Sobre el porqué de la conducta de los individuos: La perspectiva conductista en la

and compliance officers in the provision of financial advice to consumers of financial services.

Previous research has highlighted that ethical decision making is predicted by numerous factors (Aquino & Becker 2005). The question of why and how individuals make ethical decisions on their own and within a work place environment, such as a financial services organisation, is therefore complex.

In ethical decision making, the focus is also not always on the action itself (Weber 1993). What matters more is the reasoning used by the professional which sits behind the decision or action taken. It is this concept that was a focus of this study.

Gephart, Harrison and Trevino (2007) and others (Ishida 2006; Boyd & Levine 1990) have concluded that cognitive moral development is the strongest dispositional predictor of unethical behaviour. This conclusion is supported by the research of Abdolmohammadi and Sultan (2002) which found that ethical reasoning and ethical behaviour have a positive correlation. Ethical reasoning in some studies has explained 10%-15% of the variation in ethical action (Thoma 1994, p. 201).

Bigel’s (1998) study of the level of ethical reasoning amongst USA financial planners was based on Kohlberg’s (1976) six stages of cognitive moral development (Bigel 2000). Kohlberg (1969) identified a total of six stages across three levels of ethical development: the pre-conventional, the conventional and the post conventional, based on the premise that ethical maturity evolves and can be measured by the different ways in which people organise and structure their social and moral world and associated experiences. At stage one ethical judgement is motivated by a desire to avoid punishment. At stage six, judgement is motivated by the individual’s own conscience. Studies have shown that few individuals progress to the post conventional level (Weber & Green 1991), with the majority of individuals motivated by either a need to avoid isolation from a group or to abide by governing laws (Kelloway et al. 1999).

It was recognised in Chapter 2 that the literature contains many criticisms of Kohlberg’s work. However, Kohlberg’s (1969) model of moral development forms the foundation

of Bigel’s (1998) study and underpins the DIT and DIT 2 instruments used to measure ethical reasoning in this study.

In terms of individual demographic factors that may influence ethical reasoning and therefore decision making, Bigel’s study (1998) suggested that cognitive ethical reasoning increases with age, education level and experience. This is supported by the research of Hitt (1990), drawing on the work of Jaspers (1955) and Freedman (1990), which has suggested that the age of an individual is positively related to the individual’s level of integrity and that moral development continues to grow well beyond adolescence, being influenced by age and experience.

The literature also discussed whether differences can be discerned between the ethical reasoning and decision-making of men and women. Some researchers, such as Ruddick (1989) and Held (1993) have argued that men and women have different notions of morality and apply them in different ways when making decisions. These researchers have contended that the differences between men and women can be demonstrated through links to two different ethical theories; the ethics of care usually associated with Gilligan (1982) and based on responsiveness to others, and the ethics of justice linked to the work of Rawls (1971) and based on the equal distribution of social goods such as liberty, opportunity and income, unless an unequal distribution would favour the disadvantaged. Dawson (1992) has also argued that the feminisation of certain sales professions, such as financial planning, may also change its ethics.

The literature review identified very few studies of the cognitive level of ethical reasoning of financial planners. This is a relatively under-researched area. For example, whilst there have been numerous studies of the ethical reasoning of other professionals such as accountants (Thorne 2000; Armstrong 1984; Arnold and Ponemon 1991; Porco 2003), business students (Wilhelm & Czyzewski 2006), medical students (Munro, Bore & Powis 2003), journalists (Westbrook 1994), engineers (Borenstein et al. 2006) and nurses (de Casterle, Rulens & Gastrams 1998; Thissen 2003), only financial planners in the United States seem to have been the subject of a specific study examining cognitive levels of ethical reasoning (Bigel 2000).

This study replicates Bigel’s (1998) study as it applies to the statistical relationships between the attributes of the individual decision-maker and their cognitive ethical reasoning.

As discussed in Chapter 2, the measurement of ethical reasoning has been undertaken in many different forms. Rest’s (1984) Moral Judgement Scale as used by Bigel (1998) and the DIT and DIT 2 instruments (Rest et al. 1999a) are the most widely used (Hansen and Morrow 2003).

