Influence of Economic Reward and Punishment on Unethical Behavior: An Empirical

Study
Author(s): A. N. M. Waheeduzzaman and Elwin Myers
Source: Business & Professional Ethics Journal , 2010, Vol. 29, No. 1/4 (2010), pp. 155-
174
Published by: Philosophy Documentation Center

Stable URL: https://www.jstor.org/stable/41340843

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BUSINESS & PROFESSIONAL ETHICS JOURNAL, VOL. 29, NOS. 1-4

Influence of Economic Reward and

Punishment on Unethical Behavior:
An Empirical Study

A. N. M. Waheeduzzaman and Elwin Myers

Abstract: The study seeks to determine the influence of economic re-

ward on unethical behavior with the help of a Reward Punishment Mod-
el. The model postulates that ethical or unethical behavior depends on
the relationship among three factors: economic reward or benefit that a
businessperson receives from the unethical practice, the severity of pun-
ishment the society imposes for such wrong-doing, and the probability of
receiving the punishment. A short survey, which contained a hypothetical
ethical situation, was administered to 251 respondents. The findings in-
dicate that the probability of risk-taking decreases as the level of punish-
ment and the chance of being caught increases.

Key Words: Business Ethics, Economic Reward, Effect of Punishment, Ethi-

cal Decision Making, Unethical Behavior

Introduction

Corruption or white-collar crime is quite pervasive today (Riotto 2008;

Boyle and Tkaczyk 2008). Media is filled with stories about it. Despite the
importance and the coverage of the topic, we still wonder why business

© Business & Professional Ethics Journal , 2010. Correspondence may

be sent to N. M. Waheeduzzaman, Texas A&M University-Corpus Christi
College of Business, Corpus Christi, TX, 78412; or via email: waheed@
tamucc.edu; to Elwin Myers, Texas A&M University-Corpus Christi Col-
lege of Business, Corpus Christi, TX, 78412; or via email: elwin.myers@
tamucc.edu.

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156 Business and Professional Ethics Journal

managers engage in unethical behavior. What factors and forces in the

environment influence their conduct? Can social infringement or punish-
ment deter such behavior? So far, the answers to these questions are mixed
and inconclusive. This study is an attempt in addressing some of these
questions. Empirically, it tries to determine the influence of (economic)
reward and punishment on unethical behavior.
The paper is divided into five sections. After the introduction, Sec-
tion II presents a brief literature review. Section III delineates the model
and discusses the methodology, questionnaire, and limitations of the study.
Section IV presents the findings of the study. Section V relates the findings
of this study with other studies in the area and presents its relevance. Sec-
tion VI draws a conclusion with directions for future research.

Background Literature

Why individuals engage in unethical behavior has been investigated from

different perspectives in various disciplines. To keep the review focused, the
authors discuss those theories and studies that are relevant to the model pre-
sented in the study (see Figure 1 ; discussion of the model is presented in the
next section). Studies that involve ethical decision-making are emphasized.
Four theories were relevant to this study: rational choice theory, so-
cial learning theory, moral development, and deterrence theory. A brief
review of those theories and several studies that earlier used those theories
are presented.

Rational Choice Theory

One of the earliest explanations for unethical behavior came from the econ-
omists. They investigated human behavior from the "rational choice theo-
ry," which contends that utility maximization is the primary motive of an
individual; maximizing benefits and minimizing losses is the primary con-
cern. The theory argues that if the benefits of unethical behavior outweigh
its cost, then the individual is likely to engage in unethical behavior (Pili-
avin et al. 1986). The notion also relates to B. F. Skinner's (1957) Operant
Conditioning, which postulates that rewarded behaviors are repeated. This
also explains why corruption works in a vicious cycle. Those who benefit
from it allow it to continue to their favor, encouraging further corruption.

