Codes of ethics, corporate philanthropy, and employee responses

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International Journal of Hospitality Management 39 (2014) 97–106

Contents lists available at ScienceDirect

International Journal of Hospitality Management

jo u r n al homep age: www.elsev ier .com/ locate / i jhosman

odes of ethics, corporate philanthropy, and employee responses

ong-Ki Leea,1, Joowon Choib,2, Bo-young Moonc,∗, Barry J. Babind,3

College of Business Administration, Sejong University, 209, Neungdong-ro, Gwangjin-gu, Seoul 143-747, South KoreaDepartment of Hospitality Management and Dietetics, Kansas State University, Manhattan, KS 66502, USADepartment of Sports and Outdoors Eulji University, 553 Sanseongdaero, Sujeong-gu, Seongnam-si, Kyeonggi-do 461-713, South KoreaDepartment of Marketing and Analysis, Louisiana Tech University, Ruston, LA 71272, USA

r t i c l e i n f o

eywords:odes of ethicsorporate philanthropyngagement

a b s t r a c t

Although ethical management would seem to be a must in today’s business climate, research and practi-cal applications in the services industry and in developing economies remain scarce. Hence, the purposeof this study is to investigate the effects of codes of ethics and corporate philanthropy on the Korean

urnover intentionervices

services industry. The results demonstrate that, overall, a code of ethics directly affects corporate philan-thropy and organizational engagement. Corporate philanthropy, in turn, positively relates to employeeengagement and turnover intention. Turnover intention is explained by job and organizational engage-ment. The strategic importance of ethics management and the following philanthropic activities in thehospitality services are illustrated from the findings of this research.

. Introduction

Good ethics is simply good business (Koonmee et al., 2009;antos, 2001). Socially responsible marketing firms act with theealization that their actions affect many stakeholders, includingustomers, employees and society at large (Madden-Hallett, 2009).ll organizations sometimes face ethical scrutiny, even at times due

o circumstances not entirely under their control. The Bhopal gasragedy (1984) in India, the Exxon Valdez oil spill disaster (1989)nd the Enron scandal (2001) give us lessons about the diversity ofnd potential ethical consequences associated with business envi-onments.

Even a cursory examination of worldwide corruption indiceshttp://cpi.transparency.org/cpi2012/results/) suggests thateaker economies and lower standards of living tend to go alongith high corruption. South Korea provides a case study of sorts

iven the remarkable transition from among the world’s poorestountries in 1950 to one of the world’s leading economic forcesoday. South Korea has been a G20 member since 1999. The

orean government promoted the growth of large corporations byubsidizing bank loans to provide capital at below market rates androviding discounted government land use, among other things

∗ Corresponding author. Tel.: +82 31 740 7256.E-mail addresses: [email protected] (Y.-K. Lee), [email protected] (J. Choi),

[email protected] (B.-y. Moon), [email protected] (B.J. Babin).1 Tel.: +82 2 3408 3158.2 Tel.: +1 785 532 2213.3 Tel.: +1 318 257 4012.

ttp://dx.doi.org/10.1016/j.ijhm.2014.02.005278-4319/© 2014 Elsevier Ltd. All rights reserved.

© 2014 Elsevier Ltd. All rights reserved.

(Lee et al., 2009). South Korea’s corruption index remains steady(ranked 45 out of 174 nations, those with low numbers enjoyless corruption) and various public scandals put some Koreanbusinesses in an unfavorable light. Subsequently, Korean firmslinked publicly with unethical behavior openly provide charity andsupport as public retribution for potentially ill-gotten “materialgains.” These acts also fight against a prevailing anti-corporationpublic sentiment (Lee et al., 2009).

Given the potentially deleterious consequences (Jose andThibodeaux, 1999), many firms are attempting to institutionalizegood ethics by establishing a formal code of ethics, credos, ethicalvalues statement, and/or codes of conduct (Ki et al., 2012). Codes ofethics can play key roles in demonstrating the organization’s moralconcern, transmitting ethical values to organizational members,and impacting the ethical behavior of organizational members. Ifeffective, an organization’s ethical work climate improves and thefirm can respond better to external demands and pressures fromstakeholders (Raiborn and Payne, 1990; Wotruba et al., 2001). Inaddition, companies openly associate with social causes as a wayof enhancing their reputation, which in turn, may produce pos-itive effects on sales and market share (Papasolomou-Doukakiset al., 2005). Accordingly, corporate responsibility activities can bea source that helps a firm to create resources and capabilities fromresource-based view (Branco and Rodrigues, 2006; McWilliamset al., 2006). Although the effectiveness of ethics codes have been

mixed and controversial (Ki et al., 2012), it has become a fact intoday’s business world (Chonko et al., 2003). We believe that theadoption of a corporate code of ethics is particularly meaningful inSouth Korea where public displays strongly shape image.

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Ethics codes often encourage corporate philanthropy (CP) activ-ties (Sharma et al., 2011; Wood, 1991). CP activities demonstrateorporate social responsibility (CSR). CP activities may even buildompetitive advantages and increase employee morale (Porternd Kramer, 2002) and commitment (Collier and Esteban, 2007).rom this perspective, cause-related marketing strategies can bemplemented through willingful employee participation (Liu et al.,010). Such action enhances job and organizational engagementBrammer et al., 2007; Lim, 2010) and decreases turnover (Leet al., 2012a,b). Employees as internal customers then become lead-rs and encourage customers, suppliers, and community groups toommunicate a firm’s socially responsible message (De Bussy et al.,003).

