Intervention (Hidden)
There were four groups: L0, L1, L2, and L3. We started with the baseline group L0. Managers in this group were required to make decisions in the truth-telling section anonymously. We informed the managers in this group that their choices will be kept secret from everyone: no one would receive the manager’s example. For the baseline group L0, as well as for other groups, the procedure of the experiment strictly followed the double-blind principle, which keeps the participants’ identities confidential from the experiment organizers and eliminates participants’ concerns about being observed by the experimenter. The double-blind procedure was explained very carefully to the participants at the beginning of the experiment.
With the next treatment group L1, we aimed to address hypothesis 2. In particular, in this treatment, we wanted to inform the employees the motive behind their managers to undertake the LBE in honesty. To do so, managers in this treatment could select one of the two following choices. In the first choice, the managers were informed that their choices in the experiment would be offered as an example to their employees, who would make a decision in the same experiment. We also informed the managers that their employees would know that the example was of their own firm manager. The second alternative was that the manager’s decision would be kept anonymous and the experiment procedure would be identical to the baseline treatment L0. It is important to note that we did not inform anyone about the leaders who selected the second option if that was the case. Managers in treatment group L1 were presented with the following message in their truth-telling section:
Prior to completing this section, we would like to inform you that you have the two following options:
Option 1: Your choices in this section would be given as an example to your employees who will make decisions on an identical section. Your employees also know that you have decided to do so and that even you had the option of keeping your choices anonymous.
Option 2: Your choices in this section would be anonymous.
Please also be assured that no one including your employees would know you choose Option 2 in case you decide to do so.
Given this setup, managers who selected the first option were more likely to inform their employees about their initiative in undertaking LBE. Otherwise, they could select option 2, keeping their decisions confidential. It is interesting to note that among the 88 managers who were originally assigned in treatment L1, only three chose option 2. This pattern of selection indicates the motive among the manager participants to undertake LBE in honesty. To allow a simple exposition, hereafter, we use L1 to refer to managers who selected option 1. We also integrate managers who selected option 2 into the baseline group L0 in all analyses.
In the following treatment L2, the example from each manager was given to their own employees. The employees knew that the examples were from their own manager. Both the manager and the employee were aware of this information flow. Managers in treatment group L2 were presented with the following messages in their truth telling section:
Prior to completing this section, we would like to inform you your choices in this section would be given as an example to your employees, who will make a decision on an identical section. Your employees also know that the example is from you.
Treatment L2 generated a situation similar to the typical setting adopted by existing literature on LBE, especially, in the context of voluntary contribution to public goods, wherein the followers observe their leaders’ behavior and the leaders are aware of being observed by their followers. Note that the main difference between treatments L1 and L2 was that managers in L1 made a conscious choice, for their decisions to be given as an example to their employees, and the employees are aware of their managers’ intention to make this choice. However, managers in L2 did not have that choice. This distinction between L1 and L2 also implies that employees in the treatment L2 were less certain about their managers’ intention to undertake LBE in honesty.
Finally, we consider the case in which a manager may undertake LBE as a result of being observed and/or having a higher status than their employees. To explore this possibility, in treatment group L3, we matched each manager with employees from a random firm. This treatment also allowed us to investigate whether an employee would respond to LBE from their own manager in the same way as they would to an LBE of a random manager. The managers in L3 were informed as follows: “Your choice in this scenario will be given to a random employee participant as an example before that employee makes a choice regarding that same scenario”.
Treatment groups for employee participants
Regarding the employee participants, in the baseline treatment L0, the employees received no example. Their section on truth telling in the ECVS questionnaire contained no added message. Conversely, employees in groups L1 and L2 received examples from their managers. Their sections on truth telling contained relevant messages indicating whom the example came from. Employees in group L2 had the following added messages in the section on truth telling:
Prior to completing this section, we would like to refer you to the answer-sheet which your manger has completed. Your manager is ware that this answer-sheet will be given to you as an example.
Most interestingly, employees in treatment L1 knew that their managers, though they had the option to make the decision in private, chose to provide them (employees) with the decisions they (the managers) made in the same truth telling experiment. The added messages in the truth telling section for L1’s employees were as follows:
Prior to completing this section, we would like to direct you to the answer sheet that your manger has completed. Your manager has decided to send this answer-sheet to you as an example. Please note that your manger also had the option of not sending their answer sheet to anybody else if they wished.
Finally, in the treatment L3, employees in each firm received examples from a random manager. Their section on truth telling had the following added message:
Prior to completing this section, we would like to refer you to the answer sheet that has been completed by a manager of some firm. This answer sheet is given to you as an example.