(Dis)Honesty in Management: Volume 10

Enron, Parmalat, BP, Wal-Mart, Monsanto, Halliburton, Nike, Merck, Google,…the list goes on and on. It is widely acknowledged that business organizations are among the most important drivers of the quality of life that our society enjoys in our day, but the well-publicized samples of dishonest behavior by high-profile organizations around the world create no small amount of skepticism and cynicism.

The economic life is often hindered by problems that can be successfully solved by tapping into concepts of social sciences. Herein, basic assumptions uniform people’s behavior but these may also create problems and thus, nowadays the economy meets the consequences of the so-called “soft issues” for various reasons. In this light, the aim of the volume is to show what kind of influences may turn out from honesty and dishonesty to management and the economy, in general. These effects generate an ensemble where factors could affect and be affected by each other in several ways.

Purpose — The aim of this chapter is to explain the concepts of honesty and dishonesty in management and provide a general understanding why and how honesty and dishonesty may manifest in different ways.Design/methodology/approach — This conceptual chapter discusses what (dis)honesty is, which factors affect it and which consequences result from it. It is illustrated with several short examples.Findings — (Dis)honesty is a complex concept. It is not always possible to classify a certain act as honest or dishonest: sometimes, it is in the ‘grey area’. Moreover, the understanding what is honest and what is not depends on the cultural context. Thus, the term (dis)honesty may be sometimes more appropriate.Originality/value — The complexity of (dis)honesty in management (encompassing its nature, impact factors and consequences) has received relatively little research attention.

Purpose — (Dis)honesty as a quality of our actions can be assessed at different levels. Often these levels have not been differentiated. Semantically we cannot talk about a dishonest society or dishonest organizations — dishonesty can only be attributed to individual actions. We can approach a dishonest act through its essence (deontology), consequences (utilitarianism), and also through the person committing the act (virtue ethics), but most often organizational spheres are too complex objects of study to face ethical dilemmas without the influences that their context can bring. Therefore, the purpose of the chapter is to look at dishonesty as an unethical act through the lenses of behavioral ethics, since behavioral ethics is able to grasp the framing effects of ethical situations while combining the main elements of the previously mentioned traditional ethical theories.Design/methodology/approach — In the current chapter it will be differentiated between traditional ethical theories and acknowledged that depending on the level of analysis (individual, organization, or the society level) with their distinctly different ontological backgrounds, we will have different groundings for making any kind of axiological statements about the dishonesty of an action.Findings — In order to give ethical statements about (dis)honesty in organizations, we cannot neglect the influences brought by context. Organizations with endless social interactions both locally and globally usually have no universal basis for making axiological statements.Originality/value — The originality of this chapter is twofold: firstly to cover the importance of making sense of what ethical approaches we take as a grounding when we make ethical judgments in organizational context, and secondly to analyze whether and how the question of dishonesty differs when we switch between the most traditional ethical approaches. The chapter proposes a new framework how ethical decision-making should be assessed depending on the level of social interactions and how dishonesty is associated with gaining social approval.

Purpose — The purpose of this chapter is to assess empirically the levels of trust across the world and to explore possible differences in the levels of trust among different groups of respondents.Design/methodology/approach — We analyze the individual-level data from 81 countries around the world using latest available European Values Study (EVS) and World Values Survey (WVS) datasets (most data refer to the year 2008). Methodologically, we compose three trust indicators using confirmatory factor analysis and then compare the level of trust in different groups. After that we calculate country-level means of trust indicators and use these as inputs in cluster analysis.Findings — The results of our empirical analysis show that the level of trust among supervisors do not differ significantly from the overall level of trust in a society, supporting the hypothesis that honesty and trust tend to be contagious. Still, there are statistically significant differences in trust levels between almost all explored population groups which were composed on the basis of previous theoretical and empirical literature.Limitations — Our analysis covered only selected socio-economic determinants of trust. It would be reasonable to add some contextual or systemic factors at the level of nation (like GDP per capita, quality of formal institutions, society’s polarization, or others) into further analysis.Originality/value — Our analysis distinguishes between three different types of trust which are studied both at individual and national level. Also, differences between age groups and educational groups, men and women, religious and non-religious persons are examined. Finally, we compare the levels of trust of those supervising someone with the average trust levels in the society as a whole.

