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Rotman Insights Hub | University of Toronto - Rotman School of Management

Paid to misbehave: What do high-paid employees think they owe employers?

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Chen-Bo Zhong, Long Wang

There is no such thing as a free lunch – even if the buyer truly means for it to be their treat. When a person is given a gift, they feel responsible for paying back the gift giver’s generosity. And that feeling is called reciprocity.

“Reciprocity is a powerful social force,” says Chen-Bo Zhong, a professor of organizational behaviour and human resource management at the Rotman School of Management. “Imagine receiving a gift. Even if it does not benefit you directly, you still feel a moral force to reciprocate -- to return the favour. Reciprocity is a social force that binds our society together.”

But in the context of an employment relationship, reciprocity can have unexpected results. When employees are given an above-market wage, it can mean they are willing to work hard, but it can also make them more likely to engage in ethically questionable behaviours. In research published in The Journal of Management, professors Long Wang, Fei Song and Zhong argue that this is because of reciprocity.

“There are many benefits to good wages. When you pay employees well, they want to pay you back in return,” says Wang, an associate professor of management at the City University of Hong Kong. “Employers may have good intentions in doing this, but there is also a chance that employees understand their compensation as something they need to pay back. Even if they are not asked to do anything wrong, they may feel the need to pay their boss back, whenever they can, if doing so could benefit their boss economically. And this could be totally against the will of their employer.”

This is called ethical reciprocity, and the researchers found that higher-than-market wages led employees to engage in unethical behaviour to benefit the managers who gave them high compensation. In an economic sense, study participants viewed their higher wages as a “gift” to reciprocate.

The researchers conducted a series of behavioural games in a lab setting, which paid study participants differing rates: low, medium or high wages. Participants who earned higher wages did reciprocate their pay with hard work. However, they were also more likely to act dishonestly to advance the interests of their manager, through behaviours like lying and the manipulation of exchange rates in an experimental market. Their experimental results were supplemented with supporting analysis of unethical or illegal behaviour by police officers in major U.S. cities, which suggested that higher salaries correlated with a higher likelihood of illegal seizures and false arrest.

For employers, these findings create a bit of a conundrum. A body of peer-reviewed research has shown that employees who earn lower-than-market pay are more likely to commit workplace deviance, and some employers have paid higher-than-market wages as a way to prevent unethical behaviours. For dissatisfied low-paid employees, this could involve behaviour like theft or sabotage.  

“They are motivated by revenge, and want to get back at their employer, because they feel they have been mistreated. So, they engage in ethical transgressions to get even. This is a moral consequence of low pay. If you do not pay your workers well, you can anticipate this,” says Zhong.  “But having higher-than-average compensation does not mean you are free of moral ramifications. When higher-than-average wages are perceived as a favour, you could actually generate a sense of obligation strong enough that it motivates employees to consider ethically questionable behaviour to return that favour.”

But the researchers argue that the unethical behaviour of employees earning higher-than-average wages occurs because the behaviour can be viewed as payback for their high compensation. And the researchers observed this behaviour even after study participants had returned their manager’s favour through higher levels of performance.

“They still felt a lingering obligation to engage in behaviors such as deception, which would benefit the manager who offered them a better wage. This really speaks to the power of reciprocity, but also to how subjective this is. The subjectivity is precisely why it has a moral or ethical risk,” says Zhong.

Employers might reduce this risk by ensuring their expectations for ethical behaviour are clearly communicated.

“Employers should tell their employees they want them to work hard, but not to cheat or lie. They have a responsibility to define what their expectations are.” says Wang.

This can help to develop an ethical culture within an organization.

“Employees could be tempted to make a ‘harmless’ lie to help the manager who provided them with a higher salary,” says Zhong. 

“But this could have ramifications, and is not easy to recognize what they could be. Members of an organization need to recognize the moral relevance of their actions, and that they have consequences. If a company clearly communicates expectations, then higher than market wages may not have these ethical risks. More awareness could potentially mitigate the downside.”

Chen-Bo Zhong is a professor of organizational behavior and human resource management at Rotman School of Management. 
Long Wang is an associate professor of management at the City University of Hong Kong.