Ethics researchers advise managers of organizations to link rewards and punishments to ethical and unethical behavior, respectively. We build on prior research maintaining that organizations operate at Kohlbergs stages of moral reasoning, and explain how the over-reliance on rewards and punishments encourages employees to operate at Kohlbergs lowest stages of moral reasoning. We advocate designing organizations as ethical communities and relying on different assumptions about employees in order to foster ethical reasoning at higher levels. Characteristics associated with ethical communities are (...) identified and AES Corporation and Semco S/A serve as examples of corporations exhibiting the design characteristics and assumptions of ethical organizations. (shrink)

Setting goals in the workplace can motivate improved performance but it might also compromise ethical behavior. In this paper, we propose that individual differences in the dispositional tendency to morally justify behavior moderate the effects of specific performance goals on unethical behavior. We conducted an experimental study in which working participants, who were randomly assigned to a specific goal condition or to a condition with a vague goal that lacked a specific target, completed two tasks in which they had the (...) opportunity to act unethically. In an ethical dilemma task, participants in the specific goal condition were more likely to advocate using unethical methods. However, in an anagram task, only those with high moral justification overstated their performance to a greater degree in the specific goal condition. As such, individuals may not be equally susceptible to the ‘dark side’ of goal-setting. (shrink)

The concept of organizational stigma has received significant attention in recent years. The theoretical literature suggests that for a stigma to emerge over a category of organizations, a “critical mass” of actors sharing the same beliefs should be reached. Scholars have yet to empirically examine the techniques used to diffuse this negative judgment. This study is aimed at bridging this gap by investigating Goffman’s notion of “stigma-theory”: how do stigmatizing actors rationalize and emotionalize their beliefs to convince their audience? We (...) answer this question by studying the stigma over the finance industry since 2007. After the subprime crisis, a succession of events put the industry under greater scrutiny, and the behaviors and values observed within this field began to be publicly questioned. As an empirical strategy, we collected opinion articles and editorials that specifically targeted the finance industry. Building on rhetorical analysis and other mixed methods of media content analysis, we explain how the stigmatizing rhetoric targets the origins of deviant organizational behaviors in the finance industry, that is, the shareholder value maximization logic. We bridge the gap between rhetorical strategies applied to discredit organizations and ones used to delegitimize institutional logics by drawing a parallel between these two literatures. Taking an abductive approach, we argue that institutional contradiction between field and societal-level logics is sufficient, but not necessary to generate organizational stigma. (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)

This review summarizes the research on ethical decision-making from 2004 to 2011. Eighty-four articles were published during this period, resulting in 357 findings. Individual findings are categorized by their application to individual variables, organizational variables, or the concept of moral intensity as developed by Jones :366–395, 1991). Rest’s four-step model for ethical decision-making is used to summarize findings by dependent variable—awareness, intent, judgment, and behavior. A discussion of findings in each category is provided in order to uncover trends in the (...) ethical decision-making literature. A summary of areas of suggested future research is provided. (shrink)

While most business ethics texts focus exclusively on individual decision making--what should an individual do--this resource presents the whole business ethics story. Highly realistic, readable, and down-to-earth, it moves from the individual to the managerial to the organizational level, focusing on business ethics in an organizational context to promote an understanding of complex influences on behavior. The new Fifth Edition is the perfect text for students entering the workplace, those seeking to become professionals in training, communications, compliance, in addition to (...) chief ethics officers, corporate counsel, heads of human resources, and senior executives. (shrink)

This book broadens the range of theoretically informed empirical research on business ethics (using data from major American corporations) and addresses the underlying questions about business ethics scholarship. It culminates a decade’s work by the authors—individually, jointly, and with others. The first part of the book addresses the major theoretical questions involved in doing empirical research about normative issues. It addresses the boundaries—methodological, conceptual, and institutional—that too easily separate philosophical and social scientific approaches to business ethics and reviews various ways (...) in which those approaches can be brought close together to benefit research and practice. The second part of the book describes and explains the increasing institutionalization of formal systems designed to manage ethics in organizations. It reviews the state of the art initiatives to foster ethical business conduct and also looks at the relative roles of executives and external policies (e.g., government regulations) in creating meaningful ethical initiatives. In the third part, the focus shifts to individual ethical behavior and how organizations influence it, describing in detail some of the outcomes of organizational ethics initiatives. It also looks at successes, failures, and new prospects in the effort to identify and explain the multiple factors that influence individual ethical behavior. (shrink)