Purpose — Analyze and assess the actions taken by the government of Iceland prior to a banking crisis that resulted in the collapse of Iceland’s largest banks in October 2008. Was the government’s behavior prior to the crisis dishonest in the sense that it deliberately tried to fake reality or was the government honest but incompetent in the sense that it did not see the problem coming, and was therefore not trustworthy?Design/methodology/approach — Review of the existing literature, analysis, and assessment of this literature. Case study of Iceland.Findings — The government showed negligence and made mistakes by not taking credible actions to manage risks following a rapid cross-border expansion of Iceland’s largest banks. This had severe consequences and resulted in the collapse of the largest banks in October 2008. Instead of addressing the problems in the economy the government launched a PR campaign and the analysis of various scholars may have helped to justify inaction. According to the Special Investigation Commission (SIC),¹ the government did not address an obvious problem and could perhaps on that basis be charged with dishonesty, including faking reality with PR campaigns. As some scholars put it, the authorities gambled for resurrection, and failed. The analysis carried out by a number of other scholars who downplayed the problem may have confused the government and it may have been honest in its inaction. In that situation one can argue that the government was honest but incompetent and not trustworthy, as according to the SIC and several international scholars the problem was obvious.Research limitations/implications — This is a case study. The study does not present results that can be evaluated on the basis of statistical significance and generalized. Some of the lessons, however, can have a wider relevance than for Iceland only. This is especially true for small countries with a large banking sector, using its own currency, and with limited fiscal space to support the banks during a crisis.Practical implications — The combination of a risk seeking behavior of businesses, in this case in the banking sector, and inactive or negligent governments can result in the collapse of a country’s economy. The Icelandic government should encourage and enforce more risk mitigation via regulations, monitoring, and supervision of the private sector’s cross-border activities. This does not only apply to the banking sector but also to other sectors such as the energy sector.Social implications — Less risk seeking behavior and more risk mitigating actions can stabilize Iceland´s economic growth in the medium and long term, and reduce the risk of an economic collapse that typically has severe social consequences.Originality/value — The so-called Viking spirit of Icelandic business people accompanied with aggressive risk taking and bold business behavior can be very detrimental for a small economy especially when global economic and financial crisis hit.

Purpose — The chapter assesses the linkages between unreported economic activities and different individualistic and non-individualistic motives as perceived by firm management.Design/methodology/approach — The empirical research is based on a survey of the management of firms operating in the Baltic States. The survey contains information on the perceived extent of unreported activities and on a large number of firm-, sector-, and country-specific factors. A principal component analysis identifies clusters of motives for unreported activity. Regression analyses ascertain the importance of motives individually and as principal components on the extent of unreported activities.Findings — Both individualistic and non-individualistic motives are important for the prevalence of unreported activities. The individualist motives refer to the management being solely profit-oriented and self-interested. Among possible non-individualist motives, measures of government performance and perceptions of reciprocity towards the government appear to play important roles for the extent of unreported activities, but broader societal norms may also play a role.Research limitations/implications — The study considers the perceptions that managers have of unreported activities and other features. These perceptions are subjective and subject to substantial uncertainty. All results should be interpreted in light of the subjective nature of the survey answers.Social implications — Taken literally, the results suggest that stronger government performance is associated with a reduction in unreported activities, at least as perceived by the management. Broader societal developments may also be of importance.Originality/value — The inclusion of variables capturing individualistic as well as non-individualistic motives gives a comprehensive picture of factors behind unreported activities. We employ principal component analysis which allows us to cluster individual survey answers and to produce composite measures of different explanatory factors.

