Income, Money Ethic, Pay Satisfaction, Commitment, and Unethical Behavior: The Hong

Kong Experience Thomas Li-Ping Tang

Middle Tennessee State University

Randy ChiuHong Kong Baptist University

April 4, 2002

The Color of Money

ColorSizeShapeCross-Cultural Differences: History, Culture, People (Citizen,

President, King, Queen), Architecture, National Pride, World View, Euro-305M 12

The Meaning of Money

Money is an important factor in the lives of all of us.

One can not live without money. It applies to modern citizens in all over the world.

The Meaning of Money

Money is the instrument of commerce and the measure of value (Smith, 1776/1937).

The meaning of money is “in the eye of the beholder” (McClelland, 1967, p. 10).

Money is the Measure of Value

Who has more value?1. An Economist Eugen Bohm Bawerk

2. A Psychologist Sigmund Freud

3. An Artist Moritz M. Daffinger

In Austria

Austrian Schillings (ATS)US$1 = ATS 15.53 (1/1/2002)

An Economist ATS 100A Psychologist ATS 50An Artist ATS 20The Value is on the Face of ATS!?Who has the most money?

The Meaning of Money: Theory

Money is a motivator (Gupta & Shaw, 1998; Lawler,

1981; Locke, Feren, McCaleb, Shaw, & Danny, 1980: 381). Money is a hygiene factor (Herzberg, Mausner &

Snyderman, 1959; Kohn, 1998; Pfeffer, 1998).

People’s attitudes toward money can be perceived as their “frame of reference” in which they examine their everyday lives (Tang, 1992).

Managers

*Attract, Retain, and Motivate employees

*Achieve Company Goals (Chiu, Luk, & Tang, 1998; Milkovich & Newman, 2002; Tang, Kim, & Tang, 2000; Tang, Luk, & Chiu, 2000).

Research: Performance Improvement

4 Methods:

1. Participation

2. Job Design

3. Goal Setting

4. Contingent Payment

The Meaning of Money-Motivator

Performance ImprovementParticipation: 0%Job Design: 9%Goal Setting: 16%Contingent Payment: 30%.Movements vs. Intrinsic Motivation.What gets measured gets done (Inc., 1998, June)

Motivator

No other incentive or motivational technique comes even close to money (Locke, Feren, McCaleb, Shaw, & Danny, 1980: 381).

The Meaning of Money-Hygiene

Money is a Hygiene factor (Herzberg, Mausner

& Snyderman, 1959). 0, 0 point escalatesSalary has more potency as a job

dissatisfier than as a job satisfier (82).In the lows salary is found almost three

times as often in the long-range as in the short-range sequences (82).

The Meaning of Money-Hygiene

Cameron & Pierce (1994). Review of Educational Research.

Kohn (1993, September/October). Harvard Business Review.

Kohn (1998, March/April). Compensation and Benefits Review.

Pearce (1987). New perspectives on compensation.

Pfeffer (1998, May/June). Six dangerous myths about pay. Harvard Business Review.

The Meaning of Money

Money always represents or signifies something other than itself (Crump, 1981).

One is not interested in money, but in what money will buy (Crump, 1981).

The ABCs of Money Attitudes

Affective: Do you “love or hate” money?

Behavioral: What do you “do” with your money?

Cognitive: What does money “mean” to you?

Measures of Money Attitudes-1

Burgoyne (1990). Money in marriage.

Janda (1998). Love & Sex Tests. Holbrook, MA: Adams Media Corp.

MES

Measures of Money Attitudes-2

Bailey & Gustafson (1986, 1991). Money beliefs and behaviour scale. Handbook of Behavioral Economics.

Bailey & Lown (1993). Journal of Consumer Studies and Home Economics.

Bailey, Johnson, Adams, Lawson, Williams, & Lown (1994). Consumer Interests Annual.

Doyle (1992). American Behavioral Scientist. Fank (1994). Money handling inventory, PAID.

Measures of Money Attitudes-3

Furnham (1984). Many sides of the coin: PAID.

Furnham & Argyle (1998). The psychology of money.

