How Student Perceptions of Ethics Can Lead to Future Business Behavior
Shurden, Susan B., Santandreu, Juan, Shurden, Michael C., Journal of Legal, Ethical and Regulatory Issues
Unethical business behavior of many "white collar" business professionals has made major headlines over the past years. One recent example is the misuse of funds on Wall Street such as the massive bonuses paid to employees of American Insurance Group (AIG). This and other ethical dilemmas are being discussed by teachers, parents, employers, and peers of students enrolled in business schools across the country. Opinions abound as to the ethics and morality of those involved. In fact, these very individuals who participate in misconduct have children that will most likely emulate their actions. What is the perception of students enrolled in business schools regarding this type of behavior and other ethical situations that arise? Can these students be influenced in a positive direction so that they can go into the business world with values that are "above reproach" and admirable by those whom they lead. The purpose of this paper is to conduct an analysis of three years of surveys from the Wall Street Journal Ethics Quiz that were given to business students at a small, southeastern public university. An analysis is then made as to whether or not those students' perceptions of sensitive ethical dilemmas have changed over time.
INTRODUCTION AND LITERATURE REVIEW
Of recent interest is the highly debated situation of American Insurance Group (AIG) and the $ 1 65 million in executive bonuses, mostly paid to London traders who created the massive losses that resulted in government bailout money of $170 billion given to AIG. Were the AIG bonuses "legal"? In reality the bonuses were only one tenth of one percent of the total bailout amount. Additionally, AIG claimed they were contractually obligated to pay the bonuses. A government mistake was that there was no consideration of the possibility of bonus payouts in the structuring of the bailout terms by Treasury Secretary, Tim Geithner. Therefore, the AIG bonuses were contractual and legal. However, the question arises as to how ethical the bonuses were, and should there be some obligation on the part of the recipients to repay the money (Reed, 2009)?
Our laws are a starting point for ethical conduct and are implemented in order for society to avoid extreme situations. In other words, obvious unethical behavior is any behavior that is illegal or blatant (offensive) misconduct (Kullberg, 1988). The question then arises as to "Is any type of behavior 'ethical' as long as it does not violate a law or a rule of one's profession" (WhittingtonPany, 2004)?
The word "ethics" is derived from the Greek word, ethos, meaning "customs", "conduct", or "character" (Northouse, 2007). For a formal definition of ethics, Webster 's New World Dictionary (1995) defines the term as "the study of standards of conduct and moral judgment". Ethics are important to individuals because we are concerned with what leaders do and who they are - their conduct and character. Numerous theories exist as to how followers are motivated to follow their leader/employer. Teleological theories are those that stress the consequences of a leader's conduct, and they come from the Greek word "telos" meaning ends or purposes. When looking at consequences, two types of theories occur. The first type is Ethical Egoism and deals with an individual choosing an outcome that produces the greatest good for themselves, perhaps receiving a promotion if their division excels. The second type of teleological theory is Utilitarianism, which states that a leader will behave in a manner to create the greatest good for the greatest number of people. An example is when a part of a federal budget is allocated to preventing an illness through immunizations rather than all to a catastrophic illness. Close to Utilitarianism is Altruism, which is almost a total concern for others, such as was the case with Mother Teresa (Northouse, 2007).
These theories emphasize the consequences of the leader's behavior. In analyzing the actions of the AIG management, they acted in accordance with their self-interest, defined by Ethical Egoism, which falls under the teleological theory. The other subcategory to Teleological Theory was Utilitarianism, ultimately meaning to help the most people (Northouse, 2007). Under this method, management should have acted in a way to maximize "social benefits". In the AIG case, this did not occur as the consequences of the mismanagement of AIG were that people's jobs, investments, and security were affected by the decision making of management and traders receiving the bonus money.
As for conduct, there is a second category of theory that relates to "duty" and the actions of the persons. These theories are called Deontological Theories, which imply that the leader has a moral responsibility and obligation to do the right thing and should not infringe on the rights of others (Northouse, 2007). Clearly, the actions taken by AIG infringed on the rights of others by using taxpayer money for their personal use when it was not justified. While it is "right" to reward people for achievement and even preventing losses, it clearly "seems" wrong to reward people for incurring losses!
