Journal of Business Ethics, Vol. 105, No. 2 (January 2012), pp. 231-237
Published by: Springer
Stable URL: http://www.jstor.org/stable/41413257
Accessed: 21-09-2016 01:47 UTC
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J Bus Ethics (2012) 105:231-237

DOT 10.1007/S10551-01 1-0962-2

Factors Impacting Ethical Behavior in a Chinese State-Owned

Steel Company
Weihui Fu - Satish P. Deshpande

Received: 14 February 2011 /Accepted: 18 March 201 1 /Published online: 9 July 2011

Springer Science+Business Media B.V. 2011

social responsibility in Kenya (Mathuri and Gilbert 2011).

Abstract This study examines factors impacting ethical
behavior of 208 employees of a Chinese state-owned steelOver the years, we have learnt that Western management
company. Only rules climate had a significant impact on practices do not uniformly apply to the rest of the world

(Oumlil and Balloun 2009; Tsalikis and Lassar 2009). In

ethical behavior of respondents. Other ethical climate types
such as professional, caring, instrumental, independence,addition, a good command of cultural values and ethical
and efficiency did not impact ethical behavior of respon-standards of other countries are key to be successful in

dents. Ethical behavior of peers, ethical behavior of international business (Ferrei et al. 2005; Zhang et al.
2011).
successful managers, and overclaiming had a significant
China, the world's most populous country, has been
impact on ethical behavior of subjects.
getting considerable attention by academicians and busi-

Keywords China Ethical behavior Ethical climate ness professionals (Lu 2009; The Economist 2004). China
Overclaiming Steel company

has a huge pool of cheap labor and is an untapped market

for various Western products. This may explain why China

has been one of the largest recipients of foreign direct

investment in the last couple years (Tang et al. 2010).

Introduction

China passed Japan as the world's second largest economy

in 2010. Economists expect China to have the world's

In the last decade, we have seen a gradual increase in
largest gross domestic product by the middle of this decade
research examining business ethics in countries other than
2004). Since it began its economic reform three
the United States. For example, the first couple of issues (Chandler
of

decades ago, China has been successful in transforming

the Journal of Business Ethics in 2011 had articles on
itself from an agrarian economy into a powerful economic
business culture in Iceland (Vaiman et al. 201 1), corporate
machine.
In fact, China was one of the few countries in the
social responsibility in Indonesia (Waagstein 2011), audi-

world which had a positive growth rate during the recent

tor independence in China (Chu et al. 201 1), and corporate

recession (Tang et al. 2010).

However, like other countries, China also has been hit
by various ethical scandals. For example, stories of baby
W. Fu

milk tainted with melamine and toys with lead paint

highlighted major business ethics problems in China

School of Economics and Management, University of Science

& Technology Beijing, Beijing, China
e-mail: tinafull07@yahoo.cn

(Gallagher 2009; Lu 2009). Thus, it is not surprising to see

S. P. Deshpande (CE3)
Department of Management, Haworth College of Business,
Western Michigan University, 1903 W. Michigan Ave.,

investigated how financial investors responded to firms'

Mailstop 5429, Kalamazoo, MI 49008-5429, USA

e-mail: satish.deshpande@wmich.edu

a growing interest among business ethics researchers to

examine ethical issues in China. Wang et al. (2010)

corporate social responsibility in China. Zhang et al. (201 1)

studied esthetic leadership in Chinese business. Deshpande

et al. (2010) examined factors impacting ethical practices

Springer

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232
of

W.

Fu,

S.

P.

successful

qualitative
behaviors
and

Deshpande

managers
in
Chin
impact
ethical behavior of Chinese employees
and propose

research
the following hypothesis:

of

methods

managers

the

from

HI Ethical climate types will significantly impact self-

Ch

United
States.
Lin
and
reported ethical behavior of Chinese employees.
practices
in
Chinese
logistics
fi
measured
in

China.