Goldberg & Lewis (1979). Money madness: The psychology of saving, spending, loving, and hating money.

Gresham & Footenot (1989). The Money Attitude Scale. Advances in marketing.

Hanley & Wihelm (1992). Money Beliefs and

Behaviour Scale. JEP.

Measures of Money Attitudes-4

Haraoka (1990). Money & value orientation, PJSSP.

Lim & Teo (1997). Sex, money and financial hardship, JEP

Luna-Arocas, Quintanilla, & Diaz (1995). EAD-6, IAREP.

Luna-Arocas (1998). Dinero, Trabajo y Consumo. PROMOLIBRO

Lynn (1991). The secret of the miracle economy.

Measures of Money Attitudes-5

McClure (1984). Money attitudes and overall pathology, PAQJHB.

Mitchell & Mickel (1999). The meaning of money: Money Importance Scale, AMR.

Opsahl & Dunnette (1966). The role of financial compensation in industrial motivation, PB

Measures of Money Attitudes-6

Quintanilla (1997). Psicologia Economica. McGraw Hill.

Richins & Rudmin (1994). Materialism, JEP.

Rubenstein (1981). Money & self-esteem, relationships, secrecy, envy, satisfaction, PT.

Tang (1992). The Money Ethic Scale, JOB.

Tang (1995, PAID; 1999, PPM; in press, PR; Tang et al.,

2002), 5 Versions

Measures of Money Attitudes-7

Thierry (2000). The meaning of pay, in Erez & Thierry (Eds.) Work motivation.

Wernimont & Fitzpatrick (1972). The meaning of money, JAP.

Yamauchi & Templer (1982). Money attitude scale, JPA.

Zelizer (1989). The social meaning of money: Special monies, AJS.

Zuckerman (1983). Sensation seeking.

Mitchell & Mickel (1999)

The well-developed measures are those that have been developed more carefully and used more systematically. There are three of these: (1) the money ethics scale (Tang, 1992, 1993, 1995), (2) the money belief and behavior scale (Furnham, 1984; Furnham, Kirkcaldy, & Lynn, 1994), and (3) the money importance scale (Mitchell, Dakin, Mickel, & Gray, 1998) (AMR: 571).

Why Do We Study Money Attitude?

The Importance of Money (Mitchell & Mickel, 1999)

The Meaning of Money (Individual Difference)

Money Materialism

Other Attitudes--Pay Satisfaction

Why Do We Study Money Attitude?

Pay Dissatisfaction has numerous undesirable consequences (Heneman & Judge, 2000)

Commitment, Turnover, Counter-Productive Behavior, and Unethical Behavior (Cohen-Charash & Spector, 2001; Hom & Griffeth, 1995; Tang, Kim, & Tang, 2000)

The Money Ethic Scale

1. Measures the Meaning of Money2. Follows the ABC Model3. Has Multi-Dimensional Constructs (5

versions)4. Is Well Developed and

Systematically Used (17 papers)5. Reflects Individual Differences

The Money Ethic Scale

Has been used in many samples,

in many countries, and

in many languages (published articles): Chinese, English, French, Italian, Spanish, Russian, etc.

Research Question:

Does money (income) have a direct and/or indirect impact on unethical behavior?

Does money attitude (the love of money, the MES) have a direct and/or indirect impact on unethical behavior?

MES in This Study

1. Money is a Motivator2. Money is a sign of my Success3. Money is Important4. I want to be Rich

58 items, EFA—US Sample, 14 factors,

Select 4 factors (17 items), EFA, CFA--Whole Sample, 12 Countries

The Love of Money

1. Motivator

2. Success

3. Important

4. Rich

Motivator

No other incentive or motivational technique comes even close to money (Locke, Feren, McCaleb, Shaw, & Danny, 1980: 381).

Money is a motivator (Gupta & Shaw, 1998; Lawler, 1981).

Ex. I am motivated to work hard for money. Money is a motivator.

Success

In America, money is how we keep score (Rubenstein, 1981).

Some people are obsessed with “money as a sign of success” (Furnham & Argyle, 1998: 148)

Ex. Money represents my achievement. Money is a symbol of my success.

