The question of why people do bad things, particularly in business, is important because ... unethical behavior bad, or are they people who do good in most situations, ..... bank offered rate) financial scandal, in which traders fraudulently ... $20 for each bug or flaw in the software they found, and $20 for each bug they fixed.
Why Do Good People Do Bad Things in Business? Lessons from Research for Responsible Business Managers Harvey S. James, Jr. Department of Agricultural & Applied Economics, University of Missouri, USA In T. Issa and R. Wolf (Eds.), International Business Ethics and Growth Opportunities. Hershey, PA: IGI Global. ABSTRACT Promoting ethical behavior in business requires an understanding of why and when seemingly good people do unethical things. Research on this issue consists of theoretical models of moral decision-making and empirical studies of ethical sensitivity, attitudes and behaviors of people in various contexts. These studies reveal that explanations of unethical conduct include considerations of a person’s psychological disposition as well as the circumstances in which they live. They also identify general principles that explain why individuals might engage in unethical conduct. This chapter reviews studies conducted over the past 50 years and articulates lessons that can help business managers improve the ethical climate of business and ethical behavior of employees. While it does not break new ground, this discussion is important because it synthesizes scholarship in simple language accessible to both scholars and business professionals. This chapter also identifies directions for future research that can enhance and supplement these lessons. Key words: Moral decision-making, ethical sensitivity, unethical behavior, moral development, moral dilemma, self-interest, bounded rationality, opportunism, evil, disposition, authority, business roles and routines, group pressure, herd morality, incentives, corporate culture, rationalization, in-group versus out-group.
INTRODUCTION One of the most fundamental problems in business ethics is understanding why good people do bad things. Business managers ask this when they discover evidence of lying, cheating or stealing among their employees, such as the case of an employee of a Minneapolis business accused of embezzling millions of dollars from his employer between 2005 and 2009 (Hanners, 2014). Stockholders and other business stakeholders ask this when they hear reports of malfeasance by business executives, such as the recent case of a pharmaceutical company executive accused of giving improper donations to Virginia politicians (Vozzella, 2013) or the case of an oil company executive controlling secret off-shore bank accounts (Ball, 2014). Consumers ask this when they learn that products they have purchased are tainted or defective because of employee or corporate negligence, such as the case of General Motors fined in 2014 for delays in issuing recalls of automobiles with faulty ignition switches (Puzzanghera, 2014). 1
The question of why people do bad things, particularly in business, is important because business ethics scandals often, if not usually, involve seemingly ordinary people. They are colleagues, neighbors, acquaintances and sometimes even friends. Are people who engage in unethical behavior bad, or are they people who do good in most situations, but who occasionally succumb to ethical temptations? According to James (2006), Kish-Gephart, Harrison and Treviño (2010) and others who have studied this particular question, the answer must account for a complicated combination of individual, organizational and situational considerations. The purpose of this chapter is to provide further insights by identifying clear and specific lessons about human behavior from experimental and other empirical research conducted by scholars since the mid-1960s. This is not an exhaustive review. Rather, this chapter presents a selection of studies that offer lessons about why and when people may engage in unethical behavior. Some of the studies surveyed here are well-known, while others are more contemporary. Nevertheless, all of them are worth reviewing for at least three reasons. Firstly, researchers are not always clear about the precise lessons that their studies provide about the circumstances contributing to unethical behavior, in part because they typically write to other scholars rather than directly to business managers. Thus, in this chapter I identify the implications of these studies in clear and simple language. Secondly, it can be helpful to have in a single source (a collection of) insights that might be known but which are scattered among a broad and growing literature. Thirdly, because unethical behavior continues to strike business, communities and societies at all levels (Ethics Resource Center, 2013), it is clear that these lessons are not widely heeded, understood, respected, let along followed. These lessons need repeating. Therefore, this review of the literature is both timely and essential. Business managers who understand and utilize these lessons might become more capable of promoting ethical behavior and discouraging unethical behavior within their business firms. Failing to heed these lessons might result in a continuing problem of people in business doing things they ought not to be doing. This chapter will first provide a brief background of the issue and the literature, moving towards the assumptions of behavior, providing explanations for unethical behavior with seven lessons derived from the literature review, finally moving towards future research followed by conclusions.
