THE INFLUENCE OF COUNTRY AND INDUSTRY ON

ETHICAL PERCEPTIONS OF SENIOR EXECUTIVES

IN THE U.S. AND EUROPE

Bodo B. Schlegelmilch*
American GraduateSchool of InternationalManagement

Diana C. Robertson**
London Business School

Abstract. This paper reports the results of a large-scale survey among

senior executives in the U.S., the U.K., Germany and Austria. The
research provides empirical evidence on the variation of perceptions of
ethical issues by country and type of firm. Our findings suggest that
country and industry type have significant effects, both with regard to
identification of ethical problems and the comprehensivenessof written
ethics policies and ethics training.

Attention to the field of business ethics by both managers and researchers has
increased dramatically over the past five years. For ethical issues in inter-
national business, scholars have indeed engaged in considerable theoretical
work on questions such as cultural relativism [Freeman & Gilbert 1988],
the obligations of multinational companies operating in other countries
[Donaldson 1989], and the need for global ethical systems [Buller, Kohls &
Anderson 1991].
Empirical research is sparse, however, although the need for such cross-
national research is increasingly recognized [Vitell, Nwachukwu & Barnes
1993; Wines & Napier 1992]. During the past ten years, for example, the
Journal of International Business Studies published only two empirical papers
specifically devoted to aspects of international business ethics. Langlois and
Schlegelmilch [1990] focused on corporate codes of ethics; and Dubinsky,
Jolson, Kotabe, and Lim [1991] used vignettes to investigate ethical
perceptions of industrial sales people in the United States, Japan and South
Korea. Even in one of the specialized journals of the field, the Journal of

*Bodo B. Schlegelmilch is Professor of Marketing and Director of the CIBER Institute of

International Business Ethics at the American Graduate School of International Management
(Thunderbird), 15249 N. 59th Avenue, Glendale, Arizona 85303-6000, U.S.A.
**Diana C. Robertson is Assistant Professor of Organisational Behaviour and Business
Ethics at the London Business School, Sussex Place, Regent's Park, London NW1 4SA,
England. While working on this project she was the Joseph Wharton Term Assistant
Professor of Legal Studies at the Wharton School, University of Pennsylvania.
The authors would like to express their thanks to the Ethics Resource Center, its director, Gary Edwards,
and the Behavior Research Center, Inc., for permission to use the U.S. data. The authors are also grateful to
Thomas W Dunfee and William T. Ross, Jr. for their comments.
Received: April 1994; Revised: December 1994 & April 1995; Accepted: April 1995.

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860 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

Business Ethics, less than 5% of the articles published between 1988 and 1992
involve cross-national empirical research [Robertson 1993]. Consequently, the
research base remains extremely fragmented and provides little guidance to
international managers, who often must develop their own understanding of
ethics in international markets.
The present study attempts to redress, in part, the lack of empirical evidence in
international business ethics. Specifically, it uses a large-scale survey of senior
executives in the U.S., the U.K., Germany, and Austria to investigate whether:
* the perceptions of the importance of ethical issues vary by country,
by industry, and/or by interaction between the two, and
* the issues that managers perceive to be important are the same issues
that are emphasized in their company codes and ethics training.

THEORETICAL BACKGROUND AND

HYPOTHESIS DEVELOPMENT
Discussion is ongoing as to the meaning and interpretation of business ethics
in different countries [Ciulla 1991; Mahoney & Vallance 1992; van Luijk 1990;
Vogel 1992]. Some scholars contend that organizational issues are similar
everywhere.They suggest this similarity is due to comparable missions and use
of common technology [Hickson, Hinings, McMillan, & Schwitter 1974;
Miller 1987]. Other management studies document the existence of country
differences in managerial values and attitudes [England 1978; Hofstede 1993;
Kanter 1991; Kelley, Whatley & Worthley 1987; Maurice, Sorge & Warner
1980]. Parallel to these findings, previous ethics studies have documented
country differences in attitudes toward ethical issues [Becker & Fritzsche
1987b; Jzraeli 1988; Tse, Lee, Vertinsky,& Werhung 1988].
It is our expectation that perception of ethical issues varies by country and can
be linked to differences in country ideology. Such country differences are
relevant to the development of ethical theory. Knowledge of country differ-
ences could also guide firms and other organizations in the development of
transnational codes of ethics, not in the sense of providing "moral authority,"
but by alerting the individuals writing codes to the salience of issues in
different countries [Frederick 1991; Rowan & Campbell 1983].
Although interest in ethical issues should not be limited to Western countries,
we chose to study the U.K., the U.S., Germany, and Austria because their
firms are more likely to adopt formal ethics initiatives, such as written codes of
ethics [Langlois & Schlegelmilch 1990]. In addition, we expected that the form
of capitalism in the U.S. and the U.K., which is very different from the
German and Austrian model [Lodge 1990; Thurow 1992], would result in
differing perceptions of ethical issues among managers in the four countries.
The intersection of the coauthors' interests and countries of background also
had an impact on country selection.
COMPARATIVEETHICAL PERCEPTIONS 861