Importance

The one consistent thread in this body of work is “the emphasis on its importance” (Mitchell & Mickel, 1999: 569)

Ex. Money is important. Money is an important factor in the lives of all of us.

Rich

Would you like to be Rich or Poor?Most people: RichBeing Rich will make you feel Good,

Happy, Powerful, Beautiful, Healthy, etc.

Many CEOs are tested G-r-e-e-d positive (Crystal, 1990, Fortune).

Ex. Having a lot of money (being rich) is good. I want to be rich.

Other Variables

IncomePay SatisfactionOrganizational CommitmentUnethical BehaviorEthical Corporate CultureSex, Job Changes

Pay Satisfaction

18-Item Pay Satisfaction Questionnaire:

Pay Level

Benefits

Raises

Pay AdministrationHeneman & Schwab (1985)

Organizational Commitment

15-Item Organizational Commitment Questionnaire.

Two Indicators:

Commitment, Not to Leave (- items)Mowday, Steers, and Porter (1979)

Ethical Culture

5-Item Corporate Ethical Culture

Two Indicators:Ethical Policy (3 items), Act

Ethically (2 items) (Hunt, Wood, & Chonko (1989).

Unethical Behavior

15-Scenario Unethical Behavior Tendency

Abuse Position (theft, 5 items) +Ex. Take merchandise and/or cash.

Abuse Power (corruption, 5 items)Ex. Accept money, gifts, and kickback from others.

Abuse Resources (office supply, 3 items)Ex. Waste company time. Use office supplies.

Take No Action for Unethical Behavior (look the other way, 2 items)

Ex. Take no action for shoplifting/stealing cash/merchandise.

In This Study

Is “money” the root of all evil?

Is “the love of money” the root of all evil? (Bible: Tim, 6:10)

Cross-Cultural Study

Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Congo (Zaire), Cuba, Czechoslovakia, Egypt, France, Germany, Hong Kong, Hungary, India, Italy, Macau, Macedonia, Malaysia, Malta, Mexico, Nigeria, Oman, Panama, Peru, Philippines, Poland, Portugal, Puerto Rico, Romania, Russia, Saudi Arabia, Singapore, Slovenia, South Africa, South Korea, Spain, Taiwan, Thailand, Turkey, Ukraine, the UK, the USA, and Venezuela.

Need your help to expand this project

A Model of Unethical Behavior Model

Z Income

Money Ethic

Culture

Commitment

Unethical Behavior

PaySatisfaction

Jobs

Sex

Income Money EthicInverted U: + , 0, --Unsatisfied needs are important, satisfied needs are

not (Alderfer, 1971; Maslow, 1970)

Financial Hardship Obsessed with Money (Dittmar, Tang, & Tillery, 2001; Lim & Teo, 1997; Lynn, 1991; Tang et al., 2001) (+ path)

Higher Incomes Lower Marginal Utility of Money (Brandstatter & Brandstatter, 1996) (-- path)

Fairly Paid Income MES: Non-significant (Tang, Luna-Arocas et al, 2001)

Compare Income with GDP per Capita (Bill Gates: 52.8B)

Income Money Ethic

Among nations: As nations get richer, increases in wealth are associated with diminishing increases in well-being (Ahuvia & Friedman, 1998; Schyns, 1998)

Objective Wealth vs. Subjective Appraisals (Ahuvia & Friedman, 1998)

Objective Money (Income)

Within nations: Increased income is associated with well-being for the poor; once the poverty threshold is crossed, increased income matters little for happiness (Czikszentmihali, 1999;Diener,

2000; Myers 2000; Oishi, Diener, Lucas, & Such, 1999; Oropesa, 1995, Richins & Rudmin, 1994; Schyns, 2000; Tatzel, 2002)

Subjective Money (Compare)

Subjective well-being increases as income increases from below average to above average within one’s home community (Hagerty, 2000)

East Asia

The major global market for luxury goods (Wong & Ahuvia, 1998)

Materialistic-- Possessions as a measure of

Success (Webster & Batty, 1997; Wong & Ahuvia, 1998).

