© 2013 Pakistan Journal of Statistics 681 2013 Vol. 29(5), 681-696
ETHICAL CLIMATE AND WHISTLE-BLOWING:
AN EMPIRICAL STUDY OF TAIWAN’S CONSTRUCTION INDUSTRY Chung-Fah Huang§ Kung-Lung Lo and Chia-Feng Wu
Department of Civil Engineering, National Kaohsiung Univ. of Applied Sciences, Kaohsiung City, Taiwan
§Corresponding author. Email: jeffrey@kuas.edu.tw
ABSTRACT
There is a plethora of alleged and/or proven cases of illegal and unethical behaviors in construction organizations or activities, such as fraudulent practices of official-trader collusion. These problems often lead to threats to labor safety, environment, quality of the construction quality and invaluable lives of people. Therefore, how to promote engineering ethics in the construction industry is a topic must be explored and discussed further.
There is limited existing research regarding the influences of engineering ethics on national construction projects, let alone research on related issues from the perspective of construction organizations. This research aims at exploring “ethical climate” and “whistle-blowing” within the construction organizations in Taiwan by conducting a questionnaire survey. There are 458 valid returned questionnaires. By using the methods of Hierarchical regression analysis and Structural Equation Modeling to analyze the questionnaire results, this study discusses the relationships between organizational ethical climate and whistle-blowing existed in Taiwan’s construction organizations, and make the findings as follows: (1) The ethical climate dimension of construction organizations is similar to that of ordinary enterprise organization, and the major component of their ethical climate is “law and rules”; (2) Generally, the members in the surveyed construction organizations have the tendency of whistle-blowing. The establishment of organizational ethical climate helps the members of these construction organizations to improve their whistle-blowing intention; and (3) If an organization has a more positive ethical climate, its members have higher intentions of whistle-blowing.
KEY WORDS
Ethical Climate; Engineering Ethics in Construction; Whistle-blowing. 1. INTRODUCTION
In recent years, scandals of organizational illegal and unethical behaviors have been frequently heard. Regardless of business ethics, these profit-seeking behaviors have significantly disturbed social order and impaired public interests such as what was witnessed in the closure of Enron, fraud of WorldCom and crisis of CityBank. Currently these behaviors are common in each industry and the construction industry is no exception. According to the survey by Transparency International in 2002, the “public works/construction” industry is the business sector most prone to bribery and more
corrupt than the “arms and defense” and “oil and gas” industries with rampant problems of illegal behaviors.
Illegal behaviors in the construction industry are not limited to collusions between governmental officials and business representatives. In addition to causing financial losses, they can also create problems that damage labor welfare, environmental security and construction safety. Among the buildings that collapsed in the 512 Sichuan earthquakes, many were later found built by decisions to cut corners. Their unethical conduct resulted in many deaths of innocent students and citizens in the earthquake. Many other similar cases reflect problems of illegal and unethical organizational behaviors in the construction industry have a far more decisive influence on society’s safety and health than those in other industries. In addition, it is because of these behaviors that professionals of the construction industry are losing the public’s credibility and trust. Therefore, it is of great importance and urgency to study in depth illegal and unethical behaviors in the construction industry.
To reduce illegal behaviors of construction engineers, in addition to induce corrective but palliative measures such as legal penalties are equally critical to the construction industry. It is perhaps more important, however to focus on ways to enhance ethical standards of construction engineers. In the past, much attention was paid to ethical education; it influenced engineering students only within a short period of time with rather limited effect on the industry. Moreover, previous engineering ethics research discussed only ethics education and practice. Insufficient analysis of organizational influences on engineers such as business ethics and organizational internal control was included. Nevertheless, professional conduct of engineers is influenced by not only their personal moral values and professional ethics, but also by their employing organizations. In countries where engineering ethics education and ethics codes are underdeveloped or undeveloped, the possible benefits which business ethics and organizational internal control can be get in the construction industry are beyond imagination.
Among the existing studies on business ethics, many discuss the connections between background contexts and ethical or unethical behaviors of employees. These connections may include whether or not employees make ethical decisions based on the ethical climates of their employing organizations or how employees influence organizational behaviors. Whistle-blowing, for example, is a very important ethical behavior of employees that can improve or prevent organizational illegal and unethical behaviors. It is widely discussed in many books on engineering ethics and ethical codes. By understanding and facilitating factors of whistle-blowing, employees can be encouraged to report illegal and unethical organizational behaviors. However, there is limited research on the connections between organizational ethical climates and whistle-blowing. Research is more narrow on the connections between ethical climates of construction companies and whistle-blowing. There are only a few descriptive case studies (Chertow et al., 1993; Oliver, 2003) without any statistical or empirical analysis.