In the followingsectionswe will firstdiscussthe most importantvariationsin

the waysbusinessethicsis understoodin the U.S., U.K. and Germany.(To our
knowledgebusinessethicsin Austriahas hardlybeenpursuedin the literature.)
Next, we will establishthe basis for our hypothesesabout countrydifferences.
Finally,we will discusspossibleeffectsof industryon the perceptionof ethical
issuesand on ethicalpractices,as well as the relationshipbetweenperceptions
of ethical issues and the inclusionof these issues in corporatecodes of ethics
and training.
Ethical Perspectives Relating to Country Ideology
A useful distinction can be made between individual and group decision-
makingon ethical issues and, consequently,responsibilityfor the outcome of
decisionsrestingeitherwith the individualor the group.This is consistentwith
a more general individualistic-communitarian ideology of nations. Lodge
[1990]characterizesthe U.S. as the most individualisticof capitalistcountries
and Germanyas more communitarianthan the U.K. Hofstede [1980, 1993]
ranksfiftycountrieson individualismversuscollectivism,findingthat the U.S.
ranks first on individualism,the U.K. ranks third, Germanyis fifteenth,and
Austriaeighteenth.(AlthoughVitellet al. [1993]presenttestablepropositions
for all four majorculturaldimensionsidentifiedby Hofstede[1976, 1980],the
individualismdimension is best supported in the business ethics literature
discussedbelow.)
Vogel [1992] states that "Americanstend to emphasizethe role of the indi-
vidual as the most critical source of ethical values, while in other capitalist
nationsrelativelymore emphasisis placed on the corporationas the locus of
ethicalguidance"(p. 44). He cites as one point of evidencethe requirementof
U.S. business ethics cases that the individualmust decide what is right or
wrongbasedon his or her own value system.In addition,the trendin the U.S.
is toward legal protectionof the individualwhistleblower,whereasvery few
Europeanlaws offer such protection. Van Luijk [1990]agrees that business
ethics in the U.S. is distinctiveto a culturein which individualismis revered.
Emphasisis placedon individualbusinesspeoplemakingdecisionsaboutwhat
is right and wrong. In Germanythere is a greateremphasis on consensual
ethics or "communicativeethics"[van Luijk 1990].Decisions lie not with the
individual but- with the moral community. Similarly, Austrian business
decisionmakingis consensual [Marz & Szecsi 1981], which may extend to
decisionmakingabout ethical issues as well. Businessethics in Germanyhas
been characterizedas most concernedwith relationshipsbetweeneconomics
and society, not relationshipsbetweenthe individualemployeeand the firm
[Ciulla1991;Steinmann& Lohr 1992].
Thesecountrydifferencesin ethicalperspectiveslead to our firsthypothesis:

Hi Managers'perceptionsof ethicalissueswill vary by country.1

862 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

IndustryDifferences
Management research acknowledges considerable differences across industries
in the issues faced by firms [Gordon 1991]. An expectation of our study is that
industry will have an impact on the perception of ethical issues. Our expect-
ations follow an integrative social contracts approach outlined by Donaldson
and Dunfee [1994]. They argue that members of numerous localized com-
munities (such as industries) will consent to the terms of specific "micro"
social contracts. These communities are "capable of establishing norms of
ethical behavior for themselves" (p. 13). We reason that industries may well
constitute communities in which ethical norms evolve. However, most studies
of ethics in corporations have not specified how ethical issues may vary by
industry (see, for example, Center for Business Ethics [1986, 1992]; Webley
[1992]). An exception is the work of Chatov [1980, 1982] who found differences
in issues emphasized in corporate codes of ethics in a number of different
industries. Similarly, a more recent study by Beneish and Chatov [1993] found
that "codes emphasize operational rather than symbolic issues and that their
content varies across firms to reflect interests logically related to major
industry groups" (p. 5). Thus, we hypothesize:
H2 Managers' perceptions of ethical issues will vary by industry.
Furthermore, we expect country and industry effects to interact. This
expectation is based on the observation that the perception of ethical issues is
very sensitive to specific contexts [Donaldson & Dunfee 1994; Jackall 1988].
H3 Country and industry will interact to affect managers' perceptions
of ethical issues.

Ethics Policy and Training

We also expect that ethical issues perceived to be important will be the ones
that are addressed in written ethics policies or codes and in employee training,
and that there will be country and industry differences in ethical issues
addressed in corporate policy and training.
H4 The ethical issues perceived to be important by managers will be
addressed in written ethics policies or codes and in employee
training.
H5 Ethical issues addressed in corporate codes and training will vary
by country.
H6 Ethical issues addressed in corporate codes and training will vary
by industry.
We know, for example, that 93% of Fortune 1000 survey respondent com-
panies have implemented codes of ethics [Center for Business Ethics 1992],
that 90% of U.S. business schools teach a course on business ethics [The
COMPARATIVEETHICAL PERCEPTIONS 863

Economist 1993], and that business ethics has been a growth industry for
academics and consultants over the past decade. Similarly, Webley [1992]
reports that 71% of the companies responding to his survey of the 400 largest
U.K. companies have adopted corporate codes. In the U.K, corporate interest
in ethics [Ryan 1994; Schlegelmilch & Houston 1989], the teaching of business
ethics [Mahoney & Vallance 1992], and academic study of business ethics have
increased dramatically.
Although Germany has also witnessed an increased interest in the topic
of business ethics on the part of academics [Hansen 1988; Steinmann &
Oppenrieder 1985; Steinmann & Lohr 1989; Schlegelmilch 1990], there remains
considerable skepticism among German businesspeople about business ethics,
particularly the notion that ethics and profitability are compatible [Vogel
1992]. Furthermore, van Luijk [1990] points out that Europeans are generally
less optimistic about the effectiveness of corporate codes of ethics than are
Americans.

METHODOLOGY AND DEVELOPMENT OF

FURTHER HYPOTHESES
Data on perceptions of ethical issues as constituting a problem were collected
from respondents in all four countries and factor analyzed. This factor analysis
then formed the basis for formulating hypotheses about country differences.
Thus, we will first discuss the methodology employed and then present our
hypotheses.
In the U.S., mail questionnaires were sent to a stratified sample of 2000 CEOs
of companies, varying in size and drawn from six industries (see below). Dun
and Bradstreet's Million Dollar Directory served as the sampling frame.
Mailing of the questionnaires was followed up by phone calls in order to
maximize response. A total of 711 managers completed and returned the mail
questionnaires, constituting a response rate of 35.6%. The questionnaire elicits
detailed information about corporate ethics programs, as well as respondents'
perceptions about ethical issues.
In Europe, mail questionnaires identical to those used in the U.S. were sent to
1,481 U.K., 1,098 German, and 368 Austrian companies. To make the samples
as representative as possible, they were stratified to reflect the industry
structure in each country.2(The questionnaire was translated into German and
independently back-translated into English to check for consistency.) The
sampling frame used for Britain and Germany was Major Companies in
Europe. Austria is not included in this directory and Goldener Trendserved as
the basis for the selection of Austrian firms. Given the relative size of industrial
activity in the U.S. and the three European countries, the sample size for the
latter may appear unduly large. However, the sampling decision was made in
anticipation of two potential problems that would reduce response rates in the
864 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

