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Journal of Education for Business
ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Cultural Effects on Business Students’ Ethical
Decisions: A Chinese Versus American Comparison
Sherry F. Li & Obeua S. Persons
To cite this article: Sherry F. Li & Obeua S. Persons (2011) Cultural Effects on Business
Students’ Ethical Decisions: A Chinese Versus American Comparison, Journal of Education for
Business, 86:1, 10-16, DOI: 10.1080/08832321003663330
To link to this article: http://dx.doi.org/10.1080/08832321003663330
Published online: 20 Oct 2010.
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Date: 11 January 2016, At: 22:09
JOURNAL OF EDUCATION FOR BUSINESS, 86: 10–16, 2011
C Taylor & Francis Group, LLC
Copyright
ISSN: 0883-2323
DOI: 10.1080/08832321003663330
Cultural Effects on Business Students’ Ethical
Decisions: A Chinese Versus American Comparison
Sherry F. Li and Obeua S. Persons
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Rider University, Lawrenceville, New Jersey, USA
The authors used a corporate code of ethics to create 18 scenarios for examining cultural effects
on ethical decisions of Chinese versus American business students. Four cultural differences
were hypothesized to contribute to overall less ethical decisions of Chinese students. The
results support the hypothesis and indicate strong cultural effects on 5 areas of the code: (a)
accurate accounting records, (b) proper use of company assets, (c) compliance with laws, (d)
trading on inside information, and (e) reporting unethical behavior. Business educators and
corporate ethics trainers should be aware of these cultural effects, and provide more coverage
and special emphasis on these areas when they have Chinese students or entry-level personnel.
Keywords: Chinese, code of ethics, cultural differences, cultural effects, ethical decisions
In recent years, a growing body of research has been dedicated to documenting and understanding the effects of cultural differences on ethical decision making (e.g., Ahmed,
Chung & Eichenseher, 2003; Ge & Thomas, 2008; Hoivik,
2007; Phau & Kea, 2007). Among these cross-cultural studies, China not surprisingly has received considerable attention, as it is one of the fastest-growing economies in the
world. Since the 1978 economic reform, which led to the
transition from the centrally planned economy to the marketoriented economy, China has taken many steps to attract
foreign investments. However, practitioners, researchers, and
regulators have consistently expressed a great deal of concern
on the issue of business ethics in China, which does not seem
to keep pace with the development of its market-oriented
economy.
In the United States, the recent financial crises and business scandals such as the Enron, WorldCom, and Madoff
fraud have also made business ethics a highly important issue
to both the academia and the investment community. To prevent financial malpractices and encourage ethical business
conduct, in 2002 the U.S. Congress passed the SarbanesOxley Act, which is considered to be the most far-reaching
securities law in the past decades. Section 406 of the Act
Correspondence should be addressed to Sherry F. Li, Rider University, Accounting Department, 2083 Lawrenceville Road, Lawrenceville, NJ
08648, USA. E-mail: fanli@rider.edu
requires both U.S. and foreign listed companies to disclose
their code of ethics.1
In the present study we used a real-world corporate code
of ethics as a roadmap to create 18 scenarios for examining cultural effects on the ethical decisions of Chinese
and American business students. Such examination provides business-setting evidence consistent with Hofstede and
Hofstede (2005)’s finding that the Chinese businesses substantially differ from American businesses in certain cultural
dimensions. This cross-cultural comparison of ethical decision making is important because the Chinese economy
is becoming tightly integrated into the global economy and
relies on Western capital, technology, and demand. Such reliance is likely to push Chinese firms to adopt Western organizational patterns and conform to Western ways of doing
business. As a result, although the Chinese government has
not required Chinese public companies to adopt or disclose
a code of ethics, and not all Chinese companies have voluntarily adopted an ethics code, the aforementioned reasons,
such as demand for more foreign capital, would eventually
motivate Chinese companies to adopt a code similar to that of
U.S. companies. Foreign investors would likely perceive such
adoption as a positive signal of the company’s commitment
to ethical business conduct, which could help lower its cost
of capital and enhance its ability to attract foreign capital. No
prior studies (e.g., Hoivik, 2007; Phau & Kea, 2007; Shafer,
Fukukawa, & Lee, 2007) examining the cultural effects on
ethical decision making have used a real-world corporate
code of ethics for developing questions or scenarios.
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CULTURAL EFFECTS ON STUDENTS’ ETHICAL DECISIONS
A logit regression analysis shows that cultural differences
seem to contribute to less ethical decisions of Chinese students compared to American students across all 18 scenarios
combined. An additional analysis indicates strong cultural
effects on five areas of an ethics code: (a) accurate accounting records, (b) proper use of company assets, (c) compliance
with laws, (d) trading on inside information, and (e) reporting
unethical behavior. We acknowledge that these 18 ethics scenarios inherently reflect Western cultural values, and therefore American students may have an advantage in identifying
the correct ethical choices relative to their Chinese counterparts. However, the Chinese students in this study were
global business majors who had taken core business courses
taught by American professors as a curriculum requirement.
Consequently, they were likely aware of the Chinese companies’ globalization efforts as well as the Western business
practices and cultural values. Moreover, at the time of study,
the majority of the Chinese participants had already been
accepted into or were applying for a business program at
a university in the United States or had indicated desires
to pursue a graduate degree in Western countries. Therefore, this sample likely resembles Chinese students studying
in the United States. This means that the findings of this
study could have an important implication not only for U.S.
business schools that have operations in China but also for
business educators in the United States and corporate ethics
trainers of U.S. firms that provide internships for Chinese
students. In particular, they should be aware of the cultural
differences, and adjust their ethics course-coverage or training programs to emphasize the code-of-ethics areas significantly affected by culture when they have Chinese students,
interns or entry-level personnel. This is especially important
as many U.S. higher education institutions have recruited
and admitted more international students especially the
Chinese.
Corporate Code of Ethics and Questionnaire
Development
A corporate code of ethics typically covers nine common
areas. These nine areas together with their description came
from a real-world company’s code of ethics.2 Short ethics
scenario(s), each with a question requiring a yes or a no
answer, is (are) presented under each area of the code in
Table 1. A yes–no methodology is used because from a corporate viewpoint an employee’s conduct is either in compliance with the code (being ethical) or in violation of the
code (being unethical). These scenarios are based on accounting issues discussed in textbooks, suggested by accounting alumni who are certified public accountants or certified internal auditors, or adapted from real-world articles
published in business periodicals. An Accounting Department’s Advisory Board members, who were corporate executives or partners of public accounting firms, reviewed these
11
scenarios, and their comments were incorporated into the
questionnaire.
1. Accurate accounting records: All business records
must be clear, truthful and accurate. This includes
such data as quality, safety, personnel, and all financial
records. Misrepresenting facts or falsifying company
records is a serious offense.
2. Conflict of interest: Employees must make business
decisions and actions based on the best interests of
the company and its stakeholders, and must not be
motivated by personal considerations or relationships.
For example, relationships with prospective or existing suppliers, contractors, customers, competitors, or
regulators must not affect employees’ independent and
sound judgment.
3. Confidential information: Except in connection with
the performance of their duties, employees are prohibited from disclosing or using confidential or proprietary
information outside the company, either during or after
employment, without company authorization.
