Culture follows design: Code design as an antecedent of the ethical culture

• DOI: http://doi.org/10.1111/beer.12201
• Author: Barbara E. Weißenberger,Peter Kotzian,Thomas Stöber
• Date: 01 January 2019
• Published date: 01 January 2019

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  wileyonlinelibrary.com/journal/beer Busines s Ethics: A Eur Rev. 2019; 28:112–128.

© 2018 John Wiley & So ns Ltd

1 | INTRODUCTION

A code of ethics is a ma nagement control ins trument commonly u sed

in business pra ctices (Weber & Wasi eleski, 2013). Its ai m is to en‐

sure compliance by a ll organizational membe rs (Ferrell, Fraedrich, &

Ferrell, 2017; Kaptein & Sc hwartz, 20 08). In this respec t, a code helps

to align employees ’ actions with their company ’s position on ethical

and legal issue s (Weaver, Treviño, & Cochran, 1999). Accord ing to

the object‐of‐control fr amework by Mercha nt and Van der Stede

(2012), a code serve s as an instrument of act ion control by providing

detailed rul es on how to act in spe cific situations . In this regard, a

code of ethics is pa rt of a company’s for mal ethical infr astructur e

(for this notion, se e Tenbrunsel, Smith‐ Crowe, & Umphres s, 2003),

regulating a company’s ethical practices and often aimed at specific

ethical issue s, such as the acceptance of gif ts.

However, a code can also have a br oader and more inf or‐

mal impact; in p articular, it send s a signal to employees t hat the

company’s leadership values business ethics and corporate social

responsibilit y (Zhao, Chen , & Xiong, 2016). In this rega rd, a code

of ethics is par t of a company’s cultur al controls that ex press the

company’s shared v alues and guide employees’ be havior in a more

fundamenta l way. Thus, a code affects a com pany’s ethical culture,

which in turn fos ters ethical be havior beyond the sp ecific rules

stated in the co de. Evidence has shown t hat a company’s code of

ethics positively affects various elements of corporate culture,

such as perceived e thical values (Valentin e & Barnett, 2002), org a‐

nizational comm itment (Collier & Esteban, 20 07; Fryzel & Sep pala,

2016; Valentine & Barnet t, 2003), and job sat isfaction (Valenti ne &

Fleischman, 20 08), all of which contribute to et hical decision mak‐

ing (Craft, 2013; Le hnert, Park, & Singh, 2015). T hus, apart from a

code’s direct inten t to forbid or demand specif ic actions, it contrib‐

utes to a positive ethical culture, which is defined as the interplay

between form al (e.g., codes) and info rmal element s (e.g., peer be‐

havior). For an earl y concept of ethical culture, see Treviñ o (1990),

and for a more recen t one, see Kaptein (2 011). Ethical culture is

in turn a highly rel evant antecedent of co mpliance (e.g., Fer rell et

al., 2017; Holtbrügge, B aron, & Friedmann , 2014; Kaptein, 2011),

and the code per s e is insufficient to achieve comp liance or ethical

behavior (Webl ey & Werner, 2008). This pa per investigates h ow

the formal desi gn of a code affects ethical c ulture. The focus is on

whether a code’s des ign affects e mployees’ famil iarity with th e

code, their perceptions of its relevance to employees in general,

and its role as a sig nal of top management ’s commitment to th e

code’s content.

Received: 15 Mar ch 2018 

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  Revised: 19 August 2018 

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  Accepted: 22 Augus t 2018

DOI: 10 .1111/bee r.12201

ORIGINAL ARTICLE

Culture follows design: Code design as an antecedent of the

ethical culture

Thomas Stöber  | Peter Kotzian | Barbara E. Weißenberger

Faculty of Business Administration and

Economics, Heinrich Heine University

Duesseldorf, Germany

Correspondence

Thomas Stöbe r, Former Research Ass ociate

at the Chair of Accounting, Heinrich Heine

University Duesseldorf, 40225 Duesseldorf,

Germ any.

Email: thomas.stoeber@hhu.de

Abstract

Codes of ethics are di rectly aimed at beh avioral control, but th ey also affect a com‐

pany’s ethical cultur e, which in turn concerns co mpliance and ethica l behavior. To

positively influen ce a company’s ethical culture, employees mus t be familiar with its

code of ethics, perce ive that top management is committed to the code , and believe

that their peers al so comply with the code. The evidence o n whether a code’s design

affects a comp any’s ethical culture is limited. T his study’s factorial sur vey experiment

contributes to this gap i n two ways: first, it i nvestigates whether a co de’s design af‐

fects how easily t he code can be learned and, th erefore, contributes to code familia r‐

ity. Second, it examine s how a code can convey expec tations regarding top

management’s commitm ent and peers’ behavi or, both of which are part of ethic al

culture. The result s indicate that a positive tone inc reases code familiarity, and a code

signed by top managers se nds a strong signal of thei r commitment to the code.

Finally, various implica tions of the results for research and pr actice are discussed.

    

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STÖBER et al .

One obvious pre requisite for a code to success fully shape a com‐

pany’s ethical cu lture is code familiar ity: employees mu st be aware of

the code and have a th orough underst anding of its conten t (Wotruba,

Chonko, & Loe, 20 01). Thus, one question is : what drives employees’

familiarit y with the code? Compl iance training com es to mind and,

indeed, the ef fect of compliance training has b een well established

(see Kaptein, 2015 a s one example among many). However, there is

also the argume nt that a code’s design af fects fami liarity. Weaver

(1995) discussed the notion t hat a code’s design can impr ove code fa‐

miliarity. Alth ough he did not find empi rical support fo r the proposed

impact of the de sign features he studied, t he design possibilities for

a code are manifol d (e.g., Schwartz, 20 04; Kaptein & Wempe, 1998).

