John Okpara 2004

8/6/2019 John Okpara 2004

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The paper is composed of three sections; the

first is a literature review and model develop-ment. The second is a Methodology section with

Results of the data analysis. The final sectiondiscusses the conclusions implications of the

study.

Literature review

Ethics, as a science, is the reflective study of whatwe ought to do, or how we ought to live

(Ekennia, 1998). In other words, the termethics relates to choices and judgments about

acceptable standards of conduct that guide thebehavior of individuals and groups. The study

of ethics focuses on issues of practical decision-making, including the nature of ultimate value,

and standards by which a human action can be

judged right or wrong, good or bad. Ethicsapplies also to any system or theory of moral

values or principles Adenubi (1999). Whereverthere is a community of people, there are norms

and mores that guide peoples behavior.Every culture has approved moral standards

for her citizens; these constitute their moralityDandaura (2000). But ethics are a reflective

approval of some of these norms by givingreasons which transcend purely personal or

domestic considerations. Ethics eschew bias and

arbitrariness and require us to treat similar casesalike. Ethics offer impartial and universal sound

reasons for living.The question becomes; has business any-

thing to do with ethics? Given that businessactivity plays a significant role in the welfare of

a societys citizens, people within that societyhave a right to expect that businesses accept

their role as citizens and that businesses will

behave as good citizens; that is, they will behaveethically.

Proponents of ethics in business often argue

that it is in the interest of the business organiza-tion to behave in a way that recognizes the need

for moral and ethical content in managerial

decision making because it will ultimately benefitthe business Ola (1998). It is also necessary to

be ethical because the society will eventuallyforce recalcitrant businesses to behave ethically

through legislation or other regulatory require-

ments. It is assumed that by embracing ethics,business can pre-empt their operations being

regulated or penalized.

When business organizations behave ethically,

they are helping to create a society that is imbuedwith such virtues as honesty, integrity andfairness, which will ultimately benefit them in

many important ways. In other words, there is abelief that business organizations have a moral

obligation to support and assist the society byendorsing an ethical culture.

Nigeria has a history of corrupt and uneth-ical business and government practices. The

principle of endorsing an ethical culture does not

appear to have been embraced by Nigerian

businesses, especially banks. For instance, in thepast, commercial banks have disappearedovernight unannounced leaving patrons or cus-

tomers stranded and desperate.Based on the above discussion, an intriguing

question arises; if society benefits from ethicalbusiness behavior, do individuals working for

unethical businesses benefit from behavingunethically? That is, do employees endorse and

reinforce the unethical behavior of theiremployers despite the fact that such behavior

damages the society and thereby their own

welfare? Without a change in personal behavior,it is unlikely that organizational or societal

change is possible. To start analyzing this issue,the current study focuses on whether employees

of Nigerian banks believe that they work in anethical climate.

Organizational ethical climate

An organizational ethical climate can be defined

as the stable psychologically meaningful percep-tions members of organizations hold concerning

ethical procedures and policies existing in theirorganizations (Schneider, 1975; Victor and

Cullen, 1988). Employees perceptions about theethical climate of their organizations are affected

by organizations policies, procedures, and rewardsystems as well as her formal and informal

systems Barnet et al. (2000). An ethical climateassists employees as they evaluate issues and

350 Emmanuel A. Erondu et al.


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consider alternatives, and that it helps to guide

members in the determination of acceptable andunacceptable behavior at work.

The dominant ethical work climate is anindividualized, dynamic perception (Wyld and

Jones, 1977). The ethical climate of a corpora-tion is also just one aspect of the total workclimate of the organization.

Banks in developing economies like Nigeriaare clearly acting out of a desire to make money.

However, as noted above, the need for profit hasto be tempered by the need to be a good cor-

porate citizen. The extent to which employeesbelieve that the bank tempers its desire for profit

with its need to be a good citizen is the frame-work for the current study.

Theoretical framework

This study builds upon the constructs developed

by Victor and Cullen (1987, 1988) and Cullenet al. (1993), the most fully developed to date.

