A cross‐cultural construct of the ethos of the corporate codes of ethics: Australia, Canada and Sweden

Business Ethics: A European Review Volume 18 Number 3 July 2009

A cross-cultural construct of the ethos of the corporate codes of ethics: Australia, Canada and Sweden G˛ran Svensson,Greg Wood, Jang Singh and Michael Callaghann The objective of this paper is to develop and describe a construct of the ethos of the corporate codes of ethics (i.e. an ECCE construct) across three countries, namely Australia, Canada and Sweden. The introduced construct is rather unique as it is based on a cross-cultural sample seldom seen in the literature. While the outcome of statistical analyses indicated a satisfactory factor solution and acceptable estimates of reliability measures, some research limitations have been stressed. They provide a foundation for further research in the field and testing of the ECCE construct in other cultural and corporate settings. We believe that the ECCE construct makes a contribution to theory and practice in the field as it outlines a theoretical construct for the benefit of other researchers. It is also of managerial interest as it provides a grounded framework of areas to be considered in the implementation in organizations of corporate codes of ethics.

Introduction In the 20th century, industrialized economies around the world enacted legislation to protect free trade, securities dealings, consumers, suppliers, stockholders and, more recently, other stakeholders. These legislative initiatives were often precipitated by behaviour that initially appeared unethical, but in time was made illegal (Ferrell et al. 1998, Carasco & Singh 2003). Subsequently, as the powers of large corporations grew, they were confronted by greater expectations from society to behave in an ethical manner Respectively, Oslo School of Management, Norway; Deakin University, Australia; University of Windsor, Canada; Deakin University, Australia.

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(Cleek & Leonard 1998, Cohan 2002, Sørensen 2002). Errant companies were lambasted in the media (Collier 2000, Wheeler et al. 2002), charged with corporate crimes, and litigation was brought against them by citizens who had fallen victim of their malfeasance. The need for standards that transcended differences in laws and cultures was also the driving force behind various attempts by international organizations to regulate the conduct of global companies (Carasco & Singh 2003). For example, the OECD proposed the Guidelines for Multinational Enterprises and the United Nations constructed its Global Compact document (Carasco & Singh 2003). In North America, such pieces of legislation as the US Sentencing Guidelines in 1991 and the Sarbanes Oxley Act in 2002 were enacted to

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complement an already exhaustive raft of legal measures to guide business in their dealings. The spread of globalization meant that many companies expanded rapidly into new markets and into unchartered waters for their organization. Their employees began to interact cross-culturally and they were confronted by a milieu of different standards for the conduct of business. Some of these standards created ethical dilemmas for the staff involved. While the 1977 US Foreign Corrupt Practices Act banned bribery to foreign officials, new terms were ‘invented’ such as ‘facilitation payments’ in order to enhance one’s chance of business success in some of these newer foreign markets. People were still sceptical that these new terms were just the ‘Emperor’s new clothes’ and as stakeholder groups they began to put pressure upon companies to state their intentions in a formal way, such as is evidenced by a code of ethics. Many of these companies turned to codes of ethics as a means of showcasing to society that they had an interest and a desire in being ethical in the marketplaces in which they conducted business. In a model that goes beyond philosophically based ethics, Stajkovic & Luthans (1997) use social–cognitive theory as a means to identify factors that influence business ethics standards and conduct. They propose that a person’s perception of ethical standards and subsequent conduct is influenced by institutional factors (e.g. ethics legislation), personal factors (e.g. moral development) and organizational factors (e.g. code of ethics). Within the cultural context, the key antecedent factors interact together to influence the ethical standards of people and organizations (Stajkovic & Luthans 1997). Corporate codes of ethics are an important organizational factor and are the emphasis of the research reported in this paper. Berenbeim (2000) cites three trends as evidence of the growing importance of corporate codes of ethics: the globalization of markets and the need for core principles that are universally applicable; the acceptance of these codes as part of corporate governance as illustrated by increased participation of boards in their development; and the improved ethical literacy of senior managers as illustrated by the increasing sophistication of the codes. While

