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The International Business Ethics Index: European UnionAuthor(s): John Tsalikis and Bruce SeatonSource: Journal of Business Ethics, Vol. 75, No. 3 (Oct., 2007), pp. 229-238Published by: SpringerStable URL: http://www.jstor.org/stable/25123990 .

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Journal of Business Ethics (2007) 75:229-238DOI 10.1007/sl0551-006-9249-4

The International Business EthicsIndex: European Union

? Springer 2007

John TsalikisBruce Seaton

ABSTRACT. The present study expands the systematicmeasurement of consumers' sentiments towards businessethical practices to the international arena. Data for the

Business Ethics Index (BEI) were gathered in three countries ofthe European Union (UK, Germany, Spain). The

Germans were the most pessimistic whUe the British werethe most optimistic about the future ethical behaviour of

businesses.

KEY WORDS: business ethics, consumer sentiments,business ethics index (BEI), UK, Germany, Spain

Introduction

Business transactions are becoming increasinglyglobal, necessitating a deeper understanding ofdivergent cultures. An important cultural element isthe degree of consumer acceptance of current businesspractices. Such consumer trust is vital for the efficientfunctioning ofthe marketplace (Johnson et al. 2005).In order to systematicaUy evaluate consumers' sentiments towards business ethical practices, the BusinessEthics Index (BEI) was conceptualized, developedand brought to fruition in the USA (Tsalikis andSeaton, 2006a, 2006b).

John Tsalikis is anAssociate Professor ofMarketing at FloridaInternational University. His articles have appeared in theJournal ofthe Academy ofMarketing Science, journalof Business Ethics, and Psychology in Marketing.Bruce Seaton is anAssociate Professor ofMarketing at FloridaInternational University. His research interests include therole of national stereotyping in consumer choice and theapplication of experimental methods to investigatemodels ofbusiness ethics. His articles have appeared in the Journal of

Advertising, Journal of Business Research, and Journalof Global Marketing.

The purpose of this paper is to describe theextension of the BEI to the European Union (EU).

The choice of the EU was primarily based on itseconomic importance. The EU consists of 25 countries with a population of approximately 460 miUion.The economic output of the EU, asmeasured by GDPin international doUars, is shghtly greater than that oftheUSA1. In 2005, the combined GDP of the EU andtheUSA represented approximately 40% of the world

GDP.Other factors supporting the EU as a focus of the

initial international expansion are:

a. Similarity in culture: Brooks (1998) arguedthat American value systems are similar tothose of Europeans, but with such differencesas the

higher importancethat Europeans attri

bute to issues of pace-of-life and long termpay-offs.b. Similarity in methodology: the CATI (Computer Assisted Telephone Interviewing)system of data collection was used in the US.

The practice of opinion research is welldeveloped in theWestern European countriesof the EU, aUowing the respective BEI's ofthe chosen countries to be methodologicaUyequivalent to those of the USA.

Literature review

The foUowing framework is based on that proposedby Cooper (2004) to describe the development of a

Moral Point of View.Moral Theory _^ Moral Principles _? Moral Context _^ Moral Evaluation

As the BEI is self-referenced, the moral (ethical)evaluation is performed within the moral context

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230 John Tsalikis and Bruce Seaton

described by Theory/Principles/Context sketchedout above. There are various perspectives on howthe culture of a country provides some degree ofuniformity in the above process.One school of thought argues the commonality ofhuman nature and posits that a set of universal valuesand ethical standards does exist (Bigoness and Blakely,1996; Husted et al., 1996; Ralston et al, 1997).