Hong Kong

Cash Mentality (Chiu, Luk, & Tang, 2001)

The Most Popular Car in Hong Kong…Public Visibility--Face

MES Pay Satisfaction

Equity Theory (Adams, 1965)

Discrepancy Model (Lawler, 1971)

Expectation vs. Reality

“The Love of Money” as the Frame of Reference, i.e., expectation, standards

High MES High Pay Dissatisfaction

Pay Satisfaction Commitment

Job Satisfaction Commitment (Williams & Hazer, 1986, SEM)

There is reciprocal and synchronous causality between commitment and satisfaction, with satisfaction influencing commitment more than vice versa (Home & Griffeth, 1995: 98).

Pay Satisfaction Commitment

Perceived unfair procedural and distributive justice negative attitudes toward the organization (e.g., lower trust and commitment) (Cohen-Charash & Spector, 2001: 288)

Commitment Unethical Behavior

From a procedural justice perspective, perceived injustice will lead to negative perceptions of the organization and, hence to counterproductive behaviors that will hurt the organization (Cohen-

Charash & Spector, 2001: 287).

Business Ethics

Taxonomy and Concepts (Forsyth, 1980; Michalos, 1995)

Culture (Hofstede, 2001; Trompenaars, 1994)

Social Institutions (Parsons, 1990)

Personal Values (England, 1975)

Cross-cultural (Wines & Napier, 1992)

Ethical Culture Commitment

Top-level Manager can reduce unethical behavior (Finn, Chonko, & Hunt, 1988)

Attraction-Selection-Attrition (Chatman, 1989; Douglas & Schwartz, 1999; Ponemon & Glazer, 1990; Tang & Frost, 1999)

Differences in ethical culture across firms and across offices within the same firm (Jeffrey & Weatherholt, 1996)

Ethical Culture Commitment

Ethical Culture Ethical Behavior (Hunt & Vitell, 1986; Trevino, 1986) “Directly”

Ethical Culture Individual Values (i.e., idealism) Ethical Judgments (Douglas, Davison, & Schwartz, 2001) “Indirectly”

Ethical Culture Commitment Unethical Behavior Indirectly

Sex MES

Men prefer equity, women prefer equality (Tang, 1996; Tang, Furnham, & Davis, 2000)

Men consider money more important than women (Lawler, 1971)

Women are more subjectively satisfied with their pay than men, the contented female worker (Crosby, 1982; Major & Konar, 1984; Sauser & York, 1978; Smith, Kendall, & Hulin, 1969)

Job Changes Unethical Behavior

Reason for Voluntary Turnover: higher wages/career opportunities (Campion, 1991)

Leavers have lower pay satisfaction and receive 20% pay increase on their new jobs

The number of job changes is a predictor of management professors’ pay (Gomez-Mejia & Balkin, 1992) Self-Interest vs. Organization

Sample

211 Full-Time White-Collar HK Employees

HK is a part of China.

HK: 7.1 million people, 400 sq. miles

Small than LA, CA (3.5 million people)

Hong Kong

Rich people live in Luxury apartments/housesOthers: High-rise Apt. Buildings cement forest

Property (flat) size 1,440 sq. ft.HK 3,491/sq ft. (US$ 452/sq ft) in

1995

The cost of an average Apt: US$ 560,160

Hong Kong

China’s window to the worldIn 1995, 58.2% of the PRC’s foreign

investment came from HK80% of HK manufacturers have set up

production facilities in the PRCIn 2000, PRC has absorbed 188,214 direct

investment projects from HKUS$ 317 billion

Hong Kong

Cash Mentality (Chiu, Luk, & Tang, 2001)

Life achievement is measured by the size of their pay check (Chiu & Kosinski, 1995)

Additional Data

HK: income = $47,502,

*GDP per Capita = $25,100,

*ratio = 1.89

*CPI 2001 (1) Rank = 16, (2) Score = 7.6

CPI for HK: Rank = 14, Score = 7.9

Low Corruption > 9; High Corruption < 5

Data Analysis

Convert income to Z Income

1. Perform CFA for all measures

2. Test the SEM Model for HK

A Model of Unethical Behavior

Hong Kong

Z Income

Money Ethic

Culture

Commitment

Unethical Behavior

PaySatisfaction

Jobs

Sex

.50*-.30*

.68*

-.04

.38

.28*

-.28*

-.14

.02

Main Results

The Money Ethic is directly related to Unethical Behavior, whereas Income is not.