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globalization has led to increased competition that may lead to unethical corporate conduct, there is also the possibility that globalization may have facilitated the spread of corporate ethics programmes. Hence, a corporate code of ethics is viewed as an important adjunct in developing ethical standards in organizations in areas such as surveillance/training, guidance, internal/external communication and sustainability. These areas are described further in the frame of reference. Our outlined framework is, in part, based on Wood’s (2002) partnership model of corporate ethics. However, our approach is different from Singhapakdi & Vitell (2007), who focused on the ‘institutionalization of ethics’ and its consequences. Their definition of institutionalization is more narrow and limited to the degree to which an organization explicitly and implicitly incorporates ethics into its decision-making processes. The objective of this research effort is to develop and describe a construct of the ethos of the corporate codes of ethics (i.e. an ECCE construct) across three countries, namely Australia, Canada and Sweden. Accordingly, it takes a cross-cultural approach to corporate codes of ethics among the top companies in these countries. Arnold et al. (2007) applied a cross-cultural sample in Western Europe that examined whether the perceptions of an activity’s ethicality relate to elements found in company codes of conduct, and whether they vary by country or culture. They conclude that the individual’s country has a more influential impact. In the current study, therefore, it is important that socioeconomic indicators of the three nations from which corporate codes of ethics were collected – Australia, Canada and Sweden – be compared in order to establish the similarities and/or differences of the three societies. The article then examines the measures put in place by the largest companies of the three countries in order to enhance the ethos of their codes of ethics.

Comparative indicators – Australia, Canada and Sweden The economies of all three countries are well developed. Australia has a prosperous Westernr 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

Business Ethics: A European Review Volume 18 Number 3 July 2009

style capitalist economy, with a per capita GDP on a par with the four dominant West European economies. As an affluent, high-tech industrial society, Canada today closely resembles the United States in its market-oriented economic system, pattern of production and high living standards. Aided by peace and neutrality for the whole 20th century, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. It has a modern distribution system, excellent internal and external communications and a skilled labour force (CIA 2007). Canada’s GDP is US$1.65 trillion ($US purchasing power parity), Australia’s US$663 billion and Sweden’s is US$277.4 billion (see Table 1a). In all three countries, the services sector generates the majority of the GDP. Although Canada has a diversified economy, the services sector accounts for 2/3 of the country’s output (Industry Canada 2007). The services sector also dominates in Australia. In Sweden, the services sector generates 60% of the GDP. The labour force in all three countries is largely situated in the services sector (Canada 75%, Statistics Canada 2007; Australia 73%, Australian Bureau of Statistics 2007; and Sweden 74%, CIA 2007). There is no discernible difference in the GDP per capita for each country

(Australia US$32,900, Canada US$35,200, and Sweden US$31,600). In 2006, the inflation rate in all three countries was below 4% (see Table 1a). Today, the similarities between the three countries are brought about by a number of factors. First, the three economies are well developed (OECD members). Second, each country is a smaller player in its regional marketplace: a smaller economy surrounded by larger economic entities and populations. In Sweden’s case, it is the European Union; in Australia’s case, the Asian region; and in Canada’s situation, it is the United States. Third, each country has historically had to expand its horizons outside of its home markets in order to survive and forge economic growth. This need has forced a mindset in the three countries, which is deeply ingrained in each country’s psyche. This mindset has seen each country recognize the need to move away from a manufacturing base to one of services, where the intellectual capital of each country’s citizens could be transported more readily. Australia, Canada and Sweden were among the countries studied by Hofstede in developing his dimensions of national culture. In that seminal study, he identified the following four dimensions of national culture: Individualism vs. Collectivism (IC); Large or Small Power Distance (PD); Strong

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Table 1a: Australia, Canada and Sweden: comparative economic and population statistics Socioeconomic Indicator Economy Gross domestic product (GDP, purchasing power parity US$) GDP real growth rate GDP/capita (purchasing power parity US$) Inflation rate Population Population Population growth rate Life expectancy Literacy

Australia

Canada

Sweden

USA

$666.3 billion (2006 est.) 2.8% (2006 est.) $32,900 (2006 est.) 3.8% (2006 est.)

$1,165 billion (2006 est.) 2.8% (2006 est.) $35,200 (2006 est.) 2% (Dec. 2006)

$285.1 billion (2006 est.) 4.2% (2006 est.) $31,600 (2006 est.) 1.4% (2006 est.)

$12,980 billion (2006 est.) 3.4% (2006 est.) $43,500 (2006 est.) 2.5% (Dec. 2006)

20,264,082 (July 2006 est.) 0.85% (2006 est.) 80.62 years 99%

33,098,932 (July 2006 est.) 0.88% (2006 est.) 80.34 years 99%

9,016,596 (July 2006 est.) 0.16% (2006 est.) 80.63 years 99%

298,444,215 (July 2006 est.) 0.91% (2006 est.) 78 years 99%

Source: CIA World Fact Book (2007). Note: United States as a benchmark. ......................................................................................................................................

