The Role of Moral Reasoning on the Effects of Incentive Schemes and Working Relationships on Whistleblowing: An Audit Experimental Study

Supriyadi Supriyadi; Nidaul Uswah Prasetyaningsih

doi:10.22146/gamaijb.64394

The Role of Moral Reasoning on the Effects of Incentive Schemes and Working Relationships on Whistleblowing: An Audit Experimental Study

Supriyadi Supriyadi, Nidaul Uswah Prasetyaningsih

(Submitted 14 March 2021)

(Published 29 June 2021)

Abstract

This study examines the role of moral reasoning in strengthening the working relationship and incentive schemes on the likelihood of reporting accounting fraud. This study predicts that higher moral reasoning or being exposed to incentive schemes are more likely to cause someone to be a whistleblower. However, individuals with a close working relationship with wrongdoers will exhibit a lower propensity to blow the whistle than those with no close working relationship. Finally, moral reasoning is expected to interact with working relationships and incentive schemes to affect the propensity to blow the whistle. Based on a lab-experiment with 147 participants, this study documents that the simple effect of moral reasoning, the working relationship, or an incentive scheme is (marginally) significant. Similarly, the combination of moral reasoning and the working relationship significantly improves the tendency to blow the whistle. However, the combined effects of moral reasoning vs. the working relationship and moral reasoning vs. the working relationship vs. incentive scheme are not significant. This paper confirms previous studies which found that moral reasoning significantly alters the whistleblowing intention but that the impact of moral reasoning is not robust for incentive schemes and working relationships. Some limitations should be considered, namely the textual scenarios of the experimental design, working experiences, and the omission of personal orientation and the personal cost of reporting.

Keywords

moral reasoning; incentive scheme; working relationship; accounting fraud; whistleblowing

Full Text: PDF

DOI: 10.22146/gamaijb.64394

References

Adkins, C. L., Ravlin, E. C., & Meglino, B. M. (1996). Value congruence between co-workers and its relationship to work outcomes. Group & Organization Management, 21(4), 439–460.

Alleyne, P., Hudaib, M., & Haniffa, R. (2018). The moderating role of perceived organizational support in breaking the silence of public accountants. Journal of Business Ethics, 147 (3), 509-527.

Alleyne, P., Hudaib, M., & Pike, R. (2013). Towards a conceptual model of whistle‐blowing intentions among external auditors. The British Accounting Review, 45(1), 10–23.

Andon, P., Free, C., Jidin, R., Monroe, G. S., & Turner, M. J. (2018). The Impact of Financial Incentives and Perceptions of Seriousness on Whistleblowing Intention. Journal of Business Ethics, 151(1), 165-178. doi: 10.1007/s10551-016.

Ariely, D., Bracha, A., & Meier, S. (2009). Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially. American Economic Review, 99(1), 544-55.

Arnold, D. F., & Ponemon, L. A. (1991). Internal Auditors Perceptions of Whistle Blowing and the Inﬂuence of Moral Reasoning: An Experiment. Auditing: A Journal of Practice and Theory 10, 1–15.

Arvey, R. D., & Ivancevich., J. M. (1980). Punishment in organizations: A review, propositions, and research suggestions. Academy of Management Review, 5 (1): 123–132.

Baker, G. P., Jensen, M. C., & Murphy, K. J. (1998). Compensation and Incentives: Practice vs. Theory. The Journal of Finance, July, Vol. 43, No. 3, 593-616.

Batson, C. D., & Powell, A. A. (2003). "Altruism and Prosocial Behavior', in Millon, T. & Lerner, M.J. (eds.). Handbook of Psychology. Hoboken: John Wiley & Sons, 463-484.

Bénabou, R., & Tirole, J. (2006). Incentives and Prosocial Behavior. The American Economic Review, 96(5), 1652-1678.

Boo, E. F., Ng, T. B.-P., & Shankar, P. G. (2016). Effects of Incentive Scheme and Working Relationship on Whistle-Blowing in an Audit Setting. AUDITING: A Journal of Practice & Theory, 35(4), 23-38.

Brief, A. P., & Motowidlo, S. J. (1986). Prosocial organizational behaviors. Academy of Management Review, 11(4), 710-725.

