Clarity of ethical rules for open-minded discussion to resolve ethical issues in Chinese...

Asia Pacific Journal of Human Resources 2010 48(2)

Clarity of ethical rules for open-minded discussion to resolveethical issues in Chinese organizations

Robin Stanley Snell, Dean Tjosvold, and Julie Lanjun WuLingnan University, Hong Kong

In critical incident interviews, 101 Chinese mainland employees each described awork-related occasion where ethical values were at stake. Case examples andstructural equation analyses indicated that clearly understood ethical rulesfacilitated open-minded discussion of opposing views, i.e. constructive controversy,which in turn developed interactive justice, strengthened interpersonal relationships,and promoted confidence in future discussions. However, clarity about ethical rulesand engagement in constructive controversy was perceived to have no substantiveethical impact. This result was interpreted as indicating that commonunderstanding among employees about the content of the extant ethical rulescombined with open-minded discussion of the rules does not necessarily lead toagreement that bringing behavior into alignment with the extant rules is necessarilythe best moral solution, and as suggesting that using constructive controversy todevelop ethical rules may be better than imposing them from the top.

Keywords: China, conflict, constructive controversy, ethical rules

Ethical issues at work arise when actual or proposed business conduct breachesone or more principles associated with justice, rights, or the greater good(Kaptein 2008; Post, Lawrence and Weber 2002; Reynolds 2008). Such issuesoften relate to human resource management (Fusilier et al. 1996; Spector 2003;Wooten 2001), and how people respond to ethical issues at work also has reper-cussions for various other stakeholders, extending from superiors, subordinates,

185

Correspondence to: Professor Robin Stanley Snell, Department of Management, LingnanUniversity, Hong Kong; fax: (852) 2467 0982; e-mail: [email protected]

Asia Pacific Journal of Human Resources. Published by SAGE Publications (Los Angeles, London, New Delhi,Singapore and Washington DC; www.sagepublications.com) on behalf of the Australian Human ResourcesInstitute. Copyright © 2010 Australian Human Resources Institute. Volume 48(2): 185–211. [1038-4111]DOI: 10.1177/1038411110368466.

Note: This work has been supported by the Research Grants Council of the Hong Kong SpecialAdministrative Region, China (Grant number is LU3404/05H) to the second author.

Introduction

peers, suppliers, and customers, to government agencies, activist groups, andsociety as a whole (Savage et al. 1991; Weiss 2003).

Clarity of organizational expectations about ethical behaviour is consideredlikely to promote employee trust, cohesion and morale (Dickson et al. 2001;Donaldson and Davis 1991). Researchers and business practitioners alike haveargued that formulating a set of ethical rules and disseminating them to organ-ization members can inhibit wrongdoing, whether universally (Murphy, Smithand Daley 1992; Somers 2001; Tsalikis and Fritzche 1989), or with specificreference to the Chinese context (Al-Khatib, Vollmers and Liu 2007), and mayfacilitate internal reporting when ethics violations have occurred (Hassink, deVries and Bollen 2007). An underlying factor is likely to be the clarity of suchrules in terms of: their linkage to ethical principles that members can relate to(Canary and Jennings, 2008); their relevance to ethical issues that members face;and their linkage to disciplinary action (Lere and Gaumnitz 2003, 2007). HRMspecialists may thus be invited to play a key role in developing ethics programs(Martin and Woldring 2001; Winstanley and Woodall 2000).

Despite the likely importance of clear ethical rules in guiding action byraising members’ awareness of and sensitivity to relevant issues (McDonaldand Zepp 1989), these may not, by themselves, lead to the effective resolutionof ethical issues (Stevens 1999). There is, however, a dearth of research intohow ethical rules are effectively applied and integrated into organizational life(Helin and Sandström 2007; Stevens 1994). This study investigates the role ofconstructive controversy, defined as open-minded discussion of opposingperspectives, leading to the incorporation of each other’s ideas into action plansfor mutual benefit (Johnson, Johnson and Tjosvold 2006; Tjosvold 2008), inenabling organizational members to resolve ethical issues effectively.

This study makes three main contributions to the literature. First, it testswhether or not, in the context of Chinese organizations, clarity about ethicalrules has a direct impact on the resolution of ethical issues. Second, it testswhether or not clarity of ethical rules increases the likelihood that organizationalmembers will engage in constructive controversy in relation to ethical issues.Third, it tests whether constructive controversy is a factor in mediating clarityof ethical rules in the handling of ethical issues, thus facilitating resolution ofethical issues, as reflected in substantive ethical impact, interactive justice (Biesand Moag 1986), strengthened relationships, and confidence among affectedorganizational members that they can discuss future ethical issues effectively.

Ethical challenges in the People’s Republic of China

The location of our study is the mainland of the People’s Republic of China(PRC). During nearly three decades of economic reforms (Jackson 1992) strongeconomic growth has been accompanied by serious air and water pollution(Tong 2007), breaches of labor rights (Chan 1997; Shen 2008), food and drug

186 Asia Pacific Journal of Human Resources 2010 48(2)

safety scandals (Ip 2009a) and high levels of corruption and fraud (Chow 2006;O. Yu 2008), reflecting the erosion of ethical standards and the rise of a ‘profit-at-any-cost mentality’ (Ip 2009a, 214)