Victor and Cullen argued that a number ofdifferent types of ethical climates are likely to

exist in organizations. Kohlberg (1981) andVictor and Cullen (1987) postulated the exis-

tence of three distinct ethical criteria or standardsassociated with different ethical climates; Egoism,

Benevolence, and Principled.Ferrell and Fraedrich (1997) made an excel-

lent attempt at clarifying the domain of these

criteria. These researchers identified that thethree ethical criteria differ in terms of the

decision rules used in moral reasoning.Therefore, the differences between them can be

described as follows:

(1) Egoism: An egoistic or instrumental crite-rion is based on the moral philosophy ofegoism, which implies that a consideration

of what is in the individuals best interest

will dominate the ethical reasoning process

(Ferrell and Fraedrich, 1997).(2) Benevolence: The benevolence or utilitarian

criterion is based largely on utilitarian

principles of moral philosophy, whichsuggest that individuals make ethical deci-

sions by considering the positive or nega-tive consequences of actions on referent

others (Ferrell and Fraedrich, 1997).(3) Principled: The principled or deontological

criterion is based in large part on deonto-

logical principles of moral philosophy,

which posit that individuals make ethicaldecisions after considering actions inregard to universal and unchanging prin-

ciples of right and wrong (Ferrell andFraedrich 1997).

Victor et al. (1993) developed another frame-

work that focused on the organization. That is,employees are aware of three domains or

dimensions within which they are affected bycorporate climate. These dimensions are an

Individual dimension, a Local dimension, and a

Cosmopolitan dimension.The organizational climate impacts how an

employee sees him or herself directly or individ-ually. The climate affects how an employee

interacts with other people and departments(locally). Finally, the climate influences how an

employee identifies with external groups,including customers, suppliers, and other stake-

holders. Table I combines the Victor et al. (1993)

Corporate Ethics in Nigeria 351

TABLE IThe dimensions of ethical climates

Ethical criteria Locus of analysis

Individual Local Cosmopolitan

Egoism Self-interest Company profit Efficiency

Benevolence Friendship Team interest Social responsibility

Principled Personal morality Rules & procedures Laws & professional codes


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approach with that of Ferrell and Fraedrich

(1997).The combination of the two approaches above

results in some potentially interesting researchquestions. In particular, the individual and

local columns are essentially internal percep-tions of the ethical climate; the Cosmopolitancolumn represents and external perception. From

an employee perspective, it would be logical toexpect that the companys internal environment

will shape the way in which the employeebelieves the firm is perceived externally. That is,

if employees perceive a company to be uneth-ical because of its internal rules or the way it

treats individuals, then those employees are likelyto perceive the company to be perceived as

unethical externally. Therefore, the Individualand Local perspectives drive the Cosmopolitan

perspective. From this departure point, a number

of hypotheses can be developed (see Figure 1).

H1: The motivations of Self-Interest andCompany Profit are predictors of how

the organization is viewed in terms ofEfficiency.

Efficiency =f(Self-Interest, Company Profit)

It is usual for the interests of an individual toconflict with the interests of the organization,and therefore, the relationship between Self-

Interest and Efficiency is expected to be nega-tively correlated. The drive for Company Profits

is usually positively correlated with Efficiency,and therefore, it is anticipated that this relation-

ship will be positively correlated.

H2: Friendship and Team Interest are predic-tors of how the organization is viewed

in terms of its Social Responsibility.

Social Responsibility =

f(Friendship, Team Interest)

It is anticipated that the signs of the predictor

variables with the dependent variable will be

positive.

H3: Personal Morality and Rules &Procedures are predictors of how the

organization adheres to Law and

Professional Codes.

Law & Professional Codes =

f(Personal Morality, Rules & Procedures)

It is anticipated that the signs of the predictor

variables will be positive.These hypotheses can be tested using struc-

tural equation modeling; a technique often usedin confirmatory studies. The current research is

exploratory in nature, and requires verifying theextent to which the dimensions identified in the

model development stage are present in a new


Figure 1.


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domain; that is, the Nigerian business environ-

ment. Due to the exploratory nature of theresearch it was decided to use two less powerful

statistical techniques in testing the model; factoranalysis and regression.