O'Fallon and Butterfield (2005) in

their literature review
consumers'
sentiment

They
found
youn
of the empirical
research on ethicalthat
decision making made

cerned
about a strong
integrity
pr
case to examine the impact of peersand
on ethical
(2011)
contend
b
behavior that
of employees. This Chinese
is consistent with social
from
Confucianism
which
ve
learning theory which suggests
that people learn is
new
traditions.
They
stress
s
behavior through observing
behavior of closely that
associated
economic

need

to

and

cultural
people (Bandura 1977). In addition,practices
differential association

havetheory
in-depth
studie
suggests that the ratio of contact of ethical
behavior

organizations.and unethical behavior of reference group can impact

One
sector
of
the
Chinese
eco
ethical behavior
of a person
(Ferrell and Gresham 1985).
little
attention
China's
stateBased onis
these two
theories, we propose that ethical

SOEs control more than half the total industrial assets in

behavior of co-workers significantly impacts self-reported

China and tend to be much large in size than non-SOE ethical behavior of employees. Therefore:
firms (Xu 2010). Most multinational or foreign firms tend
to work in partnership with SOEs. Our research focuses on

H2 Ethical behavior of co-workers significantly impacts

self-reported ethical behavior of Chinese employees.

examining factors that impact ethical behavior of Chinese

SOE employees. Previous research has shown that an

Besides co-workers or peers, another referent group

important determinant of ethical behavior of employees is that can impact ethical behavior of employees is suc-

the organization's ethical climate (Joseph et al. 2009; cessful managers within the organization. Successful
Peterson 2002; Deshpande et al. 2000). Martin and Cullenmanagers act as role models (Hunt et al. 1984). If suc(2006, p. 177) in a meta-analytic review of the literature oncessful managers are perceived to be unethical, an

ethical climate state that the ethical climate of an organi-employee would also be motivated to do unethical
zation "is best understood as a group of prescribed climates behavior. Vitell and Davis (1990) found that for nearly

reflecting the organizational procedures, policies, andfour out of five MIS professionals (n = 61) stated that
ethical behavior was necessary for success. Deshpande
The initial work on identifying different types of ethicalet al. (2000) in a survey of 136 Russian managers found
climate was done by Victor and Cullen (1987, 1988). They that three out of five respondents felt that successful
used ethical theory research (Fritzche and Becker 1984;managers were ethical. Thus, we propose that ethical
Williams 1985), moral development research (Kohlbergbehavior of successful managers significantly impacts selfpractices with moral consequences."

1984), and sociocultural theories of organizations (Schnei- reported ethical behavior of employees.
der 1983) to identify various ethical climate types. Their

H3 Ethical behavior of successful managers will signifi-

ethical climate types were based on two dimensions: type of

cantly impacts self-reported ethical behavior of Chinese

ethical criteria used for organizational decision making

employees.
(benevolence, principle, and egoism) and the locus of

analysis (individual, organizational, or cosmopolitan).

This study also controlled for demographics and social
Based on factor analysis of data from MBA students, uni- desirability bias by respondents. Demographic variables
versity faculty, and managers of a trucking firm, they pro-included in our study were age, gender, type of job, and job
posed six distinct climate types: professionalism, caring, experience. O'Fallon and Butterfield (2005) review of
rules, instrumental, efficiency, and independence (Victor ethical decision-making literature found that past empirical

and Cullen 1987, 1988). Deshpande (1996) subsequentlyresearch on the impact of age and experience on ethical

developed global measures for the six ethical climate typesbehavior has found mixed results. In addition, they report
and used them to examine the ethical practices of managersthat while many empirical studies report no impact of
of a large American non-profit organization. Elei and Alp-gender on ethical behavior, some report that females are
kan (2009) used the Victor and Cullen typology to examinemore ethical than males. The overclaiming scales were
the impact of nine ethical climate types on job satisfaction used to control for a respondent's attempt to misrepresent
of employees from 62 telecommunication firms in Turkey. on a survey. The protocol used in this study was similar to
Therefore, we expect that ethical climate will significantly that initially proposed by Randall and Fernandes (1991).