Various "model" business organizations gave their definition of ethics. The pharmaceutical company, Eli Lilly Company contends that to act ethically means: "No Lilly employees should do anything, or be expected to take any action that they would be ashamed to explain to their family or friends." Eastman Kodak, the manufacturer of cameras and film says that ethics is a policy by Kodak "which emphasizes that Kodak's business practices throughout the world are to be conducted in a manner which is above reproach." A manufacturer of aeronautical equipment, General Dynamics, defines ethics according to their ethics vice president as "telling the truth and being fair and doing no voluntary harm." One should not allow themselves to get into a position that compromises his/her judgment, such as when a supplier takes a buyer to lunch. EDS (Electronic Data Systems), the manufacturer of software asks "Would we want to do business with ourselves" (Abend, 1988)? Our definition of ethics is a system of morals which guides the behavior of an individual when confronted with doing right or wrong. If a person were put in a situation in which right and wrong were a bit unclear, how would they react, or which of several alternatives would they choose?
This idea is the premise for this paper. How student perceptions of ethics lead to future business behavior? To help answer this question the authors used a sixteen question ethics quiz from The Wall Street Journal to survey business students in their spring classes at a small, southeastern, public university during spring 2006, 2008, and 2009. The questions ranged from giving and receiving gifts from clients/suppliers to usage of business supplies and internet while at work. Many people agree that personal ethics may vary or change from one individual to another, and most within society agree on what is generally ethical or unethical. However, the "grey" areas are most difficult to decide. Many of the questions asked in this survey are "grey" areas in which there is no clear cut right or wrong answer. Some may be answered by knowing the ethic' s policy of the company involved, while others rely on the moral character of the individual making the decision. Nonetheless, these questions provide the opportunity to evaluate the students' perceptions of ethical issues as they are confronted with business ethical dilemmas.
From a captive population of 193 students, 157 responses were collected in spring 2009, providing a rate of return of 81.3%. These were measured against previous samples taken in 2006 and 2008 . Additionally, the students were informed about the purpose of the study, and the voluntary nature of their participation. Proper research procedures were applied to assure the students' anonymity, the privacy of the information, and to avoid duplication in participation. Classificatory questions were used to be able to evaluate potential differences between the participants.
FINDINGS OF THE STUDY
Table I indicates the sample characteristics of the participants over the three year time frame. In regard to gender differences, there were similarities in the mix between the 2006 and 2008 data; however, the 2009 data indicates an increase in the female population. No conclusive explanation can be given for this increase without other data. The increase in the freshman population in spring 2009 is a result of one of the authors teaching two sections of an introductory to business class which was an elective for freshman. The authors chose to include the freshman class in order to progressively follow these students over their academic careers. The significant increase in the junior population in spring 2009 is deemed to be a result of the larger sophomore class of spring 2008 advancing. The decrease in the senior population of spring 2009 is indicative of the junior class of spring 2008 advancing. Without the 2007 demographic data, the analysis is incomplete; however, the lower enrollment in the junior class of 2008 could be a result of an increase in the SAT requirements for admission to this university which were implemented during that time frame and lowered in the following year. In regard to demographics concerning concentration, the "other" category resulted again as a consequence of one of the authors teaching the elective introductory to business course during that time.
Table 2 shows the responses of the students with regard to their answers to the ethics quiz. There is no significant difference between the students surveyed in 2006, 2008, and 2009 regarding items pertaining to internet usage and technology, with the exception of question number two and five. The percentage of respondents from 2009 was significantly different from those in 2006 regarding the use of office equipment in helping family members do homework. The 2009 students had a higher ethical view regarding using equipment in this way. The answer to question five favored the students who took the survey in 2006. The responses indicate a significant difference between 2006 and 2008 students. This was the only question that ethically favored the 2006 students. However, there were seven questions that had a significant difference in ethical responses regarding vendor, client, and employer relationships, which are items that are strenuously taught within the courses of the Department of Business. Fifteen percent of the 2009 students believe a gift of $25 was troublesome as compared to 24% for 2008 students. This difference in percentages was significant at the .05 level. The students surveyed in 2008 showed a significant difference from 2006 students in questions 8-13. The 2009 students showed a significant difference from 2006 students in questions 10-12. There was a significant difference in both receiving and giving gifts to a boss and receiving gifts from vendors. In comparison with 2006 students, those students surveyed in 2008 had higher ethical standards regarding giving a $50 gift to their boss, as well as receiving a $50 gift from their boss. Also, the 2008 students received significantly higher responses regarding receiving various gifts from vendors such as football tickets, theater tickets, holiday food baskets, and gift certificates.
