SECRETARIA DE EDUCACION PUBLICA
INSTRUCTIVO DE LLENADO DEL FORMATO DE TRANSFERENCIAS DE RECURSOS
In this study, I conduct an experiment to investigate the role of supervisors in influencing subordinate honesty in budget reporting in an organization. I find that supervisory behavioral integrity, i.e. the alignment between the superior’s words and deeds, is an effective informal control mechanism to influence employee honesty. However, the effectiveness of supervisory behavioral integrity depends on the presence of shared financial interests between the superior and the subordinates, such that high supervisory behavioral integrity may promote employee honesty only in the presence of shared financial interests. In the absence of shared financial interests, supervisory behavioral integrity is no longer effective in influencing employee honesty. Further, I develop and find support for a causal model that explains the interaction effect. The model explains that the presence of shared financial interests reduces psychological distance the subordinates feel from the superior, and the reduced psychological distance leads the
subordinates to more likely behave consistent with the superior’ behavioral ethics. Moreover, I distinguish between supervisory behavioral integrity and supervisory behavioral honesty on their impacts on subordinate honesty. Consistent with my prediction, the results suggest that, in the presence of shared financial interests, compared to supervisory behavioral honesty, supervisory behavioral integrity has a stronger influence on subordinate honesty because it impacts the subordinates’ perceptions of the superior’s credibility and trustworthiness. Furthermore, in the
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presence of shared financial interests, high supervisory behavioral integrity promotes subordinate honesty, while high supervisory behavioral honesty turns out to demote subordinate honesty. The supplemental analysis shows that the demotion effect of supervisory behavioral honesty on subordinate honesty might be explained by the vicarious moral licensing effect, i.e. due to the reduced psychological distance between the superior and the subordinates, the subordinates may take moral credentials from the superior’s ethical behavior and are more willing to express immoral attitudes.
This study provides insight on the role of supervisors and senior managers in an organization may play in influencing the behavioral ethics of the employees, establishing the theoretical explanation of how employees may vicariously learn from the superior’s behavioral integrity. Further, the superiors’ influence varies across the organizational environments when the organizational environments impact the psychological distance between the supervisors and the employees. The findings are important for practice because it identifies that the
organizational settings where the subordinates feel a low psychological distance from the superiors are most beneficial for companies to invest their limited resources to audit or monitor the behavioral integrity of supervisors or senior managers. On the other hand, in the
organizational settings where the subordinates feel a high psychological distance from the superior, investing in such a costly system to induce high supervisory behavioral integrity brings no significant benefits to the companies because supervisory behavioral integrity has no
significant impact on subordinate honesty in these organizational settings.
Further, this study contributes to the understanding of why managers should both “walk the talk” and “talk the walk”, especially in the organizational setting where the subordinates may feel a low psychological distance from the superior. The study suggests that managers’
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communication of organizational values to the subordinates without exhibiting behavior consistent with the values demotes employee honesty more than managers’ unethical behavior alone. The findings are of particular importance to the accounting literature in light of Sarbanes- Oxley Act, Section 406, requirements of the organizations to disclose the adoption of a corporate code of ethics or otherwise to justify the absence of such a code of ethics. This study suggests that senior managers’ unethical behavior, such as misreporting, may result in more unwanted behaviors from the employees and higher costs for the companies in the presence of the
corporate code of ethics than in the absence of such a code. Thus, following the code of ethics, i.e. “walking the talk”, not only benefits the outside stakeholders of the organization such as investors and creditors, but also benefits the business itself by reducing unwanted employee behavior and promoting wanted employee behavior.
In the meanwhile, this study provides evidence that, in the organizational environment where the psychological distance between the superior and the subordinates are low, superior’s ethical behavior may have a demotion effect on employee behavior. The demotion effect occurs only in the absence of a communicated ethical value, and a possible explanation for the demotion effect is that subordinates may take moral credentials from the superior’s behavior in the absence of such a communicated value. When the superior communicates the ethical value, superior’s ethical behavior effectively promotes employee behavior. Thus, managers’ “talking the walk” also play an important role in influencing the behavior of employees.