Service firms are particularly keen on creating an ethical images they inevitably interact closely with customers. For a hospitalityrm, the institutionalization of ethics manifests itself in the actionsf its front-line service providers. Frontline personnel, includingalespeople, are particular susceptible to ethical dilemmas dueo conflicting demands that they routinely face in their bound-ry spanning roles (Babin and Boles, 1998; Dubinsky et al., 1986).rontline employees who toil in a less than ethical work climatexperience greater on the job conflicts, which in turn contributeso increased turnover (Levy and Dubinsky, 1983). An ethical worklimate can be promoted through numerous means not the least ofhich is the adoption of codes of ethics and policies that promote

sense of responsibility among workers (Babin et al., 2000; Porternd Kramer, 2002).

Overall, very little is known about ethical governance in Korea ormerging economies. Lacking a more formalized approach includ-ng a code of ethics, some South Korean firms rely exclusivelyn a formalized whistle-blower system. Moreover, research aboutthics and corporate responsibility in hospitality is still in itsnfancy. Very little hospitality research reviews issues related toodes of ethics (c.f. Coughlan, 2001; Payne and Dimanche, 1996).he purpose of this study is to examine the role played by explicitorms of codes of ethics and corporate philanthropy in changing theork environment among Korean service firms. In particular, theork sheds light on the link between formalized ethical procedures

nd employee responses including job engagement, organizationalngagement and turnover intentions among service employees.his paper takes steps in bridging the research gap by groundingtself in the code of ethics and CP literature and providing empiricalvidence of their outcomes. As such, the work offers an opportu-ity to develop theory in this important area and make practicalecommendations for implementation.

. Literature review

.1. Codes of ethics

A code of ethics is a “written expression of an organization’sthical norms and values” (Valentine and Barnett, 2003, p. 359)roviding useful guidelines for managerial policy and employeeecision-making (Sims, 1991). The Code should influence decisionsbout all manner of issues including supervisor-employee behav-or, customer treatment, consideration of societal concerns andublic stakeholders, not the least of which deals with customernd public safety and welfare.

The need to institutionalize ethics is alluded to in Brenner’s1992) study saying that most ethics programs are implicitlynherent within the organizational culture, but are not explic-

tly developed. A code of ethics manifests itself in the form ofolicy manuals, formal ethics training and instructional materi-ls, employee orientation programs, ethics audits and committeesCallan, 1992; Dean, 1992; Trevino and Nelson, 1995; Vitell and

itality Management 39 (2014) 97–106

Singhapakdi, 2008). Questionnaire and telephone survey target-ing the top 200 Korean companies in 2009 showed that the keycontents of formalized charters of ethics are compliance withinternal standards of operation and regulations, followed by fairtrade and legal compliance, social contribution, and then otherthings (KCCI, 2010). However, employees often are unaware of theexistence or unfamiliar with the content of organizational codesof ethics (Wotruba et al., 2001). Hence, awareness of the code’scontents can help in establishing explicit rules and guidelines forethical behavior (c.f. Singhapakdi and Vitell, 2007).

Ethics-oriented corporations can be profitable. A corporateendorsement of high levels of ethical standards can be encour-aged by developing a code of ethics. Sims (1991) pointed outthat such codes of ethics not only help develop a CEO’s commit-ment, but they also help retain public trust, stress managerialprofessionalism, encourage employees to abide by establishedlaws and protect stakeholders against employee misconduct. Acode of ethics should do more than espouse a minimally accept-able type of behavior to keep abreast of ethical global trends(Weeks and Nantel, 1992). Establishing a code of ethics, or at leastthe perception of ethical behavior, seems mandatory for publiccorporations.

2.2. Corporate philanthropy

According to social institutional theory, a firm is viewed as a“public institution sanctioned by the state for some social good”(Boatright, 2000, p. 248). As such, corporations, not just nonprofitinstitutions, exist to serve society in some way and to promote soci-etal advancement (Carroll, 2009; Davis, 1983). Firms that do wellfrom a marketing standpoint should also work to promote a fairand just marketplace.

CSR should generally meet four societal expectations: eco-nomic, legal, ethical, and philanthropic (Carroll, 1999). Amongthose, philanthropy derives from the Greek roots meaning “thelove of humans.” A company’s economic, legal, and ethical dutiesare mandatory, whereas philanthropic responsibility is volun-tary and desirable (Carroll, 2009). As illustrated by Lantos (2001,p. 20), “If possible, do good.” A philanthropy-based companymay work to minimize public problems (e.g., poverty, illiteracy,crime, underfunded educational institutions, chronic unemploy-ment, environmental pollution) to improve societal welfare andenhance the quality of life (Brenkert, 1992; Jamali et al., 2008;Velasco, 1996).

In Korean culture, the notion of philanthropy resonates. Koreanculture is seen as a “giving culture” captured in Korean by theword, “jeong,” which translated into English means affection andsharing for one another (Yang, 2006). In addition, collectivistic Con-fucianism prevails in Korea and values obligations to others overself-interest, and gives priority to harmony between group mem-bers (Markus and Kitayama, 1991; Miller, 1994; Yang, 2006). Miller(1994) refers to it as intrinsic benevolence, charity, and virtue.