BACKGROUND Although there can be many ways to think about and define unethical behavior, Armstrong (1977) suggests that unethical behavior is knowingly making a decision that harms others or that one feels, believes or knows to be irresponsible or wrong (see also Jones, 1991). Using this definition, the question of why good people do bad things is really a question of why people would knowingly make decisions that harm others or that they believe to be irresponsible or wrong. There is an extensive body of theoretical and empirical scholarship seeking to understand and explain unethical conduct of people generally and of people in business in particular. The most important foundations for theoretical studies on ethical and unethical behavior are Kohlberg’s (1969, 1984) theory of moral development and Rest’s (1986) component model of moral behavior. According to Kohlberg, individuals progress through six stages of moral development, divided into three levels: (1) responding to external signals of reward and punishment, (2) conforming to social expectations and roles, and (3) living by an internal 2
conscience of moral principles. According to Rest, moral decision-making consists of four aspects: (1) interpreting the situation, (2) determining the appropriate moral action, (3) having an intention to do the right thing, and (4) following through with the intended moral behavior.
Table 1. Important theories and models of ethical decision-making. Scholar Kohlberg
Year 1969, 1984
Label Theory of Moral Development
Rest
1986
Elements of Moral Decision-making
Treviño
1986
Person-situation Interactionist model
Ferrell and Gresham
1985
Contingency Framework
Hunt and Vitell
1986
General Theory of Marketing Ethics
Jones
1991
Issue Contingent Model
Ajzen
1991
Theory of Planned Behavior
Haidt
2001
Social Intuitionist Model
Main items in the model Three levels of moral development are (1) responding to external signals of reward and punishment, (2) conforming to social expectations and roles, and (3) living by an internal conscience of moral principles. Moral decision-making consists of interpreting the situation, determining the appropriate moral action, having an intention to do the right thing, and following through with the intended moral behavior. Based on Kohlberg, ethical judgment determined by level of cognitive moral development, individual characteristics and the specific contexts of the ethical dilemma. Ethical decisions are affected by individual factors, organizational stakeholders, and opportunities for action. Ethical judgments include a combination of teleology (e.g., utilitarian) and deontology (e.g., Kantian) evaluations. Based on Rest, ethical judgments affected in part by the moral intensity of ethical problem, and moral intensity is comprised of magnitude of the consequences, social consensus, probability of effect, temporal immediacy, proximity, and concentration of effect. Ethical behavior affected by behavioral control and behavioral intention, and behavioral intention is affected by a person’s attitudes, subjective norms, and perceived behavioral control. Moral judgment based on (quick) moral intuition, and moral reasoning occurs after a person has made a moral judgment.
