Decision-Making Process of Internal Whistle blowing Behavior in China

Decision-Making Process of Internal Whistle blowing Behavior in China

Decision-Making Process of Internal Whistle blowing Behavior in China

 

In response to the lack of empirical studies

examining the internal disclosure behavior in the Chinese

context, this study tested a whistleblowing-decision-mak-

ing process among employees in the Chinese banking

industry. For would-be whistleblowers, positive affect and

organizational ethical culture were hypothesized to

enhance the expected efficacy of their whistleblowing

intention, by providing collective norms concerning

legitimate, management-sanctioned behavior. Question-

naire surveys were collected from 364 employees in 10

banks in the Hangzhou City, China. By and large, the

findings supported the hypotheses. Issues of whistleblowing

in the Chinese context and implications were discussed.

KEY WORDS: whistleblowing, Chinese culture, ethi-

cal organizational culture, positive affect

Introduction

Incidents of organizational wrongdoing have made

headlines recently. Examples include fraud, corrup-

tion, and other unethical acts within organizations like

Enron, WorldCom, Andersen, and Tyco. Many of

these scandals came to light because of the actions of

employees or ex-employees of those companies, who

believed that the wrongdoing should be stopped, and

reported it to the authorities. This kind of behavior is

called whistleblowing: ‘‘the disclosure by a current or

former organizational member of illegal, unethical or

illegitimate practices under the control of their

employers, to persons or organizations who may be

able to effect action’’ (Near and Miceli, 1985, p. 4).

Internal disclosure as whistleblowing behavior

The term whistleblowing can be used for any

disclosure about unethical acts of an organization

via non-hierarchical means (Kaptein, 2002;

Vandekerckhove and Commers, 2004). Miceli and

Near (1992) suggest that there are two types of

whistleblowing: internal and external disclosure.

However, individuals or employees who witness

wrongdoings within their company may not choose

to blow the whistle because of a fear of retaliation

from their employer or organizational members in-

volved in the unethical doing. Over 90% of whis-

tleblowers were made to end their career early, or

were blacklisted, treated as insane, and/or lost their

life savings from lawsuits, their marriage or even lives

(Greene and Latting, 2004). In order to keep

themselves out of trouble and to avoid being called a

rat or a snake, these individuals would choose not to

disclose anything. If and when dissonance is too

great and unbearable, they would choose to ‘‘exit’’

out instead of to ‘‘voice’’ out (Gong, 2000). That is

why whistleblowing, both external and internal, is

considered as a taboo in the minds of people in many

countries, may they be in developed, developing, or

underdeveloped economies (Carroll and Cannon,

1997).

Studies have shown that differences exist between

external and internal whistleblowing in terms of the

seriousness of the wrongdoing whistleblowers wit-

ness, the retaliation they experience, and the effec-

tiveness of their intervention (Dworkin and Baucus,

1995; Miceli et al. 1991). It is considered that

internal disclosure is the only moral action, unless

the whistleblower expects that this channel will

result in personal retaliation. In fact, scholars in

moral philosophy have generally presented a ‘‘strong

moral case’’ supporting internal reports. Ethical

issues will arise particularly in external disclosure

because disclosing insider information to outsider’s

breaches obligations to the organization, violates the

Journal of Business Ethics (2009) 88:25–41 � Springer 2008 DOI 10.1007/s10551-008-9831-z

written or unspoken contract, and elicits damaging

publicity. That is why although one can argue that

external whistleblowers may believe that the public

revelations will actually help the organization in the

long run, it is much safer for the management to

encourage whistleblowing internally (e.g., Dozier

and Miceli, 1985). Internal disclosure or whistle-

blowing is recognized as beneficial to organizations

as well; however, management does not or cannot

handle effectively this issue and can expect to incur

considerable loss of the company resources as a result

of negative company image, poor business relation-

ships, and disrupted work routines (Laczniak

and Murphy, 1991; Miceli and Near, 1994; Van-

dekerckhove, 2006). Hence, this research will focus

on examining the internal disclosure as a whistle-

blowing behavior which is more important since

internal disclosure commonly precedes external

disclosure (Miceli and Near, 1992).

