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Ethical Behavior in the Construction Industry

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6th International Project and Construction Management Conference (e-IPCMC2020)
Istanbul Technical University, 12-14 November 2020, Istanbul, Turkey

Ethical Behavior in the Construction Industry

E. I. Dala
Mangosuthu University of Engineering, Department of Construction Management and
Quantity Surveying, Durban, South Africa
Ismail@mut.ac.za

T. C. Haupt
Mangosuthu University of Engineering, Faculty of Engineering, Durban, South Africa
Theo.haupt@mut.ac.za

M. T. Akinlolu
Mangosuthu University of Engineering, Department of Construction Management and
Quantity Surveying, Durban, South Africa
akinlolumariam@gmail.com

Abstract

This paper investigates the status and practices of ethical behaviour in the South African
construction industry. Using a self-administered questionnaire,135 contractors and
consultants in the construction industry in the KwaZulu-Natal province of South-Africa were
conveniently sampled in relation to their perception and experience of unethical practices and
behaviour. The most common unethical activities experienced by construction professionals
were sexual harassment, favouritism, discrimination, fraud, corruption, fraud, bribery, and
extortion. Findings from this study provides valuable insights to construction stakeholders on
ethical issues confronting the South African construction industry.

Keywords: Construction Industry; Corruption; Ethics; Ethical Decision Making; South

Africa.

Introduction

Ethical practices have been shown to have significant benefits such as promotion of
economic efficiency and includes avoiding favouritism and nepotism, avoiding monopiles,
avoiding fraud, bribery, and unfair conduct, honouring contracts, and providing accurate
information (Bowen et al., 2007; Tanner et al., 2010). Ethical behaviour improves job
performance and reduces employee absenteeism (Mayer et al., 2010; Piccolo et al., 2010). It is
therefore an important pillar to efficient organisational operations, especially in countries
where relatively higher cases of corruption are recorded (Conrad, 2013). Studies on ethical
behaviour in the public sector such as the construction industry in South Africa have been
neglected, as the majority of the studies on ethics have on the business environment and the

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private sector (Sinha et al., 2007). According to Conrad (2013) issues concerning the public
sector directly affect the citizens.

The level of corruption is greater in the construction industry than in any other sector of the
economy (Sinha et al., 2007). The issue of ethics has become a burning public issue because
of reported cases of corruption and exercise of patronage to secure contracts and deviate from
legal rules (Bowen et al., 2007). Corruption presents one of the greatest threats to sustainable
development and pervades all sectors of social, civil, and political society (Bowen et al., 2007;
Moodley et al., 2008). The ramifications of corrupt behaviour and its persistence in the
construction industry, reach far into all levels of governance, and warrants deeper
investigation into how widespread it is (Dala & Haupt, 2019). Corruption may lead to cost
over-runs of public contracting, waste of public resources and an unstable business
environment (Moodley et al., 2008)

The complex nature of the construction industry resulting from numerous levels of
bureaucracy, opportunities for project delays , cost overruns and high competition for
contracts make the sector susceptible to unethical behaviour (Moodley et al., 2008).Within the
various areas of the construction industry, best practice guidelines are often given to
professionals and service providers using the premise that these guidelines constitute business
ethics (London & Everingham, 2006). However, ethics extends further than static business
practice guidelines and veers into issues of morality and personal consciousness of what is
right and what is wrong (Robinson et al., 2007). Although, this presents a vague and grey area,
most especially in a profession that values discrete documentation, the construction industry
provides a rich avenue to explore the deeper aspects of ethics in business (Dala & Haupt,
2019).

This paper aims to investigate the status and practices of ethical behaviour in the South
African construction industry, commencing with a background of ethics and the construction
industry. The knowledge gap indicates the lack of evidence regarding significant statistical
differences between demographic groups on the experience of unethical behaviour. The scope
of the study is limited to the construction industry in the KwaZulu-Natal province of South
Africa. A quantitative descriptive survey design was adopted, followed by the analysis and
interpretation of data from the survey. Based on the findings from this current study, issues of
unethical practices in the construction industry were identified and probable interventions
were suggested to address the unethical activities.