Although CP is relatively new in Korea, dating back onlyabout two decades (Lee et al., 2009), companies are embracingthe concept by increasing charitable giving (Korea Herald, 2011).According to the Community Chest of Korea, total charitable giv-ing from 2005 to 2010 was approximately 1.3 trillion won with844 billion won (65%) given by Korean corporations (Korea Herald,2011). As indicated above, some firms are trying to rebrand them-selves by publically participating in CSR (Kahn et al., 2012). Others

ignore the influence of social activities and solely focus on sales andprofits (Flores, 2001). Despite rising public awareness, CP’s impacton service firms specifically remains unexplored (Holcomb et al.,2007).

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.3. Job engagement and organizational engagement

Employee engagement represents a “new and emerging area”roving vital to success in the services sector (Saks, 2006, p. 612).urprisingly, researchers comment on the paucity of employeengagement research (e.g., Kim et al., 2009; Saks, 2006; Slåttennd Mehmetoglu, 2011). By Kahn’s (1990) definition, work engage-ent is “the harnessing of organization members’ selves to theirork roles [by which they] employ and express themselves phys-

cally, cognitively, and emotionally during role performances” (p.94). Roberts and Davenport (2002) set forth a definition of jobngagement as a core aspect of the self representing “a person’snthusiasm and involvement in his or her job” (p. 21). Hence,ngaged workers have a state of mind that is positive and fulfillingn work characterized by vigor, dedication, and absorption (Bakkernd Demerouti, 2008; Schaufeli et al., 2002).

Higher levels of job engagement result in outcomes that orga-izations value. An individual who is highly engaged in their joberceives that the work personally fits them and finds the work

ntrinsically motivating (Roberts and Davenport, 2002). Engagedmployees feel a strong connection to the company and work hardo innovate and improve (Mirvis, 2012). Further, they usually put inxtra effort (Mirvis, 2012). Engaged employees take actions moreikely to meet customer and company desires and in doing so, theyontribute to firm performance (Roberts and Davenport, 2002).chaufeli et al. (2009) find that when individuals are engaged inheir work, they express less psychosomatic complaints than theiron-engaged counterparts.

Previous research explores correlates of employee engagement.n Salanova et al.’s (2005) study, work engagement positivelyssociates with a supportive service climate promoting bothestaurant employee performance and customer loyalty. In theontext of fast-food restaurants, greater levels of employee engage-ent can increase their objective financial returns (Xanthopoulou

t al., 2009). Moreover, role benefits, job autonomy, and strategicttention relate positively to employee engagement (Slåtten andehmetoglu, 2011).

.4. Turnover intention

Turnover plagues many service industries including the hospi-ality industry. Sixty percent of front-line employees and 25 percentf managerial positions leave their job each year (Woods et al.,998). Turnover intention reflects the extent to which individuals

n an organization want to leave their job and are actively engagedn any effort to do so. Conversely, intention to remain expresses thepposite attitude and behavior (Kraut, 1975; Mobley et al., 1978).

In general, job performance among new and veteran serviceroviders diminishes with turnover intention. Adding to theurnover problems, new employees are unproductive and requireubstantial resources to be trained. Work-related conflicts andurnout among new employees limits productivity as employeesre unable to concentrate on the job (Tracey and Hinkin, 2008). Forhese reasons, retaining employees is more effective than hiringew ones (Budhwar et al., 2009).

Reichheld (2001) urged that effective employee retention leadso increased customer retention. Mainly, front-line employees runospitality services. Firms that try to demonstrate the fact that theompany is a concerned and caring organization may well pro-ote attitudes leading to comfort among employees and thus a

ecreased desire to leave the job.

.5. Theoretical development

While a firm may adopt a formal code of ethics as a way of get-ing some short-term positive PR, a firm that is truly concerned

Fig. 1. Theoretical framework.

about the welfare of its stakeholders wants the code of ethics tobe more than a publicity stunt (Ndubmisis et al., 2014). The promi-nence of norms and policies regarding ethical standards become aprimary dimension embodying an ethical work climate in serviceorganizations (Babin et al., 2000). An ethical work climate setsthe tone for ethics throughout the organization. In this way, thecode of ethics sets a standard and expectations for actions notonly among managers, but also among those critical employees’charged with delivering value to customers. As employees becomeaware of the ethical actions of managers they develop a healthieroutlook about the organization and their work (Deconinck, 2011).This healthier outlook provides the general mechanism by whichemployees awareness of codes of ethics and philanthropic acts bymanagement eventually reduce turnover among service employ-ees. Fig. 1 illustrates this general theoretical framework. Below,specific generalizations are offered with respect to outcomes on joband organizational engagement and then with turnover intentions.

2.6. Outcomes of codes of ethics

Valentine and Fleischman (2007) argue that moral develop-ment (i.e., ethics programs) facilitates broader corporate ethicalobligations to society. They view CP and codes of ethics as waysof stimulating social responsibility and thereby provide signals ofmoral development (also see Koonmee et al., 2009). Other authorsalso point to the performance benefits such as integrity and pub-lic philanthropy as potential sources of competitive advantage(Turban and Greening, 1997). Business research also suggests thatcompanies that have ethically sound codes of ethics participatemore in CP (Sharma et al., 2011; Wood, 1991).

As indicated in the theoretical framework, the pervasive knowl-edge of formal codes of ethics among employees can be a keyto a healthy ethical work climate (Deshpande, 1996; Jose andThibodeaux, 1999; Koh and Boo, 2001; Trevino et al., 1998;Valentine and Barnett, 2003). Over time, the ethical work climate ofa marketing organization solidifies and employees who are uncom-fortable in such an environment fail to fit in and show a greaterinclination to look for work elsewhere (Babin et al., 2000; Sims andKroeck, 1994). As a firm receives public acclimation for good ethicsover time, these long-term employees come to take greater pride intheir work and develop a stronger commitment and are willing tosacrifice to make the firm successful. Therefore, this study suggestsa set of hypotheses including outcomes of adopting, maintainingand living a strong code of ethics.