The underlying structure of ethical reasoning assessed by the DIT 2 consists of the three Kohlbergian developmental schemas: personal interest or pre-conventional development, maintaining norms or conventional development and post conventional thought (Rest et al. 1999b). Using the DIT 2 instrument, respondent’s responses are analysed to measure two scores: the degree to which post conventional thinking is prevalent (the P score); and the degree to which post conventional thinking is present and pre conventional thinking is absent (the N2 score) (Rest et al. 1999c). In this instance, the score or index is the overall number used to represent a respondent’s ethical development (Rest et al. 1997). Accordingly, the higher the individual’s score the more the subject made ethical judgements akin to Kohlberg’s higher levels of moral reasoning.

In addition to moral comprehension, the DIT and DIT 2 have also been used to measure links between the P score and the N2 score and education intervention, political and religious views and pro-social behaviour (Borenstein et al. 2006). However, these latter links did not form part of this study.

Whilst the DIT and DIT 2 have limitations, they have been extensively tested over time and are justified by the empirical literature. The correlation of moral comprehension with the P score is 0.67 and with N2 score is 0.69 (n=140, p<.001) (Rest et al. 1997). The P score and the N2 score are also highly correlated in the 0.90’s (Rest et al. 1997). However, a meta-analysis of these two indexes conducted by Rest et al. (1997) has indicated that the N2 score significantly accounts for a greater portion of the variance as a whole than the P score (p< .01) and outperforms the P score on the benchmark statistics of the classic studies as an indicator of general development in moral judgment

(n=4,125, overall effect size 0.94 v 0.69, p<.001). Despite this, the P score remains relatively easy to measure and provides straightforward interpretation of the ethical reasoning of the respondent (Rest et al. (1997).

The DIT and DIT 2 instruments are therefore indicative of a taxonomy of ethical development, particularly as they may be used to reflect post conventional thinking. In addition, they are written tests which are easily administered by an email or an online survey.

These instruments have also been adapted by numerous researchers to incorporate profession specific case scenarios, instead of generic moral dilemmas as used by Bigel (1998) and in the original DIT test, to test the ethical reasoning of certain professional groups. The approach to research of Thorne (2000) and Borenstein et al. (2006) has been influential in this study.

Utilising similar techniques to those employed by Thorne (2000) in her development of two accounting-specific measures of prescriptive and deliberative moral reasoning of accountants and Borenstein et al. (2006) in their development of the Engineering and Science Issues Test (ESIT), this study developed the FAIT instrument to test the cognitive ethical reasoning of financial planning participants through the use of profession specific case dilemmas.

According to previous studies, cognitive ethical reasoning is not the only contributor to ethical decision-making. It can be inferred from the literature review that the predicators of both ethical reasoning and decision making are both complex and indirect (Suzuki & Knudson 1989; Lefkowitz 2003; Minett 2006).

An important question for this study therefore was whether a measure of individual cognitive moral development would, on its own, be the best predictor of the ethical decision making of financial planning participants within a financial services organisation.

and home (Ferrell, Fraedrich and Ferrell 2002). In addition, some studies have demonstrated that lower level managers and employees are less likely to believe that their organisations are managed ethically and are more likely to report that their personal values are compromised to conform with organisational expectations (Lefkowitz 2003), although subordinates with higher moral cognitive development will be less affected by their supervisor’s influence (Wimbush 1999).

Consistent with the literature review therefore, this study moved away from a sole emphasis on individual cognitive development as the primary predictor of individual Decision making (Kelloway et al. 1999) to include situational and contextual factors.

In terms of situational factors that may influence the ethical reasoning of financial planning participants, Hitt (1990) has suggested that the size of the organisation may be one such variable, together with the participant’s time with the organisation, the number of staff and the age of the organisation. Many financial services organisations whose advisers took part in this study have multinational and/or complex business structures (Money Management Magazine 2007). This study was influenced by theories that the larger the organisation, the increased likelihood that employees would perceive more issues with ethical culture (Kitson & Campbell 1996, p.104). Does this mean that larger organisations are less likely to be perceived as engaging in ethical decision-making when compared to smaller organisations?

The number of other variables and constructs to be studied during the course of this thesis required the exclusion of other situational factors from this study. It is recognised however that other factors such as the moral intensity and issue perception of the ethical dilemma (Jones 1991; Butterfield, Trevino & Weaver 2000) may also be predictors of ethical decision making.

In terms of the contextual factors that influence individual ethical decision-making within organisations, four paradigms were identified from the literature:

(a) ethical culture; (b) ethical climate;

(d) remuneration and reward structures.