Regarding questions 10-12, the 2009 students' responses along with the 2008 students' responses were significantly different from 2006 students. For question 13, the 2008 students' responses were significantly different from both 2006 and 2009. The 2008 students gave a more ethical response than both 2006 and 2009. Also, the percentages of 2009 students regarding the abuse or lying about sick days was significantly different than 2008. The 2008 students' responses were much more ethical regarding this issue. However, in question 14, "Can you accept a $75 prize won at a raffle at a supplier's conference?" the percentage is still high for all three groups, 95% for 2006, 93% for 2008, and 92% for 2009, indicating that the majority of the students believe this type of prize is acceptable.
The comparison of these three data sets indicate that the 2008 students are more aware of certain ethical issues, especially those associated with vendor, client, and employer relationships. However, the 2009 student surveys indicate a rather mixed result with some questions favoring ethical choices, while other questions actually having significant differences leaning in the other direction. One reason the results were mixed in 2009 may be due to the fact that a larger percentage of freshmen and a smaller percentage of seniors were included in the 2009 sample as compared to both 2006 and 2008. Also, the authors acknowledge the variation among students from semester to semester and year to year. Nevertheless, the authors believe that student ethical perception improves as a result of emphasizing ethics in business classes and the interaction that these students may have with their teachers (leaders).
In addition, in the analysis of Table II, it is noted that questions one through six are "technology" related questions while questions seven through fourteen pertain to accepting or giving gifts to clients, employers, or employees. The remaining two questions, numbers 15 and 16, are personal, virtue related questions. These last two questions would pertain more to an individual's character, while the first fourteen questions could be easily answered simply by knowing the employer's requirements for employees working in that environment. For example, a local accounting firm will not allow employees to use company computers for personal use. If they do so, they are immediately terminated. The purpose behind their decision to have this requirement is that the accounting firm does not want any compromise of the confidential information of their clients. Therefore, if this were the case, the students would answer "Yes" to the first six questions.
With the exceptions of question one "Is it wrong to use company e-mail for personal reasons?" and question five "Is it unethical to blame an error you made on a technological glitch?" all of the responses to the technology related questions increased, indicating a positive increase in ethical perceptions of students in this area. This increase could be attributed to the fact that a week of ethics was taught in one of the author's classes with many of these questions being discussed extensively. Additionally, ethics is an accreditation related goal for the department of business within this university and is discussed in other business classes with simulation questions administered as an assessment tool. The decline in the response to the e-mail question could be attributed to the fact that e-mail is a routinely used tool among students and checking its use is a normal activity during their day. The other questions relate more to office equipment and workrelated incidences of which many of them have little or no current knowledge.
In an analysis of questions seven through fourteen, the authors again contend that information pertaining to company policies needs to be addressed. Since various companies have different standards on what constitutes an ethical violation, the employee needs to be certain that they fully understand company guidelines. In examining the concept of ethics within the work environment, one must realize that the dilemma of unethical behavior arises from relationships between individuals. In general, the "welfare" of an individual, and consequently, the work environment, is generally affected by an ethical choice being made. The business issues involved in these questions involve questions such as the value that a gift to or from an employee is considered unacceptable, as well questions of acceptability of gifts from suppliers. Even having a business lunch with a supplier could be a conflict of "independence" (Whittington-Pany, 2004).
Pertaining to the idea of "independence", which is avoiding a conflict of interest with another party, the author remembers a conversation with a business student who contended that his company would not even allow them to have a cup of coffee with a supplier, yet in many public relations departments, dining with a supplier is standard procedure. With that knowledge in mind, further analysis of these questions follow. Question seven is of much interest and reads "What is the value at which a gift from a supplier or client becomes troubling?" Choices were $25, $50, and $ 100 and at every year, the students indicated the $100 amount was most troubling. Clearly, if receiving a $ 1 00 gift from a supplier or client were troubling to this sampling of students, one could assume the significant amount of bonus money paid out would be even more disturbing to them.
Question eight and nine involve giving and receiving gifts to an employer. Both indicate an increase in ethical perception from spring 2006 until spring 2008, indicative of an increased awareness by the students which is hopefully attributable to increased teaching of ethics within the department. However, there is a decrease from spring 2008 until spring 2009 of 43% to 40% for question eight of giving a $50 gift to a boss and a decrease of 34% to 27% of receiving a $50 gift from a boss. A plausible explanation for this decrease could be that the $50.00 amount does not appear significant to the students. If this amount were increased, the author believes the responses would increase.