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Table 1b: Dimensions of national culture Country Australia Canada Sweden

IC 90 80 71

PD 56 39 31

UA 51 48 29

MF 61 52 5

Adapted from Hofstede (1983b, p. 52). ................................................................

or Weak Uncertainty Avoidance (UA); and Masculinity vs. Femininity (MF) (Hofstede 1983a: 78). Hofstede’s research, involving a databank of 40 countries and 116,000 questionnaires, allowed him to assign an index value (between 0 and about 100) on each of the four dimensions. The scores on these dimensions for Australia, Canada and Sweden are shown in Table 1b. On ‘Individualism vs. Collectivism’, a measure of the relationship between an individual and his fellow individuals, Australia is the strongest country of the three. On ‘Power Distance’, a measure of the unequal distribution of power in society, Canada and Sweden have scores that are fairly close in value whereas Australia is again the strongest on this measure. ‘Uncertainty Avoidance’, which is a measure of how a society deals with uncertainty, is related to the propensity of a culture to establish laws and formal rules such as codes of ethics. Societies strong on ‘Uncertainty/ Avoidance’ are more likely to establish formal rules to deal with unpredictability. On the ‘Uncertainty/Avoidance’ index, Australia and Canada have almost exactly the same values, while Sweden is considerably lower: the implication being that Australian and Canadian societies are more likely than the Swedish society to establish formal rules to create security. Hofstede’s final dimension of national culture, ‘Masculinity vs. Femininity’, is a measure of the division of roles between the sexes in society. Scores for Australia and Canada are close, but significantly higher than Sweden’s. Sweden was the most feminine of the countries studied by Hofstede, meaning that it puts ‘relationships with people before money, minding the quality of life and the preservation of the environment, helping

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others, in particular the weak, and ‘‘small is beautiful’’ ’(Hofstede 1983a: 85). One could postulate for this study that based on the measure of ‘Uncertainty/Avoidance’, Australia and Canada are more likely to have more formal rules established than Sweden. One could also suggest that, as a result of their more compassionate and caring side, as indicated by their ‘Masculinity vs. Femininity’ index, that, even if the Swedes have rules established, they may be more sensitive in the ways in which they interpret these rules or support their employees to attain the corporation’s expectations. Hence, one could suggest that in this study the similarities among the three groups may be sufficient to make sensible comparisons and that the differences might lead to some interesting results to explore. A point of interest is that each one of these countries has gone into the international marketplace with gusto and therefore they may well have had their cultures modified by such an involvement. When Hofstede (1983b) carried out his study, the degree of internationalization by these countries would have been much less than it was 20 years later when this study was administered. The interest will be to see whether the dimensions for national culture do still hold true for Australia, Canada and Sweden, not only in positive terms but also in relative terms. While we are not claiming that the cultures mirror each other, but one could only be interested in the similarities that exist between them. This situation makes an interesting platform for this research in its effort to develop and describe the cross-cultural ECCE construct. It makes an important contribution in two ways: first, there is no such construct in the literature; second, it is a unique approach to develop a crosscultural construct. Constructs are usually based on domestic samples within a country or a country segment.

Frame of reference This section provides a frame of reference to underpin the ECCE construct. It is divided into a selection of principal areas – surveillance/training, r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

Business Ethics: A European Review Volume 18 Number 3 July 2009

guidance, internal/external communication and sustainability. A number of sub-areas are also described under each heading. Surveillance/training Surveillance and training is one aspect in embracing the ECCE. It consists of a number of subareas. An important sub-area in the ECCE is the conduct of ethical audits (Murphy 1988, Laczniak & Murphy 1991, Crotts et al. 2005). GarciaMarza (2005) views the ethics audit as an integral part of the process of developing trust, with the other factors in developing trust being the existence of ethics codes and ethics committees in the organization. ‘Within this integrated system of ethics management in the company, ethics auditing can respond to the basic objective of ethics management, which is simply to integrate economic benefit with social and environmental benefit’ (Garcia-Marza 2005: 211). Ethics audits differ from employee appraisal. Employee appraisal is an examination of the ethical performance of individuals within the organization on a personal level, while ethical audits are an examination of the organization’s ethical performance. Another sub-area of interest is the establishment of an ethics training committee and staff training in ethics. The two areas of ethics training committee and staff training in ethics were linked from a theoretical perspective because of the researchers’ belief that one cannot just expect individuals to be ethical to the level of company expectations without having some training. A number of writers have advocated the use of training programmes as a means of institutionalizing ethics within the organization (Axline 1990, McDonald & Zepp 1990, Harrington 1991, Laczniak & Murphy 1991, Dean 1992, Maclagan 1992, Sims 1992, Schwartz 2002, Wood 2002, Rampersad 2003, Trevino & Brown 2004). An ethics training committee would, it is hoped, provide the focus and initiative to expose employees to discussion and training in ethics in business situations that they might face while in the company’s employ. In fact, it works as a surveillance function. Without training and edur 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