According to this school of thought, cultural differences are superficial and people in China basicaUyexhibit the same ethical values as people in France.The other school of thought posits that there are significant differences in cultural values that need to bestudied and addressed when dealing with diversecultures (Vogel, 1992). Wines and Napier (1992) ar

gue that cultures are similar on moral values and different on the application of moral principles to specificsituations. Similarly, Dees and Starr (1992) see the"core social values" as cultural universals while reactions to moral duemmas are culturaUy specific. Thislatter perspective ismore consistent with the relativistic approach that has come to dominate moralthought. In the relativistic tradition, FerreU andGresham (1985) introduced their "contingencyframework for understanding ethical decision making." Rather than attempting to discover universal

moral principles, they recommended the examinationof contexts (cultural, historical, situational or individual) and variables that influence ethical behaviour.As a set of self-referenced measures, the BEI has beendeveloped to facilitate longitudinal comparisons (i.e.within a cultural context) rather than horizontal (i.e.between cultural contexts) and is thus more consistent

with a relativistic perspective.Previous cross-cultural ethical studies have

focused on managerial perceptions and values(Fraedrich et al., 2000; Jackson and Artola, 1997;

Jeurissen and van Luijk, 1998; Palazzo 2002; Rittenburg and Valentine, 2002; Valentine and Rittenburg 2004). Such studies support cultural factors asinfluencing ethical beliefs and behaviour. Forexample, ViteU and PaoliUo (2004) found that"people from different countries utilize differentethical standards and evaluations." In their study,

American business persons scored higher in ethicaUtythan did their Spanish counterparts.Very few studies have measured the ethical sen

timents of consumers. The three streams of relatedresearch focusing on consumer ethicality are:

a. Consumers' perceptions of ethical consumerbehaviour using the Consumer Ethics Scale(CES) developed by ViteU and Muncy(1992). Using the CES, Polonsky et al.(2001) identified statisticaUy significant, butsHght, differences in consumer ethical perceptions between Northern and Southern EUconsumers.

b. The second stream of research related to thepresent study is that of Corporate Social

Responsibihty (see Maignan, 2001). It ishypothesized that improved corporate socialresponsibility wiU lead to increased consumergoodwiU towards the company or companiesin question and ultimately contribute tocompetitive advantage. Maignan (2001)found French and German consumers weremore wiUing to support sociaUy responsiblecompanies than their US counterparts. Thisis indicative of the ethical sensitivity of

French and German consumers.c. The Ethical Reputation Index (ERI) and theEthical Purchasing Index (EPI). According to

the ERI, UK consumers ranked McDonald'sas the most unethical company in the world(Gilbert, 2006). They were foUowed by

Nike, Adidas, SheU, Barclays and BP. The oUand clothing sectors were the lowest rankedsectors. In the same survey 74% of consumerssaid they would not buy from a companythey perceive as unethical. Bold (2003) notedthat aMORI report found that 75% of UKconsumers said that a firm's ethical behaviour

would influence their purchasing behaviour.Similarly, the EPI showed a 15% increase inthe "ethical consumption market" (Goodwinand Francis, 2003). At least in concept, thesetwo indices provide a micro view- of business,in contrast to the BEI's macro perspective.

Sampling procedureThe EU consists of 25 member countries with atotal population of approximately 460 miUion.

PoliticaUy it is best described as a hybrid arrangement combining the characteristics of a country,federation and confederation. However, in distinct


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The International Business Ethics Index 231

contrast to the US, the EU has a plethora ofnational languages, an attribute which greatlycomplicates the process of opinion poUing and

marketing research.Due to the composition of the EU and resource

constraints, we had to restrict ourselves to a smaUset of countries. The foUowing guidelines weredeveloped:

a. chosen countries had to be monolingual, or atleast have a dominant national language. Thiscriterion excluded a country such asBelgium;

b. to the extent possible, the focus would be onthe countries that were demographically andeconomically dominant in the EU;

c. the ability to access a representative sample ofresidents using the CATI method of elicitingconsumer responses was essential.

Based on the above criteria, the foUowing countrieswere selected for further consideration: France,Germany, Italy, Poland, Spain, and United Kingdom.Selected demographic, economic and studyspecific characteristics of the EU, of the above sixcountries and the US are reproduced in Table I.

Given the resource constraints, this initial exploration of the BEIEU needed to be confined to three ofthe above countries.

The first country chosen in our judgment samplewas the United Kingdom. The basis for thisselection was a commonahty of language and thecultural proximity to the US. The first of the six

countries to be eliminated was Poland. Poland's percapita GDP is less than half that of the EU averageand less than a third that ofthe US. As an "economic outlier" it was removed from furtherconsideration.