Brink, A. G., Lowe, D. J., & Victoravich, L. M. (2013). The effect of evidence strength and internal rewards on intentions to report fraud in the Dodd-Frank regulatory environment. Auditing: A Journal of Practice & Theory 32 (3):, 87–104.

Brooks, R. (2018). The financial scandal no one is talking about. The Guardian. Available at: https://www.theguardian.com/news/2018/may/29/the-financial-scandal-no-one-is-talking-about-big-four-accountancy-firms.

Ceva, E., & Bocchiola, M. (2018). Personal trust, public accountability, and the justification of whistleblowing. Journal of Political Philosophy, 27(2), 187-206.

Chan, S. Y., & Leung, P. (2006). The Effects of Accounting Students Ethical Reasoning and Personal Factors on Their Ethical Sensitivity. Managerial Auditing Journal 21, 436–457.

Chang, Y., Wilding, M., & Shin, M. C. (2017). Determinants of whistleblowing intention: evidence from the South Korean government. Public Performance & Management Review, 40(4), 676–700.

Cheng, J., Bai, H., & Yang, X. (2019). Ethical Leadership and Internal Whistleblowing: A Mediated Moderation Model. Journal of Business Ethics, 155(1), 115-130. doi: 10.1007/s10551-017-3517-3.

Cortina, L. M., & Magley, V. J. (2003). Raising voice, risking retaliation: Events following interpersonal mistreatment in the workplace. Journal of Occupational Health Psychology, 8(4), 247–265.

Davis, M. (1996). Some paradoxes of whistleblowing. Business and Professional Ethics Journal. 15(1), 3–19.

Deci, E. (1972). The Effects of Contingent and Non-contingent Rewards and Controls on Intrinsic Motivation. Organizational Behavior and Human Performance 8, 51-74.

Dellaportas, S. (2006). Making a difference with a discrete course on accounting ethics',. Journal of Business Ethics, 65(4), 391-404.

Delmas, C. (2015). The ethics of government whistleblowing. Social Theory and Practice, 41, 77–105.

Doe, R., Landrum, B. B., Barclay, E. J., & Carona, K. M. (2020). Normative Motivation in Whistleblowing Decision Making. Journal of organizational psychology, 20(4), 23-29.

Dozier, J. B., & Miceli, M. P. (1985). Potential Predictors of Whistle Blowing: A Prosocial Behaviour Perspective. Academy of Management Review 10, 823–836.

Dungan, J. A., Young, L., & Waytz, A. (2019). The power of moral concerns in predicting whistleblowing decisions. Journal of Experimental Social Psychology. 85, 1-12 Doi: 10.1016/j.jesp.2019.103848.

Eisenberg, N., & Miller, P. A. (1987). The relation of empathy to prosocial and related behaviors. Psychological Bulletin, 101(1), 91-119.

Erkmen, T., Esen, E., & Özsözgün Çalışkan, A. (2014). An empirical research about whistleblowing behavior in accounting context. Journal of Accounting & Organizational Change, 10(2), 229-243.

Fieger, P., & Rice, B. S. (2018). Whistle-blowing in the Australian Public Service: The role of employee ethnicity and occupational affiliation. Personnel Review, 47(3), 613-629.

Gundlach, M. J., Douglas, S. C., & Martinko, M. J. (2003). The Decisionto Blowthe Whistle: A Social Information Processing Framework. Academy of Management Review 28(1), 107–123.

Hamner, W. C. (1975). How to Ruin Motivation with Pay. Compensation Review 7, 17-27.

Jackson, D., Peters, K., Andrew, S., Edenborough, M., Halcomb, E., Luck, L., . . . Weaver, R. (2010). Trial and retribution: A qualitative study of whistleblowing and workplace relationships in nursing. Contemporary Nurse, 36(1-2), 34-44.

Kohlberg, L. (1971). Stages of moral development as a basis for moral education', in Beck, C.M., Crittenden, B.S. & Sullivan, E.V. (eds.) Moral Education: Interdisciplinary Approaches. New York: Newman Press.

Kohlberg, L., & Hersh, R. H. (1977). Moral Development: A Review of the Theory. Theory Into Practice, 16(2), 53-59.

Kohn, A. (1988). Incentives Can be Bad for Business. INC, 93-94.

