This review summarizes and critiques the empirical ethical decision-making literature from 1996–2003. One hundred and seventy-four articles were published in top business journals during this period. Tables are included that summarize the findings by dependent variable – awareness, judgment, intent, and behavior. We compare this review with past reviews in order to draw conclusions regarding trends in the ethical decision-making literature and to surface directions for future research.

ABSTRACT:Globally, family firms are the dominant organizational form. Family involvement in business and unique family dynamics impacts organizational strategy and performance. However, family control of business has rarely been adopted as a discriminating variable in the organizations and the natural environment (ONE) research field. Drawing on the theory of planned behavior we develop a conceptual framework of the drivers of proactive environmental strategy (PES) in family firms. We argue that family involvement in business influences the attitudes, subjective norms, and perceived (...) behavioral control of a firm’s dominant coalition. Together these factors determine the extent of the dominant coalition’s intentions to undertake PES. Further, family firms with lower levels of relationship conflict within the controlling family will be more successful in translating the dominant coalition’s intentions to allocate resources for the pursuit of PES. Research implications of the theory are discussed. (shrink)

ABSTRACT:Globally, family firms are the dominant organizational form. Family involvement in business and unique family dynamics impacts organizational strategy and performance. However, family control of business has rarely been adopted as a discriminating variable in the organizations and the natural environment (ONE) research field. Drawing on the theory of planned behavior we develop a conceptual framework of the drivers of proactive environmental strategy (PES) in family firms. We argue that family involvement in business influences the attitudes, subjective norms, and perceived (...) behavioral control of a firm’s dominant coalition. Together these factors determine the extent of the dominant coalition’s intentions to undertake PES. Further, family firms with lower levels of relationship conflict within the controlling family will be more successful in translating the dominant coalition’s intentions to allocate resources for the pursuit of PES. Research implications of the theory are discussed. (shrink)

Allthough small business accounts for over 90% of businesses in U.K. and indeed elsewhere, they remain the largely uncharted area of ethics. There has not been any research based on the perspective of small business owners, to define what echical delemmas they face and how, if at all, they resolve them. This paper explores ethics from the perspective of small business owner, using focus groups and reports on four clearly identifiable themes of ethical delemmas; entrepreneurial activity itself, conflicts of personal (...) values with business needs, social responsibility and the impact of owners' personality on business ethics. The mechanisms for resolving ethical dilemmas is not at all clear, as there appears to be a web of filters which are used in an inter-connected way. However a common starting point for resolving an ethical delemma which involves others is based on identifying who it is (e.g., a friend or institution) and the quality of the relationship with that person. The research yielded a rich source of material on business ethics and it is clear that future researchers must focus on this sector if business ethics is to make significant advances. (shrink)

The management literature is replete with studies on business ethics. Unfortunately, most of these studies have dealt exclusively with ethics in large businesses. Although a handful of studies can be found on small business ethics, none has paid attention to the issue of ethics in small minority businesses. Similarly, several studies on ethics have utilized the Wood et al. (1988) 16-vignette ethics scale, although reliability and validity issues associated with the scale have never been fully addressed. In this study, a (...) purification (via content analysis) of the above mentioned scale was performed. Three reliable factors were extracted from the purified scale. They were used to investigate the ethics in small minority businesses. The study found an association between business ethics and demographic and company-related variables. In the case of age of respondents, findings ran counter the usual relationship of age being positively related to ethical attitudes. The implications of these findings are also discussed. (shrink)

This article examines how private equity returns in Asia are related to levels of legal protection and corruption. We utilize a unique data set comprising over 750 returns to private equity transactions across 20 developing and developed countries in Asia. The data indicate that legal protections are an important determinant of private equity returns in Asia, but also that private equity managers are able to mitigate the potential for corruption. The quality of legal system (including legal protections) is positively related (...) to returns. Inefficient legal protections negatively impact transaction structures and economic certainty when exiting investments. We also find that private equity managers, irrespective of the quality of legal system they are operating within, can mitigate the potential impact of corruption. Private equity returns are higher in countries with higher levels of corruption, controlling for legal systems. This finding is consistent with the view that private equity managers bring about organizational change to alleviate the costs of corruption. Our findings are robust to inclusion of controls for Hofstede cultural variables, economic conditions, and transaction specific characteristics, as well as consideration of econometric sample selection methods for unexited investments. (shrink)