Social Learning Theory

According to Mulki, Jaramillo, and Locander (2009), "Social learning
theory suggests that observed behavior of the leader is mimicked and

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Influence of Economic Reward and Punishment on Unethical Behavior 157

translated into actual behavior with the leader acting as a role model"
(p. 125). Social learning theory, therefore, involves two components: (a)
viewing the behavior of people of authority or influence and (b) model-
ing that behavior (Bandura 1986; Grojean et al. 2004). Employees will
notice the type of behavior of their co-workers that results in favorable
and unfavorable reactions from managers. If they are smart, they will at-
tempt to perform similar actions that resulted in positive outcomes for
their colleagues and avoid actions that resulted in negative consequences
(DeConinck 2003).
This tendency to pattern behavior applies in ethical workplace ap-
plications as well. Workers will notice how co-worker's unethical behav-
ior is dealt with by management (Butterfield, Trevino, and Ball 1996). If
management takes the ethical misconduct seriously and applies a fair and
appropriate penalty, their punishment will be duly noted by other depart-
ment employees (Akaah and Riordan 1989). On the other hand, if man-
agement "looks the other way" and doesn't address unethical employee
behavior harshly, other workers are more inclined to continue participat-
ing in similar behavior (Zey-Ferrell and Ferrell 1982).

Moral Development
The psychologists and behavioral scientists have also investigated ethi-
cal decision-making. In this regard Kohlberg's (1969) moral development
process has often been cited in the literature (Chan and Leung 2006; Rest
1986). He theorized that individuals progress through three levels of cog-
nitive development (pre-conventional, conventional, and post-conven-
tional), each with two stages. Most individuals do not achieve the post-
conventional "principled conscious."
Trevino (1986) proposed a person-situation interactionist model ex-
plaining ethical decision-making. Apparently, Trevino 's model is more
pragmatic than Kohlberg's in terms of application. Rest (1986) proposed
a four-staged model where an individual (a) recognizes a moral issue, (b)
makes a moral judgment, (c) establishes moral intent, and (d) acts on mor-
al concerns. Jones (1991) and Trevino (1986) also developed decision-
making models involving four basic components (O' Fallon and Butter-
field 2005). Ferrell, Gresham, and Fraedrich (1989) integrated the existing
models, synthesizing both cognitive and social aspects in learning. Their
model incorporated cognitive development as well as other economic and
environmental issues. Jones (1991) proposed a comprehensive model on
the previous works [especially Rest's (1986) model] and emphasized the
role of moral intensity in decision-making. The role of moral intensity in

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158 Business and Professional Ethics Journal

shaping ethical behavior has been highlighted by others (Sweeney and

Costello 2009; Hayibor and Wasieleski 2009).

Deterrence Theory
Deterrence theory holds that a person's likelihood of participating in un-
ethical behavior is related to the perceived risk of being caught and the
severity of punishment if caught (Perino 2002; Young and Zhang 2007).
If the person feels that being caught in an unethical action is likely and
the punishment for the act is severe, the person would be less inclined to
participate in the activity (Williams and Hawkins 1986).
Although deterrence theory is often cited in research studies relat-
ed to crime (Midha 2008; Vance and Trani 2008), military disputes and
conflict resolution (Gartzke and Dong-Joon 2009; Langlois and Langlois
2006), company self-regulation (Short and Toffel 2007), and other areas
(Mitsuhashi and Yamaga 2006), it has also been used in research with
managerial implications. Rose and Rose (2008) studied the effects of trust
and knowledge on 40 corporate board members who had served on audit
committees; they were interested in seeing whether these audit committee
members were able to detect managerial attempts at avoiding oversight
by the audit committee. Staubus (2005) noted that the only real possible
deterrent to unethical or illegal financial fraud is managers' fears of being
caught and punished.
The deterrence theory assumes that individuals would be worried
about being caught. However, some studies have discovered that the pos-
sibility of being caught and the punishment that would follow is a type
of "rush" or excitement rather than the expected deterrent. Al-Rafee and
Cronan (2006) noted persons involved in digital pirating experienced a
low "distress" score (2.75 out of 7) and a relatively high "happiness and
excitement" score (6.21).

Model and Methodology

This section briefly elaborates the model and discusses the methodology
to test the relationships in the model. Questionnaire design, sampling, data
collection, and data analysis are discussed as a part of the methodology.
Limitations of the study are also presented.