Numerous academics including Jackall (1998), Pederson (1999) and Thompson (2004) have maintained that it is inevitable that corporate structures, organisational norms and payment structures will conflict with individual values and beliefs, and that this compromises independent ethical decision-making within organisations.

Finn (2003) has further contended that financial and professional businesses, operating under corporate umbrellas, place pressure on the ability of individual employees to meet conflicting professional and commercial obligations and imperatives.

It is recognised that there are other issues currently placing pressures on decision- makers within financial services organisations, including the global financial crisis and resultant economic downturn with the risk of job loss. However, these issues do not form part of this study.

The literature review suggested that an organisation with a strong ethical context, represented by the two multi dimensional constructs, ethical climate (Victor & Cullen (1988) and ethical culture (Trevino 1992), has a real and significant role to play in both positively influencing the ethical conduct of individuals, ensuring consistency of decision making in certain circumstances and plays a major role in addressing specific unethical behaviour (Whitehead & Novak 2003; Peterson 2002).

There appears to be no empirical data on the ethical climate and ethical culture of financial planning organisations, despite significant studies in other areas such as not for profit organisations (Deshpande 1996; Agarwal & Molloy 1999), police (Ede & Legosz 2002), IT managers (Okpara 2002), marketers (Barnett & Vaicys 2000), corporations (Erondu, Sharland & Okpara 2004) and schools (Rosenblatt & Peled 2002).

The contextual factors chosen for measurement in this study therefore included ethical climate and ethical culture. This allowed an exploration of Victor and Cullen’s (1988) ethical climate model, using Trevino, Butterfield and McCabe’s (1998) ethical climate and culture survey.

Research has also shown that organisations can reduce unethical choices by developing particular types of climates (Gephart, Harrison and Trevino 2007). For example, perceptions of caring climates may deter unethical behaviour because of their social support base (Wimbush, Shepard & Markham 1997) and caring and principled climates may lead to higher levels of ethical reasoning and more ethical decision making (Barnett and Vaicys 2000; Watley 2002).

Ineffective climates may also lead to a lack of organisational control over employee actions, or predictable errors occurring in ethical behaviour or decision making (Victor and Cullen 2001). For example, Gephart, Harrison and Trevino (2007) found that an egoistic climate increased the likelihood of unethical intentions and unethical behaviour. However, they found that a principled based climate which focuses on training; ethical guidelines, the implementation and enforcement of a code of conduct and other cultural systems, can deter unethical behaviour (p = .3 to .5).

An organisation’s ethical climate should help to determine what employees/advisers believe constitutes ethical behaviour at work; which issues employees/advisers consider to be ethically pertinent; and what criteria they use to understand, weigh and resolve issues (Kelloway et al. 1999; Vardi 2001).

Measuring the ethical climate of an organisation is based on the assumption that group members know what the climate is and can describe it in an objective way to outsiders (Weber 1993).

The Victor and Cullen (1988) model suggested nine climate types that guide ethical decision making and actions within an organisation by use of different ethical criteria. These nine ethical types were outlined in Table 2.10 of Chapter 2 and correspond to three major classes of ethical theory: egoism, utilitarianism and deontology. They are also consistent with Kohlberg’s (1969) stages of moral development at three levels: individual, local or organisational and cosmopolitan or society (Cullen, Victor & Stephens 1989), as shown in Tables 2.8 and 2.9 of this thesis.

It can be inferred from the literature that there is no one best or preferred ethical climate as firms can be ethical in many ways. The different types of climate are also not

mutually exclusive, although one is likely to dominate (Martin and Cullen 2006). However, Weber (1995) has hypothesized that perceptions of ethical climate may differ across departments and employee levels because of differences in departmental tasks and stakeholder accountability.

The Trevino, Butterfield and McCabe (1998) questionnaire adapted for the purposes of this study, contained four-item subscales to measure the nine theoretical dimensions of ethical climate using the following headings: Self Interest, Company Profit, Efficiency, Friendship, Team Interest, Social Responsibility, Personal Morality, Rules and Standard Operating Procedures and Laws and Professional Codes. The headings for each of these nine climate types are outlined in Table 4.1 below in column one. Column two provides the name ascribed to the climate for the purposes of this study and column three contains a description of the climate type.