Therefore, the empirical question remains as to whether design ele‐

ments can improve code familiarity and, indirectly, compliance.

While the code for mally outlines what sh ould be, reality may dif‐

fer (Webley & Werner, 20 08). In particular, employees’ pe rceptions

of the code’s relevance vary from company to company. While the

code is a central el ement of the corpor ate culture in som e compa‐

nies, in others i t is not. This percei ved relevance of the co de man‐

ifests its elf in employees’ ex pectations of t heir peers’ be havior or

that of top manageme nt (for these aspec ts of ethical cu lture, see

Kaptein, 2011). The beh avior expected from other s can either be in

line with the cod e or deviate from it. Following Ciald ini (2007), one

can argue that when employees observe noncompliance with formal

norms (i.e., the c ode) among their pe ers or top managem ent, it is

likely that nonco mpliance will become the inform al norm of what is

actually don e in particula r situations, reg ardless of what the co de

says (Anand, A shforth, & Joshi, 200 4; Páez & Salgado, 2016). What

matters for be havior, according to Cialdini (20 07), is not so much for‐

mal, prescrip tive norms, but those norms p eople believe to be valid

(i.e., descrip tive norms). This pap er argues that wh ile codes define

prescriptive norms, they also affect descriptive norms, particularly

by influencing wh at employees believe to be the n orm. If employees

believe that the co de is relevant to their peers, a nd that it is backed

by top management , it will be more relevant fo r their actual behav ior

(Kaptein, 2011; Treviño, Weaver, & Reynolds , 2006). This res earch

is interested in h ow a code’s formal featur es affect the se beliefs.

From in‐depth inter views conduc ted by Schwart z (2004), ther e is

initial empirical evidence that design elements are relevant. Of the

many potential des ign options a code mig ht feature, this res earch

focuses on two of t hem: the tone in which a code is wri tten and the

signatures of top ma nagement. Both featu res are easy to impleme nt,

and for both, the re are strong theoretic al arguments as to why they

should matter, albeit empirical evidence is lacking thus far.

The research objective is, therefore, to examine whether formal

design element s of a code of ethics affect an org anization’s ethica l

culture by increasing code familiarity, thereby inducing stronger be‐

liefs about the r elevance of the code f or employees and s tronger

perceptions th at top management ac tually suppor ts the code. To

address thes e research ques tions, a facto rial survey expe riment is

conducted as pa rt of a larger project among me mbers of a German

full universit y, manipulating two d esign element s of a code with a

given content. The two manipulated design elements are the tone

of a code (i.e., a posit ive tone that indic ates what to do vs. a neg a‐

tive tone that st ates prohibition s) and the presence o r absence of

top management ’s signatures on the co de. The tone is consid ered

important in conveying the message that the co de’s aim is either to

provide guidance for employees with a positive, benevolent tone

or to engage in comma nd and control with a n egative, autho ritar‐

ian tone (Gaumnit z & Lere, 2004). Top management ’s signatures are

assumed to func tion as a signal demonstrat ing their commitment to

ethical and com pliance issues (e.g ., Davidson & Stevens, 2013). A s

both design elem ents differ in cod es of ethics from compa ny to com‐

pany, the question a rises as to whether these desig n features make

a difference.

This study’s re sults show that a code of ethics wri tten in a pos‐

itive tone is signif icantly easier t o learn and to reta in than a code

written in a neg ative tone. A positi ve tone leads to highe r code fa‐

miliarity an d is thus more releva nt to a company’s ethic al culture.

Furthermore, a positive‐toned code slightly increases perceived

compliance by pee rs. Regarding top m anagement’s sign atures, the

results sugg est that a signed cod e sends a strong si gnal that top

management supports the code, which also positively contributes

to an ethical culture.

This study cont ributes to research on codes of e thics but also

to business ethi cs research in gen eral. While the relevance of an

ethical cultu re for compliance is an establish ed fact, the concept

of ethical culture remains quite vague and, in particular, the ques‐

tion of what can be d one to improve it. Cha nging the corpor ate

culture is among t he most demandi ng tasks confron ting com‐

pliance departments. Compliance training, surveillance mecha‐

nisms, and sanc tions are certainly signi ficant, but they are costly

and highly invasive. In particular, surveillance mechanisms and

the threat of san ctions may backfire, e xerting detriment al effects

on the corporat e culture. This study argu es that the design of the

code itself may hav e an impact on the et hical culture a nd shows

that this is indee d the case. Ther efore, designing t he code in a

particular way improves a company’s ethical culture. This finding

also provides practical guidance for designing and implementing

codes of ethics . By formulating the code in a posi tive way and, in

particular, by add ing top management ’s signatures to the co de,

companies can e ffectively contribu te to an ethical culture at ver y

low cost.

The paper is org anized as follows. It s tarts by out lining the

theoretical relationships between the code of conduct, the eth‐

ical culture, and ethical behavior. Then, specific hypotheses are

developed on how a co de’s design can positively inf luence ethical

culture. In the fo urth secti on, the researc h design is presente d,

and section f ive provides the results. T he final section conclude s

by discussing the theoretical and practical implications of this

study’s find ings along with it s limitations and avenues for fut ure

research.