The “Love of Money” is the root of all Evil.

Money is not the root of all evil.

Main Results

Income reduces “the love of money”.

HK: income = $47,502,

*GDP per Capita = $25,100,

*ratio = 1.89

Main Results

“The love of money” leads to high Pay Dissatisfaction.

Pay dissatisfaction leads to low organizational commitment.

Sex (male) is related to the love of money.

Ethical Issues

Commitment has no impact on unethical behavior.

Ethical culture has no impact on commitment.

Ethical Issues

Mr. Anthony Leung, a former top executive of an American bank in HK, made about HK 20 million dollars a year.

He now makes just over HK 2 million dollars as the Financial Secretary of the Hong Kong Special Administration Region Government.

Anthony Leung

The Importance of money depends on only how much one has to spend, not how much one can make (May 1, 2001, South China Morning Post).

Rich People: Make a lot of money, spend a little

Unethical Behavior

Average Income: US$ 47,509

SD of Income: US$ 45,159, a very large variability in this sample

Low-income HK employees: improve standard of living, admire others who have wealth (a large house), cover expenses

Ethical Culture

Hong Kong was returned back to China in July 1997.

The culture of corruption from China may have invaded Hong Kong.

The Rule of Man >> The Rule of LawGuanxi (Dunfee & Warren, 2001; Steidlmeier, 1999)

Corruption Report in HK

The number of cases has been on the rise1992: 21861994: 33121996: 30861998: 35552000: 4390China: GDP per Capita = US$3,600

CPI Rank = 57; Score = 3.5 < 5HK/PRC GDP Ratio: $25,100/$3,600 = 6.97

Discussion

Employee theft is a $200 million-dollar a year problem in the US

Some managers condone theft by looking the other way

Treat that as “an invisible wage structure” to compensate for their lower than average wages

Discussion

Financial loss is attributed to

Employee Theft--38.4%

Shoplifting—35.6%

Administrative Error –19.4%

Vender Theft—6.4%

Discussion

Average Loss Shoplifting—$142.49 per incidentEmployee Theft–$737.31Armed Robbery–$2,410Culture of corruption Business

failuresDiscourage and Prevent

How Do Managers Discourage and Prevent Unethical Behavior?Create Pay FairnessInternal Equity (Vertical Pay

Differential) External Competitiveness (Market)

and Individual Equity (Merit, Seniority)

How Do Managers Discourage and Prevent Unethical Behavior?

Procedural Justice (rules of the game, How the decision was made, the means)

Distributive Justice (results of the game, What was decided, the ends)

How Do Managers Discourage and Prevent Unethical Behavior?Set Role Models

Create Ethical Corporate Culture

Use Reward and Punishment

Establish Ethics Hot Line

Develop Profiles of Dishonest Employees

Select Good Employees HRM

Install Surveillance Systems

Provide Training to Employees

CEOs’ Pay

Corporate CorruptionsEnron Chairman Kenneth Lay and his

wife own over 30 million dollars worth of real estates and stocks

Employees lost their jobs and 1 billion deferred compensation and pension plan

CEOs’ Pay

Michael Eisner, CEO of Walt Disney made US$575,592,000 in 1998

The average worker made $30,000 in 1998

Pay Differential = 19,320 to 1

Conclusion

The love of money is the root of evil. (Tim, 6:10)

Additional Thoughts

It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.

Judas, who betrayed Jesus for a sum of money, was the treasurer of the disciples. John, 12: 6; 13: 29

For when he dieth he shall carry nothing away: his glory shall not descent after him. Psa, 49: 17

Beloved, follow not that which is evil, but that which is good. He that doeth good is of God: but he that doeth evil hath not seen God. John, 11

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