Ethics and the Construction Industry

Ethics and ethical behaviour are defined by the determinants which refers to judgements,
standards, and rules of conducts as a set of moral principles and values that guide behaviour
(Trevino & Nelson, 2011). Ethics are moral values of human conduct and of the rules and
principles that ought to govern the social, religious, or civil code of behaviour of a group,
profession or individual (Tagoe, 2006). Morals deal with either ‘good or bad human character’
or ‘with the distinction between right and wrong’ (Allen, 1990, p. 769). Ethics is a study of
language, thought, judgement and reasoning which guides the choices and daily lives of
people (Sebola, 2014). It is recognized that the concept of ethics is applicable in business
because business exists not only for certain individuals but for the benefit of the general
society as well (Vee and Skitmore, 2003). The decision to act ethically lingers on a

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Istanbul Technical University, 12-14 November 2020, Istanbul, Turkey

combination of ethical frameworks, ethical leadership modelling by supervisors and personal

ethical decision making (Samat et al., 2016).

Ethical decision making is a fundamental process in the management of any organisation

(Fewings, 2009). It is a personal locus of control, where judgement and ethical action are
individualised characteristics (Samat et al., 2016). Sebola (2014) suggests a strong cognitive
component to ethical decision making, where the response from a person to an ethical
dilemma presents as firstly deciding which course of action to take. This process weighs up
the different ethical issues that we may have to confront in determining the decisions that are
taken (Bowen et al., 2007). These decisions often have long-term effects and affect individual
employees, professional consultants, or the reputation of companies their customers and
stakeholders (Samat et al., 2016). Ethical decisions are made based on modelling of peers and
superiors (Tagoe, 2006). While construction professionals look to model frameworks
elucidated by professional boards, many ethical decisions turn out to have ethical implications
and consequences (Bowen et al., 2007).

Globally, the construction industry has been previously regarded for being full of good,
honest, and hardworking people, (Schwartz, 2013). Unfortunately, today people find the
construction industry associated more frequently with negative perceptions (Moodley et al.,
2008; Samat et al., 2016). With the advent of globalisation and industrialisation the current
perception of the construction industry has become more complex in nature (Moodley et al.,
2008). What was previously construed as relational dynamics and shared business
relationships as best practice, currently has evolved into conflict situations (Adjei, 2015). This
has given the impression of a problematic industry that sacrifices ethics and morality in lieu of
profits and losses (Sebola, 2014). Construction projects include the efforts of many stake
holders as human capital, as well as big monetary investments (Shakantu, 2006; Sinha et al.,
2007). While it is inevitable that a construction project should maximise profitability, it
should not be at the expense of ethics (Fewings, 2009).
1
In construction, a major ethical dilemma is associated with corrupt activities. It is argued that
no other threat supersedes the danger of corruption in a society (Samat et al., 2016). It
threatens democracy, economy, and the politics of a nation. (Sebola, 2014). Corruption is a
major contributor to unethical behaviour which is not only unique to undeveloped countries
but is evident throughout the globe (Sebola, 2014). Although almost all professions are
governed by a code of conduct related to their respective disciplines, unethical practices
continue to exist irrespective of the existence of a professional code of ethics in the
construction environment (Adjei, 2015).

Attributes of Unethical Behaviour

Studies have shown that unethical behaviour in the construction industry usually takes the
form of money laundering, extortion, bribery, cronyism, nepotism, and favouritism (Vee &
Skitmore, 2003). The construction environment is particularly susceptible to cowboy practices
(Fewings, 2009). Corruption is likely to appear commonly on a list that threaten and obstruct
business practise and is identified as one of the main impediments to sustainable development
in the construction industry (Moodley et al., 2008).