One of the most widely used models of moral decision-making is Treviño’s (1986) person-situation interactionist model. Treviño hypothesized that an individual’s ethical judgment is determined by their level of cognitive moral development, individual characteristics and the specific contexts of the ethical dilemma individuals face. The cognitive component of her model is based on Kohlberg's framework. Other theories of ethical decision-making, as summarized in Table 1, include Ferrell and Gresham’s (1985) contingency framework for ethical decision making, Hunt and Vitell’s (1986) descriptive general theory of marketing ethics, which posits that individuals consider both deontological as well as teleological factors, and Jones’s (1991) 3
issue contingent model, which places emphasis on the moral intensity of ethical problems that people face. Ajzen’s (1991) theory of planned behavior has also been applied to the problem of understanding unethical conduct (see, for instance, Chang, 1998). The common element of these studies is that they presume or rely on the expectation that decision-makers are acting rationally when making ethical judgments. However, many scholars disagree with the assumption that people think rationally when faced with moral dilemmas and personal conflicts of interests. For example, Sen (2009) distinguishes between rationality and reasonableness, arguing that while rationality means that individuals subject their behavior to “critical scrutiny,” reasonableness means that people are able to articulate “good reasons” for the behavior that they take, such as when “a particular choice [is] established in our mind through experience or habit formation” rather than through “critical scrutiny” (p. 181). Haidt (2001) takes a different approach, arguing that moral reasoning does not cause people to behave morally. Rather, moral judgments are usually made intuitively. Moral reasoning occurs after the behavior and as a means people use to rationalize the decisions they make, something akin to Schön’s (1987) reflection-in-action. The lesson here is that while considerable effort exists among scholars to understand conceptually why people engage in unethical behavior, a clear consensus is lacking. The reason is in part because there is an unresolved debate about whether conceptual models of ethical decision-making should be normative and focus on how people should act when facing ethical problems or whether the models should be descriptive and focus directly on behavioral conditions that affect individual behavior (Bazerman & Gino, 2012). More work is needed here, because conceptual models both guide the type, scope and context of empirical work conducted by scholars and provide the basis for interpreting the findings, since empirical research generally builds on a conceptual or theoretical foundation (Ethridge, 2004). Stated differently, if we don’t have a clear conceptual understanding of why, when and how seemingly good people do unethical things, then it might be difficult to understand what the empirical evidence is telling us. Empirical studies are voluminous. Helpful reviews include Collins (2000), O’Fallon and Butterfield (2005), Treviño, Weaver and Reynolds (2006) and Kish-Gephart, Harrison and Treviño (2010). These studies show that when faced with ethical problems, the judgments and actions people take are affected by a variety of individual and contextual considerations, such as age, nationality, psychological state, working conditions and observed behavior of others. However, specific lessons for business managers are often difficult to discern from this research, because researchers do not always explain the lessons in language applicable to the business community at large. For example, Kish-Gephart, Harrison and Treviño (2010) conclude their review of the literature by stating that “Cumulative data suggest not only multiple sources or facilitators of unethical choice … but also the intriguing possibility that these agents work at least sometimes through more impulsive, automatic pathways than through calculated or deliberative ones” (p. 23). But what specific lessons that managers can draw from this are unclear. Thus, this chapter is important because it identifies seven lessons and principles that can be generalized from the current body of research on why and under what circumstance people may engage in unethical behavior, drawing especially on experimental studies. Therefore, this presentation is in the spirit of Bazerman and Gino (2012), who advocate a behavioral ethics approach to understanding why
4
unethical behavior occurs in business. This will be elaborated upon in the next part of this chapter.
ASSUMPTIONS OF BEHAVIOR In order to understand why unethical behavior occurs, we need to understand people. While this is a straight-forward and simple statement, it is also a complex issue to understand people. Indeed, this is so because there are many issues that we do not know about how the human mind works, it is necessary to make some assumptions about people. The first assumption is that people usually act in ways that advance their interests (see, for instance, Miller, 1999). According to Andre and Velasquez (1989), “The view that human beings act from self-interest and from self interest alone is not new. It has long been the dominant view in psychology and in much of Western thought” (para. 4). This is a non-trivial assumption, yet it is not without controversy. For example, some research suggests that prosocial behavior is motivated by empathy or altruism rather than self-interest (Batson, Dyck, Brandt, Batson, Powell, McMaster, & Griffitt, 1988; see also Stellar, Feinberg & Keltner, 2014). In other words, self-interest is probably not the only motivating factor that can affect the ethical behavior of people. Nevertheless, if we assume that self-interest is a motivation for the behavior of people, then the question arises as to how that helps us understand and explain unethical behavior. Some people believe that if it is true that people are self-interested, then that is also the explanation for why we are plagued with ethical problems in business (see Miller, 1999). The implication is that the solution to the problem of unethical behavior is to change the fundamental nature of people so that they are not self-interested. This is neither a realistic