4. Proper use of company assets: Protecting company
assets against loss, theft, and misuse is every employee’s responsibility. The company’s equipment, vehicles, tools, and supplies are to be used for conducting
company business. They may not be used for personal
benefit.
5. Compliance with laws: Employees must comply with
laws and regulations wherever company does business.
Foreign Corrupt Practice Act prohibits U.S. firms and
their workers or agents from bribing foreign officials.
6. Competition and fair dealing: Employees must not use
any illegal or unethical methods to gather competitive information. The Federal Trade Commission Act
prohibits misrepresentations of all sorts that are made
in connection with sales including false or misleading
advertisement.
7. Trading on inside information: Using inside material
information, which is not available to the public, for
trading or tipping others to trade is both unethical and
illegal.
8. Anti-nepotism policy: To reduce favoritism or the appearance of favoritism and to prevent family conflict
from affecting the workplace, an employee’s relative is
not permitted to work as a supervisor or a subordinate
of the employee.
9. Reporting illegal and unethical behavior: Employees
have a duty to promptly report violations of a corporate
code of ethics via an anonymous phone hotline or to an
appropriate company representative (e.g., Chief Compliance Officer or Chairman of an Audit Committee).
In addition, a company usually requires employees to
certify that they have complied with all areas of the
code.
12
S. F. LI AND O. S. PERSONS
TABLE 1
Percentage of Students’ Ethical Responses to the 18 Scenarios Under the Nine Common Areas of a Corporate Code of Ethics
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Scenario
1. Accurate accounting records
1.1 Will you honor your boss’s request of you to sign and submit a purchase order
for his son’s $19.95 gift?
1.2 Will you honor your boss’s request of you to sign and submit a purchase order
for his son’s $1,995 gift?
1.3 Will you try to record next-year orders as sales in the current year by asking the
warehouse manager to promptly fulfill these orders so as to meet this year’s
target sales of the company?
1.4 Will you offer your wholesale customers an unusually big discount to induce
them to buy more products than they can promptly resell in order to meet the
company’s target sales?
2. Conflict of interest
2.1 As a purchasing department director, will you accept a supplier’s lunch
invitation?
3. Confidential information
3.1 Will you provide your sister with the name and address of customers of her
competitor?
4. Proper use of company assets
4.1 After work hours or during lunch break, will you use your employer’s
computer for personal purposes?
4.2 During work hours, will you use your employer’s computer for personal
purposes?
4.3 Will you use your employer’s copy machine to copy your personal items?
4.4 Will you use your company’s credit card to pay for your family dinner?
5. Compliance with laws
5.1 Will you make $10 bribe to a policeman in a foreign country where bribing a
policeman is very common?
5.2 Will you agree to make the $1,000 bribe to a Chinese tax authority to avoid
being audited per your business partner advice?
6. Competition and fair dealing
6.1 Will you recall the most popular product, which were advertised as 100% lead
free, but has a small trace of lead within the required safety level?
7. Trading on inside information
7.1 Will you sell your company’s stock that you own before a release to the public
the negative news about the company?
7.2 Will you try to profit from the imminent decline in stock price by buying a put
option on the stock before a public release of this news?
8. Anti-nepotism policy
8.1 Will you hire your niece instead of the other candidate who has more work
experience?
9. Reporting illegal and unethical behavior
9.1 Will you report to the company your close friend who used the company credit
card to pay for his family dinner for the first time?
9.2 Will you report to the company your close friend who has been using the
company credit card to pay for his family dinner whenever he eats out?
Chinese (n = 86)
American (n = 228)
z
46.5%
78.5%
–5.496∗∗∗
76.7%
93.4%
–4.181∗∗∗
56.5%
72.0%
–2.605∗∗
45.9%
50.9%
–0.785
61.6%
31.3%
4.893∗∗∗
81.2%
78.4%
0.534
19.8%
37.7%
–3.017∗∗∗
52.3%
66.7%
–2.340∗∗
41.9%
83.7%
60.1%
97.3%
–2.891∗∗
–4.037∗∗∗
23.5%
56.4%
–5.000∗∗∗
57.6%
84.5%
–4.774∗∗∗
72.9%
80.2%
–1.376
15.1%
55.7%
–6.442∗∗∗
33.7%
80.7%
–7.935∗∗∗
67.1%
61.5%
0.903
3.5%
13.2%
–2.463∗∗
25.9%
63.4%
–5.909∗∗∗
Note. A “no” answer was deemed ethical for all scenarios except for 6.1, 9.1, and 9.2, where a “yes” answer was ethical.
< .05.∗∗ p < .01.∗∗∗ p < .001.
∗p
Literature Review and Hypothesis Development
As suggested by many previous cross-cultural studies (e.g.,
Hofstede, 2006; Hofstede & Hofstede, 2005; Hung, 2008;
Rothlin, 2008; Shafer et al., 2007; Tam, 2002), four cultural
dimensions are expected to affect students’ ethical decisions:
(a) power distance, (b) individualism versus collectivism,
(c) difference in socioeconomic values, and (d) rule of men
versus rule of law. The effect of each dimension on students’
ethical decision making in specific scenarios is discussed
subsequently.
Small power distance versus large power distance.
Power distance measures “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally”
(Hofstede, 1991, p. 28). In small power distance societies,
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CULTURAL EFFECTS ON STUDENTS’ ETHICAL DECISIONS
organizations are fairly decentralized. Superiors treat subordinates as equals and tend to consult them before making
a work-related decision. Employees are usually not afraid
of confronting their bosses when disagreement arises. In
large power distance countries, more powerful people are
supposed to be privileged and respected. Organizations are
rather centralized. Subordinates are more tolerant of hierarchy and inequality, less likely to question and challenge
authority, and tend to act in their superiors’ interest when
disagreement arises (Ge & Thomas, 2008; Hofstede, 2006;
Hofstede & Hofstede, 2005).
English-speaking Western countries are generally considered to have small power distance whereas Asian countries typically have large power distance. Hofstede and
Hofstede (2005) reported that the United States scored 40
on the Power Distance Index, much lower than the world average of 60 and China’s score of 80.3Cohen, Pant, and Sharp
(1993) suggested that the unwillingness to accept power and
inequality in small power distance countries, such as the
United States, may prevent subordinates’ obedience to superiors when told to conduct unethical behaviors. This cultural
dimension likely contributes to less ethical responses among
Chinese students in scenarios involving superior-subordinate
relationship, specifically, Scenarios 1.1 and 1.2 in Table 1.
Individualism versus collectivism. Individualism, as
opposed to collectivism, describes the degree to which individuals are integrated into groups. In individualistic societies, people are bonded loosely with others and tend to think
and judge in terms of I instead of we. Individual goals and
achievement are valued. In business, recruiting and promotion decisions are supposed to be solely based on capability and skills (Hofstede & Hofstede, 2005). Nepotism and
discrimination in favor of friends or in-group members are
discouraged and prohibited. On the other hand, the collective
cultures greatly emphasize the ties with in-group members.
We is more important than I. People should share resources
with relatives and friends and be loyal to the social groups that
they belong to (Ge & Thomas, 2008; Hofstede & Hofstede;
Shafer et al., 2007; Tsui & Windsor, 2001). At workplaces,
employees are expected to give priority to organizational
goals and interests (Hofstede & Hofstede; Hofstede, 2006).