Purpose — The main aim of the paper is to study the occurrence and connections of different pre-insolvency violations of law on the example of Estonian firms.Design/methodology/approach — The study is based on the whole population financial data of Estonian bankrupt firms and all publicly available court judgments about firm insolvencies from the period 2002–2009. Three types of violations have been considered: non-submission of annual reports, violations of net asset requirement and elements of criminal offence.Findings — The paper shows that non-submission of annual reports is common for insolvent firms but its occurrence varies through insolvency years and types. A similar finding can be attributed to net asset requirement violations. Elements of criminal offence are also frequent, but their occurrence is not different through insolvency years, industries and firm size groups. Elements of criminal offence and net asset requirement violations are not likely to exist together. Although medians of several pre-insolvency financial variables are significantly different in case of firms where criminal offence elements were found, they are not useful for offence prediction.Research limitations/implications — Statistical analysis limitations of the current study are mainly associated with the content of the data, because the dataset itself covers the whole population of publicly available information. The application of some results in different countries might be limited because of differences in legislation and its implementation. The study outlines novel information about and connections of different pre-insolvency violations which could be applied for relevant theory-building or more elaborate empirical research in the future.Practical implications — The study can be used by managers, owners, creditors and other stakeholders of firms to improve detection of possible pre-insolvency violations.Social implications — Regulators and regulation implementers can make use of the study when considering a change in legal framework or in its practice.Originality/value — The paper shows the presence of selected pre-insolvency violations on an extensive dataset. Previous studies have mainly been theoretical, qualitative or using small datasets.

Purpose — The purpose of this chapter is to study the pattern of rogue trading, paying special attention to the aspects of the dishonest behavior of perpetrators.Design/methodology/approach — The chapter discusses selected cases of rogue trading that received the largest coverage by the mass media.Findings — No unique pattern of rogue trading schemes can be identified; however, certain similarities can be brought up based on the discussed cases. There are many aspects of dishonesty involved in fraudulent trading besides illicitness of unauthorized trading as such.Research limitations/implications — The chapter is based largely on a literature review and available data on the instances of rogue trading; probably, there is a vast amount of rogue trading cases undisclosed in order to draw a bigger picture.Originality/value — We apply the framework of white-collar crime process by McKay, Stevens, and Fratzl (2010) in order to clarify whether rogue trading schemes match the development of a typical white-collar crime. Conclusions are built on the analysis of several cases.

Purpose — This chapter is aimed at testing the strength of three different drivers to engage in dishonest behavior at work — financial gain, response to injustice, and escape from boredom — and shedding light to the power of individual and organizational values to hold down the effect of these drivers.Design/methodology/approach — We analyze the data of 167 service employees from a large retail organization, who responded to questionnaires which manipulated drivers and organizational values.Findings — As a result we find that the financial and injustice drivers are effectively triggering several dishonest behaviors, whereas — contrary to the expectations — boredom at work does not threaten employers with employee engagement in dishonest behavior. We do find weak moderating effect of individual values in reacting to the drivers for some forms of dishonest behaviors, but the role of organizational values was marginal.Originality/value — In this chapter dishonest behavior is divided into nine specific dishonest acts involving management and customers as the stakeholders whose interests are at stake. We attempt to associate these behaviors with particular drivers. We also look at the moderators in this process: individual and organizational values. To date, espoused values of the organization is an underexplored organizational instrument compared to other situational variables, for instance, the existence of codes of ethics.

Purpose — This paper explores the field of ethical conflicts of human resource (HR) managers in Slovenian organizations: unfair payments, extreme differences in rewards, not respecting employees’ rights, discrimination; using over excessive disciplinary power, not paying social contributions, and engaging in manipulations, among others. The main attention is paid to the implementation of employees’ rights and the factors that affect the process of the implementation of employees’ rights.Design/methodology/approach — We applied an ABC (antecedents — behavior — consequences) analysis of ethical organizational behavior. The survey encompasses 73 HR managers of Slovenian companies.Findings — HR managers perceive their role in an organization as being caught in a specific position in relation to senior management and employees. The study shows that in organizations where the “soft” and “combined” model of human resource management (HRM) is developed, the implementation of employees’ rights is more strongly realized.Research limitations — The sample size is one of the chapter’s limitations. The other is the use of quantitative statistical approach without applying other methods. In the future it should be accompanied with qualitative techniques by which dishonesty would be more directly linked to the violation of employees’ rights.Practical implications — Professional education can (1) form a solid system of professional values that can help to prioritize expectations and demands in the work place and (2) equip HR managers with competencies to solve ethical issues and to engage in ethical behavior.Social implications/value — The results show that first of all, HR managers are responsible in their role (responsibility of the role in developing the model of HRM which facilitates the implementation of employees’ rights) and only secondly, comes the responsibility of HR managers in an active sense of responsibility (responsibility as a virtue).