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Istanbul Technical University, 12-14 November 2020, Istanbul, Turkey

Favouritism

Favouritism deals with favouring someone over others who are more efficient because of
personal involvement (Ozler & Buyukarslan, 2011; Nadeem et al., 2015). Favours can be
tenders or contracts that are not awarded by merit alone (Bowen et al., 2007). The favoured
may include family members, friends, prior business associates and those that may offer gifts
such as money, objects, travel, or entertainment (Khatri & Tsang, 2003). One of the many
attributes of corruption is favouritism and is pervasive world-wide (Trevino & Nelson, 2011).
While many business environments allow employees to receive gifts, what sets this apart and
becomes favouritism is the value of this gifts. These gifts should be nominal and should be
accepted and declared on behalf of the organisation (Arasli & Tumer, 2008).

Family and friend relationships are social constructs that are mutable and the dynamics can
change, an example being if one spouse acts upon favouritism and awards a contract to the
other spouse, enmity or divorce might result in negative impacts on the contracts.

Nepotism

Nadeem et al. (2015) described nepotism as when relatives are preferred over other candidates
who may be from the same blood relation. When a relation is given more emphases as
opposed to competency, knowledge, and talent, there will always be some negative effect on
the performance of other employees and the organisation (Arasli & Turner, 2008). Employees
of organisations where nepotism is a high tend to underperform which makes the organisation
less productive (Ozler & Buyukarslan, 2011). Employees do not have the incentive to work to
their full potential with the knowledge that they do not belong in the inner circle and will in
all intent and purposes be ignored when opportunities for promotion do become available
(Fewings, 2009; Trevino & Nelson, 2011). Employee selection and promotion should be
based on merit, knowledge, talent, abilities and efficiency for the development, prosperity, and
success of the organisation.

Money Laundering

Money laundering and non-disclosure of funds are unethical activities that plagues the
construction-built environment (Fewings, 2009). This involves hiding funds that have been
illegally obtained usually in the form of cash or moving the monies into offshore accounts or
hidden destinations (Trevino & Nelson, 2011). International laws govern the moving of
monies in agreements with the United Nations, which run an anti-money laundering unit, but
tracking of cash is often very difficult and time consuming, resulting in this corrupt attribute
being pervasive worldwide.

Extortion

Extortion is referred to as blackmail, where payment is demanded, and the payee has no
option but to comply (Shakantu, 2006; Dala & Haupt, 2019). An example is the demand of
payment to site officials or local people living in the area to be silent about an environmental
hazard that a construction project may exacerbate (Fewings, 2009; Trevino & Nelson, 2011).

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This type of mafia or gang-controlled activity use peer pressure and bullying tactics to coerce
others into doing something they might not necessarily do (Fewings, 2009). Within the scope
of using monetary means to expedite matters, extortion also can be construed as a corrupt
activity in business.

Bribery

Pay-offs and bribes contribute towards the most frequent source of anxiety to business owners
(Trevino & Nelson, 2011). Bribery is offering an undue award or demanding a reward to get
business favours (Fewings, 2009). These favours can be kickbacks, tenders, or contracts that
are not awarded by merit alone. This also refers to the bribing of officials in governmental
institutions to pass documents and plans or expedite the passing of such documents
(Shakantu, 2006).

Research Methods
The survey explored the opinions of 135 conveniently sampled South African construction
professionals in relation to their experience of unethical practices and activities. Self-
administered questionnaires were distributed to potential participants were drawn from the
available listings of professional contractors and consultants in the KwaZulu-Natal province
of South Africa. The professions represented included architects, structural engineers, and
quantity surveyors. Responses totalled 96 (71% response rate), comprising 63 contractors
(65.6% response), 33 consultants (34.4% response). Table 1 presents a profile of the
respondents that participated in the study.