Hypothesis 1. Codes of ethics are positively associated with CP.

Hypothesis 2. Codes of ethics are positively associated with jobengagement.

Hypothesis 3. Codes of ethics are positively associated with orga-nizational engagement.

2.7. CP, job and organizational engagement and turnoverintention

Along the same lines, CP positively influences employee engage-ment in their work (Roberts and Davenport, 2002). For example,Sirota Survey Intelligence (2007) reports that 75% of employees

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3.1. Sample and procedure

Data were collected from service employees working for five-star hotels located in Seoul, South Korea. Researchers contacted

Table 1Profile of the sample.

Frequency (n) Percentage (%)

GenderFemale 156 53.8Male 132 45.5Missing 2 0.7AgeBelow 20 years old 10 3.420–29 115 39.730–39 114 39.340–49 46 15.9Above 49 years old 5 1.7EducationHigh school 4 1.4Two-year college 125 43.1Four-year university 143 49.3Graduate school 17 5.9Missing 1 0.3Hotel status

00 Y.-K. Lee et al. / International Journal o

n firms perceived as committed to social responsibility also con-ider themselves highly engaged in their jobs. Indeed, more thanhree out of four workers in a survey involving respondents from

ore than 20 countries express a preference to work for a companyoted for socially responsible performance (Reputation Institute,008). A corporate prosocial behavior enriches employees’ sensef belonging and identification in the workplace (Googins et al.,007).

Thus, public philanthropy represents another opportunity tomprove work engagement (Brammer et al., 2007; Collier andsteban, 2007). CP in this way serves as a positive motiva-ional resource (Kenexa Research Institute, 2010). CP boostsmployee goodwill and morale, and enables a firm to attractapable employees (Porter and Kramer, 2002). A six-country sur-ey suggests that employees intend to stay with organizationsonger as employees perceive them as more socially responsi-le (Kenexa Research Institute, 2010). Similarly, CP reinforcesmployees’ trust toward their organization, which in turn, low-rs turnover intention (Lee et al., 2012a,b). Hence, the followingypotheses:

ypothesis 4. CP is positively associated with job engagement.

ypothesis 5. CP is positively associated with organizationalngagement.

ypothesis 6. CP is negatively associated with turnover intention.

.8. Job engagement and organizational engagement

Kahn (1990) proposed that engagement gives rise to positiveutcomes at both the personal level (i.e., quality of work andxperiences of doing that work) and the organizational level (i.e.,he growth and productivity of organizations). Engaged employ-es express positive emotions such as happiness, joy, contentmentnd enthusiasm (Bakker and Demerouti, 2008). Such positivexperiences and emotions tend to drive positive work outcomes.chaufeli and Bakker (2004) argue that engaged employees expressreater attachment to their organization and a lesser tendencyo quit. Engaged employees have high levels of energy and pos-tive work affect (Slåtten and Mehmetoglu, 2011; Sonnentag,003). These positive energies manifest themselves in greaterngagement.

Social exchange theory (SET) provides a theoretical basis toxplain why employees choose to become more or less engagedn their work and organization (Saks, 2006). Engagement devel-ps as a result of an abundance of individual employee resourcesHalbesleben and Wheeler, 2008). When an organization providesmployees with these resources and benefits, they feel obligedo return by bringing themselves more deeply into their var-ous role performances (Kahn, 1990; Saks, 2006). When bothhe firm and the employees comply with the exchange rules, arusting and loyal relationship along with a mutual commitmentetween employees and their company develops (Cropanzano anditchell, 2005). Thus, individuals who continue to engage them-

elves do so because of the continuation of favorable reciprocalxchanges.

Transformation theory offers a similar perspective. Weitz andap (1995) claim that one’s attitudes and behaviors shift to oth-rs in an organization through day-to-day interaction. Bakker andemerouti (2008) mention also that engaged employees transfer

heir engagement to coworkers. Thus, in these types of firms, com-itment to their work brings about a proportional commitment to

he organization. Hence, the following hypothesis:

ypothesis 7. Job engagement is positively related to organiza-ional engagement.

Fig. 2. Proposed model.

2.9. Relationship among job engagement, organizationalengagement and turnover intention

Employees deep in work engagement find difficulty detach-ing from their job because of the strong personal identificationthey have with their work and organization (Hobfoll, 2001). Workbecomes a primary source of self-identity. Since their work andorganization are seen as providing so many resources, both tan-gible and intangible, engaged employees may be reluctant aboutchanging or quitting their job (de Lange et al., 2008). Engagementin this way mediates the relationship between job resources andturnover intention (Bakker and Demerouti, 2008; Schaufeli andBakker, 2004). Hence, the following hypotheses:

Hypothesis 8. Job engagement is negatively associated withturnover intention.

Hypothesis 9. Organizational engagement is negatively associ-ated with turnover intention.

The hypotheses come together to form a detailed process modelas illustrated in Fig. 2.

3. Methods

Chained 219 75.5Independently owned 71 24.5DepartmentFood & Beverage 251 86.6Rooms 38 13.1Missing 1 0.3

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Table 2EFA and CFA results.