Questions 10- 14 pertain to receiving gifts from suppliers. The wording of the questions asks if it is "OK" to receive these varying gifts, which range from a $200 pair of football tickets to a $25 gift certificate. The higher the response, the perception is that the students consider the gift to be acceptable. The highest responses were in spring 2006, indicating that students in 2008 and 2009 have been made more aware of ethical situations and what may or may not be acceptable. The differences in the answers between spring 2008 and 2009 are minimal. However, of interest in the analysis of these responses is that question 13 "Is it OK to take a $25 gift certificate?" has a higher response rate range of 72% in 2008 to 85% in 2009, indicating to the authors that this marginal dollar amount is not considered of great value to the students, thereby making it "OK" to accept. Additionally, the fact that the acceptance is a gift certificate rather than cash may not be viewed as a "bribe" by the students, which is the issue behind accepting any amount from a supplier. Likewise, question 14 reads "Can you accept a $75 prize won at a raffle at a supplier's conference?" Although the response decreased from 95% in 2006 to 92% in 2009, this percentage still indicates a strong acceptance by the students. Raffles are not uncommon at conferences, and even the authors contend that the acceptance of a prize in this context would not constitute a bribe.
Questions 15 and 16 are indicative of an individual's character. These questions were:"Due to on the job pressure, have you ever abused or lied about sick days?" and "Due to on the job pressure, have you ever taken credit for someone else's work or idea?" It is interesting to note that with the first question there was a significant percentage increase from 2008 to 2009, from 38% to 53%), with spring 2006 falling between the two at 45%>. A possible conclusion could be drawn as to the "truthfulness" or "honesty" of the spring 2009 students as 83 of 157 students answered "yes" to this question. The answer to question sixteen remained low within three percentage points between the higher (2008) and lower (2009) levels of the range. In fact only 6 of 157 students responded "yes" to this question in 2009, giving a 4%> response compared to 6% in 2006 and 7%> in 2008. Clearly, the ethical perceptions of students appeared to increase overall from 2006 to 2009, which is a positive premise in terms of future business leaders.
In analyzing the changes in responses from 2006 until 2009, the question arises as to whether or not this increase in positive responses means that it is possible to change and mold a person's values over a period of time before those individuals become leaders in a corporation? Virtue Based Theories stress a person's character and are elements of who a person is and his/her disposition. Based on the writing of Aristotle, these virtues are courage, temperance, generosity, self-control, sociability, modesty, fairness, and justice (Velasquez, 1992). At one time it was believed that these characteristics were innate; however, it is now believed that they can be learned (Kullberg, 1988). So, do leaders in education have an effect on students to mold and shape these values and consequently have an effect on future business leaders? Obviously the "leaders" within an educational environment are the teachers and administration. Are teachers influencing students in a positive way?
The progression of responses indicated that "yes", ethics can be taught, and that instructors have an impact on the ethical values that students carry with them into the business world. Callahan (1982), questions the fact that perhaps there should be a "Code of Ethics" within higher education because of various poor teaching practices. He elaborates by emphasizing that "there are a few hundred thousand teachers in higher education, a few thousand different types of colleges and universities, and the fact that just about any and all kinds of human beings teach" (Callahan, 1982).
Ethical leadership is essential in organizations such as AIG, and that leadership is ultimately provided by universities such as the one surveyed. As professors at the college level, the authors are constantly striving to teach ethical values, which have been learned from family, peers, education, professional experience, and religious instruction. The concept of ethics continues to evolve over time. Theories in literature that support ethical leadership include one theory by Heifetz (1 994), which advocates that a person must use authority to influence their people through conflicts and rapid change. The leader provides an environment in which followers feel trust and empathy. It is part of ethical theory because of the emphasis that is placed on the values of the worker, not because of the authoritative nature of the leader. James MacGregor Burns (1978) in his theory of Transformational Leadership attempts to motivate leaders to strive for higher standards of moral responsibility by emphasizing a follower's needs, values, and morals. Burns' theory is closely associated with Servant Leadership Theory by Robert Greenleaf (1970), which stresses even more emphasis on the needs of followers. Leaders under the Servant Leadership Theory should nurture followers and empathize with them. The followers would then be motivated by viewing the leader as a role model through his/her becoming a servant (Northouse, 2007). According to Stanley (2008), leaders who have ethical values which are irreproachable will motivate followers.