Whistleblowing-decision-making process

Ethic scholars in the past have had concern about

the question, ‘‘Who blows the whistle and why?’’

(Miceli et al., 1991). Researchers in various disci-

plines have attempted to answer this question with

different perspectives, such as business ethics (e.g.,

Glazer, 1983), psychology (e.g., Brabeck, 1984),

pro-social behavior (Miceli et al., 1991), organiza-

tional change (Near and Miceli, 1987), and social

influence (Greenberg et al., 1987). There is a com-

mon interest found in these studies and that is to

identify the antecedents, correlations, moderators,

and consequences of the decision to blow the

whistle, and analyzing the decision process of

potential whistleblowers. At first, they tried to

model the ethical decision-making process of po-

tential whistleblowers (cf., Greenberger et al., 1987;

Hooks et al., 1994; Lampe and Finn, 1992; Miceli

and Near, 1992; Near and Miceli, 1985, 1987;

Ponemon, 1994). Later on, researchers have also

examined various individual and situational variables

and their interaction in the psychological process of

whistleblowing decision making (e.g., King, 1997;

Miceli et al., 2001; Rothschild and Miethe, 1999).

The four-component theory (Rest, 1986) portrays

the psychological processes that underlie any moral

action. This theory has four stage, they are: ethical

sensitivity, ethical reasoning, ethical intention, and

the ethical behavior or action. It is noteworthy that

these features of Rest’s model were echoed by other

positive ethical decision process models (Ferrell et al.,

1989; Hunt and Vitell, 1986; Jones, 1991). A review

of these representative models reveals that the ethical

decision process occurs in a fixed sequence of stages,

consisting of moral perception, judgment, intention,

and behavior, which are consistent with Rest’s four

stages. Specifically, Ponemon’s (1994) application of

Rest’s model to the whistleblowing phenomenon is

particularly useful.

Based on Rest’s Four-Component Theory (1986),

Ponemon (1994) suggested a decision-making model

labeling each of the four stages slightly different so that

it fit into the whistleblowing scenario. The first stage is

the awareness that the wrongdoing is occurring, and

the interests of a party are being hurt. The second stage

is the ethical judgment that blowing the whistle is the

ideal moral choice. The third stage involves balancing

different values to formulate the intention of blowing

the whistle. The fourth stage is to implement the

ethical choice–to blow or not to blow the whistle.

Along with the process, individual and situational

factors serve as moderating factors that explain how

the outcome of each step affects the next step. Later

on, Miceli and her associates (2001) published an

article, proposing additional individual and situational

characteristics, such as positive affectivity that may

intervene in people’s whistleblowing-decision-mak-

ing process and make their model more complete.

However, most of the models are proposed con-

ceptually, or are built upon others’ theoretical work.

This maybe due to the fact that lacking validated

instruments, the impossibility of carrying out studies

on actual whistleblowers, the difficulty of getting

detailed information about both individuals and

organizations, or other method-related issues (Chiu,

2003). Nonetheless, the paucity of empirical research

regarding the whistleblowing-decision-making pro-

cess has substantially impeded the development of the

field. Thus, conducting such a study will be important

for scholars concerned with the psychological process

of internal disclosure behavior. Moreover, ethics is

culture-specific. Therefore people with different

cultural upbringings, and living under different socio-

economical influences, may have different views of

what is ethical or unethical (Chen, 2001; Patel, 2003).

The study of the decision-making process of internal

26 Julia Zhang et al.

whistleblowing behavior in China is a necessary step

for Chinese policy makers or managers who wish to

make good use of internal whistleblowing to benefit

their organizations and society at large.

