Study offers strategies to thwart unethical decisions by businesspeople

In the depths of the 2008 recession, the Bank of America, having purchased Merrill Lynch, was gearing up for its largest-ever layoffs: up to 35,000 workers. It was at this cataclysmic point in time when Merrill Lynch CEO John Thain took to decorating his office to the tune of $1.2 million U.S. (ABC News). Why do people in positions of power use their authority unwisely? And what can be done about it?

Justin Tan, professor at York University’s Schulich School of Business, sought to answer these questions. He led a team of researchers focused on unethical decisions in the business world and the roles of power and status in making these decisions, and compared China and Canada.

The differences between these two countries were interesting: When asked to explain the reasons behind their unethical decisions, study participants in China were more likely to cite position differences, while participants in Canada were more likely to cite work effort and personal abilities.

However, the findings have a broader impact: This new information provides key insights on behavior in workplace settings and greater understanding of unethical decision-making.

“Our findings expand research on the relationship between social hierarchy and unethical decision-making and provide practical insights on unethical behavior in organizations,” Tan explains.

Most importantly, Tan’s team offers some concrete suggestions for how to stop unethical decisions in the future.

The results of this research, funded by the National Natural Science Foundation of China and by Central South University (China), were published in the Journal of Business Ethics (2019).

Study fills important research void

Prior to this study, most research on unethical behavior in organizations looked at Western societies; comparative studies of unethical behavior across nations were rare. But Tan realized that much could be gained through a comparative analysis. “Our goal in this research was to determine why high-position members of organizations make unethical decisions,” he explains.

Tan and his team, including Chris Bell, also at York, and two academics from Central South University (Hunan, China), decided to focus on Canada and China.

The researchers had several hypotheses, including:

• power is positively related to unethical decision-making;
• status is positively related to unethical decision-making; and
• status moderates the positive relationship between power and unethical decision-making.

Power is defined by Tan as “an asymmetrical discretion in bestowing or withholding valuable resources or outcomes” while status is defined as “the esteem and social worth that one has in others’ eyes.”

Participants were business students in Canada and China

The team recruited university business students in China and Canada with an average age of 20 years: 100 participants from China (nearly 60 per cent were women) and 83 from Canada (50 per cent were women).

The participants completed a pen-and-paper survey. Tan explains further: “We conduct a scenario experiment, using a role-playing game to capture participants’ unethical decisions.”

The researchers set up various scenarios, such as:

You have been appointed to be the supervisor of your workgroup. You have three subordinates. You have control over an unusually large amount of resources, compared with your peers who head other workgroups. After completing the task, you will have four distribution options for bonus allocation.

Power and status play role in unethical decisions

The findings showed how much power and status influence unethical decisions, although there were some differences. “Chinese participants showed a positive correlation between need for power and unethical decisions, and Canadian participants showed a positive correlation between status and unethical decisions,” Tan explains.

When questioned about why they made unethical decisions, 90 per cent of the participants (Canada and China together) provided rationales. Chinese participants are more likely to cite position differences, whereas Canadian participants are more likely to cite work effort and personal abilities.

Practical implications

To focus on the differences between the two countries would be missing the larger point of Tan’s work. The practical implications of this research lead to prevention strategies that could be applied in any organization, country or setting.

Tan’s team provides three main suggestions to prevent unethical decisions:

1. Organizations should guide higher-ranking members’ perceptions of their superior positions and their cognizance of their own behaviors and the effects on others.
2. Organizations should address the use of discretion by high-ranking personnel because more discretion facilitates greater opportunities to engage in unethical decision-making. If clear regulations were established around discretion, then organizations could reduce the incidence of unethical behavior.
3. Managers who wish to prevent unethical behavior should watch out for position- or performance-based superiority, which could induce unnecessary entitlements in reward distribution and lead to unethical decisions.

To read the article, “How Do Power and Status Differ in Predicting Unethical Decisions? A Cross-National Comparison of China and Canada,” visit the journal’s website. To learn ore about Tan, visit his Schulich profile page.

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By Megan Mueller, senior manager, Research Communications, Office of the Vice-President Research & Innovation, York University, muellerm@yorku.ca