We examine the dynamics between enforcement actions and the responses from both the board of directors and supervisory boards amid China's governance reform. Rather than examining determinants of fraudulent activities, we investigate, after enforcement actions are imposed, whether the board of directors and supervisory boards react differently, and whether their different reactions play a role in preventing future occurrences of frauds. We find that both boards react to enforcement actions, but only the responses from the board of directors help us (...) curb future enforcements under certain circumstances. The supervisory board fails to play any role in preventing future enforcements, even though it is one of the two monitoring mechanisms in the listed companies. Policy implications are discussed. (shrink)

In response to calls for more research on how to prevent or detect fraud (ACAP, Final Report of the Advisory Committee on the Auditing Profession, United States Department of the Treasury, Washington, DC, 2008 ; AICPA, SAS No. 99: Consideration of Fraud in a Financial Statement Audit, New York, NY, 2002 ; Carcello et al., Working Paper, University of Tennessee, Bentley University and Kennesaw State University, 2008 ; Wells, Journal of Accountancy, 2004 ), we develop a framework that identifies three (...) psychological pathways to fraud, supported by multiple theories relating to moral intuition and disengagement, rationalization, and the role played by negative affect. The purpose of developing the framework is twofold: (1) to draw attention to important yet under-researched aspects of ethical decision-making, and (2) to increase our understanding of the psychology of committing fraud. Our framework builds on the existing fraud triangle (PCAOB, Consideration of fraud in a financial statement audit. AU Section 316, www.pcaobus.org , 2005 ) which is used by auditors to assess fraud risk. The fraud triangle is composed of three factors that, together, predict the likelihood of fraud within an organization: opportunity, incentive/pressure, and attitude/rationalization. We find that, when faced with the opportunity and incentive/pressure, there are three psychological pathways to fraud nestled within attitude/rationalization: (1) lack of awareness, (2) intuition coupled with rationalization, and (3) reasoning. These distinctions are important for fraud prevention because each of these paths is driven by a different psychological mechanism. This framework is useful in a number of ways. First, it identifies certain insidious situational factors in which individuals commit fraud without recognizing it. Second, it extends our knowledge of rationalization by theorizing that individuals use rationalization to avoid or reduce the negative affect that accompanies performing an unethical behavior. Negative affect is important because individuals wish to avoid it. Third, it identifies several other methods fraudsters use to reduce negative affect, each of which could serve as potential “psychological red flags” and helps predict future fraudulent behavior. Finally, our framework can be used as a theoretical foundation to explore several interventions designed to prevent fraud. (shrink)

ABSTRACT:The notion of stakeholder salience based on attributes (e.g., power, legitimacy, urgency) is applied in the family business setting. We argue that where principal institutions intersect (i.e., family and business); managerial perceptions of stakeholder salience will be different and more complex than where institutions are based on a single dominant logic. We propose that (1) whereas utilitarian power is more likely in the general business case, normative power is more typical in family business stakeholder salience; (2) whereas in a general (...) business context legitimacy is socially constructed; for family stakeholders, legitimacy is based on heredity; and (3) whereas temporality and criticality are somewhat independent in general-business urgency, they are linked in the family business case because of family ties and family-centered non-economic goals. We apply this theoretical framework to position and integrate the contributions to this special section ofBusiness Ethics Quarterlyon “Stakeholder Theory, Ethics, Corporate Social Responsibility, and Family Enterprise.”. (shrink)

ABSTRACT:The notion of stakeholder salience based on attributes (e.g., power, legitimacy, urgency) is applied in the family business setting. We argue that where principal institutions intersect (i.e., family and business); managerial perceptions of stakeholder salience will be different and more complex than where institutions are based on a single dominant logic. We propose that (1) whereas utilitarian power is more likely in the general business case, normative power is more typical in family business stakeholder salience; (2) whereas in a general (...) business context legitimacy is socially constructed; for family stakeholders, legitimacy is based on heredity; and (3) whereas temporality and criticality are somewhat independent in general-business urgency, they are linked in the family business case because of family ties and family-centered non-economic goals. We apply this theoretical framework to position and integrate the contributions to this special section ofBusiness Ethics Quarterlyon “Stakeholder Theory, Ethics, Corporate Social Responsibility, and Family Enterprise.”. (shrink)

This review summarizes and critiques the empirical ethical decision-making literature from 1996-2003. One hundred and seventy-four articles were published in top business journals during this period. Tables are included that summarize the findings by dependent variable - awareness, judgment, intent, and behavior. We compare this review with past reviews in order to draw conclusions regarding trends in the ethical decision-making literature and to surface directions for future research.

