AN EMPIRICAL INVESTIGATION OF THE EFFECTS OF ETHICAL CLIMATES ON ORGANIZATIONAL CORRUPTION

This study investigates the effects of ethical climates on organizational corruption. Data from 200 employees from seven hospitals in Poland was used to test the specific relationships between the five empirically occurring ethical climate types (i.e. caring, instrumental, independence, law and code, and rules) and organizational corruption. Law and code climates were negatively associated with organizational corruption, while instrumental and caring climates were positively associated with organizational corruption.


Introduction
Corruption has become endemic in a worldwide organizational context. The list of organizational offenders in terms of corruption are prominent -Enron, lGlobal Crossing, Adelphia, Quest, Tyco, and WorldCom -are but a few of the prominent organizations that have engaged in corruption (Ashforth et al. 2008: 670). The World Bank has suggested that corruption is a huge stumbling block for economic and social development (Aguilera, Vadera 2008;United Nations 2002, 2008World Bank 2000), and Kayes (2006) also suggests that the growing number of organizational scandals has made the public aware about corruption. The very recent world crisis has also been a resultant of corrupt financial practices (Teather 2009;Voliotis 2011;Watkins 2003), which only goes to show that corruption is very much prevalent in a global context. This growing epidemic of corruption has reduced confidence and trust in organizations and leaders (Ashforth et al. 2008;Colvin 2004;Nocera 2002). It also appears that corruption has existed since ancient times (Aguilera, Vadera 2008). Several studies have documented the negative effects of corruption -these negative effects range from economic development to different measures of economic welfare (Dumludag 2009;Mauro 1995;Ogrean et al. 2008;Rose-Ackerman 2002;Rivera-Batiz 2001;Shleifer, Vishny 1993;Venard 2009).
As one can infer from the evidence, studying the causes and consequences of organizational corruption is quite an important cause! Aguilera and Vadera (2008) and Pelletier and Bligh (2008) state that research in organizational corruption is fairly recent, as most research efforts on corruption seem to have delved into political science and political philosophy, rather than organizational corruption.
One theory that could be useful to study the causes of organizational corruption is ethical climate theory (ECT) (Victor, Cullen 1987, 1988. Ethical climates play an important role in developing the context in which employees operate (Trevino et al. 1998), and it is likely that ethical climates will be related with organizational corruption.
In this paper, we provide a literature review of organizational corruption, a theoretical background and hypotheses which are based on ECT. We present a methodology section followed by the results and discussion. Our main purpose in this paper is to explore the relationship between ethical climate types and organizational corruption.

Organizational corruption
Corruption and organizational corruption have been defined many different ways (Apaydin, Balci 2011;Venard 2009); however, the definitions proposed by Aguilera and Vadera (2008) are considered standard. Corruption is defined as an "abuse of authority for personal benefit" (p. 433) and organizational corruption is defined as "the crime that is committed by the use of authority within organizations for personal gain" (p. 433). These two definitions of corruption emerged from previous definitions propounded by other scholars -for instance, Ashforth and Anand (2003) defined organizational corruption as the "misuse of authority for personal, subunit, and/or organizational gain" (p. 2). Other definitions of corruption have also been presented by Habib and Zurawicki (2002); Luo (2004); Robertson and Watson (2004); Rodriguez et al. (2005);Sherman (1980); Theobald (1990);and Voliotis, (2011). In this paper, we will be relying on the framework provided by Aguilera and Vadera (2008) to define and work with the organizational corruption construct. Luo (2004) provided a model of organizational corruption that related the organization's environment to deviant behaviors within the organization, and then also addressed the consequences and potential anti-corruption actions. Aguilera and Vadera (2008) expanded Luo's framework and offered their version of an antecedent-effect framework. Aguilera and Vadera (2008) also connected the opportunity-motivation-justification model of crime with organizational corruption. Their framework relies heavily on Weberian concepts of authority (Weber 2002), as well as on Sedikides and Brewer's (2001) classification of motives (individualistic, collectivistic, and relational). With these two concepts, Aguilera and Vadera (2008) also introduced the notion of justification (rationalization, socialization, and ritualism).

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Corruption is classified as either individualistic or collectivistic according to who accrues the benefits of corruption (Pinto et al. 2008;Voliotis 2011;Waite, Allen 2003). However, as both Ashforth et al. (2008) and Voliotis (2011) put it, organizational corruption is essentially meant to be studied in an interactionist way that transcends levels, and is instead multilevel in scope. Ethical climate theory has been used in multilevel studies earlier (e.g. Parboteeah, Kapp 2008;Parboteeah et al. 2005), and so it seems appropriate to study the effects of ethical climates on organizational commitment -thus meeting the interactionist approach that Ashforth et al. (2008) advocate. Now we present our theoretical background and layout our hypotheses.