In general, Western cultures are considered to be highly individualistic whereas Eastern societies are more collective.
The United States has an individualism score of 91, ranking
as No. 1 among all the 74 countries and regions, whereas
China’s score is 20, which is far below the world average of
44 and the United States’ score.
Research has shown that the individualism dimension has
a strong influence on people’s ethical value (Cohen et al.,
1993; Ge & Thomas, 2008; Shafer et al., 2007). Additionally, Dunfee and Warren (2001) and Woodbine (2004) suggested that some features of collective Chinese culture such
as guanxi, which creates obligations for the continued exchange of favors, could foster unethical business practices
13
such as corruption and bribery. This cultural dimension likely
contributes to less ethical decisions among Chinese students
in Scenarios 1.3 and 1.4 (meeting corporate goals), 2.1 (conflict of interest), 3.1 (relationship with family member), 5.1
and 5.2 (bribery), 8.1 (nepotism), and 9.1 and 9.2 (reporting
unethical behaviors of close friend).
Difference in socioeconomic values. Before the
1978 economic reform, the Chinese government had direct
control over all resources regarding how they are distributed
and used. People lived in commune-like organizations where
everybody had an iron rice bowl and enjoyed cradle-tograve welfare. In such organizations, there was no concept
of privately owned assets because all assets were collectively
owned and used by its members. Although the privatization
since 1978 has greatly improved the decision-making efficiency, it has also resulted in management corruption due
to the socioeconomic value of no clear distinction between
organizational and private assets, and the lack of monitoring mechanisms. Hung (2008) stated, “As many Chinese
economists point out, the problem of management corruption is tied to the way the assets of privatized enterprises can
be transformed, through various means, into private assets”
(p. 74).
Unlike China, the United States has never adopted a highly
centralized economic system. Company assets are distinct
and legally separated from personal assets under the U.S.
market-oriented economy. U.S. companies have established
a code of ethics and an internal control to protect company
assets from personal use. Even though Chinese student participants in this study were born after 1978, it is plausible
that they may have inherited from their parents the socioeconomic value of no clear distinction between organizational
and private assets. This difference can potentially affect scenarios about the proper use of company assets (Scenarios
4.1–4) in a way that it leads to less ethical answers among
Chinese students.
Rule of men versus rule of law. Hundreds of years of
Confucian heritage has established China as a country ruled
by men instead of laws because Confucius and his followers trust and rely on innate human goodness for governance
rather than written laws that are too inflexible to handle various human activities (Iqbal, 2002). Although in the past
two decades the Chinese government has tried to establish a
fair legal system, the public awareness of law is still weaker
than in the Western countries where the rule of law is firmly
rooted. Although China has laws in many areas against undesirable business conduct, the enforcement mechanisms are
not strong enough to deter such conduct. For example, the
Chinese Securities Regulatory Commission can only suggest the companies to remove illegal insider traders from
their positions, usually only profitable insiders are charged
with a monetary penalty and an imprisonment term of up to
5 years (Shen, 2007).
14
S. F. LI AND O. S. PERSONS
Many researchers have expressed considerable concerns
that the weak legal environment in China would lead to
unethical and irresponsible business practices (e.g., Shafer
et al. 2007; Tam, 2002). Rothlin (2008) noted that,
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More than in any other circumstances, business people operating in China seem to move on a lawless ground where
corruption and nepotism, as well as all kinds of fraud and
abuses seem to be unavoidable in order to obtain the desired
business success, deeply rooted in a culture where relationships take precedence over any ethical consideration and law.
(p. 8)
This cultural dimension likely contributes to less ethical
responses by Chinese students in Scenarios 6.1 (product recall) and 7.1 and 7.2 (insider trading).
In sum, the discussions above suggest less ethical decisions of Chinese students compared to their American peers
across all 18 scenarios. This leads to the hypothesis that
cultural differences likely contribute to overall less ethical
decisions of Chinese students.
METHOD
The hypothesis was tested by using the following orderedlogit regression model with five explanatory variables, one
of which is culture, with the others being control variables.
ETHIC = a + b1 CULTURE + b2 GENDER + b3 MAJOR +
b4 ETHICEDU + b5 ETHICTRAIN
ETHIC = Total number of ethical responses of each student
to the 18 scenarios
CULTURE = 1 for an American student (born and raised in
the United States), and 0 for a Chinese student (born and
raised in China)
GENDER = 1 for female participant and 0 for male participant
MAJOR = 1 for an accounting major and 0 otherwise
ETHICEDU = Number of college-level ethics courses taken
ETHICTRAIN = Number of workplace ethics training
The hypothesis was supported if the coefficient of CULTURE was significantly positive. The other four control variables were also expected to have a positive coefficient. Regarding GENDER, prior studies (e.g., Albaum & Peterson,
2006; Cohen, Pant, & Sharp, 1998; Libby & Agnello, 2000)
found that female students are more ethical than male students. This gender difference is also documented among students in foreign countries (Roxas & Stoneback, 2004). With
respect to MAJOR, Cohen et al. and Manley, Russell, and
Buckley (2001) suggested that accounting majors may be
more ethical than other business majors because the public
and the regulators, such as the SEC, demand that the accounting profession abides by rules and standards. Arlow
and Ulrich (1983) attributed the higher ethicality of accounting majors to the fact that accounting majors receive addi-
tional training in accounting ethics within the accounting curriculum. Regarding ETHICEDU, the American Assembly of
Collegiate Schools of Business has suggested that ethics be
taught in business schools because ethics education can have
a positive influence on students’ ethicality as documented by
Luthar, DiBattista, and Gautschi (1997) and Steven, Harris,
and Willianson (1993). With respect to ETHICTRAIN, Beu,
Buckley, and Harvey (2003) stated that training could be
used to increase cognitive moral development and decrease
inappropriate competitive desire to win at any cost. Results
from a large-scale survey by Delaney and Sockell (1992)
suggest that workplace ethics training has a positive effect
on managers because the training educates managers on how
to react when confronted with workplace dilemmas.
The American participants in this study were undergraduate business students from a private Mid-Atlantic university
with which the authors were affiliated. The Chinese participants were undergraduate business students from a private university in Shanghai, which has been in educational
partnership with the authors’ university for several years.
Business students were the focus because they soon would
enter the business world and collectively constitute the future corporate leaders who will regularly face a number of
ethical dilemmas. The participants completed scenario questionnaires anonymously. There were a total of 314 student participants: 86 (27.4%) Chinese participants and 228
(72.6%) American participants.4 The differential sample size
of Chinese and American participants reflects a difference
in the raw number of students to whom the questionnaire
was administered. A total of 64 (74.4%) of the 86 Chinese
students women, whereas 94 (41.2%) of the 228 American
students were women. No Chinese student was an accounting
major, whereas 54 American students (23.7%) were accounting majors. A total of 62 Chinese students (72.1%) versus
87 American students (38.2%) had at least one college-level
ethics course. Fourteen Chinese students (16.3%) versus 95
American students (41.7%) had at least one workplace ethics
training.