Studying the Chinese context

In fact, there are many other recorded incidents

about whistleblowing around the world, for

instance, Enron, Abbey National, NSAS, Dow

Corning, BCCI, WorldCom, Rockwell, etc. As a

result, a number of countries have established

law/procedures for dealing with whistleblowing

(De Maria, 2006; Vandekerckhove, 2006) to protect

whistleblowers (Miceli and Near, 1994) and their

employers as well (Davis, 1997), such as the

Sarbanes-Oxley Act of the United States, Protected

Disclosures Act of New Zealand, Whistleblowing

Policy of France, Audit Reform and Corporate

Disclosure Act of Australia, and Public Interest

Disclosure Act of the United Kingdom. These

actions have prompted Asian countries to reap the

benefits of whistleblowing.

Back to the China front, scholars and researchers

have subscribed to themyth that Chinese people do not

approve of external disclosure (e.g., Chiu, 2003;

Vinten, 1999), despite encouragement from the gov-

ernment (Gong, 2000). In fact, ‘‘telling’’ can be con-

sidered unacceptable and unethical behavior by any

Chinese employee for this act is considered a break of

trust between employees and employers and is disloyal

and ungrateful (see Fukuyama, 1995; Greene and

Latting, 2004; Redding, 1990). Therefore, when

Dr. Jiang Yanyong, a retired Chinese surgeon of Peo-

ple’s Liberation Army General Hospital 301, blew the

whistle on the Chinese Health Ministry to Time Mag-

azine concerning the Ministry’s handling of the SARS

epidemic (Jakes, 2003), he surprised the whole world

and aroused great interest among western whistle-

blowing scholars. In recent years, there are other

reports on external whistleblowing in China. For

example, a physiotherapist from Shanghai reported the

problems regarding buying old medical equipments as

new and a pharmacist from Hunan Province blew the

whistle on the drug administration for problematic

medicine. (China Daily, February 13, 2007).

Given these cases, more awareness and concern

could be observed among Chinese business people.

A recent survey of business managers indicates that

Chinese managers perceive that the corruption of

government has not decreased, and illegal business

practices remain a problem (Wright et al., 2003).

Despite the ongoing business reform and restruc-

turing of legal and political schemes recently, busi-

ness ethical practices endure slow improvement due

to path dependence effect and the inertia of insti-

tutional changes (Nee, 1992; North, 1990). How-

ever, it is just such a continuous changing process

that provides us an opportunity to examine the

emergence and development of ethical behaviors

such as whistleblowing in Chinese firms. Therefore,

research on the Chinese perception toward whis-

tleblowing can provide valuable information for

international human resource managers, and help

them to employ, predict, and manage internal

whistleblowing more effectively.

Contributions of the study

The objective of this study is to validate a decision-

making process of internal disclosure behavior

by examining the moderating effects of individual

and situational characteristics on the relationship

between Chinese people’s judgments concerning

whistleblowing and their whistleblowing intentions.

This research attempts to make three contributions

to the whistleblowing theory and practice. The first is

to establish theoretical link between whistleblowing

judgment and whistleblowing intention. In order to

have better understanding of the psychological pro-

cess of making whistleblowing decisions, we identify

judgment behavior to be an antecedent of whistle-

blowing intention. Moreover, we tested the mod-

erating effects of individual and organizational

characteristics in the judgment-intention relationship

so as to further explore the dynamics of this psycho-

logical process. The second contribution is to extend

whistleblowing research to a Chinese context. By

gaining knowledge about the perceptions of Chinese

employees with respect to internal whistleblowing, it

contributes to international and cross-cultural whis-

tleblowing research as a whole. Third, this research is

intended to provide normative guidance to both

practitioners and policy-makers. Business managers

that understand the decision-making processes

of whistleblowers will be able to deal with internal

Decision-Making Process of Internal Whistleblowing Behavior in China 27

disclosure more effectively, reaping positive benefits

while avoiding negative consequences. Hence, con-

sistent with China’s recent anti-corruption cam-

paigns, internal whistleblowing could be utilized as a

useful internal control mechanism to stop misconduct

in the banking sector.