Elsevier

Advances in Accounting

Volume 26, Issue 2, December 2010, Pages 259-269
Advances in Accounting

The influence of dispositional affect on whistle-blowing

https://doi.org/10.1016/j.adiac.2010.05.005Get rights and content

Abstract

Consensus appears to be building that something must be done soon to stem the flood of corporate ethical lapses of the last decade. Businesses are being pressed to adopt policies, practices and procedures that advance integrity-in-action (not just talk). Provisions for whistle-blowing without retaliation might be one such practice. But, research is lacking. Our study probes why some people are willing to blow the whistle, while others are not? We examine the influence of dispositional affect on whistle blowing specifically, the affective states of sadness/demoralization, fear, arousal and contentedness/happiness. Environmental factors largely drive these affective states; environmental factors under the control of corporate management. Our hypotheses test tenets to the Toxic Triangle and Pro-Social Organizational Behavioral models. We report on a behavioral experiment using evening MBAs who express whistle blowing intent across a set of ethics laden case scenarios. Our findings provide strong support for the Toxic Triangle and Pro-Social Organizational Behavior models.

Introduction

“Integrity” is a character trait that we all admire and many people and organizations claim (e.g., PwC, 2010, KPMG, 2010, Ernst and Young, 2010, Deloitte, 2010). However, a lack of integrity by our business leaders has manifest all too frequently over the last decade. Not surprisingly, in the aftermath of a series of devastating corporate and banking debacles, the public today is demanding much more accountability from business leaders and public officials. The massive Sarbanes–Oxley (SOX) reform legislation is but one sign of the state of public discontent (SOX, 2002). Unfortunately, even in the post-SOX reform era, public trust has continued to degrade as a result of a seemingly unending stream of revelations of corporate malfeasance and failures of the financing services (banking) industry. The US, if not the world, is experiencing a true crisis of confidence in our leaders and our institutions. Consensus appears to be building that something must be done. Some standard of ethics needs to be upheld; and businesses truly need to adopt policies, practices and procedures that advance integrity-in-action (not just talk) if we are ever going to recover our bearings. Provisions for whistle-blowing without retaliation would be one such practice.

Unethical behavior needs to be discouraged, and to the extent possible, eliminated. One apparent method of accomplishing this is to encourage individuals to serve as monitors of corporate behavior and “whistle-blow” on conduct that we know can be highly destructive to the welfare of thousands of individuals, if not millions, worldwide. But, available research indicates that many, if not most, people are reticent to blow the whistle. Whether due to fear of retaliation, an improper tone at the top, or some other affective disposition, research results suggest that only a fraction of all employees who observe wrongdoing blow the whistle about it (Miceli, Near, & Dworkin, 2008). This is an issue of growing concern because, while it is impossible to know the precise number of illegal or unethical acts being perpetrated, the estimated costs associated with these events continue to rise. One estimate in 2008 in the United States was $800 billion (including employee theft, antitrust violations, tax fraud, etc. (Miceli et al., 2008). The question this research study addresses is why are some people willing to blow the whistle, while others are not? Perhaps if we learn the “why” and the “why not” policies, practices and procedures can be developed to improve the record in this area. Our focus is on a person's dispositional affect which is influenced by environmental conditions which support or discourage greater whistle-blowing. Our focus is not on personal disposition characteristics that are (a) not operationally observable in a business (e.g., moral maturity, tolerance for ambiguity, locus of control) or (b) represent characteristics upon which employers cannot legally discriminate (age, gender, and marital status).

When considering the act of whistle-blowing and environmental contributors/deterrents a centrally important factor is the superior/subordinate relationship. Nearly all the major financial reporting scandals of the last decade involved untoward conduct by the board Chairman, CEO and/or CFO, and inaction by subordinates aware of the malfeasance. Since much of modern business is run through some form of hierarchical structure where important superior/subordinate relationships are common practice, it is useful to understand how this construct relates to ethical situations in general and whistle blowing in particular. The Toxic Triangle model identifies three key components of untoward conduct: destructive leaders, susceptible followers, and a conducive (unstable) environment (Padilla, Hogan, & Kaiser, 2007). The simultaneous existence of these three components in an organization can lead to devastating negative outcomes. However, the limited research that has addressed the subordinate component in the Toxic Triangle model has focused on how such conditions impact a person's decision to commit a wrongdoing. This paper alternatively will examine how environmental pressures impact a subordinate's dispositional affect; and how that, in turn, influences their decision to blow the whistle.