The relatively underdeveloped infrastructure of laws, rules and theirenforcement (Cheung and King 2004, 256–7; Hao 1999; Tam 2002), and thepervasiveness of guanxi (use of personal or kinship connections) as an alter-native to impartial justice (Hwang and Staley 2005) and as a means for gainingspecial consideration in the allocation of benefits, resources and opportunities(Ip 2009b) present additional challenges to business ethics in the PRC. Finding,building, and maintaining strong guanxi, through networking, gift-giving,entertaining and friendship-making with authorities (Chen and Chen 2004;Zou and Gao 2007) is perceived to be a normal way to obtain favorablecommercial agreements, to win public tenders, and to obtain financial backing,in preference over rivals with weaker guanxi (Ip 2009b). While some scholarsclaim that it is possible to distinguish at least some types of guanxi from corrup-tion (Chatterjie, Pearson and Ni 2006; Steidlmeir 1999; Su, Sirgy, andLittlefield 2003), and some even argue that personal guanximay enhance effec-tiveness (Chen and Tjosvold 2006, 2007), others argue that that guanxi andcorruption are inextricably entangled (Chu and Ju 1993; Farh et al. 1998;Hoivik 2007; Hung 2008; Hwang et al. 2009; Ip 2009b; Snell and Tseng 2001).In recent years, there have been signs of an official movement by PRC author-ities (Paradise 2009), to re-introduce the Confucian virtues (Chan 2008; Lam2003), namely, ren (compassion, benevolence), yi (righteousness) and li(propriety), in order to reduce corruption and promote social harmony.However, as Ip (2009b, 471) argues:

Being virtuous by itself is not sufficient to make concrete moral judgmentabout the rights and wrongs of things all the time. To make a judgmentabout the ethics of an act, people often need to invoke elements other thanvirtues. They need norms and rules.

Notwithstanding the distinctly Chinese challenges faced in managingorganizational ethics in the PRC, experience in advanced economies providesa reference point. Companies in Hong Kong as well as in the West haveresponded to public concern about ethical issues such as bribery, fraud, harmfulproducts, and unfair discrimination, by institutionalizing corporate codes ofconduct (Conference Board 2002; Gellerman 1986; Kaptein 2004; Langlois andSchlegelmilch 1990; Schweitzer, Ordonez and Douma 2004; Snell, Chak andChu 1999; Vitell and Singhapakdi 2008). While codes of ethics appear to beunfamiliar in the PRC (Ngai 2005), it is still possible for companies there toapply ethical rules in a manner perceived as fair, rational and strict (Snell andTseng 2002, 466–7). Training programs, storytelling, meetings, coaching,mentoring and observation, are also channels through which ethical rules maybe conveyed to organizational members (Hoivik 2007; Ip 2002; Stevens 1999).

Ethical rules and open-minded discussion 187

Managing and applying ethical rules

Various factors, such as pressures for short-term profit, desire for career advance-ment, and concerns about job retention can precipitate actions that conflict withethical values (Jackall 1988). The research reported in this paper concerns worksituations in which organization members faced the prospect that ethical valuesmight be undermined by what was being proposed, planned, and done or notdone by others. In such situations, organization members are likely to face achoice between raising the ethical issue for discussion or remaining silent andnot intervening. This study uses ethical issues as a generic term to include alsoethical dilemmas, where the implications of the principles themselves mayconflict (Maclagan 2003; Maclagan and Snell 1992; Toffler 1986).

Organization members may respond to an ethical issue with silence andpassivity if they assume that responsibility for applying rules and for dealingwith potential violations resides solely with top managers (Drumwright andMurphy 2004; Snell and Herndon 2004; Stevens 2008, 603). Furthermore,Lovell (2003) found that when faced with ethical issues, those who declinedfrom voicing their moral concerns remained silent for five main reasons: therisk of being perceived as not prioritizing economic imperatives; fear aboutadverse impact on career prospects; poorly defined responsibilities; cynicismabout the moral will of others; and fear of spoiling relationships.

Clear ethical rules may encourage open discussion of ethical issues bydefusingmost of these reasons for silence. First, they provide company-sanctionedjustifications for actions or decisions beyond the purely economic or narrowlylegal (Coughlan 2005; Donker, Poff and Zahir 2008). Second, they may offercareer protection to internal whistleblowers (Hassinck, de Vries and Bollen2007). Third, they can communicate a commitment by the organization that itis everyone’s responsibility to avoid or prevent ethically questionable or unac-ceptable behavior and to identify and adopt acceptable alternatives (McDonaldand Zepp 1989). Fourth, they can strengthen moral resolve by indicating thatmembers who fail to engage in acceptable behaviors are likely to face disciplinaryaction in the event of violations (Gellerman 1986). The remaining barrier,adverse impact on relationships, may not be a problem if organizationalmembers are confident that they can adopt acceptable forms of discussion.

The next section discusses the relevance of the research on constructivecontroversy for ethical decision-making. We consider that clear rules are likelyto increase organization members’ willingness to initiate discussion aboutethical issues, and hence the likelihood that constructive controversy will takeplace. However, discussion of ethical issues may not necessarily be character-ized by constructive controversy. For example, some employees may interpretand seek to implement ethical rules in rigid ways. Piaget (1965) and Kohlberg(1969) identified a sequence of stages of moral reasoning through which, at thelater stages, people develop more mature ways of ethical reasoning, includingan understanding that morality is not realized through literally following rules


but that moral principles require interpretation to fit the circumstances andmay also conflict with each other. However, if only the earlier stages areengaged, parties to a discussion may, by contrast, treat moral principles in anabsolutist manner, where they feel that these must be enforced rigidly. To theextent that people steer clear of this and other defensive reasoning (Argyris1990), they can engage in constructive controversy.

Constructive controversy

Organizational members often have strong feelings and opinions as theyencounter ethical issues. Controversy occurs when decision-makers openlyexpress their opposing ideas, opinions, conclusions, theories, and informationthat at least temporarily obstructs resolving an issue (Wang et al. 2010).Diversity and conflict promote understanding of complex issues and the devel-opment of quality solutions (Amason 1996; Cosier 1978; Eisenhardt 1989;Eisenhardt and Bourgeois 1988; Mason and Mitroff 1981; Schweiger, Sandbergand Rechner 1989; Valacich and Schwenk 1995). Researchers have proposedvarious ways to structure controversy, such as devil’s advocacy and dialecticinquiry, to aid decision-making (Cosier 1978; Schweiger, Sandberg and Ragan1986). Diversity within teams, when properly harnessed, is thought to promotedialogue and debate that stimulate innovation (Leonard and Sensiper 1998;Leonard and Straus 1997; Nonaka 1990).