European sample, namely the use of a printed rather than a computerized

address base which tends to include a much higher proportion of "invalid"and
out-of-date addresses, and the fact that budget limitations did not permit
telephone follow-ups in Europe.
The samples in all four countries are comprised of firms in the following
industries: agriculture, manufacturing, communications, wholesale and retail
trade, finance and insurance, and other services. These industries were selected
to represent a range of business functions and thus a correlative range of
potential business ethics issues. Size of company ranged from firms with under
1,000 employees (11.7%) to those with over 50,000 employees (4.9%) with
most firms in the 2,500 to 9,999 size range (45.7%). Analysis of the job titles of
the respondents showed that the large majority of questionnaires were, indeed,
completed by the CEOs themselves. However, some questionnaires were
passed to other senior managers in the company identified as having
responsibility for implementing ethics programs. These typically held job titles
such as Deputy Chairman or Head of Human Resources. The responses
broken down by industry and country are presented in Table 1. A comparison
with the proportion in the original mailing shows a good overall match
between the intended and obtained sample, except for agriculture, which is
underrepresented in all countries, and retail and wholesale, which is
underrepresentedin the U.K.
As expected, the response rate in Europe was considerably lower than that in
the U.S. The unadjusted response rate was 7%in the U.K., 6% in Germany and
10%in Austria. However, discussions with list brokers indicate that in printed
directories approximately 20% of the entries on the list become invalid each
year. Thus, in dealing with a list that is three years old, the assumption is that
only 51.2% of the questionnaires will reach the targeted individual. Therefore,
we consider the adjusted rate of response to be 14% in the U.K., 12% in
Germany and 10%in Austria (Austria's directory was only one year old).

TABLE1
Response by Industry and Country
Response
U.S. U.K. Germany Austria
IndustryGroup No. Pct. No. Pct. No. Pct. No. Pct.
Agriculture 74 10.4 10 9.8 5 7.7 4 10.8
Manufacturing 201 28.3 53 52.0 37 56.9 15 40.5
Communication 110 15.5 5 4.9 4 6.2 3 8.1
Retail&Wholesale 130 18.3 4 3.9 5 7.7 8 21.6
Financeand Insurance 91 12.8 14 13.7 7 10.8 4 10.8
OtherServices 93 13.1 14 13.7 6 9.2 2 5.4
Missing 12 1.7 2 2.0 1 1.5 1 2.7
Total 711 100.0 102 100.0 65 100.0 37 100.0
COMPARATIVEETHICAL PERCEPTIONS 865

The lower response rate in Europe is further attributable to lack of telephone

follow-ups due to a shortage of resources to conduct callbacks. However, the
variation in response rate would be of greater concern if the study were
documenting the incidence of corporate codes of ethics, in which case those
companies that respond would be expected to be those with codes of ethics.
Instead, the study is comparing managerial perceptions of ethical issues and
comparing the content of the codes of companies that did respond.
The study elicited responses to twenty-six statements designed to explore the
relative importance of key ethical issues in the respondents' organizations.
These issues originally were formulated from experience in working with U.S.
firms in the development of ethics policies and, more generally, were based on
the ethical issues faced by the firms [Ethics Resource Center 1990]. These items
are similar to those found in European codes of ethics [Langlois &
Schlegelmilch 1990]. Examples include "abuse of expense accounts," "bribery,"
and "employee theft." The responses to these statements were measured on
ten-point scales, ranging from "not a problem" to a "major problem."
Rather than formulating hypotheses about each of the twenty-six issues, we
decided to base our hypotheses on the underlying dimensions inherent in the
set of ethical issues. To this end, a factor analysis [Nunnally 1978] was
conducted and its appropriateness was assessed by the Bartlett test of
sphericity3 and the Kaiser-Meyer-Olkin measure of sampling adequacy.4 To
determine the number of factors extracted, we used eigenvalue >1 and a visual
examination of the scree test. While the eigenvalue indicated an extraction of
seven factors, the scree test flattened out after five factors. Based on the latter
and supported by the fact that the computed alpha reliabilities [Cronbach
1971] of the variables with the highest loading on each factor (bold) only
reached .51 and .58 for factors six and seven respectively, we ignored the last
two factors in establishing our hypotheses.5
Table 2 shows the results of the factor analysis based on the entire European
and U.S. sample and illustrates that the dimensions possess a high degree of
face validity.6
Explaining 28% of the variance, the first factor represents an employee
conduct dimension, loading on variables such as "receiving excessive gifts,"
"giving excessive gifts," "kickbacks," "bribery," and "abuse of expense
accounts." Factor 2 reflects the inappropriate use of information, showing high
loadings on variables which relate to obtaining or misusing proprietary
information. The high loadings on Factor 3 relate to personnel issues such as
"drug and alcohol abuse" or "discrimination." Factors 4 and 5 load on
conceptually similar issues. However, Factor 4 appears to represent primarily
central and foreign government relationships, while Factor 5 centers on
political contributions and activities at the local level. We therefore labelled
this factor "political and local involvement" (Factor 5).
866 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

TABLE2
Rotated Factor Matrixand Factor Loadings of MajorEthical Issues
Factors
1 2 3 4 5