Study Model
The model for the study is presented in Figure 1. The model postulates
that ethical or unethical behavior depends on the relationship among three

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Influence of Economic Reward and Punishment on Unethical Behavior 1 59

factors: economic reward or benefit that a businessperson receives from

the unethical practice, the severity of punishment the society imposes for
such wrong-doing, and the probability of receiving the punishment. Se-
verity of punishment and its probability serve as a deterrent for unethical
behavior. A businessperson will risk the practice of unethical behavior as
long as the economic reward is significantly greater than the product of
punishment and its probability. Inequality of reward and punishment sets
the condition for unethical conduct. An earlier version of this model can
be found in Waheeduzzaman (2000).

Methodology
In order to test the relationships in the model a primary survey was con-
ducted. Respondents were managers working in various industries, mostly
from South Texas. The survey employed a convenience sample drawn
from the local Chamber of Commerce, Rotary Club, and students in the
MBA program. The authors and their colleagues from the university
administered the survey to the respondents. Participation in the survey
was voluntary; no inducement was offered. Respondents were assured of
anonymity prior to participation, and nowhere in the questionnaire or in
any part of the research was their identity revealed. The respondents were
asked to be true to themselves in answering the questions.
The questionnaire was pre-tested on a sample of eighteen managers
or working professionals and six business school faculty members. Their
input helped the authors modify the questionnaire. The questionnaire was
simple, easily understandable, and could be completed in about ten min-
utes. The project was duly approved by the Institutional Review Board,
Texas A&M University - Corpus Christi prior to implementation.
The respondents were given a hypothetical ethical situation to evalu-
ate. It describes a scenario where a businessperson is likely to offer a bribe
(unethical behavior) for getting a valuable contract (economic reward).
The probability of risking the contract at different levels of punishment
and their severity is evaluated by the respondents. There are two possible
chances of being caught: they could be caught with a 90% chance, or they
could not be caught with a 90% chance. Two possible levels of punish-
ments are available: jail term for two months or jail term for two years.
Technically speaking, in this model reward is held constant and punish-
ment and severity of punishment are varying.
The respondents were asked to indicate the probability of risking the
contract (i.e., engage in unethical behavior on a seven-point scale). Thus,
by design, the questionnaire captures the probability of risking the contract

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1 60 Business and Professional Ethics Journal

for four levels (two levels of chances of being caught and two levels of
punishment). These four outcomes are used to test the relationships in the
model. The relationships described in the model were tested with the help
of chi-square, mean difference test, correlation, and regression analysis.
Findings of the study are presented in the next section.

Contribution and Limitations

The primary contribution of the study is in the presentation of a simple

model that empirically tests the relationship between unethical behavior
and punishment. The authors are not aware of any other study that tried
to test the relationship in the manner it has been conducted in this study.
Additionally, the study also determines the influence of eight attitudinal
variables on unethical behavior. Demographic influence on unethical be-
havior is also determined.
The study has several limitations. First, this is a voluntary self-re-
ported study. As such, opinion expressed in the survey may not be the true
opinion of the respondents in real life. In fact, they may have provided
"socially acceptable" responses. Second, the situation provided in the sur-
vey is hypothetical; a less-than real life situation. Respondents may take
the hypothetical situations lightly and that may bias the response. Third,
it is a convenience sample. Most subjects of the study come from South
Texas. It is not a nationally representative sample. This limits the gener-
alization of the findings. Scientific sampling could produce better results.
Fourth, the size of the company and amount of the bribe indicates that it
is a medium-sized company. If we changed the size of the company or
amount of the bribe, the response could be different. Fifth, in this study
reward (i.e., amount of bribe) is held as a constant and punishment and
severity of punishment are varied. Changing the value of the reward is
also likely to change in the risk taking behavior. Sixth, the study used "at-
titudinal statements" to determine the influence of individual and social
variables on unethical behavior. They do not lend themselves to causa-
tion. Here the regression is trying to establish causality only indirectly.
Finally, the respondents were asked about "unethical" behavior. This is
not diametrically opposite to "ethical "behavior. By design, the study has
undertaken a negative behavior tone. Individuals could have responded
differently if the questions were asked about ethical behavior.
Despite the limitations, the study contributes in the empirical testing
of the relationship between unethical behavior and punishment. It also
explains the influence of some of the determinants of unethical behavior.
From that perspective it makes some incremental contribution.

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Influence of Economic Reward and Punishment on Unethical Behavior 161

Findings

The findings of the study are presented in this section. At first, respondent
characteristics are described. Then the relationship between risk taking
and punishment is explained. This is followed by an explanation of at-
titude statements and demographics and their influence on risk taking.