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Factors

Study
Sample

Impacting

cessful managers take credit for the ideas and accomplishthis

consisted
em
ments study
of others. This variable
was first used by Hunt etof
al.
company (1984)
in
Hebei
and later
by Vitell and Province
Davis (1990). It is measured of m

run

steel
was

prepared
three

for

collected
in

was

professionals ethics
toandensure
that
there
success and a high score
indicates the
presence of

within

responded

we

by
the Likert
first
using a five-point
scale, withauthor.
5 representing

were

response

Sur

English
and
then
translated
"strongly
agree", and
1 representing
"strongly disagree."
Thus, a low score
indicates the
absence of aEnglish
link between
translated
back
into
a link between
ethics and success. Cronbach's a 260
for ethical
during
translation.

information
uted

233

eyes of others; Successful managers look for a "scapegoat"

Characteristics
when they feel they may be associated with failure; Suc-

sample

survey

Behavior

Methodology
interest; Successful managers make rivals look bad in the

The
Data

Ethical

the

to

left
rate

the

in

in

was

surve

steel
company
in late 2010
behavior of
successful manager was 0.729.
survey.
After
deletion
fo
Ethical climate was
measured using
six climate types

with proposed
208byrespondents.
Deshpande (1996). They are professional
This
of

80%.
climate (people are expected to comply with the law and
professional standards in my organization), caring climate

Measures

(our major consideration is what is best for everyone in the

organization), rules climate (it is important to follow rules

The survey covered a variety of items including measures and
of procedures in this organization), instrumental climate
various ethical climate types, ethical behavior of self, ethical
(in this organization, people protect their own interest
behavior of co-workers, ethical behavior of successful
above all else), efficiency climate (the most efficient way is

managers, overclaiming and demographic variables. It also the right way in this organization), and independence
included a number of variables not included in this study. climate (each person in this organization decides for
Ethical behavior of self was measured using six items: It is themselves what is right and wrong). The subjects were

acceptable for you to make personal calls at work; It is asked to indicate how accurately each of the items
acceptable for you to take office supplies home; In order to described the general ethical climate in their company. A
get ahead in your future career you will have to compromise five-point Likert-type scale, with 5 representing "mostly

your personal ethical standards; It is acceptable to accept

true" and 1 representing "mostly false," was used to

gifts from others for preferential treatment at work; It is okay

measure the climate types. Items 2-6 were reverse coded.

to bypass established protocols in order to get work done Thus, a high score shows the presence of a climate and a
faster; I will not report others' violation of company policies low score shows the absence of a climate.

and rules to superiors. Ethical behavior of co-workers was

Overclaiming scales were used to control for social

measured using six similar items: Co-workers feel that it is desirability bias in our survey. The protocol used in our

acceptable to make personal calls at work; Co-workers feel study was first proposed by Randall and Fernandes (1991).
that it is acceptable to take office supplies home; In order to Respondents were asked to rate their degree of familiarity
get ahead in their future careers, my co-workers believe that with items within four categories (movies, products, TV

one has to compromise personal ethical standards; It is shows, and designer labels) on a three-point Likert scale
acceptable for my co-workers to accept gifts from others for (1 = not at all familiar, 3 = very familiar). Each category
preferential treatment at work; My co-workers feel it is okay has a fake item which is non-existent. Overclaiming score

to bypass established protocols in order to get work done were arrived at by calculating the average score of fake
faster; My co-workers will not report others' violation of items. High scores indicate that respondents report that they
company policies and rules to superiors. These item were were aware of items that actually did not exist. Cronbach's
measured using six items that were rated on a five-point a for this scale was 0.753. Other control variables were age,

Likert scale (5 = strongly disagree, 1 = strongly agree). gender (1 = male, 2 = female), job experience, and type
High scores imply ethical behavior while low scores indicate of job (1 = clerical, 2 = technical, 3 = office manager,
unethical behavior. The Cronbach's a for ethical behavior of 4 = executive, 5 = worker).

self and co-workers was 0.802 and 0.905, respectively.