This study focuses on the organizational ethical climates in construction companies and their influence on whistle-blowing in the industry. With its research framework based on a literature review on organizational ethical climates and whistle-blowing, this empirical study adopts questionnaire investigation and statistical analysis to derive at substantial findings.
2. PREVIOUS RESEARCH Ethical climate theory
The ethical climate of a corporation is one aspect of the total work environment of the organization, which describes the shared perception of organizational norms, values and behavior (Rasmussen et al., 2003). The ethical climate not only assists individuals to define acceptable behaviors within the confines of that organization, it also has an influence on the moral conducts of its members (Victor & Cullen, 1987; Cohen, 1995; Rasmussen et al., 2003).
Using a conceptual framework, Victor and Cullen (1987) developed the Ethical Climate Questionnaire to measure how members perceive the ethical climate of their organizations. In their questionnaire, there are five major types of ethical climates: “caring” (denotes a concern for the well-being of other people), “rule” (represents a concern for whether any of the company’s policies and procedures is being observed), “law-and-code” (represents a concern for whether any law is being violated), “instrumentality” (represents a focus on self-interest), and “independence” (represents a focus on the adherence to one’s ethical beliefs).
Ethical climate is important because it is believed its varying dimensions may be associated with different types of ethical behavior (Cullen et al., 1989; Wimbush & Shepard, 1994). The most frequently quoted model is based on the ethical climate theory by Wimbush and Shepard (1994) involving the connections between an organization’s ethical climates and the ethical behaviors of its members. Their model points out that the ethical climates of “caring,” “independence,” “law-and-code” and “rule” are based on the interests of the majority within an organization. Among those organizations with such ethical climates, ethical behaviors are common and, when making ethical decisions, their organizational policies and behaviors are more recognized and accepted by others. By contrast, among organizations with predominating “instrumentality climates” which are mainly based on self-interests, unethical behaviors are prone to occur (Wimbush & Shepard, 1994). According to Wimbush and Shepard (1994), organizational ethical climates have an influence on both ethical and unethical behaviors. Even in Chinese culture, whistle-blowing is deemed as an ethical behavior (Chiu, 2003). The process of whistle-blowing is also subject to the influence of both personal and contextual variables (Miceli & Near, 1992). Smith et al. (2001) explicitly reported that organizational ethical climates can affect whistle-blowing. Rothwell and Baldwin (2007) also reported organizational ethical climates would influence whistle-blowing behaviors.
Whistle-blowing defined and influential factors
There are various definitions of whistle-blowing. According to Near and Miceli (1985),whistle-blowing is the organizational members’ disclosure of illegal, immoral, or illegitimate practices committed by their employers to persons or organizations that may have the ability to take actions. In the research on engineers by Bouville (2008), whistle-blowing was defined as the act of exposing what the employee believes to be unethical or illegal behaviors within the organization to their supervisors or higher management (i.e., internal whistle-blowing) or to external authorities or the general public (i.e., external whistle-blowing).
Miceli and Near (1992,2002) indicated that almost all whistle-blowers initially attempted to report wrongdoing through internal whistle-blowing in lieu of external whistle blowing for the latter usually leads to public scrutiny or legal intervention. Even though internal whistle-blowing poses a lesser threat to an organization, Miceli et al. (1991a) found whistle-blowing is still unwelcomed within in an organization. Internal whistle-blowers’ reports of wrongdoings are frequently ignored or put aside (Miceliet al., 1991b; Mesmer-Magnus & Viswesvaran, 2005). Quite a few studies on the factors of whistle-blowing exist. According to some, both personal factors and contextual factors can influence on decisions of whistle-blowing. (Near & Miceli, 1995). The common factors of whistle-blowing are listed as follows:
Years of service / Tenure
Some argue senior employees have higher risks and costs associated with whistle-blowing due to their additional time invested in their organizations and have accumulated more sunk costs upon their departure, such as: possible higher salary losses (financial rewards), friendship with colleagues, and reputation (intangible rewards) among others. Consequently, they are less likely to report organizational wrongdoing than newcomers.