Latan, H., Chiappetta Jabbour, C. J., & Lopes de Sousa Jabbour, A. B. (2019a). Ethical Awareness, Ethical Judgment and Whistleblowing: A Moderated Mediation Analysis. ournal of Business Ethics, 155(1), 289-304. doi: 10.1007/s10551-017-3534-2.

Latan, H., Chiappetta Jabbour, C. J., & Lopes de Sousa Jabbour, A. B. (2019b). Whistleblowing Triangle’: Framework and Empirical Evidence. Journal of Business Ethics, 160(1), 189-204. doi: 10.1007/s10551-018-3862-x.

Latan, H., Ringle, C. M., & Jabbour, C. J. (2018). Whistleblowing intentions among public accountants in Indonesia: Testing for the moderation effects. Journal of Business Ethics, 152(2), 573-588.

Lee, G., Pittroff, E., & Turner, M. J. (2018). Is a Uniform Approach to Whistle-Blowing Regulation Effective? Evidence from the United States and Germany. Journal of Business Ethics.

Liyanarachchi, G., & Newdick, C. (2009). The Impact of Moral Reasoning and Retaliation on Whistle-Blowing: New Zealand Evidence',. Journal of Business Ethics, 89(1), 37-57.

May-Amy, Y. C., Han-Rashwin, L. Y., & Carter, S. (2020). Antecedents of company secretaries’ behaviour and their relationship and effect on intended whistleblowing. Corporate governance (Bradford), 20(5), 837-861. doi: 10.1108/CG-10-2019-0308.

Mesmer-Magnus, J. R., & Viswesvaran, C. (2005). Whistleblowing in organizations: An examination of correlates of whistleblowing intentions, actions, and retaliation. Journal of Business Ethics, 62(3), 277-297.

Miceli, M. P. (2004). Whistle-Blowing Research and the Insider: Lessons Learned and Yet to be Learned. Journal of Management Inquiry 13, 364–366.

Miceli, M. P., & Near, J. P. (1985). Characteristics of organizational climate and perceived wrongdoing associated with whistle‐blowing decisions. Personnel Psychology, 38(3), 525-544.

Miceli, M. P., & Near, J. P. (1992). Blowing the whistle: The organizational and legal implications for companies and employees. New York: Lexington Books.

Miceli, M. P., Near, J. P., & Dworkin, T. M. (2008). Whistle-blowing in organizations. New York: Routledge.

Milliken, F. J., Morrison, E. W., & Hewlin, P. F. (2003). An Exploratory Study of Employee Silence: Issues that Employees Don’t Communicate Upward and Why. Journal of Management Studies, 40(6), 1453-1476.

Near, J. P., & Miceli, M. P. (1995). Effective-whistle blowing. Academy of Management Review, 20(3), 679-708.

Near, J. P., & Miceli, M. P. (2005). Standing Up or Standing By: What Predicts Blowing the Whistle on Organizational Wrongdoing. Research in Personnel and Human Resource Management 24, University of Illinois, USA.

Pangestu, F., & Rahajeng, D. K. (2020). The Effect of Power Distance, Moral Intensity, and Professional Commitment on Whistleblowing Decisions. Journal of Indonesian economy and business, 35(2), 144-162. doi: 10.22146/jieb.55010.

Park, H., Blenkinsopp, J., & Park, M. (2014). The influence of an observer’s value orientation and personality type on attitudes toward whistleblowing. Journal of Business Ethics, 120(1), 121-129.

Pope, K. R., & Lee, C. (2013). Could the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 be helpful in reforming corporate America? An investigation on ﬁnancial bounties and whistle-blowing behaviors in the private sector. Journal of Business Ethics 112 (4):, 597–607.

Rehg, M. T., Miceli, M. P., & Van Scotter, J. R. (2008). Antecedents and outcomes of retaliation against whistleblowers: Gender differences and power relationships. Organization Science, 19(2), 221–240.

Rest, J. (1979). Development in Judging Moral Issues. Minneapolis: University of Minnesota Press.

Rest, J. (1983). ‘Morality’, in P. H. Mussen (ed.). Handbook of Child Psychology (Vol. III edited by J. Flavell and E. Markman) (Wiley, New York).

Rest, J., Narvaez, D., Bebeau, M. J., & Thoma, S. (1999). Postconventional Moral Thinking: A Neo-Kohlbergian Approach. Mahwah: Lawrence Erlbaum Associates.