Employee Conduct
Gifts and entertainment (receiving) .79 .22 .19 .01 .17
Kickbacks .78 -.04 .17 .30 .04
Gifts and entertainment (giving) .70 .27 .09 .15 .25
Bribery .66 .01 .07 .44 -.03
Abuse of expense accounts .51 .24 .41 .02 .05
Misuse of company assets .49 .19 .44 -.01 .23
Use of Information
Misuse of proprietary information .12 .84 .12 .07 .06
Misuse of sensitive information
(belonging to others) .14 .84 .15 .14 .03
Methods of gathering competitor's
information .08 .69 .06 .25 -.04
Conflicts of interest .24 .54 .15 -.10 .35
Insider trading .10 .40 .11 .06 .39

Personnel Issues
Drug and alcohol abuse .10 .15 .81 .12 .09
Employee theft .32 .04 .76 -.05 -.04
Discrimination .07 .13 .74 .09 .20
Inaccuracy of books and records .19 .10 .41 .16 .26

Central and Foreign Government Relations

Inaccurate time charging to government .16 .13 .06 .80 .04
Improper relations with foreign
government representatives .05 .10 .09 .78 .11
Improper relations with central
government representatives .30 .14 .00 .65 .51

Political and Local Involvement

Political contributions .12 .06 .15 .17 .75
Relations with local communities .06 -.02 .14 .03 .69
Improper relations with local
government representatives .34 .10 .01 .47 .59

Eigenvalue 7.28 2.20 1.95 1.83 1.28

% of variance 28.0 8.5 7.5 7.0 4.9
Cronbach's alpha .84 .80 .75 .77 .67

As a further preliminary step before establishing our hypotheses about country

differences, we pooled the German and Austrian subsamples. The rationale
behind this decision was the lack of variation across responses from these two
countries in virtually all variables included in the questionnaire.7 (This was
established by conducting F-tests of sample variances together with
subsequent t-tests.) For the set of variables analyzed in the present study, these
tests did not reveal a single significant difference between the German and
Austrian subsets. Based on the factor analysis, further hypotheses about
country differences follow.
COMPARATIVEETHICAL PERCEPTIONS 867

Our initialdiscussionof the dimensionsof individualisticdecisionmakingand

relianceon the codificationof ethical imperatives(which are most likely to
characterizethe U.S., followed by the U.K., then Germany and Austria)
suggeststhat U.S. managerswill place more emphasison ethicalissuesrelated
to the control of employeebehavior.Ciulla [1991]characterizesthe U.K. as
havingstronger"culturalrestraints"than the U.S. In her view this accountsat
least partiallyfor the relativelack of enthusiasmof Britishfirmsfor codes of
ethics. "In a more homogeneoussociety with a strongerclass consciousness,
ethicalbehaviortendsto be imbeddedin rolesand articulatedin virtuesrelated
to those roles" (p. 74). Similarly,Becker and Fritszche [1987a] found that
Germanmanagerswereskepticalabout the effectivenessof codes of ethics.
In the U.S., businessethicistshavefocuseda greatdeal of attentionon topics
such as employeewhistleblowingthat relateto the ethical decisionmakingof
individual businesspeople[Bowie 1982; DeGeorge 1986]. A cross-national
study found that U.S. managersare significantlymore likely than German
managers to indicate that they would blow the whistle in response to a
hypotheticalvignette[Becker& Fritzsche1987b].
Additional arguments for the expectation that the U.S. will emphasize
employeebehaviorstem fromCresseyand Moore [1983],who reportthat U.S.
codes of ethics give "a disproportionatedegree of attention"to controlling
conductdirectedagainstthe firm(p. 58), and Mathews[1988],who found that
large U.S. companiesare more concernedwith "conductagainst the firm or
specific illegal activity - such as bribery - on behalf of the firm than with
product safety and quality, environmentalaffairs, and other issues directly
related to consumers" (p. 61). Corporate codes may fail to consider the
importanceof the individualemployeeethics documentedby Gilbert [1991]
and Derry[1991].As such,corporateguidelinesmaybe excessivelyrepresented
in anomic organizations[Cohen 1993] and appear to be formulatedas a
sociallyacceptablemeansof controlof employeebehavior[Weaver1993].

HIa U.S. managerswill be moreconcernedwith controllingemployee

behaviorthan will U.K., Germanand Austrianmanagers.
Individualemployeeshave the potential to use informationeither to further
the goals of the firm or to underminethem. Factor2 contains some items in
whichemployeemisuseof informationwouldruncontraryto the best interests
of the firm and for which, arguably,control of individualbehavioris needed.
For the reasonscited above,the U.S. is hypothesizedto be the most concerned
with this control over employeebehavior.Furthermore,businessethicists in
the U.S. have conducted considerableresearchon the ethics of corporate
information[Beltramini1986;Paine 1991].
A possible competinghypothesisstates that becauseGermanfirms are more
likely than U.S., U.K. and French firms to emphasize innovation and
868 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

technology in their corporate codes of ethics [Langlois and Schlegelmilch

1990], German and Austrian firms would be the most protective of corporate
information. However, corporate codes in Germany are not focused on the
protection of technology; instead, they present innovation and the use of
technology as a value to be pursued by the firm and its employees. Given that
individualistic societies are much more protective of company rights to
technology and information than countries with a communitarian ideology
[Lodge & Vogel 1987], we hypothesize:

Hlb U.S. managers will be more concerned with ethical issues

associated with controlling employee use of corporate
information than will U.K., German and Austrian managers.
The individualistic nature of the ethical concerns comprising our "personnel
issues" factor (drug and alcohol abuse, employee theft, and discrimination)
suggests that U.S. managers will be most focused on these issues. Mathison
[1993] reports that U.S. executives are more tolerant than European executives
of corporate drug testing, a finding that may indicate a greater concern on the
part of U.S. executives about potential employee drug abuse. The issues of
discrimination, drug and alcohol abuse, and employee theft are well-
documented problems in U.S. corporations [Lasher & Grashof, 1993; Murphy,
1993].