policy nor a viable explanation, because it does not answer the question of why people find it in their interest to engage in unethical behavior. The importance of self-interest as an assumption of motivation is that it requires us to focus on the questions of why and when. Why do some people believe they are better off harming others or doing things they know or believe to be wrong rather than by acting in some other way? What is it about the person or the person’s circumstances that make them feel or believe that it is in their interest to harm others or otherwise engage in unethical conduct? These questions naturally follow from the assumption that people are motivated to act in their interest. In addition to the assumption of self-interest, Williamson (1985) stated that we need to consider two other assumptions about people. The first is that there are limitations in the cognitive abilities of people, which Simon (1991) and others have called “bounded rationality.” The second is that people will take advantage of the cooperative or trusting behavior of others when their interests and values are in conflict, which Williamson simply calls “opportunism.” At a fundamental level, the basic difference between these problems is one of intentions. In the case of “bounded rationally,” people intend to do well, but they make mistakes. In the case of “opportunism,” people intend “to mislead, distort, disguise, obfuscate, or otherwise confuse” (Williamson, 1985, p. 47) when they believe it is in their interest to do so. The assumptions of self-interest, bounded rationality, and opportunism provide the foundation for a consideration of general explanations for unethical behavior, which will be elaborated upon in the following section.
5
EXPLANATIONS FOR UNETHICAL BEHAVIOR There are two general explanations for why people engage in unethical behavior. The first explanation is that people desire evil and want to do bad things. A corollary is that evil acts are committed by evil people – that is, by people who inherently desire to inflict harm on others and whose satisfaction and well-being increase because others are harmed. This explanation cannot be fully discounted, since there are bad (even evil) people in this world. Nevertheless, this is a poor explanation for understanding business ethics problems in most contexts because character and behavior are infinitely complex. Simply saying, “he did something bad because he is a bad person” doesn’t answer the question “why?” Why do people do unethical, or evil, things? The second explanation is that people want to do good but they either make mistakes or they find that their interests conflict with those of others. A corollary is that ordinary, good people can do very bad things under some circumstances. Even here the problem of explaining unethical conduct in business is difficult, because behavior is affected by a complex web of dispositional, psychological, motivational, environmental, situational, social and other factors. However, this second explanation provides a direction for study and for ideas business managers can consider when seeking to alleviate business ethics problems. What this second explanation implies is that in order to understand unethical behavior, business managers need to understand circumstances in which people not only error in their judgment about what the right thing is, but also face conflicts between their personal interests and the interests and values of business leaders or other business stakeholders. There are two general approaches that scholars have considered when trying to understand these kinds of circumstances in business. The first is dispositional. The dispositional approach considers the inherent characteristics of people (Treviño & Nelson, 2011), such as the role of moral awareness, moral judgment, and moral intent on ethical behavior (Rest, 1986) and on the normative frameworks people use when making moral judgments, including the role of a person’s emotions (Frank, 1988) and self-identity (Bergman, 2004). A person’s conscience and ability to feel guilt and shame when they mistakenly or intentionally engage in unethical behavior is central to dispositional perspective. Solutions based on dispositional considerations therefore place the primary responsibility for alleviating unethical behavior on the individual. This means that people must learn to police themselves by exercising moral restraint and by learning to recognize when they are facing ethical dilemmas, especially when people know that opportunistic behavior will not be detected (Rose, 2011). Even though the dispositional approach places attention primarily on the individual, there are some things that business managers can consider. For example, they might seek to appeal to a person’s innate sense of moral duty and responsibility or to hire workers who are “moral” and who are capable of being guided by an internal sense of right and wrong. They might also regularly instruct their workers on what ethical dilemmas are and how employees can recognize and overcome them. That said, while important and perhaps even necessary, the dispositional approach is difficult for business managers to utilize because it is difficult if not impossible for them to change the inherent moral characteristics of people or to know simply by looking at people which ones are moral and which are not. Other individuals or institutions might be effective in doing so, such as religious organizations, but generally not business managers. The second approach is situational. In this approach, consideration is placed on the context within which behavior occurs and the characteristics of organizations (Treviño & Nelson, 2011), such as the organizational climate (Victor & Cullen, 1988) and the incentives and 6
disincentives created by the organizational structure (James, 2000). Broadly speaking, the situational approach considers all aspects of the work environment of employees, from the social norms guiding their behavior to the specific work requirements and expectations peculiar to each worker’s job description. Business managers have some, though not perfect, control over situational factors. Therefore, it can be helpful for them to consider how and why situational factors can increase the likelihood that people will either make mistakes in judgment or act opportunistically.