RESULTS
Table 2 reports regression results of the cultural effects on students’ overall ethical decisions, ETHIC, which for Chinese
students had a minimum value of 3, a mean value of 8.63,
and a maximum value of 13 out of 18 (SD = 2.51). On the
other hand, ETHIC for American students had a minimum
value of 4, a mean value of 11.93, and a maximum value of
18 out of 18 (SD = 3.41). The univariate Wilcoxon signedrank test with a sizable z statistic of –7.1 clearly indicated
that, overall, Chinese students were significantly less ethical
than American students. The logit regression analysis in Table 2, which controls for four variables, also confirmed this
univariate result. In particular, the results in Table 2 suggest
that although three control variables, MAJOR, GENDER,
and ETHICTRAIN, were significantly positive, CULTURE
CULTURAL EFFECTS ON STUDENTS’ ETHICAL DECISIONS
TABLE 2
Ordered-Logit Regression Results of the Five
Explanatory Variables on the Chinese and American
Students’ Overall Ethical Decisions (ETHIC)
Variables
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CULTURE
GENDER
MAJOR
ETHICEDU
ETHICTRAIN
Wald chi square
Probability level
Expected
sign
+
+
+
+
+
Est.
coeff.
1.4353
0.4765
0.9801
–0.1493
0.1676
78.6500
∗∗∗
0.000
SE
Z
Prob. > z
0.2822
0.2395
0.2987
0.1015
0.0888
5.09
1.99
3.28
–1.47
1.89
0.000
∗
0.024
∗∗∗
0.001
0.141
∗
0.029
∗∗∗
Note. There were 314 student participants. ETHIC represents a total
number of ethical responses of each student to the 18 scenarios. For CULTURE, 1 = born in the United States or came to the United States before 10
years of age, and 0 otherwise. For GENDER, 1 = women and 0 = men. For
MAJOR, 1 = an accounting major and 0 otherwise. ETHICEDU represents
the number of college-level ethics courses taken. ETHICTRAIN represents
the number of workplace ethics training.
∗ p < .05.∗∗∗ p < .001.
had the most positive and most significant coefficient. These
results strongly support the hypothesis that cultural differences contribute to overall less ethical decisions of Chinese
students.5
To provide further insight into the regression results, Table
1 presents percentage of students’ ethical responses to each
of the 18 scenarios grouped by the nine common areas of a
corporate code of ethics. Results indicate that Chinese students made significantly fewer ethical decisions than American students in 13 scenarios related to five areas of an ethics
code. These five areas were (a) accurate accounting records,
(b) proper use of company assets, (c) compliance with laws,
(d) trading on inside information, and (e) reporting unethical
behavior. For the first area, accurate accounting records, Chinese students were more likely to (a) honor a boss’s request
to sign and submit a purchase order for his son’s gift regardless of a trivial or a substantial gift value, and (b) record
sales in the present year by asking the warehouse manager
to promptly fulfill next-year orders to meet this year’s target
sales. The results are consistent with the small versus large
power distance and the individualism versus collectivism arguments.
For the second area, proper use of company assets, Chinese students were more likely to use an employer’s computer, copy machine, and credit card for personal purposes.
Although only 16.3% (14) Chinese students (vs. 2.7% [6]
American students) would use a company’s credit card to
pay for family dinner, educators and business ethics trainers
should emphasize that such conduct is an outright stealing
of a company’s fund, which is not only unethical but also
illegal. This result is consistent with the argument regarding
the difference in socioeconomic values between the Chinese
and the American participants.
15
For the third significant area, compliance with laws, Chinese students were much more likely to make bribe to a policeman and to a tax authority than American students. The
results support the individualism versus collectivism argument and the guanxi culture. The weaker law enforcement in
China relative to the United States may also explain these results. For the fourth area, trading on inside information, 85%
of Chinese students versus 44% of American students would
sell the company’s stock that they own before a public release
of the negative news, and 66% of Chinese students versus
only 19% of American students would try to profit from the
inside information. These results are consistent with the rule
of men versus rule of law argument. The high percentage
of unethical responses among Chinese students suggests that
educators and corporate ethics trainers should greatly emphasize to these students that trading on inside information
is not only unethical but also illegal, and the insider trading
law is strongly enforced in the United States.
For the fifth significant area, reporting illegal and unethical behavior, Chinese students were much less likely to
report a close friend who uses the company credit card to pay
for family dinner. This result is in line with the individualism versus collectivism and the guanxi arguments. Educators
and corporate ethics trainers should be particularly concerned
that only 25.9% of Chinese students versus 63.4% of American students would report the friend who misuses a company
credit card all the time.
DISCUSSION
We used a real-world corporate code of ethics as a roadmap
to create 18 scenarios for assessing cultural effects on the
ethical decisions of Chinese versus American business students. We hypothesized that, overall, Chinese students would
be more likely to make less ethical decisions than their American peers due to the differences in four cultural dimensions:
(a) small versus large power distance, (b) individualism versus collectivism, (c) difference in socioeconomic values, and
(d) rule of men versus rule of law. The logit regression results strongly support the hypothesis, and indicate significant
cultural effects on five areas of an ethics code: (a) accurate
accounting records, (b) proper use of company assets, (c)
compliance with laws, (d) trading on inside information, and
(e) reporting unethical behavior. These findings suggest that
business educators and corporate ethics trainers should increase coverage and place a greater emphasis on these areas
of the code when they have Chinese students or entry-level
personnel in their classes so as to make them aware of potentially negative consequences of unethical behavior.
A limitation of this study is that it did not have a large
sample, and the participants were from only one university
in the United States and one university in China. Such a
limitation might have affected the generalizability of the results. However, the study serves as a starting point for future
researchers, who may want to use a corporate code of ethics to
16
S. F. LI AND O. S. PERSONS
further explore cultural effects on an individual’s ethical decisions. Future researchers should include a direct examination
of the relationships between the students’ ethical decisions
and the four cultural variables, as the associations indicated
by the present study may be speculative and indirect. Other
interesting areas for future researchers could be exploring the
stability or persistence of cultural values by comparing the
ethical decisions made by Chinese students, Chinese American students, and non-Chinese American students all in the
United States, or to examine a different culture other than
Chinese culture.
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NOTES
1. A publicly traded company may disclose the code in
its annual report, on its website, or state that the code is
available upon request. A company that has not adopted the
code of ethics is required to provide an explanation.
2. These areas are in accordance with the Sarbanes-Oxley
Act and the NYSE and the NASDAQ ethics requirements.
3. The world average for each Hofstede cultural dimension is calculated by this study as the mean score of the
74 countries and regions reported in Hofstede and Hofstede
(2005).
4. At the time the surveys were filled out, 30 out of the
86 Chinese students had accepted the offer to continue their
undergraduate study at the authors’ university, and came to
the United States a few months later. One student had accepted a similar offer from another university in the United
States. More than 10 students were in the process of applying for graduate programs in the United States and other
Western countries. The majority of the rest of the students
indicated that they had planned to pursue an advanced degree
in Western countries after graduation.
5. To explore whether the differential sample sizes (86
Chinese participants vs. 228 American participants) affected
the study results, we randomly selected 86 out of the 228
American participants and repeated the logit regression analysis. Results based on the same sample size of 86 American
and 86 Chinese students also strongly supported the hypothesis (i.e., CULTURE had a z statistic of 4.91 and Prob. > z
was .000).