As with prior experimental studies of employee honesty, this study tests relevant theory in a controlled environment to maintain internal validity. The experimental setting abstracts the decision environments in practice. Therefore, the generalizability of the theory in this study may be subject to the influence of other factors. For example, the subordinates expect the superior’s
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behavioral integrity by observing the superior’s behavior in one self-reporting task in this study. Future research may provide insights to investigate how repeated interactions between the superior and the subordinates may influence the subordinates’ perception regarding the consistency of the superior’s behavioral integrity, and how consistency in the superior’s
behavioral integrity may influence the subordinates’ ethical behavior. Also, this study provides the theoretical basis to explain how supervisory behavioral integrity may promote desirable behavior of subordinate in organizations. Although this study tests the effect in a budgeting setting, the mechanisms through which supervisory behavioral integrity impacts subordinate behavior may generalize to other settings in organizations. Future studies may examine the effect of supervisory behavioral integrity on subordinate behavior in other organizational settings, and explore whether this effect may be moderated by different informal and formal control schemes.
Moreover, this study distinguishes between the effect of supervisory behavioral integrity and supervisory behavioral honesty on subordinate honesty while controlling for presence of shared financial interests. Future studies may examine whether the interaction between
supervisory behavioral integrity and supervisory behavioral honesty is significant in a setting of the absence of shared financial interests and whether supervisory behavioral honesty has a promotion or demotion effect on subordinate honesty in that setting. If the results suggest a promotion effect, future studies may seek and test whether vicarious moral licensing effect is the underlying mechanism or there are alternative explanations for moderation between supervisory behavioral honesty and the presence of shared financial interests.
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Appendix A – Post-experimental questionnaire
Measures for psychological distance
Please provide your opinion on the following questions. Answer these questions as how you feel RIGHT NOW.
1. How familiar are you to the division manager?
1 (not at all familiar) 11 (very familiar) 2. How close are you to the division manager?
1 (not at all close) 11 (very close)
3. How likely is it that you would do things in the same way as the division manager? 1 (not at all likely) 11 (very likely)
4. How likely is it that you would be friends with the division manager? 1 (not at all likely) 11 (very likely)
5. How strong do you feel the tie between you and the division manager? 1 (There is not tie at all) 11 (There is a very strong tie)
The following questions are designed to collect information to help the researchers understand your budgeting decision. Please be assured that you cannot be personally identified from your responses. Please be as candid as possible.
Measures for the size of the pie effect
1. Which of the following did you prefer happening?
a. The division manager reports his or her actual performance.
b. The division manager reports higher than his or her actual performance.
c. I was indifferent whether the division manager reports exactly or higher than his or her performance.
Measures for the subordinates’ perceptions of supervisory behavioral integrity
2. There is a match between the division manager’s words and actions. 1 (strongly disagree) 11 (strongly agree)
3. The division manager conducts himself/herself by the same values he/she talks about. 1 (strongly disagree) 11 (strongly agree)
4. When the division manager promises something, I can be certain that it will happen. 1 (strongly disagree) 11 (strongly agree)
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Measures for the subordinates’ perceptions of the superior’s trustworthiness
5. Indicate the degree to which you agree with each statement below.
(1) I would be willing to let the division manager have complete control over my future in the company.
1 (strongly disagree) 11 (strongly agree)
(2) I would be comfortable giving the division manager a task or problem which was critical to me, even if I could not monitor his or her actions.
1 (strongly disagree) 11 (strongly agree)
Measures for the subordinates’ perceptions of the superior’s credibility
6. To what extent, in your opinion, does the division manager possess each of the following characteristics?
a. Friendly: 1 (not at all friendly) 11 (very friendly) b. Caring: 1 (not at all caring) 11 (very caring) c. Reliable: 1 (not at all reliable) 11 (very reliable) d. Honest: 1 (not at all honest) 11 (very honest)
Measures for the subordinates’ evaluation of the importance of the characteristic of honesty 7. Please provide you opinion on the following questions:
(1) How would it make you feel to be a person who has the characteristic of honesty? 1 (extremely bad) 11 (extremely good)
(2) How important is the characteristic of honesty to be a part of who you are? 1 (absolutely unimportant) 11 (absolutely importance) (3) How strongly do you desire to have the characteristic of honesty?
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Figure 1: Timeline of experimental tasks
Superior: Perform decoding task Receive performance feedback Communicate to the subordinate of the honesty norm Report the number of correctly decoded problems Subordinate: (In the absence or presence of shared financial interests conditions)
Wait for the superior to finish the decoding task
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