EFA CFA

Standardized factorloadings

Eigen value Varianceexplained (%)

Standardizedloadings

CCR AVE

Codes of ethics 4.294 20.447 0.902 0.647My organization conducts ethics audits on a

regular basis.a–

Top management evaluates the ethics trainingprograms on a regular basis.a

–

My organization does not have a top-levelperson(s) responsible for ethics complianceprograms.a

–

Top management is involved in ethical trainingprograms.a

–

My organization does not have trainingprograms that effectively communicateethical standards and policies.

0.806 0.873

My organization does not have an ethicscommittee or team that deals with ethicalissues in the organization.

0.826 0.869

In order to prevent misconduct within myorganization, there are training programs tocreate effective ethical culture.

0.813 0.918

My organization has a formal ethics trainingprogram focusing on ethics.

0.873 0.913

Top management in my organization has amechanism for detecting ethical issuesrelating to the local community.

0.778 0.854

Corporate philanthropy 4.002 19.059 0.912 0.623Our hotel tries to help the poor. 0.800 0.827Our hotel contributes toward bettering the

local community.0.844 0.903

Our hotel tries to fulfill its social responsibility. 0.808 0.920Our hotel tries to accommodate governmental

request.0.794 0.888

Our hotel tries to accommodate request fromNGOs.

0.721 0.856

Job engagement 3.871 18.433 0.858 0.602I really “throw” myself into my job.a –Sometimes, I am so into my job that I lose track

of time.0.796 0.811

My mind never wanders and I do not think ofother things when doing my job.b

0.673 –

I am highly engaged in this job. 0.822 0.855The job I have makes me enthusiastic. 0.733 0.849I view my job as being meaningful.a –I am enthusiastic about the job I do. 0.771 0.831When I wake up in the morning, I really want

to go to work.a– –

Organizational engagement 3.175 15.118 0.884 0.656Being a member of this organization is very

captivating.0.758 0.840

I am really into the “goings-on” in thisorganization.

0.742 0.844

Being a member of this organization makes mecome “alive”.

0.797 0.913

Being a member of this organization isexhilarating for me.

0.754 0.906

I am highly engaged in this organization.a

I am committed to this organization.a –

Turnover intention 1.835 8.738 0.708 0.549I am going to quit this job in the next three

months.0.947 0.84

I am going to quit this job sometime in thenext year.

0.936 0.90

Total variance explained (%) 81.795

EFA: KMO = 0.934, Bartlett’s test of sphericity (�2 = 5724.475, df = 210, p < 0.001), Cronbach’s ˛: Codes of ethics (0.966); Philanthropic CSR (0.944); Job engagement (0.922);Organizational engagement (0.946); Turnover intention (0.820).CFA: �2 = 332.510, df = 160 (�2/df = 2.078), p = 0.000, NFI = 0.940, CFI = 0.968, GFI = 0.898, AGFI = 0.866, PNFI = 0.792, RMSEA = 0.061.

a Items were deleted during EFA procedure.b Item was deleted during CFA procedure.

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Table 3Construct intercorrelation, mean, and standard deviation.

1 2 3 4 5 Mean SD

1. Codes of ethics 1.00 5.06 1.282. Corporate

philanthropy0.679 1.00 5.35 1.17

3. Job engagement 0.459 0.566 1.00 5.23 1.094. Organizational

engagement0.579 0.541 0.710 1.00 5.07 1.20

02 Y.-K. Lee et al. / International Journal o

he room and food & beverage restaurant managers of 20 five-starotels listed in the Korea Hotel Association directory and explainedhe purpose of this study. Twelve of the 20 five-star hotels agreedo participate in the research.

The survey was conducted in June of 2011. A letter introduc-ng the purpose of this research and a top executive’s cooperation,ncouraging participants to complete and return the questionnaireas enclosed. A total of 330 questionnaires was distributed and

16 completed questionnaires were returned. Participants whoompleted the survey were given a small gift. Of those collecteduestionnaires, 26 were excluded since they had not been fullyompleted. After elimination, 290 questionnaires with an effectiveesponse rate of 87.9% were coded and analyzed for further analysis.able 1 is a summary of respondents’ profiles.

.2. Measures

All constructs were measured with multiple item scales devel-ped and tested in previous studies. Each item was measured on

5-point Likert-type scale anchored by ‘strongly disagree’ andstrongly agree’ (see Table 2). Back-translation (with the materialranslated from English into Korean and then back into English,he versions compared, and any discrepancies resolved) was usedo ensure consistency between the survey items and the originalcales (Mullen, 1995; Singh, 1995).

Code of ethics was assessed the awareness of organization’sxplicit institutionalization of ethics using 9 items adopted frominghapakdi and Vitell (2007). CP which the organization engagesn explicitly CP activities in terms of public-serving and reactive

otives was measured by 5 items adopted from Lee et al.’s (2009)ork. Employee engagement was measured by 14 items adapted

rom the work of Saks (2006) to assess employee’s perceptionsf their job (8 items) and organizational engagement (6 items).astly, turnover intention was measured by 2 items indicatinglans to leave the company in the near future (Babin and Boles,998). Pretesting of the questionnaire was performed on severalotel employees to test and improve the questionnaire design. Theretesting led to minor changes in wording, the flow of the ques-ionnaire and interpretation of the questions.

. Results

.1. Measurement model

Exploratory factor analysis (EFA) using SPSS 18.0 and confirm-tory factor analysis (CFA) using AMOS 18.0 were performed tourther verify the identified dimensions and to check unidimen-ionality and validity.