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ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20
Cultural Effects on Business Students’ Ethical
Decisions: A Chinese Versus American Comparison
Sherry F. Li & Obeua S. Persons
To cite this article: Sherry F. Li & Obeua S. Persons (2011) Cultural Effects on Business
Students’ Ethical Decisions: A Chinese Versus American Comparison, Journal of Education for
Business, 86:1, 10-16, DOI: 10.1080/08832321003663330
To link to this article: http://dx.doi.org/10.1080/08832321003663330
Published online: 20 Oct 2010.
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Date: 11 January 2016, At: 22:09
JOURNAL OF EDUCATION FOR BUSINESS, 86: 10–16, 2011
C Taylor & Francis Group, LLC
Copyright
ISSN: 0883-2323
DOI: 10.1080/08832321003663330
Cultural Effects on Business Students’ Ethical
Decisions: A Chinese Versus American Comparison
Sherry F. Li and Obeua S. Persons
Downloaded by [Universitas Maritim Raja Ali Haji] at 22:09 11 January 2016
Rider University, Lawrenceville, New Jersey, USA
The authors used a corporate code of ethics to create 18 scenarios for examining cultural effects
on ethical decisions of Chinese versus American business students. Four cultural differences
were hypothesized to contribute to overall less ethical decisions of Chinese students. The
results support the hypothesis and indicate strong cultural effects on 5 areas of the code: (a)
accurate accounting records, (b) proper use of company assets, (c) compliance with laws, (d)
trading on inside information, and (e) reporting unethical behavior. Business educators and
corporate ethics trainers should be aware of these cultural effects, and provide more coverage
and special emphasis on these areas when they have Chinese students or entry-level personnel.
Keywords: Chinese, code of ethics, cultural differences, cultural effects, ethical decisions
In recent years, a growing body of research has been dedicated to documenting and understanding the effects of cultural differences on ethical decision making (e.g., Ahmed,
Chung & Eichenseher, 2003; Ge & Thomas, 2008; Hoivik,
2007; Phau & Kea, 2007). Among these cross-cultural studies, China not surprisingly has received considerable attention, as it is one of the fastest-growing economies in the
world. Since the 1978 economic reform, which led to the
transition from the centrally planned economy to the marketoriented economy, China has taken many steps to attract
foreign investments. However, practitioners, researchers, and
regulators have consistently expressed a great deal of concern
on the issue of business ethics in China, which does not seem
to keep pace with the development of its market-oriented
economy.
In the United States, the recent financial crises and business scandals such as the Enron, WorldCom, and Madoff
fraud have also made business ethics a highly important issue
to both the academia and the investment community. To prevent financial malpractices and encourage ethical business
conduct, in 2002 the U.S. Congress passed the SarbanesOxley Act, which is considered to be the most far-reaching
securities law in the past decades. Section 406 of the Act
Correspondence should be addressed to Sherry F. Li, Rider University, Accounting Department, 2083 Lawrenceville Road, Lawrenceville, NJ
08648, USA. E-mail: fanli@rider.edu
requires both U.S. and foreign listed companies to disclose
their code of ethics.1
In the present study we used a real-world corporate code
of ethics as a roadmap to create 18 scenarios for examining cultural effects on the ethical decisions of Chinese
and American business students. Such examination provides business-setting evidence consistent with Hofstede and
Hofstede (2005)’s finding that the Chinese businesses substantially differ from American businesses in certain cultural
dimensions. This cross-cultural comparison of ethical decision making is important because the Chinese economy
is becoming tightly integrated into the global economy and
relies on Western capital, technology, and demand. Such reliance is likely to push Chinese firms to adopt Western organizational patterns and conform to Western ways of doing
business. As a result, although the Chinese government has
not required Chinese public companies to adopt or disclose
a code of ethics, and not all Chinese companies have voluntarily adopted an ethics code, the aforementioned reasons,
such as demand for more foreign capital, would eventually
motivate Chinese companies to adopt a code similar to that of
U.S. companies. Foreign investors would likely perceive such
adoption as a positive signal of the company’s commitment
to ethical business conduct, which could help lower its cost
of capital and enhance its ability to attract foreign capital. No
prior studies (e.g., Hoivik, 2007; Phau & Kea, 2007; Shafer,
Fukukawa, & Lee, 2007) examining the cultural effects on
ethical decision making have used a real-world corporate
code of ethics for developing questions or scenarios.
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CULTURAL EFFECTS ON STUDENTS’ ETHICAL DECISIONS
A logit regression analysis shows that cultural differences
seem to contribute to less ethical decisions of Chinese students compared to American students across all 18 scenarios
combined. An additional analysis indicates strong cultural
effects on five areas of an ethics code: (a) accurate accounting records, (b) proper use of company assets, (c) compliance
with laws, (d) trading on inside information, and (e) reporting
unethical behavior. We acknowledge that these 18 ethics scenarios inherently reflect Western cultural values, and therefore American students may have an advantage in identifying
the correct ethical choices relative to their Chinese counterparts. However, the Chinese students in this study were
global business majors who had taken core business courses
taught by American professors as a curriculum requirement.
Consequently, they were likely aware of the Chinese companies’ globalization efforts as well as the Western business
practices and cultural values. Moreover, at the time of study,
the majority of the Chinese participants had already been
accepted into or were applying for a business program at
a university in the United States or had indicated desires
to pursue a graduate degree in Western countries. Therefore, this sample likely resembles Chinese students studying
in the United States. This means that the findings of this
study could have an important implication not only for U.S.
business schools that have operations in China but also for
business educators in the United States and corporate ethics
trainers of U.S. firms that provide internships for Chinese
students. In particular, they should be aware of the cultural
differences, and adjust their ethics course-coverage or training programs to emphasize the code-of-ethics areas significantly affected by culture when they have Chinese students,
interns or entry-level personnel. This is especially important
as many U.S. higher education institutions have recruited
and admitted more international students especially the
Chinese.
Corporate Code of Ethics and Questionnaire
Development
A corporate code of ethics typically covers nine common
areas. These nine areas together with their description came
from a real-world company’s code of ethics.2 Short ethics
scenario(s), each with a question requiring a yes or a no
answer, is (are) presented under each area of the code in
Table 1. A yes–no methodology is used because from a corporate viewpoint an employee’s conduct is either in compliance with the code (being ethical) or in violation of the
code (being unethical). These scenarios are based on accounting issues discussed in textbooks, suggested by accounting alumni who are certified public accountants or certified internal auditors, or adapted from real-world articles
published in business periodicals. An Accounting Department’s Advisory Board members, who were corporate executives or partners of public accounting firms, reviewed these
11
scenarios, and their comments were incorporated into the
questionnaire.
1. Accurate accounting records: All business records
must be clear, truthful and accurate. This includes
such data as quality, safety, personnel, and all financial
records. Misrepresenting facts or falsifying company
records is a serious offense.
2. Conflict of interest: Employees must make business
decisions and actions based on the best interests of
the company and its stakeholders, and must not be
motivated by personal considerations or relationships.
For example, relationships with prospective or existing suppliers, contractors, customers, competitors, or
regulators must not affect employees’ independent and
sound judgment.
3. Confidential information: Except in connection with
the performance of their duties, employees are prohibited from disclosing or using confidential or proprietary
information outside the company, either during or after
employment, without company authorization.