As noted earlier, Polonsky et al. (2001) investigated the nature of consumer ethics in four NorthernEuropean countries (Denmark, Germany, TheNetherlands, Scotland) as compared to four SouthernEuropean countries (Greece, Italy, Portugal, Spain).

Wood (1995), along with others, had suggested thatthe "less developed" Southern European countriesmight be less ethical in perspective than theirNorthern counterparts. While there were statisticaUy

significant differences between the Northern andSouthern sets of countries, the effect sizes were

smaU and the differences were inconsistent indirection.

Although the distinction between "northern" and"southern" European notions of ethicality is notfuUy convincing, the judgment sample was completed by adding a country from each of Northernand Southern Europe. The Northern choice wasGermany, the EU's dominant economy (seeTable I). The Southern choice was Spain. Its GDPper capita is just below the mean for the EU as a

whole (about 10% less than Italy) and is thus in linewith Southern European levels. In addition, Spanishis the dominant language in Latin America which

represents the next region for BEI measurement. Tosummarize, the three countries chosen were:

Germany, Spain and the UK.

TABLE IEconomic/demographic characteristics for selected countries

Country Population (in thousands) GDP* (inmilHons) GDP/Capita* CATI CPI**EU61,297 12,427,413 26,940France2,370 1,830,110 29,316es .5

Germany2,500 2,521,699 30,579es .2Italy8,462 1,668,151 28,760es .0Poland8,173 495,885 12,994es .4Spain3,038 1,089,103 26,320es .0UK0,034 1,832,792 30,470 yes 8.6USA95,000 12,277,583 41,399 yes 7.6

* = PPP, International DoUars (2005)** = Corruption Perception Index (10 point scale where 10 is least corrupt).


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The instrument

The same four items used for the BEIus wereemployed in the BEIEU. This was consistent withhaving the BEI provide some cross-sectional insightin addition to its primary focus on longitudinalknowledge of consumer ethical perceptions. Theoriginal English version was retained for interviewing in the UK, while German and Spanish versionswere developed for the respective correspondingcountries. The scales were back-translated into

German and Spanish by the marketing researchcompanies in the respective countries and thenchecked for both accuracy and quaUty by two sets oftranslators associated with the authors.

Population definition and samplingThe interviews in aU three countries were conductedusing the computer assisted telephone interviewing(CATI) system. Hence, by necessity, the populationsconsisted of households accessible by telephone. Asthe companies in each of the three countries useslightly different samphng methodologies, the sampling frames differ to some degree. The applicationof weights to the raw data is designed

tomitigate

thisdeficiency. A brief description of the samplingprocess in each country foUows:

UK: NEMS research uses the CATI system tocollect a representative sample of 1000 adults from10 geographic regions (see Table II). The companyutiUzes a stratified random sampUng methodologyacross 10 ITV regions. According to NEMSresearch:

"the interviews are conducted evenly across each ofthe ITV regions to ensure accurate data weighting...

Quota controls are also appUed to ensure that thesample repHcates the profile of these TV regions. By

using random location sampHng within each TVregion, an even geographic spread is created andtelephone numbers are randomly selected" (http://

www.nemsmr.co.uk 2006).

GEPJV1ANY: OMNIQUEST uses a random sampling procedure utilizing the "last birthday" principle. According to OMNIQUEST:

"As a member of "ARGE Telefonstichproben" wemake a topical and representative sample avaUable to

every cHent... The starting point are aU telephonedirectory-entries as weU as a substantial number ofrandomized numbers (the so called Haber/Gablerprocedure), to include those people who are notregistered in German telephone Hstings" (http://

www.omniquest.de 2006).

SPAIN: TNS-Global (http://www.tns-global.com)uses the Random Digit Dialing (RDD) methodology in order to incorporate a proportion of unhstedtelephone users in their sample of 1000 householdsin 9 geographic regions (see Table II).

Results

Respondent characteristics

The national probabUity samples were comprised of:

UK: 1001 respondentsGermany: 1000 respondentsSpain: 1009 respondentsHving in private households. The 3 sets ofrespondents' demographic characteristics are presented in Table II.

Computation of the BEI

The International BEIs were calculated using thesame formula used in the calculation of the 2006 USBEI (Tsalikis and Seaton, 2006b). The 2006 International BEIs and the 2006 US BEI were:2

UK =119.7GERMANY = 90.3SPAIN = 98.52006 US = 102.63.

