Unethical culture and company performance based on employee reviews

Main Article Content

Alexandre Di Miceli da Silveira
https://orcid.org/0000-0002-4864-9429

Abstract

I investigate the relationship between unethical culture and financial performance based on a text analysis of over 100,000 employee reviews posted at Glassdoor in Brazil. An original measure of unethical culture is created based on five ethical dimensions companies need to avert for an ethical culture to flourish. After creating an original list of around 1,400 terms, I find that companies scoring higher in unethical culture are less profitable and that this relationship is likely to be economically relevant. Of the five dimensions that make up an unethical culture, organizational unfairness, lack of awareness, and fear of retaliation are the three most strongly negatively related to performance. To my knowledge, this is the first paper to document a link between (un)ethical culture and corporate performance using online reviews. For investors, this paper contributes by showing that ethical culture measured by employee reviews is a value-relevant source of information.

Downloads

Download data is not yet available.

 

 

 

 

Metrics

Metrics Loading ...

Article Details

How to Cite
DA SILVEIRA, A. D. M. Unethical culture and company performance based on employee reviews. RAE - Revista de Administracao de Empresas , [S. l.], v. 63, n. 2, p. e2020–0926, 2023. DOI: 10.1590/S0034-759020230206. Disponível em: https://periodicos.fgv.br/rae/article/view/89183. Acesso em: 25 feb. 2024.
Section
Articles

References

Bulgarella, C. (2018). A two-factor model of ethical culture: A conceptual frame for ethical systems’ culture survey (Working Paper). Retrieved from https://www.ethicalsystems.org/wp-content/uploads/2016/09/files_ES_A-Conceptual-Framework-for-Ethical-Culture-FINAL.pdf

Chapple, E., Walsh, K., & Shen, Y. (2020). Corporate culture and fraud. In H. K. Baker, L. Purda-Heeler, & S. Saadi, S. (Eds.), Corporate fraud exposed (pp. 85-106). Emerald Publishing Limited. https://doi.org/10.1108/978-1-78973-417-120201006

Chatman, J. A., & O’Reilly, C. A. (2016). Paradigm lost: Reinvigorating the study of organizational culture. Research in Organizational Behavior, 36, 199-224. https://doi.org/10.1016/j.riob.2016.11.004

Graham, J. R., Grennan, J., Harvey, C. R., & Rajgopal, S. (2016). Corporate culture: The interview evidence. Duke I&E Research Paper, (2016-42), 16-70. http://dx.doi.org/10.2139/ssrn.2842823

Graham, J. R., Harvey, C. R., Popadak, J., & Rajgopal, S. (2017). Corporate culture: Evidence from the field (Working Paper N. 23255). National Bureau of Economic Research.

Grennan, J. (2013). A corporate culture channel: How increased shareholder governance reduces firm value (Working Paper). Retrieved from https://ssrn.com/abstract=2345384

Guiso, L., Sapienza, P., & Zingales, L. (2015). The value of corporate culture. Journal of Financial Economics, 117(1), 60-76. https://doi.org/10.1016/j.jfineco.2014.05.010

Huhtala, M., Feldt, T., Lämsä, A. M., Mauno, S., & Kinnunen, U. (2011). Does the ethical culture of organizations promote managers’ occupational well-being? Investigating indirect links via ethical strain. Journal of Business Ethics, 101(2), 231-247. https://doi.org/10.1007/s10551-010-0719-3

Ji, Y., Rozenbaum, O., Welch, K. T. (2017). Corporate culture and financial reporting risk: Looking through the Glassdoor (Working Paper). Retrieved from https://ssrn.com/abstract=2945745

Kangas, M., Muotka, J., Huhtala, M., Mäkikangas, A., & Feldt, T. (2017). Is the ethical culture of the organization associated with sickness absence? A multilevel analysis in a public sector organization. Journal of Business Ethics, 140(1), 131-145. https://doi.org/10.1007/s10551-015-2644-y