Studies indicate that controversy can help problem-solving (Tjosvold and Yu2007). Groups comprising persons with different views and outlooks and groupswhose leader encouraged expression of minority opinions made high-qualitydecisions (Maier 1970; Wanous and Youtz 1986). Recently, researchers haveemphasized that conflict over task issues can contribute significantly to group andorganizational performance (De Dreu and Van de Vliert 1997; Jehn 1997).

Experiments document the dynamics involved in controversy and, specif-ically, how controversy can promote decision-making (Tjosvold 2008). Decision-makers in controversy have been found to be open to new and opposinginformation. Confronted with an opposing opinion, they have felt uncertainabout the adequacy of their own position, indicated interest in the opponent’sarguments, and asked questions to explore the opposing views. They haveshown that they knew the opposing arguments and understood the reasoningothers used to examine the problem and develop the opposing perspective. Theyhave also taken the information seriously, developed a more complex andaccurate view of the problem, and incorporated the opposing position into theirown thinking and decisions. Conflictful interaction has also resulted in creationof new solutions not originally proposed. Participants in constructive contro-versy have used information and ideas from others to develop a more completeawareness and appreciation of the complexity of the problem and have arrivedat a solution that responds to the complete information.


In relation to ethical issues, the need for discussion of different positionsand for working toward a consensus for a just and lasting resolution has beenrecognized by philosophers through the ages (French and Allbright 1998).Confucian perspectives emphasize the role of weighing potentially conflictingmoral obligations and resolving how they apply to a particular situationthrough reasoning and discussion (Cua 2002; Roetz 1993). However, whilethere is near unanimity among commentators that it is desirable to resolveethical issues through reasoned discussion and dialogue, doing so appearsdifficult in practice (French and Allbright 1998; Nielsen 1996).

Experiments have directly investigated the discussion of ethical issues(Tjosvold and Johnson 1977, 1978). Discussants who discussed their opposingviews openly about a moral dilemma taken from Rest (1986), compared tothose who avoided an open discussion, were found to be more interested, toask more questions, and to become more knowledgeable about the other’smoral reasoning. Indeed, they accurately understood the stage of moralreasoning the person had used and identified the kinds of argument theiropponent would use in a second moral dilemma.

However, it is not just open discussion of controversy that is useful.Decision-makers who emphasize solving the problem for mutual benefit areable to incorporate opposing ideas and information into high-quality decisionswhereas trying to outdo each other leads to closed-mindedness (Deutsch 1973;Tjosvold 2008). Trying to win the controversy induces defensiveness andrejection of opposing ideas. Constructive controversy occurs when decision-makers discuss their opposing views for mutual benefit.

These studies identify the key components of constructive controversy;namely, participants expressing their own opinions openly, feeling uncertainabout the adequacy of their own positions, inquiring about their opponent’sarguments, putting themselves in each other’s shoes and seeing the problemfrom other perspectives, taking new and opposing information seriously anddemonstrating that they know the other’s arguments, incorporating thesearguments into their own thinking and decisions, and creating effectivesolutions that respond to the more complete set of information. Studies overallsuggest that open discussion of opposing views for mutual benefit can promotethe effective resolution of ethical issues.

Model and hypotheses

While previous research has examined the impact of common goals onconstructive controversy and ethical decision-making (Snell, Tjosvold and Su2006), this study tests a model linking clarity of ethical rules with constructivecontroversy and the resolution of ethical issues (see figure 1).

As argued in the above section on managing and applying ethical rules,ethical rules that are clear are expected to be useful, not by dictating behaviorand making individuals conform, but by removing barriers to the discussion


of ethical issues and thereby increasing the likelihood of direct, open-mindeddiscussion about such issues.

Hypothesis 1. To the extent that clear ethical rules have been developed,organizational members engage in constructive controversy aboutethical issues.

This study adopts four measures of the effectiveness of a resolution arisingfrom discussion of an ethical issue. First, the resolution should have a positiveethical impact, where people involved conclude that any harm will be kept toa minimum and that a morally acceptable solution will be implemented, wherethey believe that they have prevented unethical action and are more committedto preventing or rectifying harm. The second measure concerns interactivejustice, where members perceive that their response to the ethical issue hashelped them and others to consider each others’ viewpoints and to deal witheach other in a truthful, considerate, and fair manner (Bies 1987; Bies andMoag1986; Tyler and Bies 1990). Interactive justice is especially important because ithas been found to be an antecedent to other types of justice (Cohen-Charash


H1 +

H2a +

H2b +

H2c +

H2d +

Ethical rulesConstructivecontroversy

Ethicalimpact

Interactivejustice

Relationshipbuilding

Futurediscussibility

Figure 1 Hypothesized model

and Spector 2001) and to the quality of leader-member exchange (Mastersonet al. 2000). Third, as organizations require people to continue to work togetherin the future, an effective resolution includes strengthening interpersonal rela-tionships. This is also an important issue, since as noted earlier, fear of spoilingrelationships has been identified as a reason for avoiding discussion of ethicalissues (Lovell 2003). Constructive controversy may serve to strengthen, ratherthan weaken, interpersonal relationships. Fourth, resolutions should also beachieved in ways that make people more confident that they can discuss ethicalissues as they encounter them in the future (Argyris 1985). The relationshipsproposed are summarized in the following hypotheses:

Hypothesis 2. To the extent that organizational members engage inconstructive controversy about an ethical issue, they develop a morallysound resolution in terms of: (2a) protection and enhancement of their ownethical values (ethical impact); (2b) interactive justice; (2c) strongrelationships; and (2d) confidence in future discussions.