Using the confidence interval ranges of the 2006 USdata (95% CI = BEI ?4.6) we can say that theSpain/US dyads show no significant differences. Theother 5 dyads are significantly different. The internalcharacteristics of the BEI are discussed below.


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TABLE IIDemographic characteristics

UK GEPJvlANY SPAIN

Gender GenderGenderMale 48.7% Male 46.7% Male 44.2%Female 51.3% Female 53.3% Female 55.8%Employment Status Employment Status Employment StatusFuU-time 38.1% FuU-time 34.8% Working 68.7%Part-time 16.5% Part-time 16.5% Retired/invaHd 27.0%

Unemployed 16.2% Unemployed 8.7% Other 4.4%Retired/invaHd 28.4% Retired 19.5%Age Age Age16-24 5.1% 14-24 18.4% 18-24 11.0%25-34 17.5% 25-34 10.8% 25-34 20.1%35-44 18.4% 35-44 20.3% 35-44 22.2%45-54 16.3% 45-54 21.1% 45-54 18.5%55-64 13.1% 55-64 16.1% 55-64 14.7%65+ 19.6% 65+ 13.3% 65+ 13.5%

Education EducationNo diploma 5.2% No diploma.3%Elementary 26.7% Elementary 22.1%High school 50.6% High school 46.9%CoUege 17.1% CoUege 26.7%

Region RegionScodand 8.3% Barcelona AM7.5%North/Borders 6.4% Catalano-Arag. 11.6%Lancashire 12.2% Levante4.5%Yorkshire 9.6% Sur9.6%

Wales 11.1% Madrid AM0.9%Midlands 15.2% Central 9.8%East England 7.0% North-east 10.8%London 18.2% North-center 10.8%Southern 9.3% Canarias 4.5%

Ulster 2.6%

Analysis ofthe individual index elementsAs with the US analysis, each ofthe four elementsof the BEI was analyzed in order to provide amore precise picture of the consumer sentiments(Exhibit 1). A Business Ethics Index Componentscore (BEIcomponent) was calculated for each of thefour BEI components using the foUowing formula:

For the Personal/Past and Vicarious/Pastquestions (QI and Q2):

(% very ethical ? % very unethical)+ (% somewhat ethical? % somewhat unethical) + 100

For the Personal/Future and Vicarious/Futurequestions (Q3 and Q4):

(% more ethically-% more unethically) + 100


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EXHIBIT 1Questions comprising the Business Ethics Index

Personal/PastQI. Based on your own experiences as a consumer in the past year, businesses you dealt with generaUy behaved:Very unethicaUy Somewhat unethically Neither nor Somewhat ethicaUy Very ethicaUyVicarious/Past

Q2. Based on what you heard from others or the media in the past year, businesses behaved:Very unethically Somewhat unethicaUy Neither nor Somewhat ethicaUy Very ethicaUyPersonal /FutureQ3. Based on your own experiences as a consumer last year, do you expect businesses in the coming year to behave?More unethicaUy About the same More ethicaUy

Vicarious /FutureQ4. Based on what you heard from others or the media last year, do you expect businesses in the coming year to behave?More unethicaUy About the same More ethicaUy

The results for the three European countries andthe 2006 US BEIs are presented in Table III and depicted graphicaUy in Figure 1. AU three Europeancountries show a positive sentiment for BEIpersonai/past,albeit not as strong as the 2006 US data. Similar to the2006 US data, the BEIvicarious/past were distinctlynegative for aU 3 EU countries with Spain having thestrongest negative sentiment (BEIvicarious/past

= 73.2).The difference between personal and vicarious ethicalperceptions were similar for Spain and Germany(slightly less than the 2006 US) but the UK showed a

markedly lesser distinction by information source.However, as examination of Figure 1 wiU confirm,aU 4 BEIpast profiles exhibited the same marked discrepancy between the distinctly "ethical" perceptionsof business based on personal experience, coupled

with a tendency toward "unethical perception" when

TABLE IIIBusiness Ethics Component Scores for the Four IndexVariables

UK GERMANY SPAIN 2006USBEIpersonal/past 115.5 111.5 110.6 126.1BEIvicarious/past 93.8 75.7 73.27.3BEIperS0nal/future 136.0 86.5 105.6 100.4BEIvlcarious/future 133.6 87.5 104.6 96.7

BEIs over 100 indicate positive consumer sentiments whUeBEIs under 100 indicate negative consumer sentiments.

the information source is external or vicarious (e.g. themedia).

