Abstract: Stakeholder theorists have typically offered both a business case and an ethics case for business ethics. I evaluate arguments for both approaches and find them wanting. I then shift the focus from ethics to law and ask: “Why should corporations obey the law?” Contrary to what shareholder theories typically imply, neoclassical or profit maximization theories of the firm can offer answers based only on instrumental justifications. Instrumental justifications for obeying the law, however, are pragmatically and normatively incoherent. This is (...) because the modern corporation is a legal artifact. It exists because communities create the legal framework necessary for its existence. Individual corporations can therefore be said to owe their existence to a partnership (what might be called a social contract) between shareholders and governments, a partnership that is itself built on the shared though often implicit understanding that corporations have an unconditional (categorical) obligation both to obey the law and to treat their stakeholders ethically while generating wealth for their shareholders. (shrink)

According to a widely credited model in the business ethics literature, ethical decisions are a function of two kinds of factors, personal(individual) and situational, and these factors interact with each other. According to a contrary view of decision making that is widely held in some areas of business research, individuals’ decisions about ethical issues (and subsequent actions) are purely a function of their self-interest.The laboratory experiment reported in this paper provides a test of the person-situation interactionist model, using the general (...) theoretical and experimental framework used in the experimental economics literature. One individual and two situational factors relating to moral intensity were examined which may influence decisions to misrepresent information in the course of business activities.The individual and one situational variable were significantly related to participants’ actions. The interactions among individual andsituation variables were not individually significant, although the model including interactions had a much higher level of statistical significance. Gender was significant, both directly and in interaction with moral development, suggesting that it may be worthy of further examination. (shrink)

According to a widely credited model in the business ethics literature, ethical decisions are a function of two kinds of factors, personal(individual) and situational, and these factors interact with each other. According to a contrary view of decision making that is widely held in some areas of business research, individuals’ decisions about ethical issues (and subsequent actions) are purely a function of their self-interest.The laboratory experiment reported in this paper provides a test of the person-situation interactionist model, using the general (...) theoretical and experimental framework used in the experimental economics literature. One individual and two situational factors relating to moral intensity were examined which may influence decisions to misrepresent information in the course of business activities.The individual and one situational variable were significantly related to participants’ actions. The interactions among individual andsituation variables were not individually significant, although the model including interactions had a much higher level of statistical significance. Gender was significant, both directly and in interaction with moral development, suggesting that it may be worthy of further examination. (shrink)

Recent stories of corporate insiders avoiding losses and, in some cases, generating enormous personal profits as their companies crumbled have led investors to question the integrity of American business and the fairness of the United States stock markets. The SEC tries to ensure the fairness of the stock markets by making and enforcing laws against unfair practices such as insider trading. In the United States, when insiders trade stock based on non-public information, they have broken the law and betrayed the (...) trust that has been placed in them.This study used student subjects to test the relationship between the likelihood of trading based on insider information and subjective probabilities of deterrents and motivations for insider trading. Expected gain, guilt, cynicism, and fairness of laws were the determinants that had a significant relationship with the intent to trade based on insider information. This study also found support for prospect theory with regard to insider trading. The results indicate that subjects are more likely to trade based on insider information to avoid a loss than to achieve an abnormal gain. The study also finds evidence of social desirability response bias. (shrink)

In this study, we test the interactive effect on ethical decision-making of (1) personal characteristics, and (2) personal expectanciesbased on perceptions of organizational rewards and punishments. Personal characteristics studied were cognitive moral developmentand belief in a just world. Using an in-basket simulation, we found that exposure to reward system information influenced managers’ outcome expectancies. Further, outcome expectancies and belief in a just world interacted with managers’ cognitive moral development to influence managers’ ethical decision-making. In particular, low-cognitive moral development managers who (...) expected that their organization condoned unethical behavior made less ethical decisions while high cognitive moral development managers became more ethical in this environment. Low cognitive moral development managers also behaved less ethically when their belief in a just world was high. (shrink)