4. Proper use of company assets: Protecting company
assets against loss, theft, and misuse is every employee’s responsibility. The company’s equipment, vehicles, tools, and supplies are to be used for conducting
company business. They may not be used for personal
benefit.
5. Compliance with laws: Employees must comply with
laws and regulations wherever company does business.
Foreign Corrupt Practice Act prohibits U.S. firms and
their workers or agents from bribing foreign officials.
6. Competition and fair dealing: Employees must not use
any illegal or unethical methods to gather competitive information. The Federal Trade Commission Act
prohibits misrepresentations of all sorts that are made
in connection with sales including false or misleading
advertisement.
7. Trading on inside information: Using inside material
information, which is not available to the public, for
trading or tipping others to trade is both unethical and
illegal.
8. Anti-nepotism policy: To reduce favoritism or the appearance of favoritism and to prevent family conflict
from affecting the workplace, an employee’s relative is
not permitted to work as a supervisor or a subordinate
of the employee.
9. Reporting illegal and unethical behavior: Employees
have a duty to promptly report violations of a corporate
code of ethics via an anonymous phone hotline or to an
appropriate company representative (e.g., Chief Compliance Officer or Chairman of an Audit Committee).
In addition, a company usually requires employees to
certify that they have complied with all areas of the
code.
12
S. F. LI AND O. S. PERSONS
TABLE 1
Percentage of Students’ Ethical Responses to the 18 Scenarios Under the Nine Common Areas of a Corporate Code of Ethics
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Scenario
1. Accurate accounting records
1.1 Will you honor your boss’s request of you to sign and submit a purchase order
for his son’s $19.95 gift?
1.2 Will you honor your boss’s request of you to sign and submit a purchase order
for his son’s $1,995 gift?
1.3 Will you try to record next-year orders as sales in the current year by asking the
warehouse manager to promptly fulfill these orders so as to meet this year’s
target sales of the company?
1.4 Will you offer your wholesale customers an unusually big discount to induce
them to buy more products than they can promptly resell in order to meet the
company’s target sales?
2. Conflict of interest
2.1 As a purchasing department director, will you accept a supplier’s lunch
invitation?
3. Confidential information
3.1 Will you provide your sister with the name and address of customers of her
competitor?
4. Proper use of company assets
4.1 After work hours or during lunch break, will you use your employer’s
computer for personal purposes?
4.2 During work hours, will you use your employer’s computer for personal
purposes?
4.3 Will you use your employer’s copy machine to copy your personal items?
4.4 Will you use your company’s credit card to pay for your family dinner?
5. Compliance with laws
5.1 Will you make $10 bribe to a policeman in a foreign country where bribing a
policeman is very common?
5.2 Will you agree to make the $1,000 bribe to a Chinese tax authority to avoid
being audited per your business partner advice?
6. Competition and fair dealing
6.1 Will you recall the most popular product, which were advertised as 100% lead
free, but has a small trace of lead within the required safety level?
7. Trading on inside information
7.1 Will you sell your company’s stock that you own before a release to the public
the negative news about the company?
7.2 Will you try to profit from the imminent decline in stock price by buying a put
option on the stock before a public release of this news?
8. Anti-nepotism policy
8.1 Will you hire your niece instead of the other candidate who has more work
experience?
9. Reporting illegal and unethical behavior
9.1 Will you report to the company your close friend who used the company credit
card to pay for his family dinner for the first time?
9.2 Will you report to the company your close friend who has been using the
company credit card to pay for his family dinner whenever he eats out?
Chinese (n = 86)
American (n = 228)
z
46.5%
78.5%
–5.496∗∗∗
76.7%
93.4%
–4.181∗∗∗
56.5%
72.0%
–2.605∗∗
45.9%
50.9%
–0.785
61.6%
31.3%
4.893∗∗∗
81.2%
78.4%
0.534
19.8%
37.7%
–3.017∗∗∗
52.3%
66.7%
–2.340∗∗
41.9%
83.7%
60.1%
97.3%
–2.891∗∗
–4.037∗∗∗
23.5%
56.4%
–5.000∗∗∗
57.6%
84.5%
–4.774∗∗∗
72.9%
80.2%
–1.376
15.1%
55.7%
–6.442∗∗∗
33.7%
80.7%
–7.935∗∗∗
67.1%
61.5%
0.903
3.5%
13.2%
–2.463∗∗
25.9%
63.4%
–5.909∗∗∗
Note. A “no” answer was deemed ethical for all scenarios except for 6.1, 9.1, and 9.2, where a “yes” answer was ethical.
< .05.∗∗ p < .01.∗∗∗ p < .001.
∗p
Literature Review and Hypothesis Development
As suggested by many previous cross-cultural studies (e.g.,
Hofstede, 2006; Hofstede & Hofstede, 2005; Hung, 2008;
Rothlin, 2008; Shafer et al., 2007; Tam, 2002), four cultural
dimensions are expected to affect students’ ethical decisions:
(a) power distance, (b) individualism versus collectivism,
(c) difference in socioeconomic values, and (d) rule of men
versus rule of law. The effect of each dimension on students’
ethical decision making in specific scenarios is discussed
subsequently.
Small power distance versus large power distance.
Power distance measures “the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally”
(Hofstede, 1991, p. 28). In small power distance societies,
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CULTURAL EFFECTS ON STUDENTS’ ETHICAL DECISIONS
organizations are fairly decentralized. Superiors treat subordinates as equals and tend to consult them before making
a work-related decision. Employees are usually not afraid
of confronting their bosses when disagreement arises. In
large power distance countries, more powerful people are
supposed to be privileged and respected. Organizations are
rather centralized. Subordinates are more tolerant of hierarchy and inequality, less likely to question and challenge
authority, and tend to act in their superiors’ interest when
disagreement arises (Ge & Thomas, 2008; Hofstede, 2006;
Hofstede & Hofstede, 2005).
English-speaking Western countries are generally considered to have small power distance whereas Asian countries typically have large power distance. Hofstede and
Hofstede (2005) reported that the United States scored 40
on the Power Distance Index, much lower than the world average of 60 and China’s score of 80.3Cohen, Pant, and Sharp
(1993) suggested that the unwillingness to accept power and
inequality in small power distance countries, such as the
United States, may prevent subordinates’ obedience to superiors when told to conduct unethical behaviors. This cultural
dimension likely contributes to less ethical responses among
Chinese students in scenarios involving superior-subordinate
relationship, specifically, Scenarios 1.1 and 1.2 in Table 1.
Individualism versus collectivism. Individualism, as
opposed to collectivism, describes the degree to which individuals are integrated into groups. In individualistic societies, people are bonded loosely with others and tend to think
and judge in terms of I instead of we. Individual goals and
achievement are valued. In business, recruiting and promotion decisions are supposed to be solely based on capability and skills (Hofstede & Hofstede, 2005). Nepotism and
discrimination in favor of friends or in-group members are
discouraged and prohibited. On the other hand, the collective
cultures greatly emphasize the ties with in-group members.
We is more important than I. People should share resources
with relatives and friends and be loyal to the social groups that
they belong to (Ge & Thomas, 2008; Hofstede & Hofstede;
Shafer et al., 2007; Tsui & Windsor, 2001). At workplaces,
employees are expected to give priority to organizational
goals and interests (Hofstede & Hofstede; Hofstede, 2006).