Kaptein, M. (2008). Developing and testing a measure for the ethical culture of organizations: The corporate ethical virtues model. Journal of Organizational Behavior, 29, 923-947. https://doi.org/10.1002/job.7520

Kaptein, M. (2011a). Understanding unethical behavior by unraveling ethical culture. Human Relations, 64(6), 843-869. https://doi.org/10.1177/0018726710390536

Kaptein, M. (2011b). From inaction to external whistleblowing: The influence of the ethical culture of organizations on employee responses to observed wrongdoing. Journal of Business Ethics, 98(3), 513-530. https://doi.org/10.1007/s10551-010-0591-1

Leelhaphunt, A., & Suntrayuth, S. (2020). The moderated mediating effect of business ethics towards firm performance. International Journal of Business Governance and Ethics, 14(1), 54-77. Retrieved from https://ideas.repec.org/a/ids/ijbget/v14y2020i1p54-77.html

Makridis, C. (2018). Does culture pay? Evidence from crowdsourced employee engagement data (Working Paper 2990210). Retrieved from https://ssrn.com/abstract=2990210

Moberg, D., & Caldwell, D. F. (2007). An exploratory investigation of the effect of ethical culture in activating moral imagination. Journal of Business Ethics, 73(2), 193-204. https://doi.org/10.1007/s10551-006-9190-6

Moniz, A. (2017). Inferring employees’ social media perceptions of corporate culture and the link to firm value (Working Paper 2768091). Retrieved from https://ssrn.com/abstract=2768091

Moon, H. K., & Choi, B. K. (2014). How an organization's ethical climate contributes to customer satisfaction and financial performance: Perceived organizational innovation perspective. European Journal of Innovation Management, 17(1), 85-106. https://doi.org/10.1108/EJIM-03-2013-0020

Pavić, Ž., Šerić, I., & Šain, M. (2018). Ethical culture as predictor of work motivation: An application of the CEV model. Society and Economy, 40(1), 125. https://doi.org/10.1556/204.2018.40.1.8

Riivari, E., & Lämsä, A. M. (2014). Does it pay to be ethical? Examining the relationship between organizations’ ethical culture and innovativeness. Journal of Business Ethics, 124(1), 1-17. https://doi.org/10.1007/s10551-013-1859-z

Ruiz-Palomino, P., & Martínez-Cañas, R. (2014). Ethical culture, ethical intent, and organizational citizenship behavior: The moderating and mediating role of person–organization fit. Journal of Business Ethics, 120(1), 95-108. https://doi.org/10.1007/s10551-013-1650-1

O’Reilly, C., & Chatman, J. (1996). Culture as social control: Corporations, cults, and commitment. In B. M. Staw, & L. L. Cummings (Eds.), Research in organizational behavior (Vol. 18, pp. 157-200). JAI Press. Retrieved from https://psycnet.apa.org/record/1996-98665-004

Treviño, L. K., Butterfield, K. D., & McCabe, D. L. (1998). The ethical context in organizations: Influences on employee attitudes and behaviors. Business Ethics Quarterly, 8(3), 447-476. https://doi.org/10.1016/S1529-2096(01)03018-8

Treviño, L. K., & Nelson, K. A. (2017). Managing business ethics: Straight talk about how to do it right (7th ed.). John Wiley & Sons.

Valentine, S., Godkin, L., Fleischman, G. M., & Kidwell, R. (2011). Corporate ethical values, group creativity, job satisfaction and turnover intention: The impact of work context on work response. Journal of Business Ethics, 98(3), 353-372. https://doi.org/10.1007/s10551-010-0554-6

Warrick, D. D. (2017). What leaders need to know about organizational culture. Business Horizons, 60(3), 395-404. https://doi.org/10.1016/j.bushor.2017.01.011

Webb, W. N. (2012). Ethical culture and the value‐based approach to integrity management: A case study of the department of correctional services. Public Administration and Development, 32(1), 96-108. https://doi.org/10.1002/pad.1602