The ethnic-Chinese business is often characterised by a central role of the family both in the structure of the firm and in its corporate culture. This has political, social as well as cultural reasons. The centrality of the family in business has its advantages and disadvantages. On the one hand, it enables a fast, efficient and flexible process of decision-making. On the other hand, it often contradicts modern business professionalism. The younger generation of ethnic-Chinese business actors tend to preserve crucial (...) elements of such family-centred characteristics. Yet, globalisation drives them to transform their business style, lessening its dependence on family resources and adopting more-modern professional ideas. Changes in current political situation, religious-cultural trend, demography and education contribute to making possible the transformation. (shrink)

Despite the economic relevance and distinctiveness of family firms, little attention has been devoted to researching their nature and functioning. Traditionally, family firms have been associated both to positive and negative features in their relationships with the stakeholders. This can be linked to different orientations toward corporate social responsibility. Thus, this research aims to identify the approaches that Spanish family firms maintain about social responsibility, based on the model developed by Quazi and O' Brien Journal of Business Ethics 25, 33-51 (...) (2000). An empirical study carried out for 112 Spanish family firms gives support to our initial assumption about these organizations not being a homogeneous group in terms of their orientation towards corporate social responsibility. The differences in perceptions do not seem to be associated to biographical characteristics. These results lead to some relevant academic and practical implications that suggest interesting lines for future research. (shrink)

This study compares corporate social performance in terms of charitable contributions of minority-owned and nonminority-owned small businesses. In this sample, minority-owned small businesses are younger, have less full-time employees, and lower annual sales. Minority-owned small businesses donate more funds to religious organizations than nonminority-owned small businesses. When annual sales are accounted for, minority-owned businesses contribute more total dollars to all charitable organizations than nonminority-owned firms. Suggestions for future research in this area are delineated.

Corporate governance is increasingly becoming an issue of global concern, not least because we are more and more living in a corporate world that transcends international boundaries. The main purpose and motivation of this study is to determine how the international community should motivate businesses in fostering exemplary corporate governance, therefore eliminating obstacles to ethically exemplary behavior. The empirical approach utilized here has been applied to 161 businesses, both listed and over-the-counter (OTC) companies, with the results indicating that ethical considerations, (...) corporate governance and organizational performance are inextricably linked and, to an extent, demonstrably proportional. This study also indicates a major finding that family management is a significant mediating variable of the ethical considerations of corporate governance and organizational performance. Finally, this study has developed an operational model of ethical considerations of corporate governance as a consultancy aid for businesses that wish to implement and/or boost their performance in respect to corporate governance. (shrink)

During the past twenty years, there has been an explosion of new interest in entrepreneurs and their activities. Yet only recently has serious research attention been devoted to the ethical problems encountered by entrepreneurs and their organizations. Entrepreneurs face uniquely complex moral problems related to basic fairness, personnel and customer relationships, distribution dilemmas, and other challenges. This essay surveys contemporary research in entrepreneurial ethics, examines the kinds of ethical dilemmas entrepreneurs confront, identifies major research topics and methodological approaches, and discusses (...) possible directions for future research. (shrink)

Recent downward trends in corporate giving have renewed interest in the factors that shape corporate philanthropy. This paper examines the relationships between charitable contributions, firm size and industry. Improvements over previous studies include an IRS data base that covers a much broader range of firm sizes and industries as compared to previous studies and estimation using an instrumental variable technique that explicitly addresses potential simultaneity between charitable contributions and profitability. Important findings provide evidence of a cubic relationship between charitable giving (...) and firm size and evidence of strong industry effects. The plus-minus-plus regression coefficient sign pattern for the cubic firm size model suggests that small and large firms give more relative to total receipts with lower giving ratios among medium size firms. One interpretation for this finding is that small firms are close to the communities they serve while high visibility creates a need for large firm philanthropy. Strong industry effects provide evidence of inter-industry differences in giving culture and/or different public relations requirements across industries. (shrink)