Ethical climates
Organizational climates have effects on many organizational variables (Martin, Cullen 2006;Simha, Cullen, 2012;Zukauskas, Vveinhardt 2011). Ethical climates are subsets of organizational work climates. Ethical climate theory was first proposed by Cullen (1987, 1988). Ethical climates refer to organizational practices and procedures that define what is considered right or wrong within an organization (Parboteeah, Kapp, 2008). Cullen (1987, 1988) based their work off on Kohlberg's (1984) work on moral development and Schneider's (1983) work on sociocultural theories of organization. Their ECT framework consists of a two-dimensional model of ethical climate types, where one dimension is ethical philosophy and the other is a dimension based on the sociological theory of reference groups (Merton, 1968). The three ethical constructs are egoism, benevolence and principle. The other construct, locus of analysis, was categorized by Victor and Cullen (1988) as individual, local, and cosmopolitan. The crossing of these two criteria results in nine theoretical climate types which are as shown in figure 1.
From nine ethical climate types, research demonstrated that five ethical climate types are the most commonly occurring ones (Martin, Cullen 2006;Tsai, Huang 2008). These five ethical climate types are represented in figure 2.

Instrumental
Employees perceiving instrumental ethical climates in their organizations tend to see their units as encouraging ethical decision-making from an egoistic perspective (Martin, Cullen 2006: 178). Self-interest promoting behavior even at the cost of potential detriment to others is prevalent in instrumental ethical climates. Evidence exists that suggests that instrumental climates are associated with unfavorable outcomes. For instance, Wimbush and Shepard (1994) said that in instrumental climates, decision-making is made so as to serve one's self-interest or personal benefit. Cullen et al. (2003) found that instrumental climates have negative associations with commitment, as did Tsai and Huang (2008). Similarly, Bulutlar and Öz (2009) found that instrumental climates were associated with elevated levels of workplace bullying. Deshpande (1996), Joseph and Deshpande (1997), and Tsai and Huang (2008) all found negative associations of instrumental climates with job satisfaction. In case of corruption as well, the self-interest criteria that is so prevalent in this type of climate may well allow corruption to flourish -especially since corruption is associated with self-interest and personal gain. This suggests that instrumental climates will be positively associated with organizational corruption.

H1:
Instrumental climates are positively related to organizational corruption.

Caring
The caring construct emerges from benevolence theory -the essence of benevolence theory is that behaviors yielding in positives for the greatest number of constituents are encouraged. Individuals operating in caring climates perceive that decisions should be based on an overarching concern for others (Martin, Cullen 2006). Caring climates are found to be associated with a lot of beneficial and positive organizational outcomesfor instance, Deshpande (1996), Joseph and Deshpande (1997), and Tsai and Huang (2008) found that caring climates were associated with elevated levels of job satisfaction. Cullen et al. (2003) and Tsai and Huang (2008) found that caring climates have positive associations with organizational commitment. Several other studies found positive outcomes associated with caring climates (Koh, Boo 2001;Parboteeah, Kapp 2008;Parboteeah et al. 2010;Sims, Keon 1997). This suggests that caring climates will be negatively associated with organizational corruption.

H2:
Caring climates are negatively related to organizational corruption.
A. Stachowicz-Stanusch, A. Simha. An empirical investigation of the effects of ethical climates ...

Independence
The independence climate is associated with independence of thought and action. In these sorts of climates, individuals believe that they need to act on deeply held, personal moral convictions to make ethical decisions. Decision making in independence climates emphasizes personal moral beliefs with minimal regard for outside influences (Martin, Cullen 2006). These individual principles are determined through careful consideration (Martin, Cullen 2006;Schminke et al. 2005). The deciding factor for people's actions is based on one's personal moral beliefs (Tsai, Huang 2008), and on a similar note, Ambrose et al. (2008) found that individuals with a post-conventional level of cognitive moral development work in independence climates.
That suggests that corruption incidences are likely to be low in an independence climate, as principles of deontology and utilitarianism are likely to dictate actions and behaviors there. Independence climates have also been associated with a lot of positive organizational outcomes, such as elevated levels of commitment and satisfaction, reduced turnover intentions, and reduced workplace bullying (Bulutlar, Öz 2009;Cullen et al. 2003;Deshpande 1996;Joseph, Deshpande 1997;Parboteeah et al. 2010;Tsai, Huang 2008). This suggests that independence climates will be associated with low levels of organizational corruption.
H3: Independence climates are negatively related to organizational corruption.