In this study, we test the interactive effect on ethical decision-making of (1) personal characteristics, and (2) personal expectanciesbased on perceptions of organizational rewards and punishments. Personal characteristics studied were cognitive moral developmentand belief in a just world. Using an in-basket simulation, we found that exposure to reward system information influenced managers’ outcome expectancies. Further, outcome expectancies and belief in a just world interacted with managers’ cognitive moral development to influence managers’ ethical decision-making. In particular, low-cognitive moral development managers who (...) expected that their organization condoned unethical behavior made less ethical decisions while high cognitive moral development managers became more ethical in this environment. Low cognitive moral development managers also behaved less ethically when their belief in a just world was high. (shrink)

In light of the many corporate scandals, social and ethical commitment of society has increased considerably, which puts pressure on companies to communicate information related to corporate social responsibility (CSR). The reasons underlying the decision by management teams to engage in ethical communication are scarcely focussed on. Thus, grounded on legitimacy and stakeholder theory, this study analyses the views management teams in large listed companies have on communication of CSR. The focus is on aspects on interest, motives/reasons, users and problems (...) related to corporate communication of CSR information. A questionnaire survey and in-depth interviews confirm that there is a distinct trend shift: towards more focus on CSR in corporate communication. Whilst this trend shift started as a reactive approach initiated by the many corporate scandals, the trend shift is now argued to be of a proactive nature focussed at preventing legitimacy concerns to arise. These findings are significant and interesting, implying that we are witnessing a transit period between two legitimacy strategies. Furthermore, the findings suggest that the way respondents argue when it comes to CSR activities coincides with consequentialism or utilitarianism, i. e. companies engage in CSR activities to avoid negative impacts instead of being driven by a will to make a social betterment or acting in accordance with what is fundamentally believed to be right to do. This provides new input to the ongoing debate about business ethics. The findings should alert national and international policy makers to the need both to increase the vigilance and capacity of the regulatory and judicial systems in the CSR context and to increase institutional pressure to enhance CSR adoption and CSR communication. Furthermore, stakeholders need to be careful in assuming that CSR communication is an evidence of a CSR commitment influencing corporate behaviour and increasing business ethics. (shrink)

This study provides evidence regarding the level of ethical cognition of business students at the entry to college as compared to a national norm. It also provides comparative evidence on the effects of group versus individual ethical cognition upon completion of a business ethics course. The Principled Score (P-score) from the Defining Issues Test (DIT) was used to measure the ethical cognition of a total sample of 301 business students (273 entering students plus 28 students in a business ethics course). (...) The results indicate that (1) business students are not significantly different from the national norms at entry to college and (2) group reasoning helps male students improve their P-scores significantly in the business ethics course at a loss of P-score (albeit not statistically significant) for female students. (shrink)

Abstract:This field survey focused on two constructs that have been developed to represent the ethical context in organizations: ethical climate and ethical culture. We first examined issues of convergence and divergence between these constructs through factor analysis and correlational analysis. Results suggested that the two constructs are measuring somewhat different, but strongly related dimensions of the ethical context. We then investigated the relationships between the emergent ethical context factors and an ethics-related attitude (organizational commitment) and behavior (observed unethical conduct) for (...) respondents who work in organizations with and without ethics codes. Regression results indicated that an ethical culture-based dimension was more strongly associated with observed unethical conduct in code organizations while climate-based dimensions were more strongly associated with observed unethical conduct in non-code organizations. Ethical culture and ethical climate-based factors influenced organizational commitment similarly in both types of organizations. Normative implications of the study are discussed, as are implications for future theorizing, research and management practice. (shrink)

In recent times, whistleblowing has become one of the most popularly debated issues of business ethics. Popular discussion has coincided with the institutionalisation of whistleblowing via legal and administrative practices, supported by the emergence of academic research in the field. However, the public practice and knowledge that has subsequently developed appears to construct a dichotomy of whistleblowing/silence ; that is, an employee elects either to ‘blow the whistle’ on organisational wrongdoing, or remain silent. We argue that this public transcript of (...) whistleblowing/silence overshadows the importance of continuing research into alternative (individual or collective) employee behaviour. Drawing on original research with a financial services organisation, our research uncovers a dissenting discourse that operates through implicit communication, such as codes, sarcasm and jokes. We suggest that this hidden transcript offers significant opportunities for employees to act ethically, and offers the potential to sustain an ethical organisational culture. (shrink)