The Seven Lessons There is a very large literature from experimental and other studies examining why and how situational considerations affect the ethical behavior of people. The following summarizes some of these studies and describes seven specific lessons that we can learn from them about how situational contexts and circumstances affect the ethical and unethical behavior of people.
Lesson One: People may harm others if asked to do so by a legitimate authority. Although shocking to think about, there is considerable evidence demonstrating that people will do bad things when asked, required or expected to do so by someone they recognize as an authority (Tourish & Vatcha, 2005; Perlman, 2007). The most famous experimental evidence of this is Stanley Milgram’s shock experiments (Milgram, 1963). In this experiment, which has been replicated (see, for instance, Burger, 2009), subjects were asked by the experimenter, who acted in the role of a scientist, to administer shocks to learners who did not correctly “learn” (that is, remember) something. Subjects were told by the experimenter to increase the voltage at each wrong answer given by the learner, up to 450 volts. On average, subjects administered the maximum voltage two-thirds of the time, and this was even when they heard the learner screaming in pain. In reality, the learner was a confederate to the experiment; that is, the learner was not actually being shocked by the subject. However, the experiment showed how frequently people can be made to do irresponsible or harmful things when instructed to do so by someone in authority (Andre & Velasquez, 1988). The lesson is that business managers can directly influence the likelihood that workers in their firms will make ethical mistakes or deliberately engage in unethical conduct based on the instructions that they give their workers. Stated differently, while business ethics research often focuses on the qualities or characteristics of ethical leaders (Brown, Treviño & Harrison, 2005), an important though overlooked consideration is what tasks managers give workers and how they give them. First and foremost, managers should not tell workers to do unethical things, such as to overcharge customers (Ross, 2010). Moreover, the tasks and associated instructions need not be explicit statements to do wrong. If instructions are vague or ambiguous, for instance, then workers may blame their unethical behavior on their superiors. Therefore, business managers have a responsibility to give ethical instructions to their workers and to be clear in their expectations. What this means is that in many circumstance, the responsibility for unethical conduct lies with the person in charge in addition with the person who committed the act.
7
Lesson Two: People may act according to their assigned roles and business “scripts” or expectations. There are a number of studies that demonstrate how the behavior of people is affected by the scripts, roles and routines that they learn directly from leaders or indirectly from the organizational or social culture (Lord & Kernan, 1987; Dionysiou & Tsoukas, 2013). Individual behavior and self-perceptions can also be affected by how one dresses (Karl, Hall & Peluchette, 2013). Consider this simple idea: When people put on a costume, they might behave according to how they are dressed. For instance, if they dress like a clown, then they might try to be funny; if they dress like a super-hero, then they might try to act brave. The 1971 Stanford Prison Experiment, conducted by Philip Zimbardo, is the best known example of this in an experimental setting (Zimbardo, 2007). In this experiment, a “prison” was set up in the basement of the Stanford University psychology building. Participants recruited for the study were assigned either prison guard or prisoner roles. Guards were given uniforms, batons, and sunglasses, while prisoners were “arrested” by police, kept in cells, and identified by guards by numbers. The study was originally designed to last for two weeks, but it was halted after six days when guards escalated sadistic and humiliating abuse on prisoners (see also Zimbardo, n.d.). In another set of experiments, Armstrong (1977) showed that “substantial proportion of managers may be expected to bring serious harm to others in situations where they feel it is proper behavior for their role” (p. 17). The lesson here is that many cases of unethical conduct by business executives and employees can be explained by their “believing” that they are acting in a way expected of them for the good of the business. For example, the lawyer representing executives of Westinghouse and General Electric convicted of price-fixing in the 1960s said “They [the executives] were driven to do what they did by reason of being devoted to the company…If this was what the company wanted them to do, they thereupon did it” (Annenberg Foundation, 2012, p. 9). Related research shows that a person’s organizational identity, or how a person’s sense of self-worth is tied to the performance of a group or organization, affects their willingness to engage in behavior that they might perceive is in the interest of the organization but which they may also believe to be irresponsible, wrong, or harmful to others. Scholars refer to this as unethical proorganizational behavior (see Umphress, Bingham & Mitchell, 2010; Umphress & Bingham, 2011). Therefore, business managers have a responsibility to assign clear expectations of behavior to their workers and to monitor them. However, more than making clear what is expected of employees, it is important for business managers also to ensure that employees do not feel a conflict between the roles they have within the business and other roles that they have, such as in their profession, family or civic groups, since role conflicts can affect the ethical behavior of individuals (Grover, 1993).