Law and code
The principle ethical criterion is the main construct behind the law and code ethical climate. The law and code climate fosters the expectation that people operating under it have to adhere to codes and regulations of their profession or other external codes. This climate, just like the caring and independence climates, has been associated with a lot of positive outcomes, such as elevated levels of satisfaction, commitment, reduced turnover, and reduced bullying (Bulutlar, Öz 2009;Cullen et al. 2003;Deshpande 1996;Joseph, Deshpande 1997;Parboteeah et al. 2010;Tsai, Huang 2008). Since in this climate, principled decision-making based on verifiable external codes is emphasized, it seems likely that law and code climates will be negatively associated with organizational corruption.
H4: Law and code climates are negatively related to organizational corruption.

Rules
This particular climate is based on the construct defined as company rules and procedures. In the rules climate, organizational decisions are perceived as being guided by a strong and pervasive set of local rules and standards such as codes of conduct (Appelbaum et al. 2005;Aquino, Becker 2005;Liu et al. 2004;Martin, Cullen 2006;Simha, Cullen 2012). Rules climates too have been associated with positive outcomes such as elevated levels of satisfaction, commitment, and reduced turnover (Cullen et al. 2003;Deshpande 1996;Joseph, Deshpande 1997;Parboteeah et al. 2010;Tsai, Huang 2008). People operating under the rules climate know that there is a verifiable code of conduct within the organization, and therefore it seems likely that rules climates will be negatively associated with organizational corruption.
H5: Rules climates are negatively related to organizational corruption.

Sample
The sample was drawn from seven hospitals in Poland, and consisted of hospital administrators and management personnel. We translated all surveys into Polish first and then back-translated them into English to remove translation errors. After the survey was validated, we distributed 300 surveys in total, and received 200 completed and useable surveys back. Our useable response rate was 67 percent, and our sample was predominantly female (82%). 62.5 percent of our respondents had at least a college degree, and the average years of experience they had was 25.29 years.

Ethical climate
We measured ethical climate by using the Ethical Climate Questionnaire (ECQ) first developed by Cullen (1987, 1988). In the ECQ, respondents are asked to act as observers reporting on organizational expectations, not on their personal beliefs or their affective evaluations of the climates. The complete version of the ECQ is available in Cullen et al. (1993). This particular scale has demonstrated excellent validity and reliability (Martin , Cullen 2006;Tsai , Huang 2008).

Organizational corruption
We measured organizational corruption by using an adapted version of the scale provided by Balci et al. (2012). In this scale, respondents are asked to report on the corruption prevalent in their organization.

Control variables
We collected responses to the following items in order to control for potential confounding effects on the perceptions of ethical climate and organizational trust: age, gender, education level, and years of work experience.

Analytical procedures
Similar to previous research (Parboteeah et al. 2005; Parboteeah, Kapp 2008), we conducted separate factor analyses on items reflecting ethical climates. Factors were then constructed using the appropriate items. The five factors that emerged corresponded to the five ethical climate types -the factor loadings and coefficient alphas of the ethical climate scales are presented in Table 1.
Even though, it may appear as though our scales have low Cronbach alphas (i.e. lower than 0.7), what we obtained is very similar to what was obtained by other researchers (Cullen et al. 2003;Tsai, Huang 2008). There exists evidence that states that Cronbach alphas are lower than 0.7 especially if the scale has lesser than 10 items (Pallant 2004;A. Stachowicz-Stanusch, A. Simha. An empirical investigation of the effects of ethical climates ... Wilson et al. 2008), so therefore the rule of thumb of 0.7 does not apply if scales have fewer than 10 items. Therefore, our scales can be considered reliable.
Similarly, a factor score was obtained for our measure of organizational corruption. Multiple regression analysis was the technique chosen by us to test Hypotheses 1 through 5.

Caring
In this company, our major concern is always what is best for the other person 0.627 Our major consideration is what is best for everyone in this company 0.751 0.64 The most important concern is the good of all the people in the company

Independent
In this company, people are expected to follow their own personal and moral beliefs  Table 2 shows a matrix of correlation and sample statistics of all variables included in the study. No abnormalities were detected through this matrix -we did find that work experience and age were significantly correlated.   Table 3 presents the results of the regression. As expected, we found that the control variable of education level had a negative relationship with organizational corruption.