Participants

Out of 120 employees who were approached, 10 employees explicitly refusedto complete the interviews, among whom 4 said that they felt it hard to under-stand the questions and 6 were unwilling to disclose their personal informa-tion. Of the 110 employees who agreed to proceed through the interview, andwhose questionnaires were collected, 9 did not provide all the data asked for.The 101 participants who provided complete responses were from organiza-tions in various sectors, specifically: manufacturing; electronic equipment andtechnology development; agencies of foreign companies; construction andarchitecture; trading; marine transportation, airline and harbor; storage,wholesale and retail; banking, insurance, securities and investment; real estate;IT, software, telecommunications, radio and television; power stations, powermachinery and petroleum exploitation; consultation, accounting and services;health care, social welfare and hospitals; chemistry and medicine; andeducation, culture and entertainment. Regarding personal information, 67were male and 34 were female; 9 were under 25 years old, 57 were 25–30, 17were 30–35, 6 were 35–40, 10 were 40–50, and 2 were 50–60; 53 were marriedand 48 were not. In terms of educational attainment, one had not graduatedfrom high school, 6 were high school graduates, 61 were university graduates,and 33 had postgraduate degrees. There were 37 non-managerial employees,35 junior managers, 25 intermediate-level managers, and 4 senior managers.

We chose the sample mainly to reflect the diverse industries and gender-balance among employees in Shanghai, as documented in the Shanghai statis-tical yearbook (2003). Another factor in selecting participants was that we chose


Method

those who were likely to understand our questions. While the sample is toosmall and locality-specific to represent the Chinese mainland as a whole, theirresponses and accounts could represent important social dynamics in discussingethical issues in this study.

Interview schedule

The critical incident technique (CIT; Flanagan 1954) was used in this study todevelop our interview structure. CIT has been considered to be particularlyuseful when studying complex interpersonal phenomena (Walker and Truly1992). This method is thought to help moderate errors compared to whenpersons are asked to summarize across many incidents as required in mostsurveys (Schwartz 1999). The interviews were conducted in Shanghai and eachlasted one hour.

Interviewees were informed that the objective of the study was to investi-gate how people interact with others when dealing with issues that may be incon-sistent with values about right and wrong. Interviewees were asked to describea recent, significant incident in detail when they worried that values about rightor wrongmight be undermined by what was being proposed, planned, and doneor not done at work. They were advised, ‘For example, you might be concernedabout whether information is being kept confidential in accordance with theorganization’s procedures, whether proper records are being kept, that budgetaryauthority is being abused, or that customers are not treated in the respectful waysthe organization expects.’ They were told that their chosen incident could referto an issue with either a satisfactory or unsatisfactory resolution. Each intervieweereported one incident, for a total of 101 cases. Interviewees were assured thattheir responses would be kept totally confidential.

As the interview schedule was developed in English, three bilingualresearchers translated it into Chinese. The questions were back-translated intoEnglish to check for possible deviation to ensure consistency (Brislin 1970).The translators and back-translators then met to discuss the differences anddevelop the final Chinese version of the instrument.

After describing the ethical incident in detail, interviewees rated aspects ofthe context, the process, and the outcomes on specific scales (see appendix) duringthe rest of the interview. All items were based on the recalled incident and useda 7-point Likert scale (from 1 = ‘strongly disagree’ to 7 = ‘strongly agree’).

Measures

Three items indicated interviewees’ perceptions of the clarity of their organ-ization’s ethical rules and prohibitions. These items measured the extent towhich interviewees perceived that their organization: identifies unethicalbehaviors that are forbidden; communicates clear expectations about how


employees are to act in this kind of situation; and warns that organizationalmembers will be disciplined for unethical actions in this kind of situation.These three items were combined to form the ‘ethical rules’ variable with aCronbach alpha reliability of 0.75.

Interviewees then responded to five items about the discussion in whichthey engaged concerning the ethical issue (Tjosvold, Wedley and Field 1986).The interviewees rated the extent they and the other worked together for thebenefit of both, expressed their own views freely, considered each other’s viewsopen-mindedly, tried to understand each other’s concerns, and used eachother’s ideas. These five items were combined to form the constructive contro-versy variable with a Cronbach alpha reliability of 0.86.

A four-item ethical impact scale measured the extent that their inter-action with the other had substantive ethical impact. Thus the intervieweesevaluated the extent that the interaction had helped them to resolve theirethical dilemma, conclude that what would happen was morally acceptable,anticipated that there was less likelihood that someone would be harmed, andempathize with the people who might have been harmed. This scale had aCronbach alpha reliability of 0.70.

A three-item scale developed fromMoorman (1991) measured interactivejustice, i.e. the extent to which the interaction helped the interviewees believethat the other is considering their viewpoint, treats them with kindness andconsideration, and provides fair interpersonal treatment. The interactivejustice scale had a Cronbach alpha of 0.93.

A four-item future discussibility scale measured the extent that their inter-action with the other had served to encourage future discussion of ethical issues.For example, the interviewees evaluated the extent that the interaction hadhelped them to be more confident that they could discuss ethical issues construc-tively with people involved in this incident. This scale had a reliability of 0.90.

Relationship building was measured by a three-item scale. For example,interviewees rated the extent that the interaction strengthened their relationshipwith the other person in the incident. This scale had a Cronbach alpha of 0.79.

Scale validation

We carried out a series of confirmatory factor analyses to test whether therespondents’ ratings would load on ethical rules, constructive controversy,ethical impact, relationship building, future discussibility, and interactivejustice as distinct factors. In order to reduce the number of parametersestimated, and to develop parallel test forms (Nunnally 1978), we simplifiedthe structural model by reducing the number of indicators for the multi-itemconstructs. Specifically, we combined those items with the highest and lowestloadings by averaging until this yielded three indicators for each construct.