Respondent Characteristics
In total, 251 respondents comprise the sample (see Table 1). A majority
(61%) of the respondents are young (18-34 years). Middle aged (35-54
years) and elderly (55 and more years) managers comprise 28% and 10%
of the sample. Relatively speaking, the managers seem to be better edu-
cated. A majority (57%) of the respondents is college graduates, and 42%
have masters' degree.
The respondents are working professionals in different organiza-
tions. Most respondents (55%) have one through ten years of work expe-
rience. Over a quarter (26%) of the respondents have over twenty years
of work experience, and 1 8% have eleven through twenty years of work
experience. Nearly half of the respondents (48%) earn below $40,000 a
year. Two out of five respondents earn between $40,000-60,000, and three
out of ten earn over $60,000 a year. Apparently, in terms of income the
sample is slightly bi-modal in distribution.

Relationship between Risk Taking and Punishment

As explained in the methodology section, the study offered four different
levels of risk taking outcomes or consequences for the proposed economic
reward situation. The means and standard deviations of these outcomes are
presented in Table 2A. Interestingly, the table indicates that the probability
of risk taking decreases as the level of punishment and the chance of be-
ing caught increases. The probability of risk taking is highest (4.30) when
the punishment is low (2 month jail term) and there is no chance of being
caught. This probability is much higher for the other three outcomes. As
the punishment increases from two months to two years with no chance
of not being caught, the probability decreases to 2.88. This is a 1.42 point
decrease (20%) on a seven-point scale. The probability of risk taking de-
creases as the chance of being caught increases. This is true for both high
(two years) and low (two months) levels of punishment. The lowest risk
taking occurs at high level of punishment and high chance of being caught
(1 .94). Overall, the table indicates that probability of risk taking decreases
as severity of punishment and chance of being caught increase.

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1 62 Business and Professional Ethics Journal

To understand the phenomenon better and determine the relation-

ship between level of punishment and chance of being caught four t-tests
were conducted with the help of PROC MEANS in SAS (see Table 2B).
The results indicate that both severity of punishment and chance of be-
ing caught significantly influence the risk taking behavior. At both levels
of chance of being caught (high and low) the mean difference test be-
tween high and low levels of punishments was significant. Again at two
levels of punishment, mean difference tests between chances of being
caught are significant. The results of the t-tests establish the relationship
hypothesized in the study model (i.e., the respondents' perception is that
the severity of punishment and the chance of receiving it reduce the risk
taking probability.

Rating of Attitude Statements and Correlations

The respondents were asked to state their agreement on eight attitudinal
statements regarding legal system, education, personal ethics, inequality,
religion, family, environment, and profession. The attitude statements and
their means are given in Table ЗА. Interestingly, "I consider myself as
an ethical person" received the highest rating, 6.33 on a 7-point scale. A
related statement "My ethical training primarily took place in my fam-
ily" also received high score (6.04). In self-reported statements like this
we are likely to give high scores to ourselves or our family in which we
grew up. These two statements reflect our deep-seated personal values,
and they indicate moderately high correlation (r = 0.23, see Table 3B).
Interestingly, both education and religion received relatively low scores in
shaping our ethical behavior. This is contrary to what most educators and
moral preachers believe. However, low scores do not mean that religion or
education have no influence in ethical conduct. It simply states that their
influence did not score as highly as other statements. To our surprise, "A
transparent legal system encourages ethical behavior" received the low-
est attitude score (5.08). Our suspicion is some of the respondents did not
fully comprehend the meaning of transparent legal system. Some even put
question marks in the actual questionnaire.
The correlation among eight attitude statements generated by PROC
CORR in SAS is given in Table 3B. The table indicates low to mod-
erate correlation. Ethical environmental (ENVIRON) and professional
ethics (PROFESS) are moderately correlated (r = 0.37). Personal ethics
(PETHIC) is significantly correlated with family (FAMILY), ethical en-
vironment (ENVIRON), and professional ethics (PROFESS). "Education
imparts ethical behavior (EDUSOC)" received low rating, and it is found

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Influence of Economic Reward and Punishment on Unethical Behavior 1 63

to be weakly correlated (r = 0.13) with personal ethics (PETHIC). Inter-

estingly, "Religion provides the foundation of ethical behavior (RELI-
GION)" is significantly correlated with family (FAMILY) and environ-
ment (ENVIRON).