Methodology

Sample and survey administration

The sample for this study consisted of bank

employees of various commercial banks inNigeria. The research questionnaire was admin-

istered to a random sample of 200 employees.The companies were chosen at random from a

directory of Lagos businesses. To enhance theresponse rate, the questionnaires were delivered

by hand to the addresses of the banks and col-

lected by hand on a scheduled pick up date.Distribution was conducted this way to avoid the

problems with the local mail system and to fitwith local cultural issues, such as knowing the

background of the researcher, and the purpose ofthe research. Nigerians will rarely respond to

anonymous surveys and want to know the personand the subject of the research before responding.

The survey was developed using the Victor etal. (1993) dimensions set out in Table I above.

That is, several items were generated using thenine dimensions. The survey was reviewed by

academic experts for accuracy in the context of

ethical behavior in Nigeria and understandability.Minor changes were made to improve the

instrument in each area. Then the survey instru-

ment was submitted to a panel of experts inNigeria for validation. The panel was asked to

review the content of the items in each of the

instruments and determine if the items were

within the linguistic capabilities and under-standing by the subjects in Nigeria.

The same instrument was administered on two

occasions using different respondents. Thisprovided two sets of data for analysis. Each data

set contained 200 respondents.

Results

Both data sets were loaded into SPSS files. One

file was subjected to a factor analysis to confirmthat the items loaded onto the intended dimen-sion (Kim and Mueller, 1978). The results

demonstrate that several items cross load ontwo or more dimensions. These items were

removed to improve the scales for each dimen-sion.

Once the scales had been purified, eachscale was verified in the second data set using

reliability analysis. Each of the items contributesits respective scale and the scales are not improved

by removing any items (Carmines and Zeller,

1979).Table II reflects the results of the data collec-

tion. Using a test of means, the only dimensionwith a mean that is significantly different from

the others is Personal Morality (mean = 1.8033;standard deviation = 1.1630). Therefore, the


TABLE II

Means and standard deviations for 9 dimensions

Ethical criteria Locus of analysis

Individual Local Cosmopolitan

Egoism Self Profit Efficiency

4.1296 (0.8883) 3.99 (0.4566) 4.3967 (0.6273)

Benevolence Friendship Team interest Social responsibility

4.5950 (0.7292) 4.2700 (0.6594) 4.4517 (0.5143)

Principled Personal morality Rules & procedures Laws & professional codes

1.8033 (1.1630) 4.5522 (0.5130) 4.4472 (0.4349)


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These results indicate the dimensions of Self-Interest and Company Profit are significant pre-

dictors of the Efficiency dimension (F= 58.55;p = 0.000). In particular, as employee percep-tion of the internal environment favors self-interest, the drive for efficiency weakens (t =7.164; p = 0.000). However, when employeesperceive that the drive for company profit

increases so does the drive for efficiency. These

are logical and expected results. The predictors

explain some 37% of the variance in theEfficiency variable. This suggests that other

variables not included in the analysis may have amajor impact on how employees perceive effi-

ciency within the organization.

Model 2: Benevolence variablesThe regression model for this test can be set out

as follows:

respondents disagreed only with the items

addressing the Personal Morality scale. The con-clusions concerning this result are discussed

below.Having established that the scales for each

dimension meet the reliability test, theresearchers tested the nature of the relationshipbetween the Locus of Analysis dimensions. The

hypotheses developed above suggest that theLocal and Individual dimensions drive the

Cosmopolitan dimension. That is, the individual

and internal dimensions determine the way inwhich employees perceive the company treats its

other publics. These relationships are tested

using linear regression. The results are shown in

the tables below.

Model 1: Egoism variablesThe regression model for this test can be set outas follows:


Model 1: Efficiency = f(Self-Interest + Company Profit)

TABLE III

Regression results for Model 1

Predictor Fstatistic R2 Beta t-test Significance

Model 58.550 0.369 0.0000

Self-interest 0.487 7.164 0.0000

Company profit 00.729 10.725 0.0000

Dependent variable = Efficiency.

Model 3: Social Responsibility = f(Friendship + Team Interest)

TABLE IV



Model 13.464 0.111 0.0000

Friendship 0.067 0.298 0.0000

Team interest 0.740 3.293 0.0000

Dependent variable = Social responsibility.