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All our hypotheses from 1 through 5 were tested using multiple regression analysis. These hypotheses proposed relationships between the different ethical climate types and organizational corruption. As our regression results show us, our regression model was highly statistically significant (p = 0.016), and we obtained support for two of our five hypotheses, i.e. hypothesis 1 and hypothesis 4. Hypothesis 1 proposed that instrumental climates would be positively related with organizational corruption, and hypothesis 4 proposed that law and code climates would be negatively related with organizational corruption. We obtained support for both these contentions. We did not however, obtain any support for hypotheses 3 and 5, i.e. the ones pertaining to independence and rules climates. In terms of hypothesis 2, we obtained support, albeit in a different direction. We had proposed that caring climates would be negatively related with organizational corruption -however, we found evidence that suggests that caring climates are actually positively related with organizational corruption.

Discussions
The overarching objective of this study was to explore the relationships between ethical climate types and organizational corruption. Our study found support for two of our hypotheses, and found that another of our hypotheses was supported albeit in an opposite direction from what we had forecasted. In summary, we found that law and code ethical climates were negatively related to organizational corruption, whereas instrumental and caring climates were positively related to organizational corruption.
Our findings are similar to previous research findings to a certain extent -instrumental climates for instance have been found to be consistently associated with a lot of negative outcomes. The self-interest criteria and self-interest promoting behaviors that flourish in egoistic and instrumental climates make it easy to understand why instrumental climates would be positively associated with organizational corruption. In instrumental climates, self-interest values may end up getting internalized by employees. That sort of internalization would then end up having a cascading effect on organizational corruption.
Similarly, our findings in terms of law and code climates having a negative association with organizational corruption can be seen in the context of other research findings, where it was found that law and code climates were associated with positive outcomes. A reduction in corruption can very definitely be considered a positive outcome, and so it is not surprising to see that law and code climates are negatively associated with organizational corruption. Our sample consisted of professionalized workers from hospitals, and it is quite possible that the professional socialization during and after training would have made these employees internalize principled values. Adherence to professional codes is another factor that would help reduce organizational corruption. That in turn would help explain why organizational corruption would be reduced in law and code climates.
However, our findings in terms of caring climates having a positive association with organizational corruption are both unexpected and startling. To our knowledge, ours is the first study that has linked caring climates with a negative organizational outcome. One way of trying to explain this rather surprising result is by considering the key senti-ment behind caring climates -the overarching concern for the well-being of others. It is quite possible that if this concern for the well-being of others gets to be overarching and the main raison d'être, then that may end up promoting a culture of corruption, wherein an attitude of 'everyone needs to benefit' ends up getting promoted. This could be one potential explanation for our finding that caring climates are positively associated with organizational corruption.

Conclusions
We must mention a few limitations of our study and findings -one limitation is that our study was conducted on a Polish sample. Other studies on other national and work contexts must be conducted in order to ensure that our findings are not context dependent.
Another potential limitation could be due to common method variance, i.e. the variance attributable to the measurement method rather than the constructs which the measures represent (Tsai, Huang 2008: 578). Method bias is a common source of measurement error, which in turn threatens the validity of the conclusions about relationships between measures (Bagozzi, Yi 1991;Podsakoff et al. 2003;Tsai, Huang 2008). It is possible that this method bias is present in our study, because all our measures were obtained through self-report questionnaires. However, since a questionnaire approach is the only feasible way to collect ethical climate data, and all of the research conducted on ethical climates relies on the questionnaire approach, we believe that our findings are somewhat robust.
In terms of practical implications, our study essentially suggests that organizations and managers invest time to promote principled climates rather than egoistic climates. As a plethora of research evidence suggests, egoistic and instrumental climates have usually been associated with negative organizational outcomes (Martin, Cullen 2006). Managers should try to curtail the growth and flourishing of egoistic cultures which only result in negative and undesirable outcomes. Instead, managers should try and promote principled cultures and behaviors, which would yield in positive and beneficial outcomes. Principled climates, since they espouse explicit and unambiguous rules of employee conduct and expectations, can certainly be very useful in curtailing or reducing corruption. However, in terms of benevolent climates, our findings suggest some sort of balance be exercised with respect to benevolent climates. Perhaps, benevolent climates should be encouraged albeit with some sort of control mechanism, i.e. in combination with principled climates. Our findings suggest that if only benevolent climates exist, then some negative outcomes like organizational corruption could end up getting promoted -it is important that rules and principles be harnessed to combat that.
An interesting area for future research would be to re-examine the link between caring and benevolent climates to organizational outcomes, especially negative outcomes which involve collaboration (such as groupthink, for instance). More research on that front would help resolve whether or not benevolent and caring climates are always desirable climates to cultivate. Similarly, studies aiming to replicate our findings in different national and work contexts too could yield some benefit for furthering the literature base.