cation, one may argue that the desire to incorporate an ethical perspective into the business practices of employees will only be a hope that cannot be translated into reality. Furthermore, if business ethics is such an important part of the company, then an ethics committee may have been an idea that organizations have contemplated and an area in which they may have initiated action (Weber 1981, Center for Business Ethics 1986, McDonald & Zepp 1989, Rampersad 2003). Companies need individuals who are designated to be in charge of their corporate codes of ethics – such as an ethics ombudsman – in order that individuals within the organization who have genuine concerns can feel free to voice these concerns to an independent arbiter (Wood et al. 2004, Anand et al. 2005). According to the Ethics and Compliance Officer Association (ECOA), which was founded in 1992 by a dozen ethics officers, the organization now has over 1,000 members representing nearly every industry. These companies conduct business in over 160 countries and the member companies include more than half of the Fortune 1000 (ECOA 2007). If an organization has a person designated as a confidante to whom staff can go with their ethical concerns, then employees will be encouraged to volunteer information about unethical practices that they perceive are detrimental to the organization. One could contend that such a position in place within the organization can only but enhance the ethical health of that organization. Guidance Guidance, which consists of a number of subareas, may be seen as a complement to surveillance and training. A crucial feature in the intent to grasp the ECCE is to use the code as a guide to strategic planning. Twenty years ago, Robin & Reidenbach (1987) suggested a method for closing the gap that they perceived existed between concept and practice in the area of ethics and corporate planning. They advocated that an organization that is committed to ethics should inculcate those espoused company values into the strategic planning process. The focus of their

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attention was on strategic marketing planning, but the principles that they proposed can be adapted to all forms of strategic planning in organizations. If companies accept that it is good corporate practice to align their codes with their strategic planning processes, then they should not only use the ethos of the code as a guide in their strategic planning process but they must also make that final comparison of the strategic plan against the code. What if the final plans and the codes are incompatible? How then does one guard against this situation and ensure that the plan not matching the espoused ethical stance of the organization does not occur? Surely as a part of good governance, all companies should make an obligatory check to be sure of consistency in these areas. Congruence between the strategic plan, which drives the organization’s actions, and the espoused ethical views of the company should also make it easier for employees to act in the marketplace. The organization’s ethical views should not clash with the strategic view of the company (Wood & Callaghan 2003). Another sub-area is ethical performance appraisal. The view that organizations should formalize the ethical performance of employees through the employee appraisal system is supported by Fraedrich (1992), Harrington (1991), Laczniak & Murphy (1991) and Trevino & Brown (2004). Harrington (1991), in common with Fraedrich’s (1992) idea, suggests that ethical decision making should become a part of the performance appraisal of individuals. This idea is a commendable one in that it integrates ethics into one’s perceived organizational performance: it is another way of rewarding ethical behaviour and discouraging unethical behaviour. The concern in this situation is with the way in which this process would be implemented and its probable vagaries and abuses. Like all performance appraisals that are not necessarily based on quantifiable data, the subjective opinion of the line manager could be imposed upon the individual subordinate. Consequently, the organization places considerable trust and faith in line supervisors. Therefore, this process would need to be scrutinized in great detail before its introduction and would need to