Will ethical leadership prevail within AIG, and what is to be done about the bonus money? Democratic Senator Chuck Schumer of New York has suggested that if the bonuses are not voluntarily returned, then they will be "taxed" back by Congress. However, a citizen named John Reed, in his writing of an internet commentary in 2009, indicated that this "taxing back" of the bonuses violates the Fifth Amendment which states that private property cannot be taken without just compensation. One could argue, though, that this "property" was initially public property that never should have been distributed to those private individuals in question. Another argument by Mr. Reed is that this "taxing back" could be considered a "bill of attainder" which is a law that declares someone guilty of a crime without benefit of trial. This bill of attainder would be considered unconstitutional under Article 1, Section 9, and Clause 3 of the United States Constitution. If he is, indeed, correct, then the money could not be taxed back (Reed, 2009).
Well, should the individuals who received the money feel an obligation to repay it? With this in mind, perhaps appealing to the morality of those involved would be the best approach to receiving back the money. In truth, 15 of 20 of the top bonus recipients did agree to return $50 million in bonuses. However, it seems unlikely that all of this money will be returned voluntarily as $80 million was paid to non Americans and is now out of jurisdiction (Clifford, 2009). Despite this fact, good may have come from the mistake of not providing specifications for the use of the bailout money in that the Federal government will be more careful with the terms of the agreement next time money is given out. The reality is that the public has not heard "the rest of the story", as the late radio commentator Paul Harvey would say. Perhaps interviews with some of these individuals would bring "to light" more understanding of the situation and the opinions of those receiving the bonus money.
Gino (2008) discussed how ethical lapses occur during negotiations because of stereotyping and giving favoritism to these within the same group as the individual or group granting the favor. This idea was paramount in the analysis of the student's perceptions in the Wall Street Journal Quiz, particularly in questions seven through fourteen involving the giving and receiving of money, gifts, and raffles. Avoiding any appearance of a "conflict of interest" between parties is necessary to obtain credibility within the business world. Perhaps this stereotyping occurred in the granting of the bailout money as the majority of those in government and business are generally "powerful" male figures. Gino further notes the idea that in negotiations, conflicts of interest are particularly ignored in the roles of law and banking, especially when audits are conducted. As she indicates "the most well-intentioned negotiators routinely and unconsciously commit ethical lapses and tolerate such lapses in others." In her article, she also mentions a Harvard Business School professor named Max Bazerman who contends that "Few professionals consciously set out to violate the law or thenown moral standards." Additionally, he insists that structural changes must occur within organizations to further eliminate the chances of ethical lapses occurring (Gino, 2008).
As an educator striving to improve ethical perceptions among students, what are some suggestions for organizations and business departments for stressing ethics and enacting structural changes that can be lasting? Stanley (2008) gives suggestions in his article Ethics in Action as to implementing structural changes within in an organization. They are:
1) Adhere to a standard of conduct and be professional in one's actions at all time - which includes the appearance of being ethical.
2) Train employees properly and continue to reinforce that training through coaching of ethics .
3) Keep ethics policies simple and easy to understand - employees will appreciate that.
4) Be viewed as ethical, meaning a firm's actions must be ethical - not just words.
5) Provide a professional service, yet be fair and reasonable in transactions and pricing.
6) Recognize that even the best leaders at times will make mistakes - allow a second chance for individuals that inadvertently made an error.
7) Be honest, as this is essential in establishing a framework for business ethics.
8) Recognize that some business organizations are going to be unethical, and those practices should be questioned. If those unethical practices continue, the popular movement is to regulate the most "mundane" transactions.
9) Publish ethical business practices to act as a guide to others.
10) Maintain the emotional health of employees as it keeps them ethical. Unethical behavior is "highly stressful"
The above ten structural suggestions for businesses such as AIG can be useful within the classroom as well. Progressive teaching of ethics within departments of business and giving examples of poor ethical decisions such as the AIG bonus situation as a teaching tool enlightens students to the business world they are about to enter. As Stanley (2008), indicated, "an ethical person will not lie, cheat, steal, or tolerate anyone who does." Enhancing students' perceptions in these areas will go far in producing a more ethical business environment.
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Susan B. Shurden, Lander University
Juan Santandreu, Lander University
Michael C. Shurden, Lander University…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: How Student Perceptions of Ethics Can Lead to Future Business Behavior. Contributors: Shurden, Susan B. - Author, Santandreu, Juan - Author, Shurden, Michael C. - Author. Journal title: Journal of Legal, Ethical and Regulatory Issues. Volume: 13. Issue: 1 Publication date: January 1, 2010. Page number: 117+. © The DreamCatchers Group, LLC 2008. Provided by ProQuest LLC. All Rights Reserved.
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