Hlc U.S. managers will be more concerned with ethical issues of

employee drug and alcohol abuse, employee theft, and
discrimination than will U.K., German and Austrian managers.
The extent of government involvement in business also varies among the four
countries. Thurow [1992] characterizes U.S. history as one of adversarial
relations between government and the private sector. Similarly, Langlois and
Schlegelmilch [1990] find that U.S. corporate documents reveal "an underlying
mistrust of government intervention in the private sector" (p 530). In Germany
and Austria, on the other hand, government and industry have had to work
closely together [van Luijk 1990]. For example, partnerships between
Germany's central government and industry are common in steel, oil,
shipbuilding, automobiles, and electronics [Allen 1987].
Our expectation is that the more individualistic nature of U.S. society will
result in greater acknowledgement of relationships with government officials
as an ethical issue. Lodge [1990] argues that an individualistic society stresses
the individual over the community, and its government tends to have a limited
role in business. Business activity takes place in a free market, and government
regulates business only to achieve objectives that the market cannot meet. By
contrast, in a communitarian society government is important in achieving
consensus about the future direction of the community. Our expectation is
COMPARATIVEETHICAL PERCEPTIONS 869

supported by Langlois and Schlegelmilch [1990] who found that the vast
majority of U.S. firms refer to relations with the U.S. government in their codes,
whereas a small percentage of European firms include the topic of government
relations.
Budde et al. [1982] found that British executives on the whole were more
supportive than German managers of the need for government intervention in
business. However, other studies have found support for an Anglo-Saxon view
that governments should not intervene in the market process except where it is
necessary to protect individual and corporate rights, and that Europeans
perceive themselves as more tolerant than Americans of government inter-
vention in social issues [O'Neil 1986].

Hld U.S. managers will be more concerned about relationships with

government officials as ethical issues than will UK, German and
Austrian managers.
In addition, corporate involvement in the political process and in the local
community is more likely to take place in Germany and Austria than in the
U.S. and U.K. Regional governments in Germany are a major source of power,
and work to foster educational and industrial policy favorable to firms in their
region [Allen 1987]; German and Austrian political systems are similar [von
Riekhoff & Neuhold 1993]. Individuals tend to be more politically active than
in the U.S. and U.K.

Hle U.S. and U.K. managers will be less concerned about political
and local involvement as ethical issues than will German and
Austrian managers.

RESULTS
Both country and industry were hypothesized to affect managerial perception
of ethical issues (HI and H2). These hypotheses were tested (while controlling
for size) through an analysis of covariance. Specifically, the five factors were
used instead of the original variables, and we initially adjusted for the effect of
company size and then assessed the effects of country and industry. The results
of this analysis are presented in Table 3.
Our findings confirm our expectation that both country and industry have a
strong influence on the perception of ethical issues (and that firm size does
not). The country effect is significant in three of the five factors and the
industry effect is significant in four of the five factors. In contrast, there is no
significant country-industry interaction effect, i.e., no evidence that particular
country/industry combinations produce different effects than do each of the
variables alone, and H3 is not supported.
870 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

TABLE3
Covariance Statistics Based on Factors
Effects
Covariate A B (A*B)
Size of Inter-
Dependent Company Country Industry action
Factor1: Gifts & Entertainment
F-Ratio .072 1.192 4.447 .996
Significance .788 .304 .001 .445
Factor2: Use of Information
F-Ratio .918 2.357 2.084 1.025
Significance .338 .096 .066 .420
Factor3: Personnel Issues
F-Ratio 11.034 60.935 1.814 .614
Significance .001 .001 .108 .802
Factor4: Central& Foreign
GovernmentRelationships
F-Ratio 1.751 1.718 5.038 .716
Significance .186 .180 .001 .710
Factor5: Politics &
Local Relationships
F-Ratio 2.571 2.894 8.552 1.199
Significance .109 .056 .001 .289

Although the above analyses identify which ethical issues are affected by
country,industryor both, they do not describethe directionand magnitudeof
the differences.Therefore,multiple classificationanalyses were carriedout,
yielding the deviations from the overall mean for each of the country and
industry subsamples (see Appendix 1). Contrast tests then allowed the
comparisonof individualmeanswhereoveralldifferencesare significant.8
Country Differences
Wenow turnto the specificcountrydifferencehypothesesestablishedearlierin
the paper.Hia predictedthat U.S. managerswould be more concernedwith
ethical issues surroundingthe control of employee conduct than U.K.,
Germanand Austrianmanagers(Factor 1). Our resultsindicatethat the U.S.
managersare not significantlymorelikelyto identifythese as ethicalissues,so
that HI is not supported.H lb made a predictionsimilarto that of HIa; in the
case of HI b, controllingbehaviorhas to do with employeebehaviorin regard
to information (Factor 2). We found that the U.S. managers are indeed
significantlymore likely than Europeanmanagersto identifythese as ethical
issues of concern,thus providingsupportfor Hilb.
COMPARATIVEETHICAL PERCEPTIONS 871

Significantdifferencesare found in personnelissues (Factor 3), and Hlc is

supportedbecauseU.S. managersare far more likelythan U.K. and German
and Austrian managers to identify personnel issues as ethical issues of
concern.HId predictedthat U.S. managerswouldbe most concernedwith the
ethicsof governmentrelations(Factor4). No significantdifferencesare found.
Hle predictedthat Germanand Austrianmanagerswould be more likely to
express concern about political and local involvement(Factor 5), and this
hypothesisis supported.
Our resultssuggestthat countrypatternsof identificationof ethical issues of
concern are not as distinct as we had hypothesized. For example, the
hypothesesthat would seem to be the most closely relatedin that they both
includethe issue of employeecontrolof behavior,Hla and Hlb, do not share
significantresults.