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be monitored once it has been introduced. However, the general principle is one that should be considered. Furthermore, the ECCE may provide a basis to resolve ethical problems that arise in the marketplace. Wood et al. (2004) found that approximately half of the companies surveyed in their study claimed not to use their code to resolve ethical problems in the marketplace. If codes are not resolving ethical problems in the marketplace, then what are the codes used for in organizations? Are codes of ethics, then, the inward regulatory documents as suggested by Mathews (1987), Lefebvre & Singh (1992) and Wood (2000), or are companies just missing an opportunity to maximize their utilization? Why does a company have a code if it does not assist one in resolving ethical problems in the marketplace? Wood et al. (2004) examined in what areas of daily business practices companies used their corporate code of ethics to assist them in the marketplace. The most common areas in which these companies had utilized the code in the marketplace were in relation to customers, suppliers and the environment. They also found that a large proportion of the companies indicated that they were convinced that their corporate codes of ethics had an impact on the bottom line. Internal and external communication Internal and external communication are pinpointed in Wood’s (2002) partnership model of corporate codes of ethics. Svensson et al. (2004) explore the ECCE within organizations in large companies, examining how it is communicated. Singh et al. (2005) examine corporate codes of ethics in Australia, Canada and Sweden; it is apparent that these codes may be used to communicate the ethos to employees of an organization. Stevens (1999), in a study of employees at two American hotels, identified training programmes, coaching employees, reading manuals and ethics codes as the top four sources from which employees learned about ethics. Stevens also found that employees learned about ethics codes mainly from orientation programmes and reading employee handbooks. r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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A number of writers (Murphy 1988, Benson 1989, Stead et al. 1990, Fraedrich 1992, Townley 1992, Wood 2002) have suggested that codes should be public documents that have an external as well as an internal focus and that organizations should be cognizant of the relationship of the organization with all stakeholders. An organization’s customers and suppliers should be informed of the existence of the company’s code. Wood et al. (2004) concluded that corporate codes of ethics are communicated to customers and suppliers either formally or informally, or in some cases both. Sustainability A number of authors (Stoner 1989, Sims 1991, Fraedrich 1992, Schwartz 2002, Trevino & Brown 2004) suggest that within a corporate code of ethics, one should outline enforcement provisions for those individuals who may not uphold the code. By having procedures to address a breach of the code, an organization signals to its employees the necessity of abiding by the code for the sake of both themselves and the organization. In addition, in a situation of recognizing unethical practices and taking steps to expose them, the dilemma that many employees face is in knowing to whom one can take an issue so as to ensure its integrity; the integrity of the person against whom the complaint is made and usually, most importantly, for the person making the complaint, the guarantee of their own freedom from reprisals (Gellerman 1989, Stoner 1989, Labich 1992, Wood & Callaghan 2003). By its very nature, whistleblowing is a dangerous path to take for any employee. Even though companies may have procedures in place to protect the whistleblower, the act of whistleblowing has historically been fraught with personal danger and the ever-present threat of recrimination (Miceli & Near 1984, Miceli et al. 1991, Keenan & Krueger 1992, Keenan 1995, McLain & Keenan 1999). If organizations are to evolve into ethical entities, both individual and collective action must be taken by individuals to change practices that they view as being contrary to the ethical r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

health of the organization. Someone must make the move to expose violations of the organization’s ethical principles. Formal guidelines to support whistleblowers should be considered, because if standards are to be set then one needs ways to ensure that either violations or breaches will be reported, reviewed and corrected.

Methodology Questionnaires that were non-sponsored and unsolicited were sent to the top 500 companies operating in the private sectors within Australia (BRW 2005), Canada (Financial Post 2005) and Sweden (SCB 2005). The Australian survey document was sent to the public relations managers of the top 500 Australian companies (based on revenue) operating in the private sector (BRW 2005). Companies were asked to answer the same questions as the Canadian and Swedish surveys and to supply a copy of their code of ethics. The 500 packages delivered elicited 111 responses, with 18 companies indicating various reasons for not participating in the study, 9 indicating that they did not have a code, 76 indicating that they did have a code and another 8 companies who declined to fill in the complete questionnaire, but who provided their code. The useable response rate was therefore 18.6%. The Canadian sample was drawn from the Summer 2005 edition of the Financial Post, which annually ranks the top 500 companies in Canada. A cover letter and questionnaire similar to those used in collecting data in Australia and Sweden were mailed to the CEO or Chair of these 500 corporations. The letter and cover page of the questionnaire briefly described the nature of the research, guaranteed the confidentiality of the information provided and requested a copy of the corporation’s code of ethics. The questionnaire consisted of 31 questions related to ethics programmes. Ten packages were returned to sender as undeliverable. The 490 packages delivered elicited 142 responses, 29 indicating various reasons for not participating in the study and 6 omitted for coding reasons. 106 questionnaires

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were completed and returned. The useable response rate was therefore 21.6%. The Swedish survey document was sent to the public relations managers of the top 500 companies (based on revenue) operating in the private sector (SCB 2005): firms that, for several reasons such as the size of turnover, employee numbers and business profile are more likely to have developed a formal code of ethics (Brytting 1997). Companies were asked to answer the same questions and to supply a copy of their code of ethics as were those companies in Australia and Canada. The Swedish sample was corrected to 443 companies due to multiple addresses and undeliverable packages in the company list that was used (SCB 2005). The response rate was 42% after this correction, with 185 companies returning the completed questionnaire and 110 companies acknowledging that they had a code of ethics.

Empirical findings A selection of univariate and multivariate statistical techniques (e.g. Norusis 1993, 1994) was used to describe the cross-cultural sample of data collected and to analyse it with respect to the communication of the ECCE. The outcomes of the statistical techniques are summarized in Tables 2–5. Univariate description of the cross-cultural sample The sample of companies and the nature of their business was spread across various industries.