Influence of Attitude Statements and Demographics

Using PROC REG in SAS, the attitude statements were regressed with four
risk taking outcomes, and their results are given in Table 4 A. The F-ratio
indicates that all four models are significant at p = 0.05 level. However,
their R-Squares are very low, ranging from 0.08 to 0. 10. This indicates that
only 8%- 10% of the variability in the outcomes can be explained by the
attitude statements. Interestingly, personal ethics (PETHIC) is significant-
ly negatively related to the risk taking behavior in three out of four models
(see beta-coefficients). This indicates that respondents who rate their per-
sonal ethics to be high are less likely to take a risk for unethical behavior.
Also, "Inequality in a society enhances unethical behavior (INEQUAL)"
is significant in three out of four models. This indicates that as inequality
in a society increase, the probability of unethical risk taking also increases.
No other attitudinal statements show notable significance in the models.
In order to test the influence of the respondent characteristics or de-
mographics on the outcomes general lineal models were run in SAS with
PROC GLM. The results are given in Table 4B. The F-ratios indicate that
all four models are significant. The R-square vary from 0.07 to 0.12. In-
come (INCOME) of the respondent is found to be negatively significant
in all four models. This conveys a meaning that we all expect. Respon-
dents with higher income are less likely to risk unethical conduct. It is
consistent with the relationship with inequality in Table 4A. Individual
education (EDUIND) plays a significant role in ethical conduct and is
found to be negatively significant with risk taking behavior in three out of
four models. It means that with higher levels of education respondents are
less likely to risk participating in unethical practices. A discussion of the
findings of the study is presented in the next section.

Discussion

It is difficult to compare the findings of the study with previous studies

in the area and make an objective comparison since the objective, meth-
odology, and context of the previous studies are different from this one.
Despite the limitations the authors try to relate the findings of this study
with other studies.

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1 64 Business and Professional Ethics Journal

The model proposed in this study draws primarily from the rational
choice theory. The theory holds that people are rational and thereby at-
tempt to weigh the "perceived probabilities and magnitudes of both re-
wards and punishments" (Buckley, Wiese, and Harvey 1998; Michaels
and Miethe 1989; Piliavin, Thornton, Gartner, and Matsueda 1986). Peo-
ple sometimes perform a type of "cost-benefit" analysis in which they
determine for themselves whether the likely benefits of participating in
an action - even unethical or illegal ones - outweigh the costs of possibly
being caught and punished (Buckley, Wiese, and Harvey 1998).
This study specifically sought to determine the perception of survey
respondent managers towards risk taking given a reward-punishment (and
its severity) scenario. The respondent managers indicated that with an in-
crease in punishment and its severity the tendency to take risks decreases.
This tendency has some important implications in both the business and
nonbusiness world. For instance, a good legal system and its proper execu-
tion are likely to reduce white-collar crime (bribery in this case). Many of the
executives who have been implicated in illegal business dealings recently
may have thought that their chances of getting caught were relatively small.
In addition, even if they were caught, they expected that any punishment
would be relatively light. Simply put, they felt that the rewards significantly
outweighed any risks involved. However, some debate remains whether
an increased imprisonment rate would result in a diminished crime rate; at
least one study (Lynch 1 999) found there to be no statistically significant
difference between the two rates for the period under investigation.
Gurley, Wood, and Nijhawan (2007) also hypothesized that the prob-
ability of getting caught and the severity of punishment were related to
ethical behavior. To test their hypothesis, they administered survey instru-
ments to 115 respondents. The survey instrument contained six scenarios
containing ethical dilemmas; respondents were asked to select one of the
four provided responses to each scenario that best reflected their likely ac-
tion to the dilemma. After respondents provided their likely action to the
dilemma, they were then asked to identify how much the "likelihood of
getting caught" and the "severity of the punishment if caught" entered into
their decision. That aspect of their study methodology (likelihood of get-
ting caught and severity of punishment) was very similar to the procedure
used in this study. Likewise, their finding that the two factors are strongly
correlated with ethical behavior was confirmed in this study.
The study also incorporated various social and environmental issues
that have often been related to moral behavior. For instance, one survey
question asked respondents whether they felt that inequality in society led

