Demonstrating the Need for Effective Business Ethics an alternative approach 

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Demonstrating the Need for Effective Business Ethics: An Alternative Approach 

JASON CHILDS

ABSTRACT

 Since the financial crisis, the malfeasance of business leaders has been a recurring theme in the news, along with calls for increased regulation and oversight. This focus on the ethics of the business community raises a concern about the ethics of those in business or going into business. The ethics of business people and business students have been explored by a number of researchers using survey techniques. We propose and report the results of an alternative method for investigating unethical behavior by students. In a motivated economic experiment with introductory-level students, we find that business students were almost twice as likely to lie for a monetary reward as students in other disciplines, demonstrating the need for effective business ethics.

INTRODUCTION

Businesses have received a remarkable amount of negative press since the financial crisis. The conviction of Bernard Madoff, the civil case against Goldman-Sachs for fraud-

lent misconduct and the accusations of “Robo-signing” foreclosures all contribute the public belief that those in business are untrustworthy. Incidences of fraud have not been restricted to the banking sector. The examples of Enron, WorldCom, and Parmalat are still cited as evidence of unethical behavior in business. Public reports of losses to employee theft and fraud, approximately one trillion dollars in the United States alone (Association of Certified Fraud Examiners), further harm the reputation of the business.

The public perception begs the question: are those in the world of business truly more prone to dishonesty than those in other fields? A growing body of literature attempts to address this issue. Direct surveys of business people are rare, but some have found that dishonest behavior is not uncommon (Greeman  and Sherman 1999). Dishonesty in the workplace has been linked to cheating in university and college (Lawson 2004; Nonis and Smith 2001; Simkin and McLeod 2010 p. 443; Sims 1993; Teixeira and Rocha 2010), making surveys of students a viable alternative. As researchers have more access to students, more work has been done exploring the ethical behavior of students in business schools and business programs; Day et al. (2010) and Brown and McInerney (2008) both provided reviews of the existing literature. In general, this research ftnds that academic dishonesty is extremely common. In short, students cheat.

The ubiquity of cheating by students is a concern for both

academic institutions and future employers. If cheating is promi- nent in a program or institution, the reputation of the school falls, reducing the value of the degree to potential students. Detecting and preventing cheating is clearly in the best interest of any academic institution. From the viewpoint of a future employer, academic dishonesty is a concern as well. If a degree is obtained through fraud, the employer cannot be certain that the applicant actually has the skills the degree is supposed to indicate. This would cause employers to demand more experience of job appli- cants. Of course, job experience tends to be associated with demands for higher pay.

A natural starting place is to see if students differ by discipline of study. Given the current attitudes portrayed in the media, it makes particular sense to focus on business students. There is disagreement in the literature about the relationship between fteld of study and dishonesty. Some ftnd that business students are signiftcantly more likely to engage in dishonest behavior than students in other disciplines (Bernardi et al. 2004; Smyth and Davis 2004). Other research has found no relationship between dishonesty and fteld of study (Klein et al. 2007; Molnar et al. 2008; Smyth et al. 2009; Zopiatis and Karmbia-Kapardis 2008). If business students are in fact more prone to dishonest behavior, it will be in the best interest of business schools to take steps to improve the ethics of business students both while they are studying and later in life.

The studies cited earlier all report the results of unmotivated

surveys. Given the conflicting results of this literature, an alter- native method of assessing students’ propensity for dishonesty is justifted. We report the results of an economic experiment with monetary incentives in which subjects were given an opportunity to lie. In the experiment, business students were signiftcantly more likely to lie than students in all other disciplines.

In the next section, we make the case for an alternative method of assessing students’ behavioral tendencies. We then present the experimental design. This is followed by the results of the experi- ment. In the ftnal section, we offer some discussion of the results and their implications.

THE CASE FOR AN ALTERNATIVE METHOD OF MEASUREMENT

 The existing literature on the likelihood of dishonest behavior      of students makes use of two different types of unmotivated surveys. One approach is to ask students to report their own or other’s dishonesty, generally in terms of academic cheating. This approach has two limitations. First, there is no general deftnition of cheating among students. For example, while some students may consider sharing information about an assignment cheating, others may simply view it as teamwork. A well-designed survey can address this, but it does make the survey more complex and

time-consuming to complete. The larger limitation of this type of survey is that it relies on honest reporting of dishonest behavior. If business students are actually more honest than students in other disciplines, and honesty includes survey responses, busi- ness students would appear to be less honest than others  because they told the truth about lying on a survey. For example, if those business students who score highly on a test of Machia- vellianism are more willing to admit to dishonest behavior, they would appear to be more dishonest without actually being so.  This could explain the ftndings of Bloodgood et al. (2010) and Tang and Chen (2008). This problem of honest reporting extends to the other survey method, which asks students about their attitudes toward dishonesty and cheating. The responses of stu- dents who are dishonest on a survey could indicate that they ftnd dishonesty objectionable even though they have no reservations about taking such actions themselves.

Another weakness of the existing literature is that it focuses on

academic dishonesty. In the minds of students, academic dishon- esty occurs at the expense of the course instructor. Students’ attitudes toward their instructors are potentially different from their attitudes toward employers, other students, or future  clients. In existing studies of academic dishonesty, a difference between business and nonbusiness students may arise due to how different students view their instructors and their program. This may play a part in explaining why students are found to be more dishonest than practitioners (Teixeira and Rocha 2010).

Techniques developed in experimental economics offer an alter- native to surveys. Instead of being asked whether or not they have been dishonest, an experimental environment gives students an opportunity to be dishonest in exchange for monetary gain. The choices of students in this environment can be directly observed, meaning the analysis is based on actual behavior rather than self-reported actions.

There is a growing body of literature in both economics and business that makes use of motivated experiments to further our understanding of dishonesty. Mazar and Ariely (2006) and Mazar et al. (2008) used a simple testing environment to explore the internal rewards, social norms or self-concept, threshold expla- nation of cheating. Different groups of students were asked to ftnd pairs of numbers in matrices that summed to 10. The control

group received only the matrices and a sheet on which to report the number of pairs found. Those in the treatment groups were asked to perform short tasks1 before searching for pairs of numbers and were provided with an opportunity to cheat. The groups that were provided the opportunity to cheat reported higher average scores than groups that did not have the oppor- tunity to cheat. The increased scores are interpreted as evidence cheating by the authors. While the treatments explored are inter- esting, this approach is limited by the fact that dishonesty can only be inferred from aggregate behavior and not directly observed at an individual level. Observing only group behavior makes it difftcult to determine the impact individual characteristics have on dishonesty.

Another, arguably simpler, approach is based on a sender–

receiver environment initially used by Gneezy (2005). In this type of experiment, one subject is shown a set of two payoffs. This subject then sends a message (making them a sender) to the other subject (the receiver) about the two payoffs. The message either honestly identiftes which payoff would yield the most money to the receiver or is a lie. The direct observation approach avoids the limitations of other methods.

This approach has been used to consider the relationship between a number of factors and the propensity to lie. The origi- nal work (Gneezy 2005) examined the impact of different levels of monetary incentives on lying. Dreber and Johannesson (2008), Erat and Gneezy (2011), and Childs (2012) examined lying by gender. None of the preceding work has considered the relation- ship between the chosen fteld of study and lying. We use this sender–receiver environment to examine the relationship between fteld of study and willingness to lie.

 

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