Ethical practices of successful managers or ethical

optimism was measured using six items. They were: Suc-

Results

cessful managers are generally more ethical than unsuccessful managers; In order to succeed at work, it is often Table 1 shows mean, standard deviation, and range of all
necessary to compromise one's ethics; Successful managers the variables considered in our study. An average responwithhold information that is detrimental to their self
dent was a 33-year old with 8 years of experience. 74% of

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234

W.

Table

information of all variables

Fu,

S.

P.

Deshpande

DescriptiveMean
Ethical

behavior

of

self

SD

3.69

0.78

208

Ethical behavior of co-worker 3.41 0.98 208

Ethical behavior of successful managers 3.24 0.79 208

Professional

Caring
Rules

climate

climate

climate

Instrumental

Efficiency
(in

4.27

climate

climate

Independence
Age

4.17

3.48

years)

32.32

208

1.16

1.24

2.17

208

208

0.97

2.46

3.01

climate

1.06

1.34

1.21

7.39

208

208
208
208

Gender (1 = male, 2 = female) 1.04 0.19 208

Type

of

job

4.26

1.30

208

Job experience (in years) 8.05 6.15 208

Overclaiming
the

respondents

dents
most

were

0.50

208

of co-workers, ethical
behavior 9
of successful
managers,
workers.
Over
out of
10 res
While
and professional
we
caringrules
climate, job experience,
and overclaiming are sig-

ethical

ethical

2.57

were

men.

reported

reported

scales

climates,
independence
was
nificantly correlated with
ethical behavior of self. None
of

th

climate.
the other climate types significantly impacted ethical

Pearson's zero-order correlations for all variables are

behavior of self. It is inappropriate to draw major conclu-

presented in Table 2. The reliabilities (coefficient as)sions

of based on correlations as they only show the association between two variables but so not tell us which
ethical behavior of self, ethical behavior of co-workers,

ethical behavior of successful managers, and overclaiming

variables has the most important impact on dependent
are shown on the diagonal in parentheses. Ethical behavior
variable. For this, we have to do regression analysis.
Table 2 Zero-order correlations among the variables
1

10

11

12

13

14

1. Ethical behavior (0.80)

of self

2. Ethical behavior 0.77 (0.91)

of co-worker

3. Ethical behavior 0.30 0.22 (0.73)

of successful
managers

4. Professional 0.02 -0.10 -0.16 1.00

climate

5. Caring climate 0.17 0.18 -0.07 0.53 1.00

6. Rules climate 0.05 -0.07 -0.22 0.73 0.37 1.00
7. Instrumental -0.07 -0.13 -0.01 0.10 0.13 0.09 1.00
climate

8. Efficiency climate -0.01 -0.03 -0.05 0.27 0.06 0.31 0.34 1.00
9. Independence -0.07 -0.03 -0.03 0.08 0.01 0.14 0.45 0.48 1.00
climate

10. Age (in years) 0.03 0.00 0.02 0.15 0.14 0.15 0.00 0.21 0.01 1.00
11. Gender -0.09 -0.06 -0.05 -0.03 -0.02 -0.03 0.09 0.00 0.03 0.08 1.00

12. Type of job 0.06 0.02 -0.04 0.16 -0.15 0.09 -0.10 -0.01 -0.09 -0.24 -0.20 1.00
13. Job experience -0.14 -0.17 -0.09 0.17 0.16 0.12 0.06 0.18 -0.05 0.67 0.08 -0.21 1.00

14. Overclaiming 0.16 0.00 0.13 0.08 0.09 0.06 -0.04 0.05 -0.15 0.05 -0.10 0.12 0.09 (0.73)

Correlations of 0.18 and greater or -0.18 or less are significant atp < 0.01 (two-tailed); correlation between 0.14 and 0.18 and are significant at p < 0.05 (two-tailed)
Listwise n = 208

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Factors

Table

Impacting

analysis

shows

results.