We argue that corporate social performance (CSP) has become a legitimizing identity (brand) for researchers in the business and society field, but it has not developed into a viable theoretical or operational construct. Because measuring CSP is contingent on the operational setting (industry, issues, etc.), it is difficult to produce worthwhile comparisons across studies or generalizing beyond the boundaries of a specific study. The authors suggest that researchers remove the CSP label from their operational variables, and instead narrowly define their (...) studies in operational terms. They provide aworking example of the proposed research direction by examining the theory underlying the popular CSP–financial performance (FP) debate. In the authors’ conceptualization, stakeholder action provides the underlying logic connecting CSP-FP, and we recast the research question to investigate the conditions under which stakeholders will take action to influence the focal organization and when those actions will influence the CSP-FP link. (shrink)

The purpose of this paper is to examine the various guidelines presented in the literature for instituting an ethics curriculum and to empirically study their effectiveness. Three questions are addressed concerning the trainability of ethics material and the proper integration and implementation of an ethics curriculum. An empirical study then tested the effect of ethics training on moral awareness and reasoning. The sample consisted of two business classes, one exposed to additional ethics curriculum (experimental), and one not exposed (control). For (...) the experimental group, ethics exercises and discussion relevant to each topic were completed. Findings suggested gender differences such that, relative to other groups, women in the experimental group showed significantly improved moral awareness and decision-making processes. An explanation of the underlying cognitive processes is presented to explain the gender effect. (shrink)

In management theory and business practice, the dealing with diversity, especially a diverse workforce, has played a prominent role in recent years. In a globalizing economy companies recognized potential benefits of a multicultural workforce and tried to create more inclusive work environments. However, many organizations have been disappointed with the results they have achieved in their efforts to meet the diversity challenge [Cox: 2001, Creating the Multicultural Organization (Jossey-Bass, San Francisco)]. We see the reason for this in the fact that (...) while much attention has been paid to the strategic dimension of diversity policies, systems, and processes, much less thought has been given to the normative dimension, the norms and values involved. Given the fact that diversity is essentially about cultural norms and values, appropriate reflection work becomes a fundamental task to create a truly inclusive work environment where people from diverse backgrounds feel respected and recognized. Therefore, we focus in this article on the challenge of building an inclusive diversity culture showing that such a culture of inclusion has to be built on solid moral grounds. We present a conceptual framework of inclusion based on a moral theory of recognition and introduce the founding principles of reciprocal understanding, standpoint plurality and mutual enabling, trust and integrity. After revealing barriers that hinder a culture of inclusion from emerging we shed light on the process of developing such a culture which involves four essential transformational stages: The first phase focuses on raising awareness, building understanding and encouraging reflection. The second phase deals with the development of a vision of inclusion as an important step to define the change direction. In a third phase key management concepts and principles should be re-thought. This leads to the fourth, action-oriented phase, that focuses on an integrated Human Relations Management (HRM)1 system that helps implement change by doing both, translating the founding principles via competencies into observable and measurable behavior and fostering the development, reinforcement and recognition of inclusive behavior. (shrink)

Abstract:This field survey focused on two constructs that have been developed to represent the ethical context in organizations: ethical climate and ethical culture. We first examined issues of convergence and divergence between these constructs through factor analysis and correlational analysis. Results suggested that the two constructs are measuring somewhat different, but strongly related dimensions of the ethical context. We then investigated the relationships between the emergent ethical context factors and an ethics-related attitude (organizational commitment) and behavior (observed unethical conduct) for (...) respondents who work in organizations with and without ethics codes. Regression results indicated that an ethical culture-based dimension was more strongly associated with observed unethical conduct in code organizations while climate-based dimensions were more strongly associated with observed unethical conduct in non-code organizations. Ethical culture and ethical climate-based factors influenced organizational commitment similarly in both types of organizations. Normative implications of the study are discussed, as are implications for future theorizing, research and management practice. (shrink)

We understand responsible leadership as a social-relational and ethical phenomenon, which occurs in social processes of interaction. While the prevailing leadership literature has for the most part focussed on the relationship between leaders and followers in the organization and defined followers as subordinates, we show in this article that leadership takes place in interaction with a multitude of followers as stakeholders inside and outside the corporation. Using an ethical lens, we discuss leadership responsibilities in a stakeholder society, thereby following Bass (...) and Steidelmeier’s suggestion to discuss “leadership in the context of contemporary stakeholder theory” (1999: 200). Moreover, from a relational and stakeholder perspective we approach the questions: What is responsible leadership? What makes a responsible leader? What qualities are needed? Finally, we propose a so-called “roles model” of responsible leadership, which gives a gestalt to a responsible leader and describes the different roles he or she takes in leading stakeholders and business in society. (shrink)