Results


This is a common approach in the literature of structural equation analysis(Mathieu and Farr 1991; Mathieu, Hofmann and Farr 1993). With six latentconstructs, and an effective sample size of 101 interviewees, the indicators tosample size ratio was favorable.

Table 1 shows a good fit between our proposed 6-factor measurementmodel (model M0) and the data, with a comparative fit index (CFI) and anormed fit index (NFI) of 0.92 and 0.83, respectively. The 6-factor measure-ment model was then compared to 5 different 5-factor models, a 3-factorsolution model and a 1-factor solution model. In order to make these compar-isons, each of the 5-factor models (M1 to M5) was formed by merging 2 of the6 factors into one aggregate factor, the 3-factor model (M6) was formed bymerging 4 of the 6 factors into one factor and the 1-factor solution model (M7)was formed by merging all indicators into a single factor. These seven alter-native models were selected on the basis of the logical possibility that each pairof adjacent variables in the model might not be conceptually distinct, and thatinstead of there being a causal relationship, there might be a single factor.

Table 1 Scale validation through confirmatory factor analyses

Models d.f. Model χ² ∆χ² NFIa CFIb

Baseline 6-factor model (M0) keeping Ethical rules,

Constructive controversy, Ethical impact, Interpersonal

justice, Relationship building and Future discussibility as

distinct factors

137 219.65 – .83 .92

5-factor model (M1) including a combined Ethical rules

and Constructive controversy factor

143 303.01 83.36 .85 .75

5-factor model (M2) including a combined Constructive

controversy and Ethical impact factor

143 288.14 68.49 .86 .77


controversy and Relationship building factor

143 350.12 130.47 .80 .71


controversy and Interactive justice factor

143 366.69 147.04 .78 .70


controversy and Future discussibility factor

143 369.43 149.78 .78 .70

3-factor model (M6) including a combined Ethical

impact, Interpersonal justice, Relationship building and

Future discussibility factor

152 417.25 197.6 .74 .66

1-factor solution (M7)c 157 624.30 404.65 .55 .50

N =101aNFI Bentler-Bonnett normed fit indexbCFI comparative fit indexc In the one-factor model (M7), all the factors were combined into one factor.

Results in table 1 show that the model Chi-squares of the alternativemodels (M1, M2, M3, M4, M5, M6 and M7) were all significantly greater thanthat of the proposed 6-factor model (M0). All the alternative models hadsubstantially lower CFI scores and most had lower NFI scores. Overall, thesecomparisons suggest that the 6 factors in the proposed model (M0) weredistinct measures of the constructs in our study.

Hypotheses testing and other analysis

Correlational analysis was performed first for initial hypothesis testing. Formore rigorous testing, structural equation analysis was then used to examinethe underlying covariance structure between ethical rules, constructive contro-versy (open-minded discussion), ethical impact, interactive justice, relationshipbuilding and future discussibility.

A nested model test, which is commonly adopted in causal model analysis,was used and the indirect effects model that proposed mediating effects wascompared to the direct effects model. The direct effects model holds thatethical rules impacts outcomes directly. The indirect effects model holds thatopen-minded discussion mediates the relationship between the antecedentvariables and the outcomes.

Correlational analyses

The correlations (see table 2) support the first hypothesis that clarity of ethicalrules and constructive controversy were positively related (r = 0.37, p < 0.01).Results were also consistent with other hypotheses that organizationalmembers who engaged in constructive controversy developed a morally ethicalimpact, interactive justice, relationship building, and future discussibility (r =0.24, p < 0.05; r = 0.45, p < 0.01; r = 0.43, p < 0.01; r = 0.52, p < 0.01).


Table 2 Correlations among variables

Mean SD 1 2 3 4 5 6

1 Ethical rules 4.06 1.31 (.75)a

2 Constructive controversy 4.02 1.25 .366** (.86)

3 Ethical impact 4.17 1.16 .198* .242* (.70)

4 Relationship building 4.27 1.27 .213* .426** .467** (.79)

5 Interactive justice 4.03 1.28 .204* .451** .261** .654** (.93)

6 Future discussibility 3.99 1.41 .293** .516** .347** .655** .502** (.90)

N = 101a Values in brackets on the diagonals are reliability (coefficient alpha) estimates.*significant at p < 0.05 **significant at p < 0.01


Structural equation analysis

Using the nested model test in causal model analysis, the indirect effects model,which hypothesized that constructive controversy mediates the relationshipbetween the antecedent of ethical rules and the outcomes of ethical impact,interactive justice, relationship building, and future discussibility, wascompared with the direct effects model, which proposed a direct relationshipbetween clarity of ethical rules and these outcomes.

The fit statistics and path coefficients for the hypothesized model andalternative model are displayed in table 3. The Chi-square of the indirecteffects model was 2.72 (d.f. = 4) and the Chi-squareof the direct effects modelwas 44.59 (d.f. = 5). The hypothesized model thus represented substantialimprovements in Chi-square over the alternative model. The NFI (0.98 versus0.77) and CFI (0.99 versus 0.77) fit statistics also indicated that the indirecteffects model fitted the data better than the direct effects model. Figure 2represents the accepted model. Results indicate that ethical rules has signifi-cant positive effects on constructive controversy (ß = 0.35, p < 0.01), thussupporting hypothesis 1. Constructive controversy has significant effects onthree of the four outcomes, namely, interactive justice, relationship building,

Table 3 Results of the nested model analyses

Indirect effects model (hypothesized model)

Direct effects model (after dropping paths to

and from constructive controversy)

Path from Path to Path coefficient Path from Path to Path coefficient

Ethical rules Constructive

controversy

.35**

Constructive

controversy

Ethical

impact

.013 Ethical rules Ethical

impact

.18

Constructive

controversy

Interactive

justice

.46** Ethical rules Interactive

justice

.20

Constructive

controversy

Relationship

building

.43** Ethical rules Relationship

building

.21

Constructive

controversy

Future

discussibility

.58** Ethical rules Future

discussibility

.29

Model χ2 2.72 Model χ2 44.59

d.f. 4 d.f. 5

NFIa .98 NFI .77

CFIb .99 CFI .77

a NFI Bentler-Bonnett normed fit index.b CFI comparative fit index.**significant at p < 0.01.

and future discussibility (ß = 0.46, p < 0.01; ß = 0.43, p < 0.01; ß = 0.58,p < 0.01), thus supporting hypotheses 2b, 2c and 2d, but not on ethical impact(ß = 0.13, ns). Hypothesis 2a was not supported.