The nine ethical climate scales in the Trevino, Butterfield and McCabe (1998) survey contained items to measure peer behaviour and the extent to which:

• norms supported ethical conduct; • ethical behaviour was rewarded; • unethical behaviour was punished;

• senior managers acted as models of ethical conduct;

• employees were expected to obey authority figures without question; and • employees reported unethical behaviour when it occurred.

Table 4.1: A summary of the nine ethical climate scales measured in this study

Ethical Climate Type Name used in this

study

Description

Employee Focus Employee Focus The organisation is perceived as being

concerned with the welfare of individuals and groups within the organisation.

Community Focus Community The organisation is usually perceived as being

focussed on team and social responsibility which considers what’s best for everyone and what is right for the customer and the public, when making decisions.

Obedience to authority Locus of Control Organisation members are expected to obey the authority and expectations of their superiors when making decisions.

Code Implementation Code Implementation Employees are expected to comply with an

internal code of ethics to regulate their decision-making.

Self Interest Situational Context The organisation’s members perceive they are

expected to act and make decisions primarily based on furthering the company’s interests first.

Efficiency Efficiency The organisation is usually perceived as

requiring members to take the course of action that will lead to the most efficient outcome. Rules and Procedure Rules and Procedure There is a focus on internal rules and standard

operating procedures which everyone is expected to follow when making decisions.

Personal Ethics Personal Ethics This climate allows individual members to

make decisions consistent with their own personal and moral beliefs.

Law and Professional Codes

Law and Professional Codes

Employees are expected to comply with the codes and regulation of their profession and other externally generated standards in choosing a course of action.

As indicated in Chapter 2, research has demonstrated evidence of a relationship between perceptions of ethical climate type and individual level work outcomes, such as job satisfaction (Vitell & Davis 1990; Martin & Cullen 2006; Armstrong, Kusuma & Sweeney 1999; Joseph & Deshpande 1997) and organisational commitment (Trevino 1986; Cullen, Parboteeah & Victor 2003). In their empirical study Cullen, Parboteeah and Victor (2003) found that perceptions of a benevolent climate were positively related to commitment and perceptions of an egoistic climate were negatively related to commitment.

Research conducted by Okpara (2002) has also shown that employees desire consistency between their own ethical value system and the ethical climate of their organization. Discrepancies between an individual’s internal ethical values and their perception of management values and the ethical climate within the organization can result in moral conflict if inconsistency prevails (Ferrell, Fraedrich & Ferrell 2002). Conflict can also exist if the values espoused by the organisation and management are not the ones actually utilised in practice.

Trevino, Butterfield and McCabe’s (1998) organisational commitment measure was used in this study and contained items selected from two dimensions of the three- dimensional commitment measure. The first dimension is “identification” which represents the person’s identification with the attitudes or goals of the organization. For example: “I talk enthusiastically to my friends about the Licensee as it is a great organization to belong to” and “I feel very loyal to this Licensee.”

The second dimension was a values based type of commitment called “internalization”. This measures the extent to which the person internalizes the organisation’s perspectives or characteristics. For example, “I find that my values and the organization’s are very similar.” These types of questions were located within the Employee Focus climate scale.

Ethical culture was another key contextual factor affecting ethical decision-making measured in this study. It was defined by Trevino, Butterfield and McCabe (1998) to mean the formal and informal control systems within an organization that articulate and

According to Trevino, Butterfield and McCabe (1998, p. 452) ethical conduct should be higher in organisations which have these formal and informal systems in place. For example, organisations where leaders and norms encourage and support ethical conduct and where ethical conduct is rewarded and unethical conduct punished should have higher levels of ethical conduct, than in organisations without such characteristics.

Ethical culture can be measured through a survey that identifies the absence or presence of these systems or mechanisms (Standards Australia 2003c at p.4).

Remuneration source was another construct identified for study from the literature review. Bigel’s (1998) research did not find a significant correlation between remuneration source and ethical reasoning amongst financial planners. However, there were some theories within the literature review that suggested that remuneration source and reward structures (Hegarty & Sims 1978; Trevino & Youngblood 1990) are factors influencing ethical decision making within organisations. These theories were supported for the purposes of this study by anecdoctal evidence outlined in Chapter 3 that remuneration and reward structures in the financial services sector were related to unethical conduct by financial planners (Johnston 2004; Lucy 2006b & FRPA 2006e).

Measuring the influence of ethical leadership and role on ethical decision-making