Abstract: In this article, I offer a proposal to clarify what I believe is the proper relation between value maximization and stakeholder theory, which I call enlightened value maximization. Enlightened value maximization utilizes much of the structure of stakeholder theory but accepts maximization of the long-run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders, and specifies long-term value maximization or value seeking as the firm’s objective. This proposal therefore solves the problems that arise (...) from the multiple objectives that accompany traditional stakeholder theory. I also discuss the Balanced Scorecard, which is the managerial equivalent of stakeholder theory, explaining how this theory is flawed because it presents managers with a scorecard that gives no score—that is, no single-valued measure of how they have performed. Thus managers evaluated with such a system (which can easily have two dozen measures and provides no information on the tradeoffs between them) have no way to make principled or purposeful decisions. The solution is to define a true (single dimensional) score for measuring performance for the organization or division (and it must be consistent with the organization’s strategy), and as long as their score is defined properly, (and for lower levels in the organization it will generally not be value) this will enhance their contribution to the firm. (shrink)

This paper explores possible connections between gender and the willingness to tolerate unethical academic behavior. Data from a sample of 285 accounting majors at four public institutions reveal that females are less tolerant than males when questioned about academic misconduct. Statistically significant differences were found for 17 of 23 questionable activities. Furthermore, females were found to be less cynical and less often involved in academic dishonesty. Overall, the results support the finding of Betz et al. (1989) that the gender socialization (...) approach dominates the structural approach. (shrink)

The finance industry is required to respond to public criticism of perceived immoral behaviour. To create legitimacy, financial firms not only undertake corporate social responsibility activities, but also support such activities with precise justifications. In this paper, we study CSR justifications appearing in annual and sustainability reports from the Swedish finance industry. Our objective is to investigate the ethical character of CSR justifications in the finance industry. This is an interesting topic, both because CSR carries ethical meaning and because CSR (...) justifications play a role in actual business activities. A secondary aim of this article is to test whether decoupled corporate claims about CSR can be recoupled, which would potentially help companies to act responsibly. The observed CSR justifications avoided the fundamental question of whether the finance industry does in fact have responsibilities, and they did not manifest awareness of stakeholders’ demands for CSR. Seemingly value-based CSR activities often lacked ethical justifications. These characteristics do not harmonize with the responsible image that the contemporary finance industry wants to portray. Our counterintuitive finding is that amorality prevails in the justifications that banks give for undertaking CSR activities. (shrink)

This study explores the impact of both individual ethics (IE) and organizational ethics (OE) on ethical intention (EI). Ethical intention, or the individual's intention to engage in ethical behavior, is useful as a dependent variable because it relates to behavior which can be an expression of values, but also is influenced by organizational and societal variables. The focus is on EI in international business decision-making, since the international context provides great latitude in making ethical decisions. Results demonstrate that both IE (...) and OE influence EL Ethical congruence is also discussed as a positive influence. Younger managers are more influenced by OE than older managers. The findings call for creating governance mechanisms to enhance ethical congruence, thereby increasing the likelihood of managers making ethical choices in organizational decision-making. (shrink)

This long-awaited two-volume set constitutes the definitive presentation of the system of classifying moral judgment built up by Lawrence Kohlberg and his associates over a period of twenty years. Researchers in child development and education around the world, many of whom have worked with interim versions of the system, indeed, all those seriously interested in understanding the problem of moral judgment, will find it an indispensable resource. Volume I reviews Kohlberg's stage theory, and the by-now large body of research on (...) the significance and utility of his moral stages. Issues of reliability and validity are addressed. The volume ends with detailed instructions for using the forms in Volume 2. Volume 2, in a specially-designed, user-friendly format, includes three alternative functionally-equivalent forms of the scoring system. (shrink)

While a number of studies have examined the impact of gender/sex on ethical decision-making, the findings of this body of research do not provide consistent answers. Furthermore, very few of these studies have incorporated cross-cultural samples. Consequently, this study of 222 American and Spanish business executives explored sex differences in ethical judgments and intentions to act ethically. While no significant differences between males and females were found with respect to ethical judgments, females exhibited higher intentions to act more ethically than (...) males. This difference was true of both U.S. and Spanish executives. Further research is warranted to develop a clearer understanding of the linkage between ethical judgment and intention to act in an ethical manner. These findings have implications for global firms, particularly regarding codes of conduct and ethics training. (shrink)

Shareholder value orientation has been introduced as a means to improve the performance of the corporation. The paper investigates the theoretical justification for the claim that increasing shareholder value is the purpose of corporate governance. It demonstrates that shareholder value is the control principle, not the purpose of the firm. The idea that shareholder value is the only goal of the corporation is a mistaken transfer from the financial to the industrial firm. The paper also questions that the merger of (...) manager interests and owner interests introduced by the remuneration of managers by stock options improves the management performance. The self-apportioning of stock options by the management is in danger of becoming a form of insider trading. (shrink)