In contrast to the internal components of theBEIpast, those ofthe BEIfomre showed marked internalsimUarity and between country distinctiveness whenthe four countries were examined. In aU four countries, the difference between BEIpersonai/future and the

BEIvicarious/future was smaU with the BEIpersonal/futuremore positive than the BEIvicarious/future except forGermany. StatisticaUy aU four within country differences were no different from zero. However, thebetween country distinctions were extremely large.

UK respondents were extremely positive about thedirection ofthe ethical behaviour of business. At theother extreme German respondents' BEIfoture scoreswere indicative of a distinctly pessimistic view offuture business ethicality. Spain and the US occupiedthe middle of the distribution. As inspection of

Table III wiU readily confirm the between-countrydifferences were primarily due to the variations in the

BEIfuture across the four countries.

Effects of demographic variables on index elements

While the majority ofthe demographic variables didnot significantly effect the BEI, the few exceptionswere:

UK: While UK respondents exhibited a generalpositive sentiment, for both future components ofthe BEI (Q3 and Q4), younger respondents weremore optimistic about the future ethical behaviour


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140 n-Il-1* ? ? ? 4

130-/- ? -GERMANY/ -Hk? SPAIN1 120--f-- j 2006US

I 110-V--ri 10?-\ \ /-/-?-\ / ^?_*?80-\/^'

70 J-.-.-.Personal/Past Vicarious/Past Personal/Future Vicarious/FutureBEI Component

Figure 1. Business ethics component scores for the four countries.

of businesses than older respondents. Whipple andSwords (1992), in a study of American and Britishstudent's ethical perceptions, found that demographic variables did not significandy affect ethicaljudgments. In addition, UK females express moreethical assessments of business ethicality than males, apattern previously noted in the US..

GERMANY: Females perceived that, in the past,businesses treated them personaUy more ethicaUythan males did.

SPAIN: As inGermany, Spanish females perceivedthat, in the past, businesses treated them personaUymore ethicaUy than males did. In addition, Spanishfemales were more optimistic about the future ethical

behaviour of businesses (based on the informationthey heard from others). No age effect was observedfor the Spanish sample. Apparendy thememory ofthecooking oil scandal of 1981 (where 161 Spaniards diedingesting poisonous rapeseed oil sold as olive oil) hasfaded from the national memory.

Conclusions

A problem of real unification ofthe EU is the diversityof cultures belonging to the union (Grimond, 1995).As inspection of Table III and Figure 1 will readilyconfirm, the EU is a coUection of countries ratherthan a unified

entity,at least as

regardsconsumers'

perceptions of business ethical practices. Polonskyet al. (2001) identified some differences in consumerethical perceptions between four Northern EUcountries (Germany, Denmark, Scotland, The

Netherlands) and four Southern EU countries (Portugal, Spain, Italy, Greece). Van Luijk (1997) suggested that Southern and Eastern European countries'business ethical practices lag behind those of the

Northern andWestern European countries. Similarethical differences between North and South werereported byWood (1995). The results of the presentstudy show that the three European countries aresirrhlar in their perceptions of the ethical behaviour ofbusiness in the past. However, the three countriesvary widely on their perceptions of future ethicalbehaviour by businesses. More specificaUy, the distinction of North vs. South breaks down because the

widest gap in perceptions about the future existsbetween Germany and the UK, with Spain locatedsomewhere in the middle.

For clarity of presentation, each country wiU bedealt with individuaUy:GERMANY: According to Becker and Fritzche(1987), German managers exhibited a pessimistic

orientation. The same was true in our findings aboutGerman consumers' sentiments of future ethicalbehaviour of business. An explanation for this mightbe provided by Benoit (2000) who declared that"In Germany, civilised corporate behaviour is as


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sacrosanct as a good loaf of bread. Any companyperceived to be tampering with the country's labourlaws is bound to regret it" (p. 36).