I argue in this article that responsible leadership (Maak and Pless, 2006) contributes to building social capital and ultimately to both a sustainable business and the common good. I show, first, that responsible leadership in a global stakeholder society is a relational and inherently moral phenomenon that cannot be captured in traditional dyadic leader–follower relationships (e.g., to subordinates) or by simply focusing on questions of leadership effectiveness. Business leaders have to deal with moral complexity resulting from a multitude of stakeholder (...) claims and have to build enduring and mutually beneficial relationships with all relevant stakeholders. I contend, second, that in doing so leaders bundle the energy of␣different constituencies and enable social capital building. Social capital can be understood as actual or potential resources inherent to more or less institutionalized relationships of mutual recognition (Bourdieu 1980). By drawing on network analysis I suggest, third, that responsible leaders weave durable relational structures and ultimately networks of relationships which are rich in ties to otherwise unconnected individuals or groups. Against this background I argue, fourth, that responsible leadership may result in the creation of value networks (Lord and Brown, 2001) of multiple stakeholders, which enhance social capital and thereby contribute to both a sustainable business and the common good. (shrink)

As the world is getting increasingly connected and interdependent it becomes clear that the world’s most pressing public problems such as poverty or global warming call for cross-sector solutions. The paper discusses the idea of business leaders acting as agents of world benefit, taking an active co-responsibility in generating solutions to problems. It argues that we need responsible global leaders who are aware of the pressing problems in the world, care for the needs of others, aspire to make this world (...) a better place, and act in word and deed as global and responsible citizens. The argument is structured as follows: first, in highlighting some leadership challenges we discuss why it takes a responsible, global, and ultimately cosmopolitan mindset to enhance human values on a global scale. Second, we define more specifically responsible global leadership and the (potential) role of business leaders acting as agents of world benefit. Third, drawing on latest research on cosmopolitanism, we discuss the hallmarks of contemporary cosmopolitanism. Fourth, and concluding our argument, we propose key cosmopolitan business principles to help leaders build a more inclusive world. (shrink)

This study focused on the effects of individual characteristics and exposure to ethics education on perceptions of the linkage between organizational ethical practices and business outcomes. Using a stratified sampling approach, 817 students were randomly selected from a population of approximately 1310 business students in an AACSB accredited college of business. Three hundred and twenty eight of the subjects were freshmen, 380 were seniors, and 109 were working managers and professionals enrolled in a night-time MBA program. Overall, the respondents included (...) 438 male students and 379 female students. Exposure to ethics in the curriculum had a significant impact on student perceptions of what should be the ideal linkages between organizational ethical practices and business outcomes. Gender based differences were found with female students having a higher expectation regarding what should be the “ethics practices and business outcomes” link. Exposure to ethics in the curriculum had a positive moderating influence on the gender-based effects on perceptions of ideal ethical climate. The interaction effect showed that exposure to ethical education may have a positive impact on males and allow them to catch up with females in their ethical sensitivities concerning the ideal linkage between organizational ethical behavior and business outcomes. Further, consistent with the literature, the study found that gender differences in ethical attitudes regarding the ideal ethical climate, while significant for undergraduates, appeared to narrow considerably for the working professionals who were part-time MBA students. (shrink)

Recent events at Enron, K-Mart, Adelphia, and Tyson would seem to suggest that managers are still experiencing ethical lapses. These lapses are somewhat surprising and disappointing given the heightened focus on ethical considerations within business contexts during the past decade. This study is designed, therefore, to increase our understanding of the forces that shape ethical perceptions by considering the effects of business school education as well as a number of other individual-level factors (such as intra-national culture, area of specialization within (...) business, and gender) that may exert an influence on ethical perceptions. We found significant effects for business education, self-reported intra-national culture, area of specialization within business, and gender for some and/or all areas of ethics examined (i.e., deceit, fraud, self-interest, influence dealing, and coercion). One of our most encouraging findings is that tolerance for unethical behavior appears to decrease with formal business education. Despite the prevalent stereotype that business students are only interested in the bottom line or that business schools transform idealistic freshman into self-serving business graduates, our results suggest otherwise. Given the heightened criticism of the ethicality of contemporary managerial behavior, it is heartening to note that, even as adults, individuals can be positively affected by integration of ethics training. (shrink)