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The results indicate that the overall model issignificant (F = 13.464; p = 0.000). However,only one of the predictors is statistically signifi-cant. That is, as employees perceive that the

company is concerned about employees percep-

tions of social responsibility increase. Thisrelationship is not significant for the Friendship

variable. The sign of the significant predictor isas expected. However, the proportion of variance

explained (R2) is small at 11%, indicating that thevariables included in this analysis, while statisti-

cally significant, are not conceptually important.Further research should be undertaken to deter-

mine variables with greater significance.

Model 3: Principled variablesThe regression model for this test can be set outas follows:


Model 3: Laws & Professional Codes = f(Personal Morality + Rules & Procedures)

TABLE V



Model 209.908 0.681 0.0000

Personal morality 00.814 19.777 0.0000

Rules & procedures 0.375 9.118 0.0000

Dependent variable = Law & professional code.

The overall model is significant (F= 209.908;p = 0.000). However, the predictors do not eachhave the expected positive correlation with the

dependent variable. When employees perceivethat the internal environment encourages

personal ethical decisions, the employees alsoperceive the company behaves legally. However,

when employees perceive rules and procedures

are to be followed strictly, then the company isperceived to acting against the law. This last result

is somewhat surprising. The proportion ofvariance explained is high at 68%, indicating that

the predictors are the major issues under con-sideration in this aspect of an employees per-

ceptions.

Conclusions and implications

The study focuses on the extent to which the

Cullen, Victor, and Bronson (1993) and the

Ferrell and Fraedrich (1997) frameworks areapplicable to the Nigerian banking environment.

The overall result seems to confirm the applica-bility of those conceptual frameworks. That is,

the Ethical Criteria (Egoism, Benevolence, and

Principled) and the Locus of Analysis (Individual,Local, and Cosmopolitan) seem to be verified as

separate dimensions in a distinct structure.Furthermore, the fact that these dimensions and

relationships are found in the Nigerian workenvironment, appears to make the framework

robust to cultural change.

Table II presents the results of the means andstandard deviations for the descriptive data of

ethical climates. The only dimension that was notpositively endorsed was the Personal Morality

vector on the Individual and Principled dimen-sions (mean = 1.8033; s.d. = 1.1630). On a scale

of 15, with 1 the lowest and 5 the highest, the

other vectors reported means of 3.99 or higher.The Personal Morality score seems to indicatethat employees experienced the most disconti-

nuity in what they believe is their own ethical

perspective and that of the organization. Thisseems to fit with the results of the regression

analysis reported above.The current study attempts to determine the

relationship between the Individual and Localloci and the Cosmopolitan locus. The regression


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models seem to fit the hypothesized relationships

laid out in the above discussion, with one excep-tion. That is, in the final regression model, the

Rules & Procedures predictor had a negative signwhen a positive sign was expected. As employees

perceive that they must follow company rules andprocedures they consider the company to beacting less legally. In contrast, when employees

perceive they should follow their own moralcompass, the company acts more legally. The

only way this inconsistency can be explained isthat many companies must have rules that run

counter to the employees perceptions of legalbehavior. If that is the case, then the results

would be consistent.In terms of implications, there are a couple

of important points to be noted.

(1) Nigerian business is considered by manyto be one of the most corrupt environ-

ments in the world. Based on the evidenceof the current research, it appears that

Nigerian bank employees share the sameethical and moral compass as people in

other business environments. Therefore,

corruption is more likely to be an institu-tional concept than an individual one. If

Nigeria is to clean up its act, any legal

and administrative solutions should bearthese results in mind.

(2) Further studies are necessary to verify

these results in other business environ-ments. However, if these results are repli-

cated, it would seem to be logical thatemployee training should encourage and

train employees to use their own judgmentin deciding ethical and moral issues,

because that is more likely to result in

legal corporate behavior than if theemployee follows company rules.

References

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to Ethical Behavior and Supervisory Influence,

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(Chartered Institute of Bankers of Nigeria, Lagos).

Emmanuel A. EronduCity University of New York,

Medgar Evers College,School of Business,

1600 Bedford Avenue,Brooklyn, NY 11226,

U.S.A.E-mail: [email protected]


Alex SharlandAndrews School of Business,

Barry University,Miami Shores, FL,

U.S.A.

John O. OkparaDepartment of Business Administration,

Briarcliffe College,Bethage, NY,

U.S.A.


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John Okpara 2004