Rocha, E., & Kleiner, B. H. (2005). To Blow or Not to Blow the Whistle? That is the Question. Management Research News 28(11/12), 80–87.

Rose, J. M., Brink, A. G., & Norman, C. S. (2018). The Effects of Compensation Structures and Monetary Rewards on Managers’ Decisions to Blow the Whistle. Journal of Business Ethics, 150(3), 853-862. doi: 10.1007/s10551-016-3222-7.

Schultz, J. J., Johnson, D. A., Morris, D., & Dyrnes, S. (1993). An investigation of the reporting of questionable acts in an international setting. Journal of Accounting Research, 75-103.

Schwartz, M. S. (2016). Ethical Decision-Making Theory: An Integrated Approach. Journal of Business Ethics, 139:, 755–776.

Silverman, K., Jarvis, B. P., Jessel, J., & Lopez, A. A. (2016). Incentives and motivation. Transl Issues Psychol Sci. 2016; 2(2):. 97-100.

Singh, J. B. (2011). Determinants of the effectiveness of corporate codes of ethics: An empirical study. Journal of Business Ethics, 101(3), 385-395.

Skivenes, M., & Trygstad, S. C. (2010). When whistle-blowing works: The Norwegian case. Human Relations, 63(7), 1071-1097.

Taylor, E. Z., & Curtis, M. B. (2010). An examination of the layers of workplace influences in ethical judgments: Whistleblowing likelihood and perseverance in public accounting. Journal of Business Ethics, 93(1), 21-37.

The-Jakarta-Post. (2018a). Consumer finance firm allegedly defrauds banks of Rp 14 trillion',. The Jakarta Post. Available at: http://www.thejakartapost.com/news/2018/09/25/-consumer-finance-firm-allegedly-defrauds-banks-of-rp-14-trillion.html.

The-Jakarta-Post. (2018b). Doubts over audited reports. The Jakarta Post. Available at: http://www.thejakartapost.com/academia/2018/06/04/doubts-over-audited-reports.html.

Trompeter, G. M., Carpenter, T. D., Jones, K. L., & Riley Jr., R. A. (2014). Insights for research and practice: What we learn about fraud from other disciplines. Accounting Horizons 28 (4), 769–804.

Tsui, J. S. (1996). Auditors' ethical reasoning: Some audit conflict and cross cultural evidence. The International Journal of Accounting, 31(1), 121-133.

Uddin, N., & Gillett, P. R. (2002). The Effects of Moral Reasoning and Self-Monitoring on CFO Intention to Report Fraudulently on Financial Statements. Accounting Organizations and Society 40(1), 41–51.

Verschoor, C. (2005). Is This the Age of Whistleblowers? Strategic Finance 86(7), 17–18.

Wang, T. K., Fu, K.-J., & Yang, K. (2018). Do Good Workplace Relationships Encourage Employee Whistle-Blowing? Public Performance & Management Review, Vol. 41, No. 4, 768–789.

Weber, J. (1991). Adapting Kohlberg to enhance the assessment of managers’ moral reasoning. Business Ethics Quarterly, 1(3), 293-318.

Weber, J., & McGivern, E. (2010). A New Methodological Approach for Studying Moral Reasoning among Managers in Business Settings. Journal of Business Ethics, 92(1), 149-166.

Welton, R. E., Lagrone, R. M., & Davis, J. R. (1994). Promoting the moral development of accounting graduate students: an instructional design and assessment. Accounting Education, 3(1), 35-50.

Werbel, J. D., & Johnson, D. J. (2001). The use of person–group fit for employment selection: A missing link in person–environment fit. Human Resource Management, 40(3), 227–240.

Xu, Y., & Ziegenfuss, D. E. (2008). Reward Systems, Moral Reasoning, and Internal Auditors' Reporting Wrongdoing. Journal of Business and Psychology, 22(4), 323-331.

Zollo, L., Pellegrini, M. M., & Ciappei, C. (2017). What Sparks Ethical Decision Making? The Interplay Between Moral Intuition and Moral Reasoning: Lessons from the Scholastic Doctrine. Journal of Business Ethics, 145,, 681–700.

Refbacks

There are currently no refbacks.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.