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A Multi-Method Approach to Identifying Norms and Normative Expectations within a Corporate Hierarchy: Evidence from the Financial Services Industry

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  • Burks, Stephen V.

    () (University of Minnesota, Morris)

  • Krupka, Erin L.

    () (University of Michigan)

Abstract

This paper presents the results of a field study at a large financial services firm that combines multiple methods, including two economic experiments, to measure ethical norms and their behavioral correlates. Standard survey questions eliciting ethical evaluations of actions in on-the-job ethical dilemmas are transformed into a series of incentivized coordination games in the first experiment. We use the results of this experiment to identify the actual ethical norms for financial adviser behavior held by key personnel – financial advisers and their corporate leaders – in three settings: a clash of incentives between serving the client and earning commissions, a dilemma about fiduciary responsibility to a client, and a dilemma about whistle-blowing on a peer. We also measure the beliefs of financial advisers about the ethical expectations of their corporate leaders and the beliefs of corporate leaders about financial adviser norms. In addition, we ask financial advisers about their personal normative opinions, matching a common methodology in the literature. We find, first, systematic agreements in the normative evaluations across the corporate hierarchy that are consistent with ex ante expectations, but second, we also find some measurable differences between the normative expectations of corporate leaders about on-the-job behavior and the actual norms shared among financial advisers. When there is a normative mismatch across the hierarchy we are able to distinguish miscommunication from ethical disagreement between leaders and employees. Our subjects also report their job satisfaction and take part in a second incentivized experiment in which it is costly to report private information honestly. A last finding is that a mismatch between advisers’ personal ethical opinions and corporate norms – especially those of peers – strongly correlates with job dissatisfaction, and less strongly but significantly with the willingness to be dishonest.

Suggested Citation

  • Burks, Stephen V. & Krupka, Erin L., 2011. "A Multi-Method Approach to Identifying Norms and Normative Expectations within a Corporate Hierarchy: Evidence from the Financial Services Industry," IZA Discussion Papers 5818, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5818
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    References listed on IDEAS

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    Cited by:

    1. Erkut, Hande & Nosenzo, Daniele & Sefton, Martin, 2015. "Identifying social norms using coordination games: Spectators vs. stakeholders," Economics Letters, Elsevier, pages 28-31.
    2. Stephen V. Burks & Daniele Nosenzo & Jon Anderson & Matthew Bombyk & Derek Ganzhorn & Lorenz Goette & Aldo Rustichini, 2015. "Lab Measures of Other-Regarding Preferences Can Predict Some Related on-the-Job Behavior: Evidence from a Large Scale Field Experiment," Discussion Papers 2015-21, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    3. Štěpán Veselý, 2015. "Elicitation of normative and fairness judgments: Do incentives matter?," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 10(2), pages 191-197, March.
    4. Danilov, Anastasia & Sliwka, Dirk, 2013. "Can Contracts Signal Social Norms? Experimental Evidence," IZA Discussion Papers 7477, Institute for the Study of Labor (IZA).
    5. Abigail Barr & Tom Lane & Daniele Nosenzo, 2015. "On the social appropriateness of discrimination," Discussion Papers 2015-25, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    6. Gächter, Simon & Gerhards, Leonie & Nosenzo, Daniele, 2017. "The importance of peers for compliance with norms of fair sharing," European Economic Review, Elsevier, vol. 97(C), pages 72-86.
    7. D'Adda, Giovanna & Drouvelis, Michalis & Nosenzo, Daniele, 2016. "Norm elicitation in within-subject designs: Testing for order effects," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 62(C), pages 1-7.
    8. Simon Gächter & Daniele Nosenzo & Martin Sefton, 2013. "Peer Effects In Pro-Social Behavior: Social Norms Or Social Preferences?," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 548-573, June.
    9. Gibson, Rajna & Tanner, Carmen & Wagner, Alexander F, 2014. "The Choice of Honesty: An Experiment Regarding Heterogeneous Responses to Situational Social Norms," CEPR Discussion Papers 9880, C.E.P.R. Discussion Papers.
    10. Francesco Feri, Caterina Giannetti, Pietro Guarnieri, 2017. "Risk taking for others: an experiment on ethics meetings," Discussion Papers 2017/229, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    11. Charness, Gary & Schram, Arthur, 2012. "Social and Moral Norms in the Laboratory," University of California at Santa Barbara, Economics Working Paper Series qt6rv7x0tf, Department of Economics, UC Santa Barbara.
    12. Felix Koelle & Tom Lane & Daniele Nosenzo & Chris Starmer, 2017. "Nudging the electorate: what works and why?," Discussion Papers 2017-16, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    13. Bernd Irlenbusch & Marie Claire Villeval, 2015. "Behavioral ethics: how psychology influenced economics and how economics might inform psychology?," Post-Print halshs-01159696, HAL.
    14. Nikiforakis, Nikos & Noussair, Charles N. & Wilkening, Tom, 2012. "Normative conflict and feuds: The limits of self-enforcement," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 797-807.

    More about this item

    Keywords

    norms; field experiment; corporate leader; coordination game; financial services; financial adviser; ethics;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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