Abstract
Organizations have increasingly relied on team-based reward systems to boost productivity and foster collaboration. Drawing on the literature on ethics and justice as well as appraisal theories of emotion, we examine how team-based reward systems can have an insidious side effect: They increase the likelihood that employees remain silent when observing a team member engage in unethical behavior. Across four studies adopting different methods, measures, and samples, we found consistent evidence that people are less likely to report (i.e., speak up or provide anonymous feedback about) a team member’s unethical behavior in team-based than in individual-based reward systems. Furthermore, our research reveals that this effect is primarily driven by a decrease in the experience of moral anger, which subsequently leads to a decreased likelihood of reporting unethical behavior when it benefits the team rather than the individual. We do not find support for perceived indirect benefit or envy as alternative explanations, suggesting that the decision to report a team member’s unethical behavior is not driven by calculative and selfish motives, but by moral motives. Finally, we establish that the effect is contingent on the observer and the perpetrator being members of the same team; it dissipates when the observer and the perpetrator are part of different teams. Our work contributes to research on reward systems and business ethics and provides practical implications for human resource practices.
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Data Availability
Data used and analyzed in the current study are available upon request.
Notes
We added this description for two purposes. First, we did not want to describe Li Le only as an unethical person without any redeeming qualities; otherwise, most participants may have reported Li Le’s unethical behavior due to strong social desirability. Second, we intended to provide the participants with more information about Li Le so they could comment on something else when they were asked to provide feedback.
While team benefits focus on the benefits the unethical behavior brings to the team and more directly reflect the reward interdependence among team members, indirect benefits focus on the benefits the unethical behavior brings to only the observer and more directly speak to personal calculative evaluations of the observed unethical behavior.
We also included several additional variables, such as team identification, organizational identification, and professional identification, in an exploratory fashion. We do not report them in this paper because we are examining them for a potential follow-up project.
To ensure the engagement of the participants, we inserted an additional attention check (i.e., “Please select “Mars” if you are still paying attention”) in the survey. All participants responded correctly.
One reversely stated item (i.e., “At work, my compensation is completely determined by my individual performance”) was dropped from the original scale because it severely affected the reliability of the measure. The reliability decreased from 0.74 to 0.62 if this item was included. The results yielded the same pattern with or without this item.
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Acknowledgements
We thank Elad N. Sherf, Zhenyu Liao, Jingjing Yao, and Run Ren for their insightful comments on an early draft of this article.
Funding
This research was supported by the National Natural Science Foundation of China (No.72272134, No. 72172139, No.71902172) and Scientific Research Fund of Zhejiang Provincial Education Department (Y201839686).
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Appendices
Appendix
Pilot Study
The pilot study aims to provide initial evidence for our main hypothesis in a real work setting: Is there a negative relationship between reward interdependence and peer reporting of unethical behavior? That is, the more dependent individuals perceive their rewards to be on other team members’ performance, the less likely they are to report their team members’ unethical behavior.
Methods
Participants and Procedure
We contacted a large furniture company that has 62 direct-sales stores in Eastern China. Through initial interviews with a store manager and a regional manager, we confirmed that there are differences in reward allocation between and within stores. Therefore, it was possible to capture differences in reward interdependence. We received permission to send a short survey during their internal sales conference. Two of the authors attended the conference in person and explained to the salespersons that the data will be confidential and only used for academic purposes. The salespersons who agreed to participate scanned the QR code of the survey and finished it on their own mobiles. In doing so, we tried to ensure their anonymity to the maximum extent. A total of 273 salespersons completed the questionnaire.
The prerequisite of our main hypothesis is that people have witnessed their team members’ unethical behavior that can be deemed individual-benefitting or team-benefitting depending on the reward system. We therefore generated a filter question and asked participants to describe any ethical violations in service of customers or clients that they may have witnessed in their stores. Of the 273 participants, 53 explicitly indicated that they had witnessed their team members’ unethical behaviors toward customers. These behaviors included exaggerating product functions, badmouthing other brands, lying about the product price, etc. to land a sale, which could be rendered relatively self-benefitting or team-benefitting under different levels of reward interdependence. These participants constituted the focal sample for data analysis.
There was no difference in age (Ms = 30.15, 32.02 years, t = 1.28, p = 0.203) between the final sample and the excluded sample. The final sample had a slightly higher percentage of male participants (35.85%) than the excluded one (21.36%), t = 2.22, p = 0.027.
Measures
Reward Interdependence
We measured reward interdependence using four itemsFootnote 5 from Belmi and Pfeffer (2018). Example items were “My compensation increases (or decreases) depend on how well my store is doing,” and “My salary increases (and/or bonuses) depend on the performance of my coworkers.” (1 = disagree, 5 = agree), α = 0.74.
Peer Reporting of Unethical Behavior
The scale was adapted from Mayer et al. (2013) two-item scale of reporting unethical behavior internally. The items were “When I witnessed a coworker violate our company’s code of conduct in service of customers or clients, I reported it,” “When I personally observed a coworker violate our company’s standards of ethical business conduct, I reported it” (1 = disagree, 5 = agree), α = 0.95.
Control Variables
We controlled for gender and age because previous research indicates that these demographic factors influence ethics-related decisions (e.g., Kish-Gephart et al., 2010; Mesmer-Magnus & Viswesvaran, 2005). The results yielded the same pattern with or without the control variables.
Results
Peer Reporting of Unethical Behavior
As shown in Table
8, reward interdependence was negatively related to peer reporting of unethical behavior, r = − 0.37, p = 0.007. Also, as shown in Table
9, this relationship held up when including gender and age in the model, b = − 0.42, p = 0.006. Thus, the results supported our prediction that the more individuals perceive that their rewards are dependent on the performance of other team members, the less likely they are to report team members’ unethical behavior.
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Hu, Q., Adam, H., Desai, S. et al. Turning a Blind Eye to Team Members’ Unethical Behavior: The Role of Reward Systems. J Bus Ethics (2024). https://doi.org/10.1007/s10551-023-05598-4
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DOI: https://doi.org/10.1007/s10551-023-05598-4