Lesson Three: People may do bad things as part of a group, even though they may never consider doing so when acting alone. There are many examples in which mob violence, mass riots and massacres are linked to group pressure, crowd psychology or herd morality (Handwerk, 2005; Welner, 2011; see also Sims, 1992). According to psychologists, the psychology of a crowd differs from that of an individual (Reicher, 2001). The reason is that people can get swept up in the collective 8
movement and therefore do things they may never have considered when acting alone, such as committing acts of violence against other people. If events within the group move too fast, people may act without thinking until it is too late. The problem with such “groupthink” is that it is easy to lose one’s identity – that is, to become anonymous. It is also easy for individuals to feel a loss of individual responsibility, because responsibility can become diffused within groups. Generally, the larger the group, the easier it is not to be noticed and the less responsible a single group member may feel about the actions of the group. For example, if I cause the death of a person, I might (and probably should) feel fully responsible for that terrible act. However, if I am one of 300 individuals in a group that causes the death of someone, should I say that I am fully or only partly responsible? If partly responsible, then is my responsibility one part of 300 or something different? This example shows why it can be difficult for group members to feel responsible for actions taken by the group. A classic experiment documenting the role of group pressure on individual behavior was conducted by Solomon Asch in the 1950s (Asch, 2004). In this study, subjects were shown two cards. One card had one vertical line and the other card had three vertical lines of different lengths. Subjects were asked to select, from the card with three vertical lines, the one that was the same length as the single line on the first card. When making this choice alone, subjects almost always selected the right line. However, when asked to make their decision within a group, people erred when others in the group incorrectly selected the wrong line. What subjects did not know was that members of the group were confederates to the experimenter; the confederates knowingly selected the line of wrong length in order to determine whether the subject would be able to choose independent of the group’s collective incorrect decision. Asch was able to document that “an individual’s resistance to group pressure in these experiments depends to a considerable degree on how wrong the majority is” (p. 25). In other words, the greater the number of group members choosing incorrectly, the more likely it is that a single person will also make an incorrect choice. Asch’s experiments and similar studies of conformity have been replicated numerous times in a variety of countries (Sunstein, 2003). Responsibility that people feel in groups can also be diffused as group tasks or activities are divided among members of the group. For example, consider the extreme case of a firm that makes a product that causes the death of a consumer, as illustrated by the Jack-in-the-Box restaurant case in the U.S. in 1993 in which three children died and hundreds sickened by eating beef tainted with the E. Coli bacteria (Porterfield & Berliant, 1995) or by the Remedia case in Israel in 2003 in which three babies died and nearly two dozen more injured when fed vitamindeficient baby formula (Tsoref, 2008; Bob, 2013). Who is responsible for such deaths? The individual who designed the product? The person who built a component of the product? The person who oversaw its assembly? The person who marketed it? The person at the store who sold it to the consumer? The company president? In this case, it is not clear who could be held responsible, or if any particular person had a responsibility to raise a warning about a potential harm. We could say that everyone had a shared responsibility, but is this valid? Is the secretary to the human resources vice president as responsible as the person who designed the product? If they have differently levels of responsibility, then how are we to apportion that responsibility? The lesson here is that business managers must recognize that individuals working as a group within a firm may feel differently about their decisions than when making decisions alone. Therefore, in order to reduce the likelihood that groups make ethical mistakes or intentionally engage in opportunistic acts, business managers should take responsibility for the actions of workers collectively in their firms. They should also teach their workers the importance of being 9
responsible and hold individuals within their organizations responsible who are caught behaving unethically.