Industry Differences
Our expectationsled us to predictthat industrywould have an impacton the
issues identified (H2). This was confirmed by our multiple classification
analysis,showingthat the perceptionof ethicalissues variesstronglywith the
type of industry.Among the more notable differencesare the comparably
larger concern about "employeeconduct" (Factor 1) in wholesaling and
retailing, and the greater concern about "central and foreign government
relations"(Factor 4) within agricultureand manufacturing.While most of
these differenceswould be expected(e.g., the importanceof "insidertrading"
in finance), others (e.g., the lack of attention to "central and foreign
governmentrelations"(Factor 4) in the communicationssector) are more
difficultto explain.The only areawhereno significantindustryeffectscould be
observedwas "personnelissues"(Factor3).

Formulationof Ethics Policies and Training

Shiftingthe focus to the formulationof ethics policies and training,initially
two new variableswerecomputed.They representa count of the ethicalissues
a companyaddressesin its writtenpolicy and trainingand are expressedas a
proportionof the total numberof potentialpolicy/trainingitems listed in the
questionnaire. Our findings indicate that companies tend to address
substantiallymore ethical issues in written policy statements(mean=36%)
than in training(mean=5%).Moreover,it is worthnoting that 108companies
(14%) do not address any of the listed ethical issues in written policy
statements,and 534 (67%) do not address any of the issues in employee
training.
To test our hypotheses that different countries and industries will have
differentethical issues includedin their written ethics policies and in ethics
training, two analyses of covariancewere conducted. The design of these
872 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

analyses specifies the proportion of ethical issues addressed in written policies

and in training as dependent variables and treats the company size together
with the five factors representing the perception of ethical problems as
covariates. The rationale is that not only company size but also the perception
of ethical issues potentially influence the formulation of ethics policies and
training. The country and industry measures are again treated as main effects
with a design introducing the covariates prior to the main effects. The results
of the two analyses are presented in Table 4.
Country and industry effects are highly significant, reiterating the importance
of these variables, supporting H5 and H6. No significant interaction effect
could be observed between country and industry. The direction and magnitude
of the country and industry-specific influences were again determined with

Table4
Covariance Statistics: Written Policies and Training

Dependent Covariates F-Ratio Effects F-Ratio Inter- F-Ratio

(Sign.) (Sign.) Action (Sign.)

Proportionof Size of Company .041 Country 8.263 Country 1.269

EthicalIssues (.839) (.001) x (.244)
Addressed in Industry
Written EmployeeConduct .024 Industry 4.040
Policies (.877) (.001)
Use of Information 2.190
(.139)

Personnel Issues .124

(.724)

Central& Foreign 1.228

Gov't Relationships (.268)
Political& Local .814
Involvement (.367)

Proportionof Size of Company .052 Country 2.965 Country 0.977

EthicalIssues (.820) (.052) x (.462)
Addressed in Industry
Training EmployeeConduct .017 Industry 1.876
(.896) (.097)

Use of Information 1.063

(.303)

Personnel Issues .027

(.870)
Central& Foreign 1.163
Gov't Relationships (.281)
Political& Local 1.755
Involvement (.186)
COMPARATIVEETHICAL PERCEPTIONS 873

multiple classificationanalyses (Appendix 2) and subsequentcontrast tests

permittedthe comparisonof individualmeans where overalldifferencesare
significant.9Interestingly,the results provide no support for H4 in that the
perceptionof ethical problemsappearsto have no significantbearingon the
proportionof ethicalissues addressedeitherin writtenpoliciesor training.In
termsof writtenpolicies,the resultsshow that the U.S. and the U.K. arerather
similar to each other and considerablydifferent from the German and
Austriansubsample.With regardto training,the resultsagain point towards
the U.S and U.K. aligningin relationshipto Germanyand Austria;however,
the magnitudeof this differenceis not as pronouncedas it is in regard to
written policies. Looking at the influenceof industry,the multiple classific-
ation analysisillustratesthat manufacturingand agricultureare addressinga
relativelyhigher proportionof issues in their written policies, while service
industriesaddresscomparativelymore issuesin training.
DISCUSSION
Our resultsindicatethat the U.S. (the most individualisticof the countries)is
most likely to stand alone and the Europeancountriesto align. Vogel [19921
has characterizedbusinessethics in the U.S. as shaped by the "traditionof
individualism."Furthermore,as the EuropeanUnion becomes more solidi-
fied, Europeanalignmenton ethicalissuesmay be expectedto follow.
Themost strikingcountrydifferenceoccursforpersonnelissues,withthe United
Statesmanagersmuch more likelythan the United Kingdomor Germanand
Austrianmanagersto perceivepersonnelissuesas ethicalissues.This findingis
consistentwiththatof Langloisand Schlegelmilch[1990]-
who reportedthatU.S.
firmstendedto emphasizeconceptsof employeefairnessand equityand focused
on the "qualityof companypolicy towardsemployees,"while Europeanfirms
weremorelikelyto stress"employeeresponsivenessto companyactivities."
In addition, U.S. managers are significantlymore likely to perceive that
employeeuse of informationconstitutesan ethical issue. On the other hand,
German and Austrian managers are significantlymore likely to consider
political and local involvementan ethical issue of concern. Such involvement
is likely to take place at the firm level, as well as at the individualemployee
level, and thus would be consistent with a communitarianperspective.The
lack of differenceon the employeeconduct dimensionis particularlysurpris-
ing because other studies show that U.S. corporationsare "rules-minded"
about formulatingguidelinesfor employeeethicalbehavior[Cressey& Moore
1983;Mathews19881.In fact, the U.K. is aheadof the U.S. on this factor.One
possible explanationto be tested in future researchis that more recent U.S.
corporatecodes of ethics havetendedto be concernedwith employees,but in
a protectiveratherthan a restrictivemanner.
The U.S. demonstratesthe most concernand the U.K. the least about central
and governmentrelationships(Factor4), althoughcountrydifferencesare not
874 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