Summary of ethical incidents

We classified each of the 101 incidents according to its main presenting issue,and identified as many as nine categories, indicating a wide range of presentingissues. The categories and their frequency (in brackets) were: employees notreceiving proper payment, or otherwise being unfairly treated (29 mentions);failure of work procedures to meet company standards (27); failure ofproduct/service quality to conform to standards or requirements (20); lack ofteamwork and open discussion (7); unreasonable or unwarranted expenditures(5); breach of confidentiality (4); improper record-keeping (4); company strat-egies that may harm the community (4); and information inaccuracy (one). For


Figure 2 Path coefficients of the indirect effects model

0.35**

0.013

0.46**

0.43**

0.58**

Ethical rulesConstructivecontroversy

Ethicalimpact

Interactivejustice

Relationshipbuilding

Futurediscussibility

**significant at p < 0.01


each incident, the associated presenting issue was also linked to concern withone or more underlying ethical principles such as justice, honesty, integrity,moral duty, respect, prevention of harm, and achieving the greater good.

Illustrative cases

We now present two cases (A and B), illustrating how the clarity (or lack ofclarity) of ethical rules and prohibitions may have facilitated (or impaired)constructive controversy, and how constructive controversy (or the absence ofconstructive controversy) may have had a positive (or negative) effect on inter-active justice, relationship building, and future discussibility.

Case A illustrates how, as reported by one interviewee, absent ethical rulesinhibited the use of constructive controversy to resolve an ethical issue,resulting in undesirable ethical impact, interactive injustice, a weakenedsuperior–subordinate relationship, and reduced confidence in the futurediscussibility of similar issues.

A male technical worker, who had been employed in an elevator companyfor more than 20 years, reported that, at the time of the incident, he had becomeconfident in his familiarity with his company’s products, and that customerssaw him as warm-hearted, such that many had been turning to him if theyencountered problems in using the elevators, and that he had sometimes helpedthem to solve such problems, in return receiving what he regarded as small butreasonable payments from them for his extra services. He added that his generalmanager had known about such matters for a number of months. Thus, heappeared to believe that there were no ethical rules that specifically proscribedsuch behavior, and that his behavior was legitimate, and not forbidden.

However, this interviewee said that eventually the general manager chal-lenged his behavior, claimed that it had been harming their company, andinformed him that it was the company’s responsibility to arrange the repairwork, not that of the employee. The interviewee said that he disagreed withhis general manager’s assessment. He believed, to the contrary, that it was hisresponsibility to solve the problems of the company’s customers, and that doingso was beneficial to the company. It appeared that in their discussions therewas no reference to company rules, with the implication that if there had beenclear rules about this issue, the managing director would have been able toinvoke them.

This interviewee said that in the end, rather than being persuaded throughdiscussion, he was forced to promise to his general manager (i.e. in the absenceof constructive controversy) that he would not provide this kind of service tothe customers in future and was given a formal warning as a punishment. Herated the incident low on interactive justice, expressing the feeling that he wastreated disrespectfully. He also reported a very negative relationship with hisgeneral manager after this incident and expressed very low confidence in thelikely value of future discussion about similar issues.

Case B illustrates how, as reported by another interviewee, clearly formu-lated ethical rules can pave the way for constructive controversy, leading tointeractive justice, and to perceptions of improved relationships and expecta-tions of strengthened future discussibility of ethical issues.

This incident was reported by a young female interviewee, who occupieda relatively junior post at a retail branch of a cosmetics company. The contextfor the issue was that one particular brand of cosmetics had been selling espe-cially well, but the branch was running out of saleable stock because althoughthere were still 80 boxes of this product left, these all had a residual shelf life ofonly one year. The branch had requested a large consignment from the head-quarters and had been waiting for many days, but the consignment had stillnot arrived. The interviewee described events at a meeting, where a colleaguesuggested to their store manager that they should revise the shelf life stampedon the products, a suggestion that inspired much controversy. The storemanager supported the colleague’s suggestion, noting that the original shelf lifeof this product was 2.5 years, significantly shorter than the 3-year shelf life formost of the products sold by the company. The store manager also argued thatthat this measure would prevent a stock-out ‘crisis’ and in his view would notcause serious harm to the customers. The interviewee said that on hearing this,she wondered whether to argue against the proposal or keep silent. After initialhesitation, she decided to voice her point of view directly, since she believed thatthe proposed action would go against the ethical rules of their company, andthat they would be punished if someone in the headquarters were to find out,i.e. she regarded the ethical rules as clearly formulated.

Therefore, the interviewee in case B spoke against her colleague’s sugges-tion, telling the others that, from the perspective of a woman, she understoodthe customers’ expectations when buying the cosmetics, and expressing herconcern about the potential physical and psychological harm to the customers.After some discussion, the store manager decided to turn down the colleague’ssuggestion that he had originally supported, and indicated agreement with theprinciple raised by the interviewee, and with the company’s ethical rules.

The interviewee in case B rated her discussion with her superior, the storemanager, as above average in terms of constructive controversy. She alsoindicated satisfaction with the interactive justice entailed by the incident, andindicated that the way in which she reached an agreement on this issue withthe store manager strengthened their relationship and gave her confidence inthe future discussibility with him of ethical issues regarding the quality of thecompany’s products.