A five-point Likert scale was used to rank the perception of respondents on their experiences
of unethical behaviour and factors that influence ethical behaviour in the construction
industry. To ensure the reliability of this study, the Cronbach’s coefficient alpha was used to
test the consistency of the obtained. The Cronbach’s coefficient was 0.97, which satisfies the
reliability test requirements. Descriptive and inferential statistics were used to analyse the data
obtained. The technique adopted for inferential statistics in this study was the Mann-Whitney
U test.

Results and Discussion

Experience of Unethical Behaviour and Activities

The study sought to investigate respondents’ experience of unethical behaviour and activities
in the construction industry. A 5-point Likert scale was used for this purpose where 1= Never
and 5= Always.

Several forms of unethical activities exist. Engaging in unethical behaviour could result in the
acceptance of favours or benefits. These benefits can be in the form of gifts, money while
others could be in the form of nepotism, favouritism, money laundering, conflict of interest
and so on.

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The findings show that respondents in the sample reported high means in their experience of
unethical activities in the construction industry. A mean range of 3.95 to 3.11 shows that
respondents agreed with the list of unethical activities presented. Table 2 shows that the
following unethical activities were ranked highest; sexual harassment (mean score=3.95),
favouritism (mean score=3.93) and discrimination (mean score =3.88) were the activities that
respondents regarded as the most practiced unethical activities. Other activities that were
considered unethical as revealed in literature were corruption (mean score=3.86), fraud (mean
score= 3.86), bribery (mean score=3.82) and extortion (mean=3.81).

Table 1. Profile of respondents.

Respondents No %
Contractor 63 65.6
Consultants 33 34.4
Total 96 100

Most of the respondents had experienced or witnessed sexual harassment, favouritism,

discrimination, fraud, corruption, fraud, bribery, and extortion. Evidence from the survey
suggested that unethical behaviour is pervasive and is an accepted practise within the
construction workforce. To identify which group of construction professional experienced
these unethical activities the most, a non-parametric Man-Whitney U test was conducted.

Table 2. Experience of unethical activities.

Unethical Activities Mean Std. Dev. Rank

Sexual Harassment 3.95 1.65 1
Favouritism 3.93 1.53 2
Discrimination 3.88 1.69 3
Fraud 3.86 1.68 4
Corruption 3.86 1.69 5
Improper use of information 3.83 1.62 6
Bribery 3.82 1.64 7
Extortion 3.81 1.68 8
Money Laundering 3.80 1.67 9
Nepotism 3.77 1.68 10
Aggressive Accounting 3.69 1.58 11
Conflicts of interest 3.69 1.66 12
Use of intermediaries 3.68 1.52 13
Kickbacks 3.62 1.62 14
Receiving and gifts 3.20 1.57 15
Receiving and giving entertainment 3.12 1.54 16

Contractors and Consultants Experience of Unethical Activities Subjected to the Mann-

Whitney U test

Table 3 shows the test of statistics in contractor and consultant’s experience of unethical
activities. The test revealed no significant difference between the groups (p=0.29), indicating
that there was no variance in the responses of contractors and consultants.

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Table 3. Mann-Whitney U: Knowledge of unethical activities

Unethical Mean Rank Mann- Z-Score Exact Sig. (2

Activities Whitney sided test)
U
Consultants 52.68 1177.50 1.066 .29
Contractors 46.31

Ranking of Ethical Behaviour and Influences

Respondents were required to rank how important they regarded 20 factors on influences on
ethical behaviour in the construction industry. Table 4 shows that respondents place most
importance on their own contribution to group behaviour and norms when those in
management and supervisory positions conducted themselves ethically (mean score=4.34) ;
their dealings with others when those in management and supervisory positions conducted
themselves ethically (mean score=4.32); the willingness of managers and supervisors to learn
from their experiences (mean score=4.17) and good examples set by managers and supervisors
(mean score=4.13). Furthermore, it was revealed that the ethical dynamics of supervisory and
managerial influence is much stronger than that of inner personal values, attitudes, or most
especially direct line peers. Findings also show that the role of managers and supervisors
cannot be ignored as it is evident that the leaders are seen as role models and their behaviours
serve as a benchmark for what is acceptable and what is unacceptable. There is a lack of two-
way communication and top leadership do not engage often with their subordinates on several
issues, for example, issues concerning business ethics and values as well as encouraging the
workers to voice their concerns. Interestingly responses showed that employees tend not to
emulate the behaviours and attitudes of unethical managers and supervisors.