Lowe and Reckers (2010) argue that “an area holding significant potential to bring clarity to subordinates' ability to withstand (or succumb) to pressures from superiors is dispositional affect.” While many people oversimplify the affect construct by only considering its two most prominent aggregate factors (positive affect and negative affect), there are actually a number of discrete affective dimensions (states) within each aggregate factor that can greatly alter a person's decision making process (Lerner and Keltner, 2001, Shiv, 2007, Smith and Ellsworth, 1985). For example, fear and anger are similar in that both are dimensions of negative affect; yet fear and anger are distinct from one another because fear prompts passive behavior while anger elicits active responses. That is, fear leads to compliance while anger leads to resistance (Lerner & Keltner, 2001). As environmental conditions promote affective states such as fear and anger they in turn promote or discourage whistle-blowing.

While it is a common layman misperception that affective reactions (emotions) are fundamentally “illogical” and therefore must be rooted out in organizational settings, recent research argues many affective reactions are indeed normative (Griskevicius et al., 2010, Ohman and Mineka, 2003, Pham, 2007). Research has shown that “affect, not cognition, should be considered the primary medium of interpersonal (and therefore also organizational) behavior” (Barsade and Gibson, 2007, February, Forgas and George, 2001). For example, Damasio (1994) reports evidence from patients with brain lesions that disabled parts of their neural systems dealing with affective reactions but leaving intact portions of the brain dealing with conventional memory, language, and reasoning skills, had considerable difficulty in their decision-making (see also LeDoux, 1993; LeDoux, 1996). In addition, Bechara, Tranel, Damasio and Damasio (1996) found that prefrontal-damaged patients make significantly more decisions that result in bankruptcy as compared with control subjects, even though the patients are aware of the consequences of their decisions. The fact is that almost all situations in real life are complex and few are cut and dry. Everyday work environments, relationships with coworkers, outside influences pertaining to home life, and a myriad of other factors compound to create “inherently complex and ambiguous situations” that subsequently “require actors to go beyond the information given, allowing affect to influence what is retrieved and used from memory and how that information is processed” (Forgas & George, 2001).

We outline in the following sections how different sub-dimensions of affect will interact in the superior–subordinate relationship. Specifically, we predict that individuals with relatively high levels of the passive affective states of sadness (or frustration), fear, and contentedness will be more likely to adopt acquiescent responses to their superiors' unethical behavior. Further, we predict that high levels of the active affective state of arousal (or enthusiasm) will more likely whistle blow. We also hypothesize four theory based interactions.

To test these predictions, we conducted a behavioral experiment with 65 Masters of Business Administration (MBA) students enrolled in evening classes. These were working adults with an average age of 30.

The remainder of the paper is organized as follows. The next section presents the literature review followed by a list of testable hypotheses. The third section details the methodology and overall experimental design. The results are presented in the fourth section. In the last section we discuss results and provide important implications from our research.

Section snippets

Research on affect

Affect is a complex concept. It is considered both “trait-based (driven by individual temperament and physiological processes) and state-based (induced by environmental stimuli)” (Connelly, Helton-Fauth, & Mumford, 2004). Early researchers classified all affective states as belonging to one of two categories: positive or negative affect. The terms adopted (positive affect and negative affect) however were unfortunate. The two categories are orthogonally discrete; and not two ends of one

Participants

Participants consisted of 75 working professionals who were enrolled in Masters of Business Administration (MBA) programs at two major universities in the United States. The gender of the participants was approximately equally divided in this sample. The average age of participants was 29.6 years; thirty-six percent of participants had a background in accounting or finance. Ten participants did not fully complete the case instrument and were excluded from further analysis. Therefore, the

Results

The research design was operationalized as a full factorial design with the independent measures consisting of the following affective dimensions (factors): (1) Happiness, (2) Arousal (3) Fear, and (4) Sadness. The dependent measure was the Whistle-Blow Index. Two covariates were also utilized in the analyses: Tolerance for Ambiguity and Age/Experience. Participants' tolerance of ambiguity score was observed to be marginally significant (F = 3.740; p = .059). The only demographic measure that was

Discussion and conclusions

Through the research and analysis conducted for this paper, two negative affect factors (sadness and fear) and two positive affect factors (happiness and arousal) have been identified as significant with regards to an employee's decision to blow the whistle. High levels of happiness, sadness, and fear, low levels of arousal, and various interacting combinations appear to have considerable effect on this decision-making process. Therefore, various conclusions have been drawn that should help

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