Lesson Four: People may respond to the incentives and disincentives created by or existing within the business structure. If people are motivated to act in their interest, then we should expect that they respond to incentives and disincentives. According to Condly, Clark and Stolovitch (2003), numerous studies support this assessment. Simply put, people will do things that bring them rewards and avoid things that result in something unpleasant, such as fines and punishments. Therefore, if there are direct incentives for people to behave unethically in business firms, then we should not be surprised when unethical behavior occurs (Kerr, 1975). An important consideration here is the reward, monitoring, and compensation system that directly pays workers for behaving unethically (James, 2000). For instance, many financial scandals can be traced to compensation systems that reward employees for doing unethical things and that do not reward them for doing the ethical but unprofitable action (Tenbrunsel, 1998). An example is the LIBOR (London interbank offered rate) financial scandal, in which traders fraudulently manipulated bank interest and other financial rates. According to The Economist (2012), the scandal arose because “those involved in setting the rates have often had every incentive to lie, since their banks stood to profit or lose money depending on the level at which LIBOR was set each day” (para. 7). In fact, financial conflicts of interests might be the most important source of perverse incentives resulting in unethical conduct, in part because people often fail to recognize when they face a conflict of interest (More, Tetlock, Tanlu, & Bazerman, 2006). An example of perverse incentive systems in business is offered by the humorist Scott Adams (1995). He explained how a software company wanted to improve the quality of the software it produced. So, it instituted an incentive system whereby software engineers were paid $20 for each bug or flaw in the software they found, and $20 for each bug they fixed. The problem was that the software engineers providing the quality checks were the same ones who wrote the original software code. The result was that the engineers created software with flaws that they then found and corrected. Adams reported that the company halted the incentive program after one week, but not before one software engineer received $1,700 from the incentive program. Corporate culture is also important in providing incentives and disincentives for ethical behavior. In fact, some scholars believe that corporate culture is as important, if not more so, than business strategy and other considerations (Gandz & Hayes, 1988; Chen, Sawyers & Williams, 1997; Goodpaster, 2013), although strong moral identities can mitigate the influence of corporate culture and perverse reward systems on ethical judgments (Ashkanasy, Windsor, Treviño, 2006; Caldwell & Moberg, 2007). For example, in some cases, managers can send a signal that unethical conduct will not be punished when they fail to take actions against workers caught violating the law or company policies. In other cases, people can become “ethically blind” (Palazzo, Krings, & Hoffrage, 2012), in that they do not recognize that they are facing an ethical problem. This can occur when people focus on the rewards and sanctions offered by firms rather than on their behaviors or the implications of their behaviors beyond how they are rewarded (see Bazerman & Tenbrunsel, 2011).