However, German consumers should be the leastto worry because a cross-referential survey foundthat German managers were perceived by other

manager as the most ethical (Jeurissen and van Luijk,1998). If anything, the ones that should worryshould be the Spaniards because their managers wererated second to last.4 This contradiction between

what Germans should diink (having the most ethicalmanagers) and what they actuaUy think (BEI's pes

simistic results about future expectations) could beexplained by the findings of Vogel (1992).

Vogel (1992) argued that "Americans tend toemphasize the role of the individual as the mostcritical source of ethical values, while in other capitalist nations relatively more emphasis is placed onthe corporation as the locus of ethical guidance"(p. 44). More specificaUy, in Germany the focus is

on "consensual" or "communicative" ethics whereethical decisions he not with the individual but withthe community as a whole (van Luijk, 1997).

Apparendy the ethical behaviour of individualGerman managers is lost in the shift of focus to thecorporation or the community as a whole.

SPAIN: For a comprehensive historical perspectiveof business ethics in Spain see Argandona (1999).

According to Argandona, ethical development inSpain "has run paraUel to that of other countries, andhas been affected by similar factors" (p. 159). In ourfindings the Spaniards are closer to American consumers' ethical sentiments but quite distinct from theethical sentiments about the future of the Germansand the British. The present findings agree with

Argandona's questioning ofthe cliche that the citizensof southern European countries hold a contempt anddistrust towards the law and the State.

Spain has a significant gray economy (about10-23% of GDP). Gray economy, being an iUegalcoUusion of businesses and consumers to defraud theState, should prima facie be expected to influenceconsumer perceptions toward business. However thepresent data do not support such a contention.

Argandona (1999) argued that pubhc corruption inthe late eighties was detrimental to the ethical perceptions of Spanish society. Spanish consumers seemto have bounced back from this pubhc corruption andthe aforementioned cooking oil disaster of 1981.

UK: The highest BEI by farwas observed in theUK (especiaUy perceptions about the future). Thisfinding seems to corroborate Gwyther's (2002)declaration that in the UK "the fact remains thatoutright fraud in business is rare" (p. 4). On theother hand, The Economist declared that "Europe'scorporate culture is serving shareholders and owners

with no more distinction than its short-termistAmerican counterpart. Nor is the continent free ofaccounting scandals. Indeed, it appears simply to bebehind America in bringing them to light. In theclash of capitalist systems, Europe's armoury is

weaker than might be expected" (The Economist,2002, p. 63). Our data revealed a UK populationcloser to Gwyther than to The Economist.

The positive ethical sentiment of the UKrespondents could also be explained by Bussey's(2006) argument that UK companies "are becomingincreasingly conscious of the need to demonstratetheir ethical credentials to consumers" (p. 17). Inaddition, as with the Germans, a poU of businessexecutives ranked the top 5 countries with highethical standards as being: US, UK, Canada, Switzerland and Germany (Singer, 1991).

Future direction of the BEI

A first step was made for the expansion of the BEI inthe international arena. WhUe the results and thecomparison between the four countries are intriguing, the value of the BEI lies on the relativemovement asmeasured by future runs. The first stepwas in countries simUar to the US both in cultureand data gathering methodologies. The next stepwould be to measure the BEI in more diverse cultures such as in Africa, Asia, Latin America and the

Muslim cultures.

Notes1 As reported by the International Monetary Fund

using the Purchasing Power Parity method.2 AU four BEIs were calculated using the weightedscores as wUl be aU future calculations of the BEI.3 Based on the formula for the BEI, numbers above100 indicate consumer sentiments leaning towards theethical side whUe numbers under 100 indicate consumersentiments leaning towards the unethical side.


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The scores of ethical business conduct were:Germany = +210, Sweden = +170, United States = +73,Denmark = +66, Netherlands = +50, UK = +37,Belgium = -37, France = -116, Spain = -171, andItaly = -428.

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John Tsalikis and Bruce SeatonMarketing,Florida International University,

University Park, Miami, FL, 33199,U.S.A.

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