According to Miceli and Near (1992), senior employees are actually more inclined to be whistle-blowers for they are more familiar with issues at their organizations and the whistle-blowing procedures. Employees with longer tenures may choose to blow the whistle when noticing any improper or illegal behavior of their organizations instead of leaving their organizations because they have developed closer attachment to their organizations or they are going to retire (Mesmer-Magnus Viswesvaran, 2005; Miceli & Near, 1992; Rothwell & Baldwin, 2007). Moreover, mature workers have more secure value systems than younger workers, and they are more willing to defend their value systems even if they have to go through lengthy whistle-blowing process and face possible retaliation (Chiu, 2003).
According to the empirical research by Jos et al. (1989) and Miceli and Near (1988), tenure and whistle-blowing are positively correlated. However, this observation is not shared by other studies (Sims & Keenan, 1998; Chiu, 2003; Rothwell & Baldwin, 2007). The results of the meta-analysis indicate that tenure is correlated with actual whistle-blowing, but not necessarily correlated with the intentions of whistle-blowing (Mesmer-Magnus & Viswesvaran, 2005).
Supervisory status
Rothwell and Baldwin (2007) stated that common responsibilities require supervisors to regulate employee behavior, enforce standards, and report misconducts. Subsequently, individuals in the management level are often prone to blow the whistle (Reuss-Ianni, 1983). Michelin Engineering ethics is a branch of professional ethics, covering moral norms and other related issues in engineering professions (Martin and Schinzinger, 1996) and Engineering ethics is a branch of professional ethics, covering moral norms and other related issues in engineering professions (Martin and Schinzinger, 1996). Fritzsche (1988) found that executives, middle managers, and supervisors did not differ in their stated intentions to blow the whistle when presented with scenarios of hypothetical wrongdoing (Miceli & Near, 1984).
Rothwell and Baldwin (2007) indicated several studies of whistle-blowing and supervisory status have found positive correlations between these two factors (Miceli & Near, 1984). However, research by Rothschild and Miethe (1999), and Lee et al. (2004) did not demonstrate that there is any significant relationship between whistle-blowing and supervisory status.
Social Exchange Theory suggests that when there is a high level of support from supervisors and co-workers within the organization, the development of norms of reciprocity would make an individual to use means of internal whistle-blowing other than those of external whistle-blowing. Keenan (2000) also had a similar argument, indicating that employees with higher seniority or higher positions are more likely to have access to high-level management members who are able to make decisions to change the organization. Besides, intentions of whistle-blowing can be predicted based on the age and supervisory status of potential whistle-blowers. Hence, whistle-blowing can be predicted based on the supervisory status and tenure of employees (Mesmer-Magnus & Viswesvaran, 2005).
Educational level
Miceli and Near (1992) indicated educational level would affect a whistle-blowing decision. They found engineering ethics is a branch of professional ethics, covering moral norms and other related issues in engineering professions. Higher education might affect one's recognition and assessment of wrongdoing and increase the perceived responsibility for action. When other variables were controlled, external whistle-blowers tended to be slightly less educated, and internal whistle-blowers slightly more educated than were other organizational members (Miceli & Near, 1984). Moreover, Graham (1989) suggested that although education is positively associated with whistle-blowing, the effect is not strong.
3. METHODOLOGY
This study mainly addresses the influence of organizational ethical climates on both internal and external whistle-blowing. Based on the previous literature review, this study collected data through empirical questionnaire surveys and applied hierarchical regression methodology to analyze the relationships between organizational ethical climates and whistle-blowing.
Samples and data collection
The samples in this study are major workers in the construction industry in Taiwan, including engineers, designers, a construction supervisor, procurers, a construction superintendent and those holding related positions in the civil engineering and construction industries in Taiwan. They are mainly working in the construction companies, engineering design companies, real estate development, and governmental engineering departments. There were 1,200 anonymous questionnaires distributed in the study and 497 of them were returned with 458 valid samples (valid return rate: 38.17%).
Measures
Dependent variables
In this study, the whistle-blowing intention refers to the tendency of employees to blow the whistle. However, currently there is no sufficiently stable questionnaire on
whistle-blowing intention available for this study. In addition, there is no referential empirical research in Taiwan on the influential factors of whistle-blowing intention. Therefore, this research developed a blowing intention questionnaire based on a literature review on whistle-blowing and the engineering ethics principles developed by the National Society of Professional Engineers. An example of such a principle is to “hold paramount the safety, health, and welfare of the public” (Oliver, 2003). In deciding the question items, additional references were found from: existing knowledge about common wrongdoing in the construction industry; methods of both external and internal whistle-blowing; and velocity of different unethical organizational behaviors. The questionnaire in this study is composed of 11 items, using a 6-point Likert-type scale with answers representing different levels of agreement in each item. The answer option, “unable to answer,” is also incorporated. If a sample subject chooses this option to a question, it is regarded as an unanswered question and excluded in the statistical analysis.