Manufacturing companies is a common denominator in the corporate samples of Australia, Canada and Sweden. These companies correspond to approximately 18–37% of the total sample across the three countries. Finance and/or insurance is the second most frequent category in Australia (20%). In Canada, the category of other is the second (20%), while trade and transport/ storage is the second in Sweden (8%), closely followed by other industries. The three surveys are dominated by domestic ownership of the parent companies. In the Australian sample, 55% of the parent companies are domestic, while almost 80% are domestic in the Canadian sample. Sixty-eight percent are domestic parent companies in the Swedish sample. Accordingly, there is an emphasis on domestic parent companies in the three cultures that may support the outcome of a cross-cultural ECCE construct. The three samples are dominated by large companies in their respective economies. More than 90% of the Australian, Canadian and Swedish samples have an annual turnover of 4500 million dollars (AUD). This finding provides support for the focus on an ECCE construct of the top firms in each country. The largest interval in the three samples regarding the equivalent full-time staff is 1001– 5000 employees. For example, 41% in the Australian sample belong to this interval. The second largest one is 101–1000 employees (i.e. 35%). The corresponding percentage in the Canadian sample for the interval 1001–5000 is 48%, while the second largest one is 420,000 employees (14%). In the Swedish sample, 40% are

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Table 2: Corporate code of ethics Item

(n 5 76)

Yes No Total

Aus 76 9 85

(n 5 102) % 89.4 10.6 100.0

Can 102 4 106

(n 5 113) % 96.2 3.8 100.0

Swe 113 72 185

(N 5 291) % 61.1 38.9 100.0

All 291 85 376

Pearson v2 Testa % 77.4 22.6 100.0

Value df Sig.

61.29 2 0.000nn

0 cells have expected count o5. The minimum expected count is 19.84.

a

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Table 3: Univariate outcome – questionnaire items Item (1) Our company believes that the Code should be displayed in our organization for all stakeholders to view. (2) Our company believes that the Code should be communicated to all our organization’s workers. (3) Our company believes that we should inform new staff of the Code. (4) Our company believes that there should be consequences for a violation of the Code. (5) Our company believes that employees’ ethical performance should be a criterion for employee appraisal. (6) Our company believes that we should have formal guidelines for the support of whistleblowers (i.e. someone who blows the whistle on his/her organization for its wrongdoing!). (7) Our company believes that the Code should guide our strategic planning. (8) Our company believes that we should have a standing ethics committee or its equivalent. (9) Our company believes that we should have an ethics training committee or its equivalent. (10) Our company believes that ethics training should be conducted for all staff in our organization. (11) Our company believes that we should have an ethics ombudsman or its equivalent. (12) Our company believes that all our customers should be informed of the existence of the Code. (13) Our company believes that all our suppliers should be informed of the existence of the Code. (14) Our company believes that the Code will assist the bottom line (i.e. profit). (15) Our company believes that the Code should be used to assist us with resolving ethical dilemmas in the marketplace.

N 285

Mn 6.06

Me 7

Md 7

Sk 1.7

Ku 3.07

286

6.7

7

7

4.0

19.5

287 287

6.7 6.3

7 7

7 7

4.5 2.1

24.4 4.5

284

5.4

6

7

0.9

0.1

285

5.8

6

7

1.2

0.7

283 283

4.9 4.6

5 4

4 4

0.5 0.2

0.3 1.0

281

4.2

4

4

0.0

0.7

284

5.3

6

7

0.8

0.2

283

4.5

4

4

0.3

0.3

283

5.4

6

7

0.7

0.1

283

5.6

6

7

0.9

0.1

281

5.3

5

7

0.7

0.0

282

5.6

6

7

1.0

0.5

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in the interval of 1001–5000 employees, followed by the interval of 501–1000 employees (28%). Table 2 indicates that a large majority of the companies in the cross-cultural sample have indicated the possession of a corporate code of ethics (77%). Australian and Canadian companies have a much higher frequency of them than Swedish companies. The Australian sample shows 89% and the Canadian sample 96%, while the Swedish sample indicates 61%. It should be noted that the research reported in this paper is based on the companies that have corporate codes of ethics and filled in the questionnaire (i.e. Australia 5 76; Canada 5 102; Sweden 5 113) and accordingly are able to provide insights into and share their views on their ECCE. The cross-tabulation in Table 2 is significant. r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

Univariate analyses – questionnaire items In the questionnaire administered to each company across the three cultural groups, the respondents were asked to proffer the opinion of their company, not their own opinion in relation to a number of statements. The univariate outcome for each statement/item is shown in Table 3. A variety of items, based on the areas described in the frame of reference, have been applied in order to test the stability and randomness of the collected answers. Ratio scale measurements were used (i.e. seven-interval Likert-scales – Likert 1932). The anchor points of the scales used are ‘Strongly Disagree’ (i.e. 1) and ‘Strongly Agree’ (i.e. 7). The following abbreviations are used to illustrate the outcome of each variable in the