The results of the study provide qualified support for the indirect effectsmodel. Those participants who indicated that their organization had clearlyformulated rules concerning ethical behavior tended to report also that they


Discussion


were able to engage in open-minded discussion of various views with othersinvolved in dealing with an ethical issue. Open-minded discussions were,in turn, found to lead to three kinds of effective outcome: interactivejustice, strengthened relationships, and confidence that constructive discus-sions about ethical issues would take place in the future.

Qualified support for the indirect effects model but not for the directeffects model indicates that constructive controversy supplements ethical rulesin enhancing some outcomes of critical incidents involving ethical dilemmas.While identifying and announcing clear ethical rules are first steps in devel-oping an ethically responsible organization, constructive controversy, whichentails skilled, open-minded discussion, is also needed to help organizationalmembers consider ethical issues more effectively.

Clarity of ethical rules was found to encourage organizational membersto engage in open discussion and debate with others who are also involved.Knowing that ethical behavior is valued by the organization may leademployees to believe that discussing ethical issues is also appreciated andwelcomed, and may thus embolden them to identify ethical problems andvoice their views about them. Constructive controversy supported by clearethical rules may spread optimism among organization members about theirability to discuss ethical issues in an interactively just manner, since theyprovide a foundation for working out how ethical issues can be resolved onceidentified. Future research is needed to explore and document further thedynamics through which rules foster constructive controversy.

In supporting hypotheses 2b, 2c and 2d, the results are consistent withsocial psychological theory and research indicating that agreement on thecontent of norms and other rules promotes social order (Coleman 1990;Hechter 1984; Parsons 1952; Scott 1971). The combination of agreement aboutwhat the rules are and the phenomenon of constructive controversy may seemlike a paradox in that organizational members are seen simultaneously to agreeand yet also to disagree. Nonetheless, as Piaget (1965) and Kohlberg (1985)have argued, applying ethical rules or principles in practice requires contro-versial discussion in order that solutions can be developed that resolve contra-dictions among such rules or principles while also responding to non-moralvalues, such as the efficient use of resources. The study builds upon previousresearch by suggesting that constructive controversy is a useful model ofcommunicative discourse that is conducive to the discussion of ethical issues(French and Allbright 1998; Snell, Tjosvold and Su 2006).

However, as manifest in the lack of support for hypothesis 2a, ethical ruleformulation followed by constructive controversy did not appear to havesubstantive ethical impact, as perceived by organization members. This mayreflect that, in the great majority of organizations, ethical rules tend to beimposed top-down rather than developed and revised through constructivecontroversy involving organizational members (Business Roundtable 1988;Collins and O’Rourke 1993; Snell and Herndon 2000). While constructive

controversy that takes place after ethical rules have already been formulatedmay help to increase understanding among organizational members about whatthe extant rules are, this may not necessarily ensure that they will reachagreement about the soundness of the extant rules, such that even if behavioris brought into alignment with them, some members may believe that alterna-tive courses of action may be morally superior. This line of analysis suggeststhat constructive controversy might have greater ethical impact if it wereemployed to guide and facilitate the development of ethical rules, and notmerely facilitate common understanding about their application. Furtherresearch is needed to explore the proposition that ethical rules that aredeveloped through constructive controversy may be more robust impedimentsto the escalation of unethical practices than are rules that are imposed top-down.

Limitations

We acknowledge that, in a massively populated country such as the People’sRepublic of China, characterized by huge variations in wealth, industrycomposition, and regional norms, sample selection may have limited the gener-alizability of our results.

Also, in terms of internal validity, the salient statistics comprise relationalconstructs that are subject to biases associated with self-reporting, and mayonly provide partial and inaccurate representations of the incidents that werereferred to. That said, research published in respected outlets suggests that self-reported data may not be as biased as commonly expected, and that peopleoften accurately perceive and report their social environment, especially whenthey are given credible assurances that they themselves are not being evaluated,and that the purpose of the study concerns research into focal areas that relateto external factors (Balzer and Sulsky 1992; Crampton and Wagner 1994;Murphy, Jako and Anhalt 1992; Shrauger and Osberg 1986; Spector 1992;Sudman, Bradbum and Schwarz 1996). Furthermore, arranging for the inter-viewees to provide full descriptions of a critical incident, while also ratingspecific aspects of this incident, may have reduced the scope for distortion orbias, as compared with studies that ask informants for broad generalizationsacross events (Podsakoff and Organ 1986; Schwartz1999; Sudman, Bradbumand Schwarz 1996). While the study faced the possibility of common methodvariance, commentators have pointed out that this may not be as much of anartifact as is often assumed (Spector 1987; Avolio, Yammarino and Bass 1991).Furthermore, as shown in table 1 and reported in the scale validation subsec-tion, a 1-factor solution (M7) was tested and was found to be a relatively poorfit with the data. Notwithstanding this, further research studies, between themusing a variety of methods, are needed to further test and refine the proposi-tions argued here (Spector and Brannick 1995). For example, it would bedesirable to provide direct experimental verification of the role of ethical rulesand constructive controversy in resolving ethical issues.



Practical implications for organizations and managers

The ideas of ethical rules and constructive controversy, although originating inthe West, have proved useful in this study for understanding the resolution ofethical issues in China (Deutsch 1973). In addition to developing theoreticalunderstanding, those hypotheses that have received support from our findingshave important practical implications for helping organizational members tomanage ethical issues that arise at work.