Purpose — This chapter aims to present the way how to think about honesty in leadership, practically and simply on an example of the Czech Republic.Design/methodology/approach — This chapter discusses what (dis)honesty in leadership is, how it manifests and how it is perceived in the Czech Republic. It is illustrated with corruption statistics and a short interview with a Czech top manager from Microsoft.Findings — Contemporary leadership models accentuate soft side of leading personalities, including emotion, integrity, communication, networking, and serving others. Honesty belongs to necessary characteristics of effective leaders. Among Czech culture standards, several values are associated with integrity and honesty, particularly generosity, care about relatives, and confidence based on social relations as well as high evaluation of human behavior. The main weaknesses are low acceptance of formal structures and rules, the importance of informal communication, a strong tendency to conflicts and personal interpretation of any criticism.Originality/value — The complexity of (dis)honesty in leadership (encompassing its nature and impact factors) has received relatively little research attention.

Purpose — This chapter investigates how dishonesty may be legitimized in organizations through customary practices of gift giving, patronage, and non-meritocratic employment practices.Design/methodology/approach — A survey of managers was undertaken in four sub-Saharan African countries: Ghana, Kenya, Tanzania, and Uganda.Findings — Gift giving was perceived to be widespread in organizations in all four countries and yet the vast majority of managers we surveyed, rejected the proposition that the practice of gift giving causes dishonesty in organizations. There were cross-country variations as to whether the expectations of the society on individuals “glorify and endorse” dishonesty as they may feel pressured to accumulate and (re)distribute wealth among their wider social groups. Non-meritocratic employment practices were unanimously perceived to engender incompetent workforce, lack of accountability and transparency without necessarily improving trust, and loyalty in organizations.Research limitations — This study used quantitative methods to gauge managers’ perceptions of the relationship between customary practices and dishonest behavior in only four African countries. Further qualitative research is required to gain a deeper insight into how customary practices may inform dishonest behavior in organizations.Implications for managers — Managers should be clear about the distinction between customary practices and dishonest behavior in order to facilitate the development of appropriate organizational strategies to minimize their negative impacts.Originality/value — This paper explores the relationship between dishonesty and customary practices of gift giving, patronage and nepotism in African organizations from the managers’ point of view, an approach that had not been undertaken previously.

Purpose — This study explores organizational ‘honesty’ when implementing corporate community initiatives (CCIs) with a particular focus on those community projects which are carried out in developing countries.Design/methodology/approach — This exploratory chapter adopts a qualitative case study approach and uses both primary and secondary data.Findings — The exploratory examination of organizational ‘honesty’ in relation to the ‘motives, decision-making and outcomes’ when implementing CCIs, provides unique findings which indicate the multi-faceted nature of organizational motives, the engagement of salient stakeholders in CCIs’ implementation and the underlying economic nature of the expected outcomes from the initiatives which are largely considered to be socially progressive. Framework consisting of four evaluative criteria is proposed as a possible evaluative framework to examine organizational ‘honesty’ in the implementation of CCIs.Research limitations — Although this study provides an initial explorative perspective of the debate on organizational ‘honesty’ in corporate social responsibility (CSR), it is limited by its scope and generalizability of the findings as it was based only on three cases.Originality/value — The chapter provides a unique and internal perspective of the manifestation of organizational ‘honesty’ in the implementation of CCIs. It shows that determining such ‘honesty’ within CCIs is complex and requires an in-depth assessment of a range of evaluative criteria.