Independent variables
Responses concerning the ethical climate, the independent variable, were collected using Victor and Cullen’s (1988) 26-item Ethical Climate Questionnaire (ECQ), the instrument most widely used in examining organizational ethical climates. The ECQ was also used in several studies on organizational ethical climates in different industries in Taiwan and its validity has clearly been established. Each of the respondents was asked to rate their perceptions of their organization using the 6-point Likert-type scale with answers ranging from “Completely False” to “Completely True” The ECQ covers the five types of ethical climates: Law-and-code (4 items); Independence (4 items); Rule (4 items); Caring (7 items); and Instrumentality (7 items).
Control variables
The control variables in this study included “supervisory status,”“years of service” and “ethical education experience.” If the subject holds a managerial or supervisory position, the variable of “supervisory status” is coded 1; otherwise, it is coded 0. The “years of service” variable refers to the amount of years the subject has served in the current organization. In terms of “ethical education experience,” this study asked the engineers if they had taken any engineering ethics-related courses in school, received on-the-job training or education related to engineering ethics, or acquired ethical codes in their companies which emphasized strict ethical codes (Huang, 2007). The assigned variable value codes are EEA, EEB, and EEC, respectively.
4. RESULTS AND DISCUSSION Sample characteristics
Most of the samples in this study are male (84.0%) and married (72.3%). The average age of the samples is 38.9 years with an SD of 8.15 years. Their average of service years is 7.9 years with an SD of 7.33 years. 33.3% of the subjects work in construction companies, 26.8% in the construction design consulting sector, 23.7% in governmental organizations, and 16.1% in other types of private enterprises.
exclusively in charge of related affairs (such as the auditing department); obtaining support from high-level management; and providing anonymous protection for whistle-blowers. With better organizational internal control through internal whistle-blowing, the construction organizations can reduce illegal or unethical behaviors; hence, prevent any negative impact of poor-quality construction projects on the safety of the general public.
REFERENCES
1. Bouville, M. (2008). Whistle-Blowing and Morality. J. Bus. Ethics, 81, 579-585. 2. Chertow, M., Lenz, J. and Plourde, R.P. (1993). Whistle-Blowing: a Professional
Responsibility. J. Profess. Issues in Engg. Edu. and Prac., 119(1), 27-30.
3. Chiu, R.K. (2003). Ethical Judgment and Whistle-blowing Intention: Examining the Moderating Role of Locus of Control. J. Bus. Ethics, 43, 65-74.
4. Cohen, D.V. (1995). Creating Ethical Work Climates: a Socioeconomic Perspective.
J. Socio-Econ., 24 (4), 317-344.
5. Cullen, J.B., Victor, B. and Stephens, C. (1989). An Ethical Weather Report: assessing the Organization’s Ethical Climate. Organizational Dynamics, 50-62. 6. Fritzsche, D.J. (2000). Ethical Climates and the Ethical Dimension of
Decision-Making. J. Bus. Ethics, 24, 125-140.
7. Graham, J.W. (1989). Whistle-blowing as Organizational Citizenship Behavior and/or Civic Duty. The Annual Meeting of the American Society of Criminology, Reno, NV. 8. Gunsalus, C.K. (1998). How to Blow the Whistle and Still have a Career Afterwards.
Scien. and Engg. Ethics, 4, 51-64.
9. Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998). Multivariate Data Analysis with Readings. Maxwell Macmillan International, NY.
10. Huang, C.F. (2007). An Empirical Study on Engineers’ Professional Ethics Education Experience and Ethical Behaviors. CSCE 2007 Annual General Meeting and
Conference, Yellowknife, Northwest Territories, Canada.
11. Keenan, J.P. (2000). Blowing the Whistle on Less Serious Forms of Fraud: a Study of Executives and Managers. Employee Responsibilities and Rights Journal, 12(4), 199-217.
12. Kolarska, L. and Aldrich, H. (1980). Exit, Voice, and Silence: Consumers’ and Managers’ Responses to Organizational Decline. Organizational Studies, 1, 41-58. 13. Lee, J., Heilmann, S.G. and Near, J.P. (2004). Blowing the Whistle on Sexual
Harassment: test of a Model of Predictors and Outcomes. Human Relations, 57, 297-322.