Principal components analysis with varimax rotation was usedo initially identify the dimensions of a code of ethics, CP, jobngagement, organizational engagement, and turnover intention.ight items were eliminated because of low factor loadings of lesshan 0.4 and a couple of cross loadings on two factors. EFA identifiedve factors with 21 items (Table 2). All five factors had eigenvaluesreater than 1, accounting for 83.52% of the total variance.

CFA results assess the validity of the measures and overall mea-urement quality. Several items that had factor loadings lower than.5 were dropped to maintain the proper level of discriminantnd convergent validity. As shown in Table 2, the CFA results sug-est good fit; GFI = 0.898, CFI = 0.968, PNFI = 0.792, RMSEA = 0.061,nd a �2 = 332.5 (df = 160, p < 0.01, �2/df = 2.078). All AVEs and con-

truct reliability estimates are adequate. Discriminant validity washecked by comparing the proportion of variance extracted in eachonstruct to the square of the coefficients representing its corre-ation with other factors (Fornell and Larcker, 1981). The variance

5. Turnoverintention

−0.432 −0.419 −0.496 −0.542 1.00 2.64 1.32

Note: All coefficients were significant at p < 0.01.

extracted in each measure exceeded the respective squared corre-lation estimate, showing evidence of discriminant validity.

To check common method bias, we additionally employed Har-man’s one-factor test (Bauer et al., 2006; Lee et al., 2011; McFarlinand Sweeney, 1992). This test was done by comparing the fit ofthe proposed model (i.e., multidimensional model) against the fitof a one-factor model. If the fit of the single-factor model is bet-ter than the proposed model, common method bias may indeed bepresent (Podsakoff and Organ, 1986). The one-factor model yields a�2 residual of 2127.4 with 170 df (compared with the �2 = 332.510and df = 160 for the five dimensional measurement model). The fitis considerably worse than the unidimensional model, suggestingthat common method bias is not a serious threat to the study. Cor-relations between the constructs, means, and standard deviationsare presented in Table 3.

4.2. Structural model and hypotheses testing

Table 4 displays fit statistics and maximum likelihood estimatesfor the model parameters. The multiple model fit indices suggestthat the model fits the data well: �2 = 357.4 (df = 161, p < 0.01),GFI = 0.908, CFI = 0.974 and RMSEA = 0.058.

Hypotheses 1–3 state that awareness of ethics codes influencesCP, job engagement, and organizational engagement. As shownin Table 4, awareness of the firm code of ethics significantly andpositively influences CP (�11 = 0.787, t-value = 17.4, p < 0.01) andorganizational engagement (�31 = 0.306, t-value = 5.18, p < 0.01) butdoes not affect job engagement (�21 = 0.107, t-value = 1.45, n.s.).Thus, the results support H1 and H3 but not H2.

Hypotheses 4–6 posit that awareness of CP influences bothjob and organizational engagement as well as turnover intention.The results suggest that CP affects job engagement (ˇ21 = 0.604,t-value = 7.70, p < 0.01) and organizational engagement posi-tively (ˇ31 = 0.306, t-value = 5.18, p < 0.01), but CP affects nega-tive turnover intention negatively (ˇ41 = −0.159, t-value = −2.41,p < 0.05). Therefore, Hypotheses 4–6 are all supported.

Hypothesis 7 states that job engagement relates positivelyto organizational engagement. As hypothesized, job engagementhas a significant positive effect on organizational engagement(ˇ32 = 0.631, t-value = 10.88, p < 0.01), thus supporting Hypothesis7.

Hypotheses 8 and 9 propose that job engagement and organi-zational engagement relate negatively to turnover intention. Ashypothesized, job engagement (ˇ42 = −0.232, t-value = −2.52,p < 0.05) and organizational engagement (ˇ43 = −0.377, t-value = −4.20, p < 0.01) have a significant negative effect onturnover intention. Hence, H8 and H9 are supported.

Fig. 3 summarizes the results of testing hypotheses and the esti-mates.

4.3. Mediating testing

The mediating effects of CP, job engagement, and organiza-tional engagement on the relationship between codes of ethics

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Y.-K. Lee et al. / International Journal of Hospitality Management 39 (2014) 97–106 103

Table 4Standardized structural estimates.

Estimate C.R. p-Value

H1 Codes of ethics → Corporate philanthropy 0.787 17.407 0.000**

H2 Codes of ethics → Job engagement 0.107 1.448 0.148H3 Codes of ethics → Organizational engagement 0.306 5.179 0.000**

H4 Corporate philanthropy → Job engagement 0.604 7.700 0.000**

H5 Corporate philanthropy → Organizational engagement 0.306 5.179 0.000**

H6 Corporate philanthropy → Turnover intention −0.159 −2.409 0.016*

H7 Job engagement → Organizational engagement 0.631 10.881 0.000**

H8 Job engagement → Turnover intention −0.232 −2.516 0.012*

H9 Organizational engagement → Turnover intention −0.377 −4.196 0.000**

SMC (R2)Corporate philanthropy 0.619 (61.9%)Job engagement 0.478 (47.8%)Organizational engagement 0.715 (71.5%)Turnover intention 0.495 (49.5%)

�2 = 357.361, df = 161, p = 0.000, NFI = 0.955, CFI = 0.974, GFI = 0.908, AGFI = 0.880, PNFI = 0.809, RMSEA = 0.058.* p < 0.05,

** p < 0.01,

Table 5Results of mediating role estimation of corporate philanthropy, and job and organizational engagement between codes of ethics and turnover intention.