The impact of smaller firm size on corporate social responsibility (CSR) is ambiguous. Some contend that small businesses are socially responsible by nature, while others argue that a smaller firm size imposes barriers on small firms that constrain their ability to take responsible action. This paper critically analyses recent theoretical and empirical contributions on the size–social responsibility relationship among small businesses. More specifically, it reviews the impact of firm size on four antecedents of business behaviour: issue characteristics, personal characteristics, organizational (...) characteristics and context characteristics. It concludes that the small business context does impose barriers on social responsibility taking, but that the impact of the smaller firm size on social responsibility should be nuanced depending on a number of conditions. From a critical analysis of these conditions, opportunities for small businesses and their constituents to overcome the constraining barriers are suggested. (shrink)

We examine enforcement action in China’s emerging markets by focusing on the agents that impose this action and the role played by supervisory boards. Using newly available databases, we find that supervisory boards play an active role when Chinese listed companies face enforcement action. Listed firms with larger supervisory boards are more likely to have more severe sanctions imposed upon them by the China Security Regulatory Commission, and listed companies that face more severe enforcement actions have more supervisory board meetings. (...) Our findings are of interest, as supervisory boards in China are generally perceived to be dysfunctional. This study contributes to the existing literature in three ways. First, we shed light on the effects of supervisory boards whose role in a fraud setting has not yet been examined. Second, the study has important policy implications for governance reform. Finally, our analyses provide the most up-to-date picture of fraud and governance issues in China’s ever-growing markets. (shrink)

The rising tide of corporate scandals and audit failures has shocked the public, and the integrity of auditors is being increasingly questioned. It is crucial for auditors and regulators to understand the main causes of audit failure and devise preventive measures accordingly. This study analyzes enforcement actions issued by the China Securities Regulatory Commission against auditors in respect of fraudulent financial reporting committed by listed companies in China. We find that auditors are more likely to be sanctioned by the regulators (...) for failing to detect and report material misstatement frauds rather than disclosure frauds. Further analysis of the material misstatements indicates that auditors are more likely to be sanctioned for failing to detect and report revenue-related frauds rather than assets-related frauds. In sum, our results suggest that regulators believe auditors have the responsibility to detect and report frauds that are egregious, transaction-based, and related to accounting earnings. The results contribute to our knowledge of auditors’ responsibilities for detecting frauds as perceived by regulators. (shrink)

ABSTRACT:The ubiquity of family dominated firms in economies worldwide suggests that inquiry into the nature of the ethical frames of these types of firms is increasingly important. In the context of a social exchange approach and the norm of reciprocity, this manuscript addresses social cohesion in a dominant family firm coalition. It is argued that the factors underlying this cohesion, direct versus indirect reciprocity, shape unique attributes of family firms such as intentions for transgenerational sustainability, the pursuit of non-economic goals, (...) and strong interpersonal ties. Exchange structures, represented by direct and indirect reciprocity, lead family and non-family firms toward development of distinctive ethical frames of reference. (shrink)

This study investigates the impact of fraud/lawsuit revelation on U.S. top executive turnover and compensation. It also examines potential explanatory variables affecting the executive turnover and compensation among U.S. fraud/lawsuit firms. Four important findings are documented. First, there was significantly higher executive turnover among U.S. firms with fraud/lawsuit revelation in the Wall Street Journal than matched firms without such revelation. Second, although on average, U.S. top executives received an increase in cash compensation after fraud/lawsuit revelation, this increase is smaller than (...) that of matched non-fraud/lawsuit firms. Third, fraud/lawsuit firms were more likely to change top executive when chief executive officer (CEO) was not the board chairman and CEO had been on the board for a short time. Fourth, fraud/lawsuit firms were more likely to reduce their executive cash compensation when profitability was low, firms were involved in fraud, the compensation committee size was small, and the board met more often. These findings indicate that although, in general, U.S. fraud/lawsuits firms did not reduce their executive cash compensation, those involved in fraud were more likely to reduce their executive cash compensation than to change their top executives. The finding, that ethical standards is not a significant factor for U.S. executive turnover nor compensation reduction, suggests that ethics appears to play no part in the board’s decisions, and that U.S. firms may have ethical standards in writing but they do not implement nor enforce the standards. (shrink)