The results overall suggest that top managers in organizations shouldfacilitate the development of consensus both on what their organization’sethical rules should be and on the value of open-minded discussion of theapplication of these rules as aids to an ethically responsible organization. Theybroadly support the suggestion that top managers in the PRC should arrangefor the development and dissemination of codes of ethical conduct, provideclear explanations and practical applications, and organize group sessionsinvolving employees at all levels to discuss these rules. We suggest also thatcode items themselves should not be imposed top-down, but instead bedeveloped through constructive controversy involving employees, since ethicalcodes that are imposed top-down are unlikely to engage employees in devel-oping and applying their own ethical values (Engels-Zandén 2007; Hoivik2007; X. Yu 2008, 2009).

The present study suggests also that constructive controversy facilitates theongoing review of ethical rules. Managers can include constructive controversyin the same vehicles that they use to develop ethical rules so that employeesunderstand that there is consensus for open discussion as well as ethical rules.In addition, employees can be trained to develop the central skills of construc-tive controversy, namely, expressing views directly and forcefully, understandingand rephrasing the opposing views, combining diverse ideas into new solutions,and agreeing to high-quality alternatives (Tjosvold 2008). Managers shouldensure that employees also recognize the need for constructive controversy anddevelop skills in its use, so that they can discuss ethical issues open-mindedly formutual benefit. In this way, organization members would be equipped to applyethical rules and promote ethical values in sensitive, practical ways.

Discussions that address controversy, in which people confront the limita-tions of absolutist applications and appreciate alternative resolutions, have beenfound, in the West, to induce people to develop more principled, ethicallymature reasoning capabilities (Johnson, Johnson and Tjosvold 2006). Ourfindings indicate that to the extent that constructive controversy takes place inrelation to ethical issues in mainland China, it serves to build relationships,foster interactive justice, and encourage further discussions. The results of thestudy also support the theorizing that ethical rules tend to encourage, ratherthan discourage, open discussion of ethical issues. With a consensus on whatthe rules are, organizational members have reason to believe that discussingethical issues will be welcomed and that they will be able to discuss their diverseviews openly for mutual benefit to create solutions. Qualitative data also suggest

that conditions for constructive controversy would be more favorable if thoseinvolved in an issue were to assume that it is appropriate to discuss ethical issuesand were to accept that organizational practices are open to challenge, even ifthe ones in question are initially preferred by a superior. In practical terms,organizations may prevent the escalation of unethical activities by trainingmembers to engage in constructive controversy, arranging for them to use thisas a means of developing ethical rules, and reminding members about the needfor constructive controversy as soon as they detect potential code violations.Ethical issues may bring with them the threat of blame and feelings of angerand annoyance. In the event of such feelings, addressing them throughconstructive controversy is likely also to affirm social face and strengthen rela-tionships (Tjosvold and Su 2007). We interpret the results of our study assuggesting that ethical rules and constructive controversy are important foun-dations for ethical organizations in China and perhaps other countries as well.

Robin Stanley Snell (PhD, Lancaster University) is professor of management and director of Business

Programmes at Lingnan University, Hong Kong. He has written more than two dozen academic journal

papers on business ethics, along with a book, Developing Skills for Ethical Management. These reflect

his longstanding interest in topics such as codes of conduct, anti-corruption, ethical reasoning, ethical

dilemmas, moral atmosphere, moral development, and business ethics education. His other research

has involved the use of qualitative methods to study managerial learning, competencies for small

business growth, organizational learning, workplace invisibility, organizational citizenship, and impression

management.

Dean Tjosvold (PhD, University of Minnesota) is Henry Y.W. Fong Chair Professor of Management. He

was president of the International Association of Conflict Management, and served on the Academy of

Management Board of Governors. He has published over 200 articles, 20 books, 30 book chapters, and

100 conference papers on managing conflict, cooperation and competition, decision-making, power,

and other management issues. He is now associate editor of the Journal of Organizational Behavior and

Asian editor of the Journal of World Business. With colleagues, he has written books on teamwork,

leadership, and conflict management in China published in Chinese.

Julie Lanjun Wu (MPhil, Lingnam) received her Masters in Philosophy degree from the Department of

Management at Lingnan University in 2008. She is now a student in the Supply Chain Program offered

by three universities in the European Union. She is now also doing an internship in Huawei Electronics

and is based in Amsterdam. Her research interests are in cooperation and competition, conflict

management, and supply chain management.



Appendix Measurement scales

Ethical rules

• Our organization specifies the kinds of unethical behaviors that are forbidden in this kind of

situation.

• We in this organization know clearly what the organization requires from us in terms of ethical

behavior in situations like this.

• Members know that they will face disciplinary action if the organization discovers that they

have done something unethical in this kind of situation.

Constructive controversy

• How much did you and the other work together for the benefit of both of you?

• How much did you and the other express your views fully?

• How much did you and the other consider each other’s views open-mindedly?

• How much did you and the other try to understand each other’s concerns?

• How much did you and the other try to use each other’s ideas?

Ethical impact

• To what extent did this interaction help you resolve your ethical dilemma?

• To what extent did this interaction help you conclude that what would happen was morally

acceptable?

• To what extent did this interaction help you conclude that there was less likelihood that

someone would be harmed?

• To what extent did this interaction help you empathize with the people who might have been

harmed?

Interactive justice

• How much did this interaction help you believe that the other person will consider your

viewpoint?

• How much did this interaction help you believe that the other person treats you with kindness

and consideration?

• How much did this interaction help you believe that the other person provides fair interpersonal

treatment?

Relationship building

• How much did this interaction with the other person make you more confident that you could

work successfully with him/her in the future?

• To what extent did this interaction strengthen your relationship with the other person?

• To what extent did this interaction make you more trusting of the other person?

Future discussibility

• The incident made it more likely that I would discuss similar ethical issues in the organization.

• After this incident, I was more confident that I could discuss ethical issues constructively with

people involved in this incident.

• As a result of this incident, I and others involved in this situation are more open about

discussing issues such as this one.

• As a result of this incident, it has become more acceptable for us to discuss ethical issues.


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Clarity of ethical rules for open-minded discussion to resolve ethical issues in Chinese...

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