Ethical

Behavior

235

the ordinary
least square
plants.
Ma
Theytivity
provide us stronger
ev
and

cedures
ensure no deviates from relationships.
established standards.
significance of the
existing
regression coefficients
showed
that
ethica
The second most reported climate type
was professional
co-workers, ethical climate.
behavior
of successful
m
Both rules and professional
climate types use
climate and overclaiming
significantly
im
principle based ethical criterion.
However, while the source

reported

ethical

behavior
of
employees.
of ethical reasoning
for rules
climate is within the organization (management and workgroup), the source of ethical
reasoning for professional climate is outside the firm like

Discussion and Conclusions

professional association or a law (Victor and Cullen 1988).

The least reported climate was independence. This suggests

Chinese trade and investment policies in the last three

that Chinese employees are less likely to consider their
decades have enabled it to become the world's largest
own personal and moral beliefs in making decisions at the
workplace.
exporter and the destination of choice for global investEthical behavior of co-workers was the most significant
ment. This has enabled China not only become an ecodominant factor impacting ethical behavior of Chinese
nomic superpower, but also lift millions of its citizensand
into
the middle class. As western businesses interact with

employees. China has been reported to have a high collectivist and obligation culture toward work groups and
China, it is important they have a good understanding

organizations (Jackson 2001). This may explain why peer

Confucian value systems and its impact on business pracinfluence was so critical in our study. Ethical behavior of
tices. Jackson (2001) in a 10-nation study of cultural values

successful managers also significantly impacted ethical

classified his Chinese sample as high uncertainty avoidbehavior
of employees. This clearly indicates that sucance. In countries with high uncertainty avoidance,
the
cessful managers act as role models for actions of their
society looks for rules and regulations to avoid ambiguity.
However, compared to ethical behavior of
Thus, decision making in these cultures are basedsubordinates.
on
managers, ethical behavior of co-worker clearly
adherence to rules. Thus, it is not surprising that successful
rules
had a greater impact (0.76 vs. 0.14) on the employees. Our
were the most prevalent climate in our Chinese sample.
results
suggest that if employees see that their co-workers
A dominant rules climate implies that decision making
is

or successful
managers go unpunished if they perform
typically centralized in the firm and ensures control
of

behavior or get rewarded for their unethical

decision making by top management. It is important todeviant
note
behavior, they are likely to also indulge in such behavior.
that such a climate type is typically found in manufacturing

Rules climate had a significant impact on ethical

behavior of Chinese employees. A detailed code of ethics

Table 3 Regression results

Variable

is a good way of reinforcing a rules strategy. It is inter-

Ethical behavior of co-worker 0.76 16.16***

Ethical behavior of successful managers 0.14 3.03***

Professional climate 0.06 0.85

Caring climate -0.05 -0.92

Rules climate 0. 1 1 1 .79*
Instrumental climate 0.07 1.42

Efficiency climate -0.03 -0.61

Independence climate -0.06 -1.18

Age 0.06 0.99
Gender

-0.02

-0.40

Type of job 0.00 -0.02

Job experience -0.07 -1.12
Overclaiming 0.13 2.84***
F

28.96***

R2

standards within organizations and raise the overall ethical

standards across organizations. Other effective strategies

include orientation programs for new employees on com-

pany rules and procedures. The use of risk-assessment

selection tests during the hiring process can be an effective
tool to weed out those who are risk takers and less likely to

follow company rules and regulations.

Previous research suggests that companies that stress the
rules climate within their organization are less likely to
suffer from property deviance behavior form employees
(Peterson 2002; Appelbaum et al. 2005). Property deviance

serious in nature and directed toward the organization.

However, a rules climate may have little impact on pro-

208

***

growing corruption among Chinese officials. It is implied

that a code of ethics will disseminate minimum ethical

behaviors (e.g., employee theft and taking kickbacks) are

0.66

Adjusted R 2 0.64
N

esting to note that the Communist Party of China Central

Committee issued new code of ethics in 2010 to control

duction deviance behavior (e.g., excessive breaks), political

<

deviance
behavior (e.g., favoritism), **
or personal aggression
0.01;
p
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<

236

W.

Fu,

S.

P.

Deshpande

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Weber

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