14. Martin, M.W. and Schinzinger, R. (1996). Ethics in Engineering (3rd ed.). McGraw-Hill.
15. Mesmer-Magnus, J.R. and Viswesvaran, C. (2005). Whistle-blowing in Organizations: An Examination of Correlates of Whistle-blowing Intentions, Actions, and Retaliation. J. Bus. Ethics, 62, 277-297.
16. Miceli, M.P. and Near, J.P. (1984). The Relationship among Beliefs, Organizational Position, and Whistle-Blowing: A Discriminate Analysis. Acad. of Mgmt. J., 27, 687-705.
17. Miceli, M.P. and Near, J.P. (1988). Individual and Situational Correlates of Whistle-Blowing. Personnel Psychology, 41, 267-281.
18. Miceli, M.P. and Near, J.P. (1992). Blowing the Whistle: the Organizational and
Legal Implications for Companies and Employees. Lexington Books, NY.
19. Miceli, M.P. and Near, J.P. (2002). What Makes Whistle-blowers Effective? Three Field Studies. Human Relations, 55(4), 455-479.
20. Miceli, M.P., Dozier, J.B. and Near, J.P. (1991a). Blowing the Whistle on Data Fudging: a Controlled Field Experiment. J. Appl. Social Psy., 21(4), 271-295.
21. Miceli, M.P., Near, J.P. and Schwenk, C.R. (1991b). Who Blows the Whistle and Why? Indus. and Labor Relations Rev., 45(1), 113-130.
22. Near, J.P. and Miceli, M.P. (1985). Potential Predicators of Whistle-blowing: a Pro-social Behavior Perspective. Acad. of Mgmt. Rev., 10(4), 823-936.
23. Near, J.P. and Miceli, M.P. (1995). Effective Whistle-blowing. Acad. of Mgmt. Rev., 20(3), 679-708.
24. Oliver, D. (2003). Whistle-Blowing Engineer. J. Prof. Issues in Engg. Edu. and Prac., 129(4), 246-256.
25. Peterson, D.K. (2002). The Relationship between Unethical Behavior and the Dimensions of the Ethical Climate Questionnaire. J. Bus. Ethics, 41, 313-326. 26. Rasmussen, K., Malloy, D. and Agarwal, J. (2003). The ethical climate of government
and non-profit organizations. Pub. Mgmt. Rev., 5(1), 83-97.
27. Rothschild, J. and Miethe, T.D. (1999). Whistle-Blower Disclosures and Management Retaliation. Work and Occupations, 26, 107-128.
28. Rothwell, G.R. Baldwin, J.N. (2007). Ethical Climate Theory, Whistle-blowing, and the Code of Silence in Police Agencies in the State of Georgia. J. Bus. Ethics, 70(4), 341-361.
29. Ruess-Ianni, E. (1983). Two Cultures of Policing: Street Cops and Management
Cops. Transaction Books, London.
30. Sims, R.L. and Keenan, J.P. (1998). Predictors of External Whistle-Blowing: organizational and Intrapersonal Variables. J. Bus. Ethics, 17, 411-421.
31. Smith, H.J., Keil, M. and Depledge, G. (2001). Keeping Mum as the Project Goes Under: toward an explanatory Model. J. Mgmt. Infor. Sys., 18(2), 189-227.
32. Transparency International. Transparency International Bribe Payers Index 2002, http://www.transparency.org/policy_research/surveys_indices/bpi/bpi_2002, 2008/5/25. 33. Victor, B. and Cullen, J.B. (1987). A Theory and Measure of Ethical Climate in
Organization. Res. in Corp. Social Perfor. and Policy, 9 (1), 51-71.
34. Wenger, N.S., Korenman, S.G., Berk R. and Liu, H. (1999). Reporting Unethical Research Behavior. Eval. Rev., 23, 553-570.
35. Wimbush, J.C. and Shepard, J.M. (1994). Toward an Understanding of Ethical Climate: Its Relationship to Ethical Behavior and Supervisor Influence. J. Bus. Ethics, 13, 640.
36. Wimbush, J.C., Shepard, J.M. and Markham, S.J. (1997). An Examination of the Relationship between Ethical Climate and Ethical Behavior from Multiple Levels of Analysis. J. Bus. Ethics, 16, 1705-1716.