This article summarizes the multitude of empirical studies that test ethical decision making in business and suggests additional research necessary to further theory in this area. The studies are categorized and related to current theoretical ethical decision making models. The studies are related to awareness, individual and organizational factors, intent, and the role of moral intensity in ethical decision making. Summary tables provide a quick reference for the sample, findings, and publication outlet. This review provides insights for understanding organizational ethical (...) decision constructs, where ethical decision making theory currently stands, and provides insights for future empirical work on organizational ethical decision making. (shrink)

To ensure ethical employee behavior, companies often utilize several forms of mostly one-way communication such as codes of conduct. The extent to which these efforts, in addition to informing about the company stance on ethics, are able to positively influence behavior is disputed. In contrast, research on business ethics communication and behavior indicates a relatively clear, positive link between open workplace dialogue about ethical issues and ethical conduct. In this article, I therefore address the question: What influences employee attitudes to (...) talking openly about ethical issues? Answers are proposed on the basis of focus group interviews with staff at the Denmark and Brazil affiliates of the global healthcare company Novo Nordisk. It was found that interest in discussing ethical issues was influenced by two main factors: employee conceptualizations of business ethics and the level of inter-collegial trust, credibility, and confidence. In this article, by examining these phenomena, I aim at providing insight that can both inform scholars in these fields as well as help managers in their attempts to promote open workplace dialogue about ethical issues. (shrink)

Using a 2×2×2 experimental design, the effects of situational and individual variables on individuals' intentions to act unethically were investigated. Specifically examined were three situational variables: (1) quality of the work experience (good versus poor), (2) peer influences (unethical versus ethical), and (3) managerial influences (unethical versus ethical), and three individual variables: (4) locus of control, (5) Machiavellianism, and (6) gender, on individuals' behavioral intentions in an ethically ambiguous dilemma in an work setting. Experiment 1 revealed main effects for quality (...) of work experience, Machiavellianism, locus of control, and an interaction effect for peer influences and managerial influences. Experiment 2 showed main effects for all three situational variables and Machiavellianism. Neither experiment supported gender differences. Limitations, future research, and implications for management are discussed. (shrink)

This study examines the ethical beliefs and behavior of a sample of Israeli managers (n=97) and comparable data from the United States. Israeli managers rated themselves both highly ethical and more ethical than their peers. These results are similar to those found for the U.S., and indicate that the best predictor of respondents' ethical behavior is their beliefs and perceptions concerning their peers' behavior. In addition, this study examines the managers' predisposition to promote social responsibility by joining social networks of (...) managers and other business people, established for that purpose. Seventy-eight percent are of the opinion that networks for the promotion of social responsibility in business are needed and 57% are ready to join them. (shrink)

Abstract:Business ethicists are eager to connect the ethical treatment of stakeholders with financial rewards. However, little attention has been paid to the cultural and industry context that influences how stakeholders are regarded by the firm, and how innovative strategies for engaging stakeholders can help a firm outperform its competitors. By reconnecting stakeholder theory to its roots in the field of strategy, we provide a framework for understanding the dynamic interplay between stakeholder relationships, innovation, and competitive advantage. The result is a (...) set of testable propositions aimed at better characterizing when and how “ethics pays” (Paine 2003). (shrink)

Abstract:Business ethicists are eager to connect the ethical treatment of stakeholders with financial rewards. However, little attention has been paid to the cultural and industry context that influences how stakeholders are regarded by the firm, and how innovative strategies for engaging stakeholders can help a firm outperform its competitors. By reconnecting stakeholder theory to its roots in the field of strategy, we provide a framework for understanding the dynamic interplay between stakeholder relationships, innovation, and competitive advantage. The result is a (...) set of testable propositions aimed at better characterizing when and how “ethics pays” (Paine 2003). (shrink)

A new approach to understanding the nature of ethics and ethical decision making, not only in the context of business, but also in other life contexts.

This 10th book in the series addresses automaticity and how it relates to social behavior.