We assess the organizational culture in the finance industry in relation to the global financial crisis and consider the potential of cultural change to improve the financial sector. To avoid biases, we build on the person–organization fit literature and develop a novel, indirect method for assessing organizational culture that revolves around relationships between employees’ personal traits and their career success in the industry or organization under study. We analyze personal values concerning the pursuit of private gain versus personal values concerning (...) caring for others and consider whether employees that value self-enhancement more and self-transcendence less enjoy more career success relative to their peers when working in finance than when working in other industries. Results do not reveal any sort of cross-industry differences that would implicate the finance industry’s culture in the financial crisis. Instead, we find the opposite, namely that strong self-enhancement values and weak self-transcendence values go together with less career success in the finance industry compared to other industries. Hence, if anything, the culture in the finance industry does not seem to resonate well with professionals that seek to pursue personal gain at the expense of clients’ welfare. Implication is that cultural change has little potential to improve the financial system. Meanwhile, the method for assessing organizational culture indirectly by analyzing relationships between employees’ traits and their career outcomes has wider applicability, particularly when relying on scores or measures obtained directly from the people concerned is likely to render biased evidence. (shrink)

Bankers have a reputation for deviating from standard morals. It is an open question, though, if this claim can be substantiated. Here, it is tested directly if bankers respond differently to moral dilemmas. Evaluations of the moral acceptableness of behavioural options in two trolley cases by bankers (n = 23) are compared to those of ordinary people (n = 274). An apparent difference in response behaviour between the groups can be fully explained by a difference in the response behaviour of (...) men and women. When controlling for gender, no differences between bankers and other people remain. (shrink)

This paper investigates the effect of the countervailing forces within organizations of formal systems that direct employees toward ethical acts and informal systems that direct employees toward fraudulent behavior. We study the effect of these forces on deception, a key component of fraud. The results provide support for an interactive effect of these formal and informal systems. The effectiveness of formal systems is greater when there is a strong informal “push” to do wrong; conversely, in the absence of a strong (...) push to do wrong, the strength of formal systems has little impact on fraudulent behavior. These results help to explain why the implementation of formal systems within organizations has been met with mixed results and identifies when formal systems designed to promote ethical behavior will be most efficacious. (shrink)

This paper examines the role which organizational context factors play in individual ethical decision making. Two general propositions are set forth, examining the linkage between ethical work climate and decision making. An agenda for research and the potential implications of the study and practice of managerial ethics are then discussed.

This study analyzes the marketing ethics decision-making process of Thai managers. In particular, it examines the relative influences of ethical perceptions, religiosity, personal moral philosophies, and corporate ethical values on ethical intentions of managers in Thailand. Managers enrolled in executive MBA or special MBA programs from public and private universities throughout Thailand were selected as target respondents. The survey results generally indicate that both dimensions of moral philosophies, idealism and relativism, are significant predictors of a Thai manager''s ethical intention, as (...) hypothesized. The results also reveal that perceived ethical problem is a positive factor of a Thai manager''s ethical intention. The results generally support our hypothesis regarding the influence of corporate ethical values, that Thai managers in organizations with higher levels of ethical values tend to have a more ethical intention than the managers in organizations with lower levels of ethical values. The survey results regarding the influences of religiosity, however, are mixed. (shrink)

Starting from MacIntyre’s virtue ethics, we investigate several codes of conduct of banks to identify the type of virtues that are needed to realize their mission. Based on this analysis, we define three core virtues: honesty, due care, and accuracy. We compare and contrast these codes of conduct with the actual behavior of banks that led to the credit crisis and find that in some cases banks did not behave according to the moral standards they set themselves. However, although banks (...) and the professionals working in them can be blamed for what they did, one should also acknowledge that the institutional context of the free market economy in which they operated made it difficult to live up to the core values lying at the basis of the codes of conduct. Given the neo-liberal free market system, innovative and risky strategies to enhance profits are considered desirable for the sake of shareholder’s interests. A return to the core virtues in the financial sector will therefore only succeed if a renewed sense of responsibility in the sector is supported by institutional changes that allow banks to put their mission into practice. (shrink)

This paper considers ethical decision making by blending three streams of related research: cognitive moral development of the decision maker, rational choice theory and a subjective expected utility model. Ethical dilemmas can be defined as situations where moral certainty is compromised by rational cognition. In this paper, the authors assume that some people use a morality-first perspective and others a rationality-first perspective. Ethical scenarios were written and used to test hypotheses derived from this perspective. The instrument developed was shown to (...) be in need of further refinement. Results are discussed in terms of relationships between participant-characteristics variables overall and subscale responses to the ethical scenarios. (shrink)