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Influence of Economic Reward and Punishment on Unethical Behavior 1 65

to unethical behavior. A fairly high number of respondents agreed with the

statement (5.13 mean out of 7). Several studies confirmed the notation that
as inequality in a society increase, the probability of unethical risk taking
also increases; or, stated differently, as economic situations improved for
people individually or collectively, the crime rate tended to drop (Bonger
1969; Phillips, Maxwell, and Votey 1972; Jing and Graham 2007). Myers
(1984) noted that better wages and increased employment tended to result
in lowered crime rates.
Philosophers and moral preachers have traditionally highlighted the
role of individual's personal ethics. They emphasized the importance of
education and training in imparting what Socrates calls "ethos" in human
behavior. This study supports the popular moral preachers' contention -
personal ethics matter. Individuals with a high level of personal ethics
are less likely to offer a bribe; at least that is what the perception is. Our
findings on education are also very similar. In our study we observe that
individuals with higher education are less likely to engage in bribery. This
is contrary to what we observe on white-collar crimes committed. In real
life we find that a large number of people who commit white-collar crimes
are fairly well educated.
Despite the importance of religion, family, ethical environment, and
professional ethics in the literature this study did not find them to be sta-
tistically significant with bribery. However, the findings should not under-
mine the importance of these variables in real life. It is commonly believed
that organized religion has played a positive role in shaping our morals and
minds. In many cases it has helped the reduction of crime. The same is true
for family. By and large, our ethical training takes place in the family.
Providing an ethical environment or establishing a professional code
of conduct does help the reduction of crime. Law provides the basis for
ethical conduct. In a transparent and effective legal system, businesspeo-
ple cannot get corrupt easily. The legal system will force their conduct.
The same is true for professional code of conduct. Today, most profes-
sions require members sign a professional code of conduct. Organizations
also maintain a code of conduct for all employees. This guides the be-
havior of the employees. Studies have shown that it helps in developing
ethical organizations.

Conclusion and Future Direction

The probability of risk taking decreases as the level of punishment and the
chance of being caught increases. If people indeed respond to the likelihood

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1 66 Business and Professional Ethics Journal

of being caught and the severity of possible punishment, those in authority

should do all within their control to make sure that their organizations pos-
sess adequate but fair (Butterfield et al. 2005; Zelizer 2007) mechanisms
to serve as deterrents to employees. This can be attained through laws,
organizational codes of conduct, moral persuasion, counseling and guid-
ance, and education and training. In some aspects this study has addressed
some of these popular issues.
Unlike some other studies (Myers 1980; Martinson 1974; Brier and
Fienberg 1980) this study indicates that the punishment does have a nega-
tive influence on unethical behavior. Understandably, the theory of ratio-
nal choice holds in terms of managerial perception. Personal ethics and
education also affects behavior. Better personal income and reduction of
inequality can play a positive role in reducing corruption.
The study establishes the relationship between individual's risk tak-
ing behavior and reward/punishment. It indicates that individuals take
less risk if severity of punishment is high and its probability is certain.
Influence of various attitudinal statements and demographics on risk tak-
ing is also determined. Hopefully, the findings of the study make some
incremental contribution and lead to further investigations in the area of
business ethics.

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Influence of Economic Reward and Punishment on Unethical Behavior 1 67

Table 1 . Characteristics of Respondents

Characteristics Frequency Percentage

Age
18-34 154 61.35
35-54 71 28.29

55+ 26 10.36

Income

Below $40,000 per

year 121 48.21
$40,000-60,000 per 51 20.32
Уеаг 79 31.47
$60,000+ per year

Education

High School 2 0.8

College graduate 143 56.97
Masters 106 42.23

Work Experience
I-10 years 139 55.38
II-20 years 46 18.33
21+ years 66 26.29

Note: n= 251, Chi-square tests for equa

confirm that there is significant differe

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1 68 Business and Professional Ethics Journal

Table 2. Probability of Risk Taking and T-test Results

A. Probability of Risk Taking

Consequences/Outcomes Mean Std Dev

Has a 90% chance of not being caught and serves a two-month 9 n

jail term (NO_LO)