Paths of mediating role Indirect effects 95% bootstrap CIs Z-values Mediating roles

LL CIs UL CIs

Codes of ethics → Corporate philanthropy → Job engagement 0.475* 0.346 0.582 6.992** Full mediatorCodes of ethics → Organizational engagement → Turnover intention a −0.514* −0.602 −0.399 3.282** Full mediatorCorporate philanthropy → Job engagement → Organizational engagement 0.381* 0.253 0.506 6.267** Partial mediatorJob engagement → Organizational engagement → Turnover intention −0.238 −0.446 −0.036 3.835** Partial mediator

*

N ble 4,

w

ats(yaSom

(atrssoB

p < 0.05,** p < 0.01,ote: The direct effect of code of ethics on turnover intention is not presented in Taas not significant.

nd turnover intention are examined with the Aroian version ofhe Sobel test (see Table 5; see also Appendix) and the BC boot-trapping method (Preacher and Hayes, 2004). MacKinnon et al.2002) suggest that this combined approach to mediation anal-sis is more powerful than traditional single mediation analysispproaches (e.g., Lee et al., 2012a,b). The Aroian version of theobel test presents the level of significance of the indirect effectf the independent variable on the dependent variable through aediator (see Preacher and Leonardelli, 2003).Other studies view CSR as a mediator of the codes of ethics

i.e., ethics programs) – job satisfaction relationship (e.g., Valentinend Fleischman, 2007). Others treat engagement as a modera-or of relationships between antecedents (i.e., job characteristics,ewards and recognition, perceived organizational and supervisorupport, perceived justice, withdrawal) and consequences (i.e., job

atisfaction, organizational commitment, intentions to leave, andrganizational citizenship behavior) (e.g., Saks, 2006; Schaufeli andakker, 2004; Sonnentag, 2003).

Fig. 3. Estimates of model tests.

but when the direct path from codes of ethics to turnover intention is conducted, it

Table 5 shows the results that CP signifi-cantly mediates the effect of codes of ethics(�codes of ethics → corporate philanthropy → job engagement; 0.475, p < 0.01;95% bootstrap CI = 0.34L CI, 0.582UL CI; Z = 6.99, p < 0.01) on jobengagement. The direct effect of codes of ethics on job engage-ment is not significant (�codes of ethics → job engagement; 0.107, n.s.).This result indicates that CP plays a full mediating role in therelationship between codes of ethics and job engagement.

Job engagement significantly mediates the effect of CP(�corporate philanthropy → job engagement → organizational engagement; 0.381,p < 0.01; 95% bootstrap CI = 0.25L CI, 0.506UL CI; Z = 6.27, p < 0.01)on organizational engagement. The direct effect of CP on organi-zational engagement (�codes of ethics → organizational engagement; 0.306,p < 0.01) also is significant. This result indicates that job engage-ment plays a partial mediating role in the relationship between CPand organizational engagement.

Organizational engagement significantlymediates the effect of codes of ethics(�codes of ethics → organizational engagement → turnover intention; −0.514,p < 0.01; 95% bootstrap CI = −0.60L CI, −0.399UL CI; Z = 3.282,p < 0.01) on turnover intention. Additionally, the direct effectof codes of ethics on turnover intention is not significant(�codes of ethics → turnover intention; −0.107, n.s.). This result indicatesthat organizational engagement fully mediates the relationshipbetween codes of ethics and turnover intention.

Finally, organizational engagement signifi-cantly mediates the effect of job engagement(� job engagement → organizational engagement → turnover intention; −0.238,p < 0.01; 95% bootstrap CI = −0.44L CI, −0.036UL CI; Z = 3.835,p < 0.01) on turnover intention. The direct effect of job

engagement on turnover intention is also significant(� job engagement → turnover intention; −0.232, p < 0.05). Thus, orga-nizational engagement plays a partial mediating role in therelationship between job engagement and turnover intention.

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. Discussion

Corporations should establish and enforce explicit ethics rulesnd guidelines to make clear what proper actions employees shouldollow. Employees perceive organizational values through codesf ethics and thus create greater awareness of CP. Additionally,ngagement must be regarded as a long-term and ongoing strat-gy that eventually retains employees and guarantees a company’sustainable success.

.1. Theoretical implications

First and foremost, this study highlighted philanthropic traitsf CSR on the basis of “jeong” and collectivistic Confucianism per-inent to Korea’s unique business situations. Second, Saks (2006)rgues that engagement has little basis, pointing to it as the “fla-or of the month” (p. 615). This study attempted to integrate theoncept of engagement as an important link between ethics andurnover.

In addition, the meaningful difference between job engage-ent and organizational engagement was suggested based on three

ifferent theories: social exchange (Saks, 2006), conservation ofesources (Hobfoll, 2001), and transfer (Bakker and Demerouti,008). Employees who feel that the company provides plenty ofources are likely to reciprocate with high engagement in both theirob and company. These employees hesitate to leave the company.mployees with high engagement in their job also transfer theirositive attitudes or behaviors throughout their work environment.

Lastly, as is true for other studies (e.g., Schaufeli and Bakker,004; Sonnentag, 2003), job and organizational engagementogether with CP play mediating roles between codes of ethicsnd turnover intention. This result compares similarly with previ-us research showing that CSR intervenes between organizationalthics and job satisfaction (Valentine and Fleischman, 2007).