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tables referred to: N: number of observations, Mn: mean; Me: median; Md: mode; Sk: skewness; and Ku: kurtosis. Fifteen items have been used in order to develop and describe the ECCE construct (see Table 3). Initially, the items were formulated and structured according to the pre-specified areas of the frame of reference: internal communication (1, 2 and 3), sustainability (4 and 6), external communication (12 and 13), surveillance and training (8, 9, 10 and 11) and guidance (5, 7, 14 and 15). Characteristics of multivariate analyses The data collected were also analysed statistically using factor analysis. A confirmatory approach and an R factor analysis were applied on the collected data (e.g. Norusis 1994, Hair et al. 2006). This means that the degrees to which the data met the expected underlying structure originating from the frame of reference were considered and that a correlation matrix of the variables was used in order to summarize the characteristics of the collected data. A component model was used to summarize the original variance of the variables in a minimum

number of factors. An orthogonal solution was applied to extract the factors in such a way that the factor axes were maintained at right angles to one another. The orthogonal approach of Varimax was used to rotate the initial factor solution, which focused on simplifying the columns of the factor matrix. In addition, the orthogonal rotation procedure was applied, because it eliminates the co-linearity between factors. Factors that have eigenvalues very close to 1 (i.e. 40.96) were considered as significant. These factors have been selected and included in the final factor solutions. The factor solution accounted for approximately 72.1% of the total variance. The communalities for each of the variables were within the range from 0.58 to 0.88. The measure of sampling adequacy for each of the variables was within the range from 0.75 to 0.93. Factor loadings above 0.4 were interpreted as significant in the tables (Hair et al. 2006). Factor analysis – cross-cultural sample A factor analysis was performed to test the prespecified dimensions of the items of the ECCE construct (see Table 4). The outcome of the factor

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Table 4: Outcome of factor analysis Item (8) Having a standing ethics committee (9) Having an ethics training committee (11) Having an ethics ombudsman (10) Ethics training for all staff (7) Code should guide strategic planning (14) Code assists our bottom line (5) Criterion for employee appraisal (15) Code assists with ethical dilemmas (2) Communicated to all employees (3) Should inform new employees (1) Displayed for all to view (13) Suppliers should be informed (12) Customers should be informed (4) Consequences for violation (6) Support to whistleblowers Total explained variance per factor Cumulative explained total variance

Factor 1 0.840 0.821 0.768 0.603 0.182 0.154 0.176 0.175 0.144 0.047 0.142 0.111 0.112 0.077 0.277 36.6% 36.6%

2 0.171 0.225 0.057 0.391 0.762 0.761 0.681 0.594 0.164 0.152 0.115 0.174 0.195 0.164 0.021 12.0% 48.6%

3

4 0.091 0.035 0.125 0.294 0.101 0.050 0.238 0.080 0.866 0.864 0.730 0.139 0.198 0.188 0.194 9.6% 58.1%

5

0.046 0.101 0.124 0.057 0.132 0.188 0.000 0.350 0.069 0.080 0.360 0.884 0.872 0.051 0.180 7.6% 65.7%

0.114 0.109 0.167 0.003 0.160 0.158 0.159 0.306 0.272 0.304 0.061 0.146 0.077 0.792 0.726 6.4% 72.1%

Communality per variable 0.758 0.748 0.653 0.606 0.666 0.665 0.576 0.606 0.875 0.872 0.700 0.866 0.856 0.698 0.674 Overall MSA

MSAn per variable 0.812 0.817 0.885 0.886 0.820 0.852 0.912 0.901 0.745 0.747 0.929 0.752 0.751 0.883 0.866 0.826

Measures of sampling adequacy. Highlighted cells indicate those items that loaded onto those factors.