In general, Western cultures are considered to be highly individualistic whereas Eastern societies are more collective.
The United States has an individualism score of 91, ranking
as No. 1 among all the 74 countries and regions, whereas
China’s score is 20, which is far below the world average of
44 and the United States’ score.
Research has shown that the individualism dimension has
a strong influence on people’s ethical value (Cohen et al.,
1993; Ge & Thomas, 2008; Shafer et al., 2007). Additionally, Dunfee and Warren (2001) and Woodbine (2004) suggested that some features of collective Chinese culture such
as guanxi, which creates obligations for the continued exchange of favors, could foster unethical business practices
13
such as corruption and bribery. This cultural dimension likely
contributes to less ethical decisions among Chinese students
in Scenarios 1.3 and 1.4 (meeting corporate goals), 2.1 (conflict of interest), 3.1 (relationship with family member), 5.1
and 5.2 (bribery), 8.1 (nepotism), and 9.1 and 9.2 (reporting
unethical behaviors of close friend).
Difference in socioeconomic values. Before the
1978 economic reform, the Chinese government had direct
control over all resources regarding how they are distributed
and used. People lived in commune-like organizations where
everybody had an iron rice bowl and enjoyed cradle-tograve welfare. In such organizations, there was no concept
of privately owned assets because all assets were collectively
owned and used by its members. Although the privatization
since 1978 has greatly improved the decision-making efficiency, it has also resulted in management corruption due
to the socioeconomic value of no clear distinction between
organizational and private assets, and the lack of monitoring mechanisms. Hung (2008) stated, “As many Chinese
economists point out, the problem of management corruption is tied to the way the assets of privatized enterprises can
be transformed, through various means, into private assets”
(p. 74).
Unlike China, the United States has never adopted a highly
centralized economic system. Company assets are distinct
and legally separated from personal assets under the U.S.
market-oriented economy. U.S. companies have established
a code of ethics and an internal control to protect company
assets from personal use. Even though Chinese student participants in this study were born after 1978, it is plausible
that they may have inherited from their parents the socioeconomic value of no clear distinction between organizational
and private assets. This difference can potentially affect scenarios about the proper use of company assets (Scenarios
4.1–4) in a way that it leads to less ethical answers among
Chinese students.
Rule of men versus rule of law. Hundreds of years of
Confucian heritage has established China as a country ruled
by men instead of laws because Confucius and his followers trust and rely on innate human goodness for governance
rather than written laws that are too inflexible to handle various human activities (Iqbal, 2002). Although in the past
two decades the Chinese government has tried to establish a
fair legal system, the public awareness of law is still weaker
than in the Western countries where the rule of law is firmly
rooted. Although China has laws in many areas against undesirable business conduct, the enforcement mechanisms are
not strong enough to deter such conduct. For example, the
Chinese Securities Regulatory Commission can only suggest the companies to remove illegal insider traders from
their positions, usually only profitable insiders are charged
with a monetary penalty and an imprisonment term of up to
5 years (Shen, 2007).
14
S. F. LI AND O. S. PERSONS
Many researchers have expressed considerable concerns
that the weak legal environment in China would lead to
unethical and irresponsible business practices (e.g., Shafer
et al. 2007; Tam, 2002). Rothlin (2008) noted that,
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More than in any other circumstances, business people operating in China seem to move on a lawless ground where
corruption and nepotism, as well as all kinds of fraud and
abuses seem to be unavoidable in order to obtain the desired
business success, deeply rooted in a culture where relationships take precedence over any ethical consideration and law.
(p. 8)
This cultural dimension likely contributes to less ethical
responses by Chinese students in Scenarios 6.1 (product recall) and 7.1 and 7.2 (insider trading).
In sum, the discussions above suggest less ethical decisions of Chinese students compared to their American peers
across all 18 scenarios. This leads to the hypothesis that
cultural differences likely contribute to overall less ethical
decisions of Chinese students.
METHOD
The hypothesis was tested by using the following orderedlogit regression model with five explanatory variables, one
of which is culture, with the others being control variables.
ETHIC = a + b1 CULTURE + b2 GENDER + b3 MAJOR +
b4 ETHICEDU + b5 ETHICTRAIN
ETHIC = Total number of ethical responses of each student
to the 18 scenarios
CULTURE = 1 for an American student (born and raised in
the United States), and 0 for a Chinese student (born and
raised in China)
GENDER = 1 for female participant and 0 for male participant
MAJOR = 1 for an accounting major and 0 otherwise
ETHICEDU = Number of college-level ethics courses taken
ETHICTRAIN = Number of workplace ethics training
The hypothesis was supported if the coefficient of CULTURE was significantly positive. The other four control variables were also expected to have a positive coefficient. Regarding GENDER, prior studies (e.g., Albaum & Peterson,
2006; Cohen, Pant, & Sharp, 1998; Libby & Agnello, 2000)
found that female students are more ethical than male students. This gender difference is also documented among students in foreign countries (Roxas & Stoneback, 2004). With
respect to MAJOR, Cohen et al. and Manley, Russell, and
Buckley (2001) suggested that accounting majors may be
more ethical than other business majors because the public
and the regulators, such as the SEC, demand that the accounting profession abides by rules and standards. Arlow
and Ulrich (1983) attributed the higher ethicality of accounting majors to the fact that accounting majors receive addi-
tional training in accounting ethics within the accounting curriculum. Regarding ETHICEDU, the American Assembly of
Collegiate Schools of Business has suggested that ethics be
taught in business schools because ethics education can have
a positive influence on students’ ethicality as documented by
Luthar, DiBattista, and Gautschi (1997) and Steven, Harris,
and Willianson (1993). With respect to ETHICTRAIN, Beu,
Buckley, and Harvey (2003) stated that training could be
used to increase cognitive moral development and decrease
inappropriate competitive desire to win at any cost. Results
from a large-scale survey by Delaney and Sockell (1992)
suggest that workplace ethics training has a positive effect
on managers because the training educates managers on how
to react when confronted with workplace dilemmas.
The American participants in this study were undergraduate business students from a private Mid-Atlantic university
with which the authors were affiliated. The Chinese participants were undergraduate business students from a private university in Shanghai, which has been in educational
partnership with the authors’ university for several years.
Business students were the focus because they soon would
enter the business world and collectively constitute the future corporate leaders who will regularly face a number of
ethical dilemmas. The participants completed scenario questionnaires anonymously. There were a total of 314 student participants: 86 (27.4%) Chinese participants and 228
(72.6%) American participants.4 The differential sample size
of Chinese and American participants reflects a difference
in the raw number of students to whom the questionnaire
was administered. A total of 64 (74.4%) of the 86 Chinese
students women, whereas 94 (41.2%) of the 228 American
students were women. No Chinese student was an accounting
major, whereas 54 American students (23.7%) were accounting majors. A total of 62 Chinese students (72.1%) versus
87 American students (38.2%) had at least one college-level
ethics course. Fourteen Chinese students (16.3%) versus 95
American students (41.7%) had at least one workplace ethics
training.