.2. Managerial implications

Our results add to the body of evidence suggesting that ethi-al firms enjoy greater productivity and higher employee retentionSharma et al., 2011). Social involvement like community servicesnd volunteer programs could make employees feel connectedith their job and organization. Armed with a strong commitment

oward CP, services firms should leverage moral values, legal com-liance and social responsibility as a way of creating a philanthropicrganizational culture.

Hospitality employees’ organizational engagement is drivenn part by codes of ethics and CP activities. Thus, firms shouldnderstand the importance of good ethics and develop supportivections. The InterContinental Hotels Group (2012) focuses on thewo themes of community and environment (e.g., disaster relief,ecycling). The Westin Chosun Hotel (2011) in Korea received anward in 2009 for maintaining strong ethical norms and promotingoral guidelines for employees. The Chosun also increased chari-

able giving through food bank donations, blood donation drives,ree planting projects, matching gifts, etc. Likewise, ethical firmehaviors give credibility to employees and promote employeengagement through numerous avenues some of which conveythical skills to team members (Halbesleben and Wheeler, 2008).

Top management should design ethics training programs thatonvey the parameters of good employee conduct. Regular train-ng can highlight ethical issues surrounding the work environmenthrough class presentations and role-playing exercises. In-house

ampaigns, for example, an ethics day, anti-corruption campaignsnd ethical management slogans (KCCI, 2010) may help buildthical climates, particularly in work cultures lacking a strong eth-cal tradition. Employees should be informed of corporate ethics

itality Management 39 (2014) 97–106

through all manner of communication including social networkingsites, newsletters, and face-to-face training. The display of orga-nizational support and caring for such social concerns encouragesemployee engagement and, in doing so, reduces turnover.

Ethics guidelines drive philanthropy and indirectly, job engage-ment. In other words, when employees acknowledge ethics rulesand norms, and in turn philanthropic initiatives, they will put moreeffort into their work. Hence, to have employees more engagedin their job, hospitality firms should create an ethical work cli-mate. Employees that fit with the ethical values of the organizationstay on the job longer and in doing so, promote the welfare ofthe organization and its stakeholders (LRN, 2006; Sims and Kroeck,1994). In sum, philanthropy should be embedded in corporate cul-ture to improve employee awareness and engagement and reduceturnover. To institutionalize ethics could help accomplish thesegoals.

Since many of hospitality firms distribute their units acrossregions or nations via franchising or chain systems, it is diffi-cult for the headquarters to control the effectiveness of ethicsmanagement and CP actions. Therefore, local or district managersand their employees should be empowered when it comes toethics-related decision-making and voluntary practices. With theirauthority ethics appreciation and/or assessment programs, includ-ing reward systems, can be more effectively implemented than bymore centralized authorities. Internal control systems such as whis-tle blowing mechanisms or online reporting systems and internalcontrol checklists (KCCI, 2010) also can be utilized to solve ethicalproblems occurring within the organization effectively while notserving to demotivate employees.

6. Limitations and future research

These study findings should be viewed in light of a few lim-itations. There are several fruitful avenues for future research toconsider. First, the survey was conducted in a single service sectorof hotels. We also received responses only from twelve hotels toallude to the generalization of study findings. Also, this study waslimited to front- and bottom-line employees, not middle or upperlevel managers. Ethical attitudes and behaviors of managers andtheir CP activities are perceived to be successful in their organi-zation (Viswesvaran and Deshpande, 1996). From this perspective,linking institutionalization of ethics and CP with leadership stylecould be more effective to explain hospitality management (Carlsonand Perrewe, 1995; Weeks and Nantel, 1992). Accordingly, ourstudy could be replicated in other hotel tiers or different hospital-ity sectors such as restaurants, airlines, casinos, etc. and in differentemployee levels.

Second, the research here considered perceptions of explicitethical norms as expressed in codes of ethics rather than onimplicit ethical values. Implicit ethical values may play a key rolein whether or not hospitality employees pay attention to CP (Vitelland Singhapakdi, 2008). Third, even if CP was selected as the mostimportant Korean ethics business trait, it may be done based on thesubjective judgment by authors. In other words, other types of CSRwere not included to this study despite possible impacts. Futurestudy should conduct comparative research including all three- orfour dimensions of CSR to ensure what are the truly influential CSRin Korean business situations.

Fourth, the results of this study suggest that employee engage-ment is worthy of future research. This study only includes twovariables related to ethics and CP as antecedents, and turnover

intention as a consequence of job and organizational engagement.However, there are several others that may also be crucial forboth job and organizational engagement. For example, Saks (2006)employed four different outcome variables (i.e., job satisfaction,

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rganizational commitment, intention to quit, and organizationalitizenship behavior directed to the individual and organization).n Saks (2006)’s study, both job and organizational engagementsredicted intention to quit while only organizational engage-ent predicted organizational citizenship behavior. For possible

redictors, personality variables (e.g., self-efficacy, hardiness, self-steem, and locus of control) might also be considered (Maslacht al., 2001). Future studies should embrace other variables thatan make this present research more meaningful.

ppendix.

The Aroian version of the Sobel test (Baron and Kenny, 1986)s represented as follows (see Preacher and Leonardelli, 2003;ttp://quantpsy.org/sobel/sobel.htm):

-value = a × b√b2 × s2

a + a2 × s2b

+ s2a × s2

b

here a and b are unstandardized path coefficients of paths and sa

nd sb are associated standard errors.

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