significant.We had expectedthat the least concernwith governmentrelation-

ships would characterizethe most communitariansociety.However,the U.K.
has a long traditionof governmentinvolvementin industry,and despiterecent
relationships[Budde,
privatizationinitiatives,has close government-corporate
Child,Francis,& Kieser 1982].Buddeet al. reportthat Britishexecutiveswere
significantlymore supportiveof "appropriategovernmentinterventionin the
businessworld"than wereGermanexecutives.
Four out of the five factors show significantindustrydifferences.The excep-
tion is the personnelissues factor, suggestingthat these are common to all
industries.Most of the industrydifferencesare not surprising.However,the
profile of political and local involvement is puzzling in that it is not
immediatelyobvious why the communicationsand finance and insurance
industrieswould havethe greatestconcernand wholesaleand retailindustries
the least. Similarly,in looking at industry differences for the individual
variables,we note, for example,that the issue of drugand alcohol abusevaries
significantlywith the communicationsindustry having the most concern,
whereas the finance and insurance industries do not. Companies in the
manufacturingindustrymay be more inclinedto drug test and thereforeless
inclinedto reportthis as an ethicalissue.
Giventhe countryand industrydifferencesfound, froma managerialperspec-
tive, it appearsto be a mistaketo expect all corporateethics policies to look
alike.Carefulthoughtshouldbe givento tailoringthe policy to the particular
firm,industryand country.Largemultinationalfirmsoperatingin a numberof
countriesneed to considerthe generalapplicabilityof a code of ethicsor ethics
trainingthat was developedin the countryin whichthe firm'sheadquartersis
located.If ethicalconcernsdifferby country,then imposinga set of standards
developed for one country on another country may be counterproductive.
Similarly,expatriatesworkingfor multinationalfirms need to be awarethat
theirown perceptionof ethicalissuesmay not matchthat of theirnativefellow
employees.
However,our results should not be interpretedas supportiveof a cultural
relativismargument.The fact that thereare countrydifferencesin approaches
to ethical issues does not necessarilymean that there should be country
differencesin ethicalprinciples,nor that it is impossibleto formulateuniversal
ethicalprinciples.What "is"should not be the determinantof what "oughtto
be."Donaldson[1991]points to the counterproductive and skepticalnatureof
cultural relativismin that it "declaresmorality to be defined exclusivelyin
terms of cultural norms" (p 50). We agree with Donaldson that empirical
researchto identify such norms can make pronouncementsonly on cultural
practice,not on moraltheory.A full discussionof culturalrelativismis outside
the scope of the presentstudy (see Freeman& Gilbert[1988],for an excellent
criticismof theoriesof culturalrelativism).
COMPARATIVEETHICAL PERCEPTIONS 875

This researchis exploratory,and the generalizabilityof our findingsis conse-

quentlyuncertain.The low ratesof responsein the Europeansamplesuggest
that we need to be particularlycautiousabout our results.However,our study
leads to at least threeavenuesthat appearpromisingfor futureresearch.First,
and most obvious,the studyshouldbe repeatedin othernationsto explorethe
generalizabilityof the results. It would be especially interesting to study
countriessuch as Japanand Chinawhich are highlycommunitarian,but have
adoptedveryfew corporateethicsinitiativessuch as ethicscodes and training.
One may even focus on subcultureswithin countries,recognizingthat these
may havedistinctiveapproachesto ethicalissues.
Second, future researchcould concentrateon discoveringthe ethical issues
that are salient in other countries and the ways in which corporationsare
addressingthose issues. One possible approachwould be to link stakeholder
theoryto ethicalissues.Identificationof the most relevantstakeholdergroups
in each country should prove revealingabout which ethical issues managers
perceiveto be important.
Finally,the findingsdemonstrateconsiderablesimilaritiesbetweenthe U.S. and
U.K. on writtenethics policies and training.In other words,the ethicalissues
in the two countriesmay be different,but the corporateresponsein terms of
ethics initiativesis similar.Future studiescould investigatediffusionpatterns
of corporateethics practicesamong countries.Ciulla [1991]has arguedthat
Europeans are beginning to adopt codes of ethics because managers are
increasinglydealingwith a pluralismof valueswithintheirfirmssimilarto the
pluralismfound in U.S. companies.This still does not explainwhy the ethical
issues Europeanmanagersidentifyare differentfrom those of concernto U.S.
managers.Our discoveryof a Europeanalignmenton these issues needs to be
exploredfurther.
APPENDIX I
Multiple Classification Analysis
DeviationsfromGrandMean
Adjustedfor
Variables Adjustedfor Independents
and Effects Unadjusted Independents &Covariate
Factor 1: Employee Conduct (Grand Mean = -.003)
1 UnitedStates (a) .03 .01 .01
2 United Kingdom .00 .08 .07
3 Germany/Austria - .18 - .15 - .16

1 Agriculture (b) -.01 -.01 .00

2 Manufacturing -.12 -.12 -.12
3 Communications -.09 -.09 -.09
4 Wholesale, Retail .42 .42 .42
5 Finance, Insurance .11 -.11 -.11
6 Services -.03 -.04 -.03
876 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