RESULTS
Table 2 reports regression results of the cultural effects on students’ overall ethical decisions, ETHIC, which for Chinese
students had a minimum value of 3, a mean value of 8.63,
and a maximum value of 13 out of 18 (SD = 2.51). On the
other hand, ETHIC for American students had a minimum
value of 4, a mean value of 11.93, and a maximum value of
18 out of 18 (SD = 3.41). The univariate Wilcoxon signedrank test with a sizable z statistic of –7.1 clearly indicated
that, overall, Chinese students were significantly less ethical
than American students. The logit regression analysis in Table 2, which controls for four variables, also confirmed this
univariate result. In particular, the results in Table 2 suggest
that although three control variables, MAJOR, GENDER,
and ETHICTRAIN, were significantly positive, CULTURE
CULTURAL EFFECTS ON STUDENTS’ ETHICAL DECISIONS
TABLE 2
Ordered-Logit Regression Results of the Five
Explanatory Variables on the Chinese and American
Students’ Overall Ethical Decisions (ETHIC)
Variables
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CULTURE
GENDER
MAJOR
ETHICEDU
ETHICTRAIN
Wald chi square
Probability level
Expected
sign
+
+
+
+
+
Est.
coeff.
1.4353
0.4765
0.9801
–0.1493
0.1676
78.6500
∗∗∗
0.000
SE
Z
Prob. > z
0.2822
0.2395
0.2987
0.1015
0.0888
5.09
1.99
3.28
–1.47
1.89
0.000
∗
0.024
∗∗∗
0.001
0.141
∗
0.029
∗∗∗
Note. There were 314 student participants. ETHIC represents a total
number of ethical responses of each student to the 18 scenarios. For CULTURE, 1 = born in the United States or came to the United States before 10
years of age, and 0 otherwise. For GENDER, 1 = women and 0 = men. For
MAJOR, 1 = an accounting major and 0 otherwise. ETHICEDU represents
the number of college-level ethics courses taken. ETHICTRAIN represents
the number of workplace ethics training.
∗ p < .05.∗∗∗ p < .001.
had the most positive and most significant coefficient. These
results strongly support the hypothesis that cultural differences contribute to overall less ethical decisions of Chinese
students.5
To provide further insight into the regression results, Table
1 presents percentage of students’ ethical responses to each
of the 18 scenarios grouped by the nine common areas of a
corporate code of ethics. Results indicate that Chinese students made significantly fewer ethical decisions than American students in 13 scenarios related to five areas of an ethics
code. These five areas were (a) accurate accounting records,
(b) proper use of company assets, (c) compliance with laws,
(d) trading on inside information, and (e) reporting unethical
behavior. For the first area, accurate accounting records, Chinese students were more likely to (a) honor a boss’s request
to sign and submit a purchase order for his son’s gift regardless of a trivial or a substantial gift value, and (b) record
sales in the present year by asking the warehouse manager
to promptly fulfill next-year orders to meet this year’s target
sales. The results are consistent with the small versus large
power distance and the individualism versus collectivism arguments.
For the second area, proper use of company assets, Chinese students were more likely to use an employer’s computer, copy machine, and credit card for personal purposes.
Although only 16.3% (14) Chinese students (vs. 2.7% [6]
American students) would use a company’s credit card to
pay for family dinner, educators and business ethics trainers
should emphasize that such conduct is an outright stealing
of a company’s fund, which is not only unethical but also
illegal. This result is consistent with the argument regarding
the difference in socioeconomic values between the Chinese
and the American participants.
15
For the third significant area, compliance with laws, Chinese students were much more likely to make bribe to a policeman and to a tax authority than American students. The
results support the individualism versus collectivism argument and the guanxi culture. The weaker law enforcement in
China relative to the United States may also explain these results. For the fourth area, trading on inside information, 85%
of Chinese students versus 44% of American students would
sell the company’s stock that they own before a public release
of the negative news, and 66% of Chinese students versus
only 19% of American students would try to profit from the
inside information. These results are consistent with the rule
of men versus rule of law argument. The high percentage
of unethical responses among Chinese students suggests that
educators and corporate ethics trainers should greatly emphasize to these students that trading on inside information
is not only unethical but also illegal, and the insider trading
law is strongly enforced in the United States.
For the fifth significant area, reporting illegal and unethical behavior, Chinese students were much less likely to
report a close friend who uses the company credit card to pay
for family dinner. This result is in line with the individualism versus collectivism and the guanxi arguments. Educators
and corporate ethics trainers should be particularly concerned
that only 25.9% of Chinese students versus 63.4% of American students would report the friend who misuses a company
credit card all the time.
DISCUSSION
We used a real-world corporate code of ethics as a roadmap
to create 18 scenarios for assessing cultural effects on the
ethical decisions of Chinese versus American business students. We hypothesized that, overall, Chinese students would
be more likely to make less ethical decisions than their American peers due to the differences in four cultural dimensions:
(a) small versus large power distance, (b) individualism versus collectivism, (c) difference in socioeconomic values, and
(d) rule of men versus rule of law. The logit regression results strongly support the hypothesis, and indicate significant
cultural effects on five areas of an ethics code: (a) accurate
accounting records, (b) proper use of company assets, (c)
compliance with laws, (d) trading on inside information, and
(e) reporting unethical behavior. These findings suggest that
business educators and corporate ethics trainers should increase coverage and place a greater emphasis on these areas
of the code when they have Chinese students or entry-level
personnel in their classes so as to make them aware of potentially negative consequences of unethical behavior.
A limitation of this study is that it did not have a large
sample, and the participants were from only one university
in the United States and one university in China. Such a
limitation might have affected the generalizability of the results. However, the study serves as a starting point for future
researchers, who may want to use a corporate code of ethics to
16
S. F. LI AND O. S. PERSONS
further explore cultural effects on an individual’s ethical decisions. Future researchers should include a direct examination
of the relationships between the students’ ethical decisions
and the four cultural variables, as the associations indicated
by the present study may be speculative and indirect. Other
interesting areas for future researchers could be exploring the
stability or persistence of cultural values by comparing the
ethical decisions made by Chinese students, Chinese American students, and non-Chinese American students all in the
United States, or to examine a different culture other than
Chinese culture.
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NOTES
1. A publicly traded company may disclose the code in
its annual report, on its website, or state that the code is
available upon request. A company that has not adopted the
code of ethics is required to provide an explanation.
2. These areas are in accordance with the Sarbanes-Oxley
Act and the NYSE and the NASDAQ ethics requirements.
3. The world average for each Hofstede cultural dimension is calculated by this study as the mean score of the
74 countries and regions reported in Hofstede and Hofstede
(2005).
4. At the time the surveys were filled out, 30 out of the
86 Chinese students had accepted the offer to continue their
undergraduate study at the authors’ university, and came to
the United States a few months later. One student had accepted a similar offer from another university in the United
States. More than 10 students were in the process of applying for graduate programs in the United States and other
Western countries. The majority of the rest of the students
indicated that they had planned to pursue an advanced degree
in Western countries after graduation.
5. To explore whether the differential sample sizes (86
Chinese participants vs. 228 American participants) affected
the study results, we randomly selected 86 out of the 228
American participants and repeated the logit regression analysis. Results based on the same sample size of 86 American
and 86 Chinese students also strongly supported the hypothesis (i.e., CULTURE had a z statistic of 4.91 and Prob. > z
was .000).
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