Table 4. Ethical behaviours and influences.

Ethical Behaviour and Influences Mean Std. Rank

Dev.
I contribute to group or organizational performance when those in 4.34 0.83 1
authority or supervisory positions are ethical and fair in their dealings
with me
Because my manager and supervisors are ethical and fair I 4.32 0.92 2
reciprocate with others I interact with in the same way
Managers and supervisors set and communicate high performance 4.20 1.04 3
expectations
Managers and supervisors are willing to learn from their experiences 4.17 1.09 4

Good examples are set by managers and supervisors 4.13 1.23 5

Managers and supervisors emphasize a strong sense of purpose 4.09 1.18 6

My managers and supervisors set an example on how to do things the 4.08 1.15 7
right way in terms of ethics
They speak up about issues of concern 4.06 1.17 8

My managers and supervisors are good for the collective 4.04 1.18 9

Managers and supervisors emphasize a collective sense of mission 4.03 1.18 10

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Istanbul Technical University, 12-14 November 2020, Istanbul, Turkey

They treat people with respect 3.97 1.31 11

Business ethics or values are discussed with employees by managers 3.96 1.34 12
and supervisors
My managers and supervisors treat people fairly 3.90 1.34 13

Everyone at work performs tasks that are expected of them 3.90 1.17 14

They demonstrate appropriate role-modelling behaviours 3.90 1.28 15

Everyone at work adequately completes assigned duties 3.82 1.21 16

Employees speak up and encourage others to get involved in issues 3.75 1.30 17
that affect us at work
Employees communicate their opinions about work issues to others 3.68 1.26 18
even if their opinions are different and others at work disagree with
them
They use rewards to hold people responsible for appropriate conduct 3.57 1.43 19

I emulate the behaviour and attitudes of managers and supervisors 2.98 1.64 20
who are not ethical and fair in their dealings with me

Contractors and Consultants’ Ranking of Subjected to the Mann-Whitney U test

The results in Table 5 show that no statistically significant difference exists between
contractors and consultants on their perception of the importance of ethical behaviour and
influences in the construction industry (p=0.59), indicating no variance in the responses
between the groups. The asymp. Sig (p-value) was greater than 0.05.

Table 5. Mann-Whitney U: Knowledge of the importance of ethical behaviour and influences

Unethical Mean Rank Mann- Z-Score Exact Sig. (2

Activities Whitney sided test)
U
Consultants 52.68 954.0 -.540 .59
Contractors 46.31

Conclusion and Recommendation

To obtain maximum benefits in terms of economic contribution of the construction industry,

for the development of the country, it is crucial to ensure that ethical behaviour is practiced.
The construction industry in South Africa run this gauntlet of media attention of state capture,
corruption and generally a whole list of unethical activities and practises. The relentless
revelations of information relating to unethical practices runs the risk of the society accepting
unethical behaviour as a norm. So far, the study shows that there are significant loopholes
regarding ethical behaviour, indicating that limited interventions have been put in place to
address unethical behaviour and practises in the construction industry. Current structures

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targeted to combat unethical behaviour which leads to corruption are found to be

unsustainable and riddled with lack of accountability for the culprits.

A quantitative analysis may be sufficient for the purposes of initiating understanding and
awareness in this study, but deeper examination in terms of in-depth qualitative research will
further enhance and add substance to this relevant and important issue of ethics in the
construction industry.

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