APPENDIX I (continued)
DeviationsfromGrandMean
Adjustedfor
Variables Adjustedfor Independents
and Effects Unadjusted Independents &Covariate
Factor 2: Use of Information (Grand Mean = -.004)
1 UnitedStates (c) .04 .05 .05
2 United Kingdom .00 -.05 -.04
3 Germany/Austria -.23 -.25 -.24
1 Agriculture (d) -.20 -.21 -.21
2 Manufacturing .05 .09 .09
3 Communications -.13 -.15 -.16
4 Wholesale, Retail -.07 -.09 -.09
5 Finance, Insurance .19 .18 .18
6 Services .10 .08 .08
Factor3: Personnel Issues (GrandMean = .009)
t UnitedStates (e) .26 .25 .25
2 United Kingdom -.72 -.68 -.68
3 Germany/Austria -.87 -.84 -.84
1 Agriculture (f) .10 .07 .07
2 Manufacturng -.26 -.07 -.07
3 Communications .25 .11 .11
4 Wholesale, Retail .21 .09 .09
5 Finance, Insurance -.17 -.22 -.22
6 Services .17 .10 .10
Factor4: Centraland ForeignGovernmentRelations(GrandMean = -.007)
1 UnitedStates (g) .02 .04 .05
2 United Kingdom -.05 -.13 -.15
3 Germany/Austria -.05 -.11 -.13
1 Agriculture (h) .42 .41 .42
2 Manufacturing .11 .15 .14
3 Communications -.16 -.18 -.18
4 Wholesale, Retail -.15 -.17 -.17
5 Finance, Insurance -.21 -.22 -.22
6 Services -.05 -.07 -.06
Factor5: Politicaland Local Involvement(GrandMean = -.017)
1 United States (i) -.02 -.03 -.03
2 United Kingdom -.10 -.06 -.08
3 Germany/Austria .24 .28 .25
1 Agriculture ).00 .00 .00
2 Manufacturing -.10 -.12 -.13
3 Communications .34 .36 .36
4 Wholesale, Retail -.35 -.35 -.34
5 Finance, Insurance .35 .36 .37
6 Services -.08 -.07 -.06
Scheffe Procedureat .05 level
(a) not significant (f) Group2 vs. 3, 4, 6
(b) Group4 vs. 2, 3, 5 (g) not significant
(c) not significant (h) Group1 vs. 3, 4, 5
(d) not significant (i) Group1 vs. 3
(e) Group1 vs. 2, 3 () Group3 vs. 2, 4
Group5 vs. 2, 4
COMPARATIVEETHICAL PERCEPTIONS 877

APPENDIX 11
Multiple Classification Analysis
Deviations from Grand Mean

Adjusted for
Variables Adjusted for Independents
and Effects Unadjusted Independents & Covariate

Proportion of Ethical Issues Addressed in Written Policies

(Grand Mean = 36.22)
United States (a) .84 1.53 1.80
United Kingdom 4.40 1.99 1.41
Germany/Austria -9.88 -11.69 -12.81

Agriculture (b) .92 .84 1.97

Manufacturing 5.07 6.03 6.29
Communications .76 .09 - .64
Wholesale, Retail -2.97 -3.33 -2.77
Finance, Insurance -5.60 -6.02 -7.47
Services -4.88 -5.52 -5.55

Proportion of Ethical Issues Addressed in Training

(Grand Mean = 5.54)
United States (c) -.07 -.15 -.26
United Kingdom -2.12 -1.85 -1.63
Germany/Austria 2.62 2.90 3.31

Agriculture (d) -.47 -.50 -.91

Manufacturing - .87 - .90 -1.00
Communications -1.72 -1.72 -1.45
Wholesale, Retail .96 .89 .72
Finance, Insurance -.03 .05 .58
Services 3.70 3.81 3.81

Scheffe Procedure at p< .05

(a) Group 3 vs. 1,2
(b) not significant
(c) not significant
(d) not significant

NOTES
1. This hypothesisis developedinto further,more specificdetail followingour discussionof
the resultsof a factor analysisin the next section.
2. The four countriesanalyzedoperateslightlydifferentSIC (StandardIndustrialClassific-
ation) systems.To facilitatecomparison,the U.S. categorieswereadopted.
3. The Bartletttest of sphericitytests the hypothesisthat the correlationmatrixis an identity
matrix.If this hypothesiscannot be rejected,factor analysis is not appropriatefor the data
set.
4. The Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy compares the
magnitudesof the observedcorrelationcoefficientswith the magnitudesof the partialcorrel-
ation coefficients.If the value of the KMO statisticis low (less than .60), the use of factor
analysisis not recommended.
5. Since the U.S. sample was so much larger than the sample drawn from the European
countries,we also re-ranthe factor analysisfive times with successiverandomsamplesof the
878 JOURNAL OF INTERNATIONALBUSINESS STUDIES, FOURTH QUARTER 1995

U.S. respondents in order to achieve roughly equal subsample sizes for the European
countries and the U.S. These analyses confirmed the stability of the factor structure obtained
when all U.S. cases were processed.
6. To test for possible country-specific influences on the resulting factor dimensions, separate
factor analyses were conducted for the country subsamples and a number of factor
comparison indicators were computed, notably the root mean square (RMS), the coefficient
of congruence (CC) and the Pearson Correlation coefficient (r) [Levine 1977]. While, overall,
similar factor structures emerged, the results indicate no total congruence. However, in
interpreting these findings, some caution is called for in the light of the ratio between the
analyzed variables and the total number of cases in the European subsamples.
7. A high degree of congruency in the attitudes of German and Austrian managers has also
been observed in different fields (e.g., Muller [1991], pp. 136-39) and lends support to our
findings.
8. The ANCOVA design had to be changed in order to conduct multiple classification
analyses. This did not have a substantial impact on the results; all significant findings
remained significant and additional significant relationships were found. SPSS/PC+ also does
not permit the direct calculation of contrast tests (cf. SPSS/PC+ V2.0 Base Manual, p. B-169).
Thus, to check for statistically significant differences between the country and industry
subsamples, the covariate (company size) was regressed against the response variables to
isolate the residuals as follows:
Residuals =Response Variable- bo - b, xi - b2 X2 - bn Xn

The obtained residuals were subsequently included in the SPSS/PC+ ONEWAY procedure
which permits multiple comparisons (such as Scheff&,LSD, etc.)
9. Changing the ANCOVA design (see Note 8) to facilitate a multiple classification analysis
again reiterates the stability of the results, i.e., this had no effect on either the significance of
size, industry or country. The factors used as covariates also remained relatively stable, with
the exception of "central and foreign government relations," which become significant in the
analysis of written policies.

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