Has a 90% chance of not being caught and serves a two-year 2 - 88 OQ л 180 on
jail term (NO_HI) 2 - 88 OQ л 180 on
Has a 90% chance of being caught and serves a two-month _
jail term (YES_LO)

Has a 90% chance of being caught and serves a two-year . Q. .

jail term (YES_HI)

B. T-Test Results

Chance of I Mean-Hîgh I Mean-Low ! t.valu J Prob. of t

between Punishment Punishment

Not being I High and Low I ~ 8.2

caught Punishment

Being High and Low

caught Punishment

Level of T-Test Mean*High Chance Mean-Low Chance t-vajue prob

punishment between of Being Caught of Being Caught

High and Low

Low Chance of 2.43 4.30 10.68 <.0001
Being Caught

High and Low

High Chance of 1.94 2.88 6.06 <.0001
Being Caught

Note: Table 2A indicate that probability of risk

increases. Pooled variance method was used for th
when we hold chance constant and vary punishmen
chance of being caught. Both chance of being caugh
taking behavior.

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 Influence of Economic Reward and Punishment on Unethical Behavior 1 69

Table 3. Attitude Statements and Their Correlations

A. Mean of Attitude Statements

Abbreviation Attitude Statements Mean

PETHIC I consider myself as an ethical person 6.33

FAMILY My ethical training primarily took place in my family 6.04

PROFESS People in our profession follow an established ethical code 5.24

ENVIRON The environment in which I live is ethical 5.19

INEQUAL Inequality in a society enhances unethical behavior 5.13

EDUSOC Education imparts ethical behavior 5.10

RELIGION Religion provides the foundation of ethical behavior 5.10

LEGAL A transparent legal system encourages ethical behavior 5.08

B. Correlation Matrix of Attitude Statements

LEÖAL EDUSOC PETHIC INEQUAL RELIGION FAMILY ENVIRON PROFESS

LEGAL 1.00

EDUSOC 0.15** 1.00

PETHIC 0.17** 0.13** 1.00

INEQUAL 0.17** 0.17** -0.03 1.00

RELIGION 0.04 0.09 0.02 0.006 1.00

FAMILY 0.08 0.09 0.23** -0.09 0.26** 1.00

ENVIRON 0.01 0.08 0.22** -0.12* 0.19** 0.21** 1.00

PROFESS 0.05 0.12* 0.24** 0.04 0.02 0.16** 0.37** 1.00

Note: Significance of p at 0.05 and 0.10 level is given by ** an

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1 70 Business and Professional Ethics Journal

Table 4. Regression Results

A. Influence of Attitude Statements

NOJLO NÖJHI YES_LO YiS^HI

F-Ratio 2.90** 3.52** 2.64** 2.70**

R-Square 0.09 0.10 0.08 0.08

INTERCEPT 6.11** 2.42** 3.59** 2.42**

LEGAL -0.05 0.08 -0.08 0.14*

EDUSOC 0.02 0.03 0.09 0.15**

PETHIC -0.20 -0.29** -0.32** -0.38**

INEQUAL 0.29** 0.24** 0.18** 0.05
RELIGION 0.008 0.07 0.10 0.07
FAMILY -0.14 0.11 0.04 0.05

ENVIRON -0.08 -0.20** -0.13 -0.09

PROFESS -0.11 0.10 -0.04 -0.001

B. Influence of Demographics

NO_LO NO_HI YES_LO YESJ4I

F-Ratio 8.53** 7.84** 7.74** 4.48**

R-Square 0.12 0.11 0.11 0.07

INTERCEPT 8.15** 5.50** 5.14** 3.00**

AGE -0.10 -0.16 0.48 0.60**

INCOME -0.67** -0.70** -0.73** -0.52**

EDUIND -0.62** -0.43* -0.56** -0.14

WORKEXP -0.20 0.22 -0.09 -0.30

Note: Significance of p at 0.05 and 0.10

Figure 1. The model states that et

lationship among three factors: ec
receives from the unethical practic
of receiving it. A businessperson w
as the economic reward is significa
its probability.

(Un)ethical _ Economic
behavior Reward Punishment Punishment

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Influence of Economic Reward and Punishment on Unethical Behavior 171

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