n

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analysis of the items in the questionnaire was satisfactory [KMO: 0.826 (Overall MSA); Bartlett’s Test: Approx. w2: 1896,945: df 105: Sig: 0.000]. Five factors were identified. Factor 1 consists of the variables 8, 9, 10 and 11, which represent: the presence of standing ethics committee, ethics training committee, ethics ombudsman, and training for all staff. It is labelled surveillance and training. Factor 2 consists of the variables 5, 7, 14 and 15, which represent: code should guide strategic planning; code assists the bottom line; should be the criterion for employee appraisal; and code assists with ethical dilemmas. It is labelled guidance. Factor 3 consists of the variables 1, 2 and 3, which represent: code should be communicated to all employees; organization should inform new employees about the code; and it should be displayed for all to view. This factor is labelled internal communication. Factor 4 consists of the variables 12 and 13, which represent: suppliers and customers should be informed. It is labelled external communication. Factor 5 consists of the variables 4 and 6, which represent: consequences for violation of the code; and support to whistleblowers. It is labelled sustainability. Consequently, the five identified factors are in accordance with the pre-specified dimensions of the ECCE construct outlined in the frame of reference and the items used in the questionnaire. Reliability of the ECCE construct The reliability coefficient of Cronbach’s a (Cronbach 1951) was used to estimate the reliability of the ECCE construct. Cronbach’s a is widely used in different research fields (Peterson 1994). An acceptable score of the reliability coefficient of Cronbach’s a is 0.5–0.6 for new scales (e.g. Davis 1964, Nunnally 1967, Malhotra 1996). The reliability score is interpreted by others to be acceptable if it reaches a value of 0.7 (e.g. Nunnally 1978, Kaplan & Saccuzzo 1982, Murphy & Davidshofer 1988, Nunnally & Bernstein 1994). The reliability coefficients of the dimensions of the ECCE construct (i.e. a new scale) are highly satisfactory taking into consideration the higher r 2009 The Authors Journal compilation r 2009 Blackwell Publishing Ltd.

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Table 5: Reliability coefficients of Cronbach’s a ECCE construct Factor Surveillance and training Guidance Internal communication External communication Sustainability

Items Cronbach’s a 8, 9, 10 and 11 0.826 5, 7, 14 and 15 0.762 1, 2 and 3 0.806 12 and 13 0.876n 4 and 6 0.594n

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level of reliability score, i.e. 0.7 (see Table 5). It leads to the conclusion that the multi-item measures are acceptable. However, the factors of external communication and sustainability contain only two items, where Cronbach’s a is normally based on three or more items. Therefore, Cronbach’s a coeffcient is estimated with an asterisk for these two factors to highlight this restriction. It should be noted that the factor loadings for each of these two factors are high, which transmit another estimate of a certain degree of reliability (see Table 4).

Conclusion The previous sections of this paper have reported an international research effort to develop and describe a cross-cultural construct that reflects the ECCE (Figure 1). It has been introduced and labelled as the ECCE construct. The ECCE construct makes a contribution to theory and practice in the field. It makes a contribution to theory as it outlines a construct for the benefit of other researchers. It is also of managerial interest as it provides a grounded framework of areas to be considered in the implementation of corporate codes of ethics in organizations. These items are common across three different country cultures that have welldeveloped business systems predicated on the capitalist ethos. These items of the construct may be used cross-culturally as guides for consideration in the utilization of codes of ethics as an effective artefact to enhance the ethical behaviour within organizations. Making use of each item one contends will lead to a superior

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Figure 1: The foundations of the cross-cultural ECCE construct Canada

Sweden

ECCE construct

Australia

utilization of the code of ethics in an organization. The items of the construct may well lay out a blueprint to maximize code usage in major corporations. The multivariate technique used in the statistical analysis indicated that it consists of five dimensions as follows (see further details in Tables 4 and 5):  Surveillance and training,  Guidance,  Internal communication,  External communication, and  Sustainability. This may be seen as a cross-cultural construct. In fact, it is based on an interface of research data between the three corporate cultures of Australia, Canada and Sweden (see Figure 1). Previously, a strong domestic ownership of the parent companies in each sample used in the three surveys was indicated. The introduced ECCE construct is rather unique as it is based on a cross-cultural sample seldom seen in the literature. While the outcome of statistical analyses indicated a satisfactory factor solution and acceptable estimates of reliability measures, there are some research limitations that should be stressed. They provide a foundation for further research in the field and

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testing of the ECCE construct in other cultural and corporate settings. It should be noted that the ECCE construct has been derived from large companies in each country’s corporate culture; it might be less applicable to smaller businesses. Another limitation may be the validity and reliability across other samples. The three survey samples contain a variety of businesses, but they do not cover all of the major areas of business and they are not equally represented across the samples. Furthermore, a potential limitation is that the three domestic samples do not only consist of companies having their headquarters within the country. However, Arnold et al. (2007: 335) conclude about ethical perceptions that: ‘differences associate with the subjects’ country to a much greater degree than with the subjects’ employer’. A suggestion for further research is to examine the ECCE construct in other countries/cultures that differ from and/or are similar to the three countries surveyed in this international research effort. For this purpose, Hofstede’s (1983b) dimensions of national cultures may be used to target different national corporate samples. It would be of interest to see whether there are similarities among other cultures of similar characteristics and/or whether there are similarities or dissimilarities across other countries that are decidedly different from the three countries under study in this paper. Like all survey research on a selected sample, we are confident that the construct is correct for the countries studied, but only further work in other countries will enhance its effectiveness if it is to be seen as a true measure for those countries too.

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