Since manager's decisions impact organizational goals and organizational ethical behavior, this researcher investigated the degree to which there are differences in the moral reasoning ability of business managers of selected industries and whether there are significant differences between top, middle, and first-line management levels. To determine the relationship between managers' locus of control and their moral reasoning ability, this study considered three independent variables: reported organizational ethical climate, locus of control, and selected demographic and institutional variables. For a foundation, this (...) researcher relied on Kohlberg's theory of moral development, Victor and Cullen's ethical work climate theory, and Rotter's theory of internal—external locus of control (which evolved from Carl Jung). The short form of Rest's DIT instrument measured the moral reasoning abilities of the participants. The selected demographic and institutional variables (age, work tenure, education, gender, management level and industry category) provided the useful information to investigate these relationships of moral reasoning ability of individual managers. A survey questionnaire was sent to 400 managerial and executive level employees at a random sample of Fortune 500 firms throughout the United States: Dun and Bradstreet provided the researcher with a proportional stratified random sample of these 400 managerial and executive level employees at a variety of organizations. Interestingly, women in this study exhibited slightly higher (more external) mean I—E scores and (more principled) higher mean “P” score than men. While both of these results were anticipated, neither was significant. However, one major finding of this study was the statistically significant relationship between age and perceived organizational ethical climate types (Caring, Law and Code, Rule, Instrument, and Independence). Another major finding revealed a statistically significant relationship between management levels and organizational ethical climate. (shrink)

Research by academics, professional organizations, and businesses on ethics in the workplace often relies on surveys that ask employees to report how frequently they have observed others engaging in unethical behavior. But what do these frequencies in observer-reports say about the frequencies of committed unethical behavior? This paper is the first to address this question by empirically exploring the relationship between observer- and self-reports. Our survey research among the Swiss working population shows that for all 37 different forms of unethical (...) behavior investigated, observer-reports show higher frequencies than self-reports. Ratios of observer- to self-reports vary substantially among these forms, ranging from 1.46 for improperly gathering competitor’s confidential information to 6.4 for engaging in (sexual) harassment or creating a hostile work environment. The results indicate that researchers should not assume that the frequency in self-reports can generally be approximated by the frequency in observer-reports. Four possible explanations are presented for the differences in ratios, with recommendations for future research. (shrink)

While a number of studies have examined the impact of gender/sex on ethical decision-making, the findings of this body of research do not provide consistent answers. Furthermore, very few of these studies have incorporated cross-cultural samples. Consequently, this study of 222 American and Spanish business executives explored sex differences in ethical judgments and intentions to act ethically. While no significant differences between males and females were found with respect to ethical judgments, females exhibited higher intentions to act more ethically than (...) males. This difference was true of both U.S. and Spanish executives. Further research is warranted to develop a clearer understanding of the linkage between ethical judgment and intention to act in an ethical manner. These findings have implications for global firms, particularly regarding codes of conduct and ethics training. (shrink)

Despite a strong plea for integrating sustainability goals into traditional corporate bonus schemes, a comprehensive implementation of these systems has been lacking until recently. This article explores four illustrative cases from the Netherlands, where several multinationals started to pioneer with sustainable bonuses in the past few years. The article examines the setups and the different elements of bonus programmes used, in terms of performance criteria (focusing in particular on external vs. internal benchmarking), their link to specific stakeholders, type and size (...) of bonuses, target levels and transparency. While sustainable bonuses signal corporate awareness of responsibility vis-à-vis society and stakeholders, credibility varies considerably depending on these elements. Our case evidence sheds some light on the extent to which sustainable bonuses may be a credible sign of corporate responsibility or rather just another perverse mechanism meant to keep up bonus levels (window dressing). A definite assessment is hampered by the emergent state and lack of full transparency—while ‘justified’ by companies for competitive reasons, this raises questions. Insights are offered to appraise current and future systems and provide directions for further research. (shrink)

Goal-setting has become a popular and effective motivational tool, utilized by practitioners and substantiated with decades of empirical research. However, the potential for goal-setting to enhance performance may come at the cost of ethical behavior. I propose a theoretical model linking attributes of goals and goal-setting practices to unethical behavior through two psychological mechanisms – ethical recognition and moral disengagement; and addressing the moderating role of individual differences (e.g., goal-commitment and conscientiousness), as well as the broader organizational ethical context.