Purpose — This chapter focuses on trust-building between American and Chinese business negotiators in the U.S.–Chinese collaborative projects through the work of ethnic Chinese employees. These ethnic Chinese employees can be effective trust-builders who can prevent dishonest behaviors in negotiations and implementations of projects in China through adequate corporate policies and training.Design/methodology/approach — The data were collected through semi-structured personal in-depth interviews through years 1994–2004 in the United States and in Hong Kong. The data were further validated by the author’s recent six years of field work in mainland China (2006–2011).Findings — The work explains how 36 Chinese expatriates in the United States and 24 Chinese executives in Hong Kong established trust between the U.S. negotiators coming from an individualistic, goal-oriented, low-context culture with a mature market economy and a well-established legal system and Chinese negotiators coming from a collectivistic, relationship-oriented, power-driven, high-context culture with an emerging market economy and an embryonic legal system. Many Chinese expatriates and executives have learned to entwine affect-based trust (feeling) and cognitive-based trust (information) with the Chinese representatives but cannot convey the affect-based trust to the relationships between American and Chinese representatives. Many Chinese expatriates and executives can use their affect-based trust to ask for reciprocity from the Chinese representatives and discern how to leverage on valid information provided by both sides. The social consequences of breaking affect-based trust relationships in the context of the Chinese culture are well above the norms to facilitate honest relationships between the U.S.–Chinese collaborative projects. The affect-based trust between ethnic Chinese employees and Chinese negotiators is transferred to defer dishonest behaviors in negotiations and projects when these ethnic Chinese employees perceive to have authority to mobilize American corporate resources in the negotiation processes.Social implications — American corporations need to enhance the effectiveness of their ethnic Chinese employees as valuable honesty builders in negotiations and implementations of projects in China, where there are weak institutional policies and structures to punish dishonest organizational practices.Originality/value — It is important for American corporations to develop a shared understanding between American representatives and their ethnic Chinese employees in the context of U.S.–Chinese cooperative project negotiations through corporate policies and training programs before a team of American representatives is formed.

Purpose — This chapter aims to argue that in some cases, dishonesty in international partnerships may be beneficial from the dishonest firm’s perspective.Design/methodology/approach — The chapter is based on three cases of dishonest Chinese firms that cheated their American or German partners.Findings — We argue that dishonesty does not always lead to negative consequences for the dishonest/opportunistic firm and if it does, benefits may be larger than costs.Practical implications — It is not always easy to avoid partners’ dishonest behavior especially if they hope to benefit considerably from this and if the probability of getting caught and punished is low.Originality/value — The consequences of dishonesty in international partnerships — especially, relationship dissolution and positive impacts of dishonesty for the dishonest firm — have not received considerable research attention yet. We argue that despite relationship dissolution caused by the Chinese partners’ dishonesty, two of the dishonest firms gained.

Purpose — The aim of this chapter is to explore the relative bounds between the domains of dishonesty and honesty, focusing on the antecedences and consequences of these phenomena.Design/methodology/approach — This conceptual paper discusses the literature on the nature of (dis)honesty in management based on the chapters published in this book but also other management literature.Findings — (Dis)honesty is a complex concept, especially in international management. The chapter brings out two main features of dishonesty. First, dishonest behavior occurs always in result of moral path dependency, and second, both honest and dishonest behaviors seem to be contagious — belonging to our social surrounding, we inevitably mirror others.Originality/value — The complexity of (dis)honesty in management (encompassing its nature, impact factors and consequences) has received relatively little research attention.

Isaac O. Amoako is a researcher at the Centre for Enterprise and Economic Development Research (CEEDR) and lecturer in enterprise and small business at the Department of International Management and Innovation, all at Middlesex University Business School, UK. He completed his Ph.D. in 2012 in the same university and his paper on “alternative institutions” used by exporting SMEs in Ghana has been accepted and forthcoming in International Small Business Journal (ISBJ). His research interests include enterprise and small business start-up and management, interorganizational trust, culture and organizations, and international business management. Prior to his academic career he was an entrepreneur starting and managing his own businesses for over 20 years.