10
The lesson here for business managers is that they need to review carefully what it is that they reward their workers to do. They also need to monitor carefully how employees respond to company compensation plans, especially noting any individuals or groups of employees who respond with an excessive drive to achieve organizational objectives. Goodpaster (2004) says this is a problem defined by an “unbalanced pursuit of purpose in either individuals or organizations” (p. 5). Symptoms include fixation on company objectives, rationalization and detachment, which is the belief that one’s worth is defined by rewards received. Business managers therefore need to help workers see the business’s objectives and rewards in a proper perspective, perhaps by emphasizing the broader social responsibility of business. They should not place too much pressure on employees to meet sales or other performance goals (Litzky, Eddleston, & Kidder, 2006). They also need to listen to workers who raise concerns or objections. Too often, people who raise alarms about problems with company reward and compensation systems are the ones who are punished by being reprimanded, bullied or fired (see, for instance, Matthiesen, Bjorkelo & Burke, 2011). Instead, for the good of the business, and the people employed there, business managers should listen to and respect people who raise concerns about ethical problems in the business firm.
Lesson Five: People may rationalize unethical conduct the more they think others do it. People often take their ethical cues by observing what others do. If others behave ethically, then people may respond to the “social norm” and behave ethically themselves. If others lie, cheat or steal, however, then people may believe the social norm accepts such behavior and behave accordingly (Felps, Mitchell, & Byington, 2006; Kerr, Rumble, Park, Ouwerkerk, Parks, Gallucci, & van Lange, 2009). James and Hendrickson (2008) show this is a study of Missouri farmers, who were surveyed in 2006 to determine what they thought about various ethical scenarios and how often they believed the problems occurred. The authors found that farmers recognize three different types of ethical problems – those that are harmful, are unlawful, and are in bad taste. They also found a strong correlation between how acceptable farmers view an unethical conduct and how frequently they perceived it in their community, suggesting that the more frequently a farmer believes the action occurs, the more tolerant he or she is of the unethical action. The lesson here for business managers is that they need to be aware of what people within their organization are doing. Ways to do this might include meeting informally with employees, visiting production sites and otherwise just observing what workers are doing. Thus, it is important to be aware of the business firm’s organizational culture, since culture is created by the interaction of individuals within groups. Moreover, responsible business managers know that others within their organization see what they do, so the ethical (or unethical) behavior of business managers can be used to establish the social norm of behavior with the organization. Simply stated, if business managers want their workers to behave ethically, then they need to behave ethically as well. This includes not only not doing unethical things but also not appearing to lie, cheat or steal. Appearances matter. Even seemingly innocent comments and actions can be perceived by others as showing a tolerance of unethical behavior.
11
Lesson Six: People may engage in unethical conduct if they see others within their in-group doing so, but they are less likely to behave unethically if they see out-group members doing so. This lesson builds on the previous one but recognizes that people not only take their ethical clues from what they observe others doing, but also show a particular concern about the behavior and opinion of others with whom they identify or want to associate (Randall & Fernandes, 1991; Cialdini & Goldstein, 2004). If I see people in my group behave differently than people in another group, then I may be more likely to follow the behavior of my group. This is a logical reaction for humans, who are strongly social creatures (Frith & Frith, 2009). Experimental evidence of this in the context of ethical behavior is provided by Gino, Ayal and Ariely (2009). In this study, students at a university were asked to complete a task as quickly as possible, to evaluate their performance themselves, and then to pay themselves based on how they scored their performance. Given the set-up of the experiment, it was expected that some subjects would cheat by saying that had correctly completed the task when in reality they might not have. As part of the experiment, a confederate to the experiment was the first to stand and announce that he had completed the task quickly, which was not possible given the nature of the tasks that students were asked to complete. In one version of the experiment, the confederate wore a sweatshirt from the university the students attended. In this case, a lot of students cheated. However, in another version of the experiment, the confederate wore a sweatshirt of a rival university. In this setting, the number of students in the study who cheated was relatively low. This suggests that if we observe members of our social group behaving unethically, then we may think the norm allows this behavior, so we may be more likely to behave unethically. Conversely, if we observe unethical conduct in members of an “outside” group or rival organization, then norms of appropriate behavior within our group could be reinforced as the group seeks to differentiate itself from the other group (see also Duke University, 2009). Importantly, these findings are affected by whether others observe the actions of group members. For example, Gino, Gu and Zhong (2009) show through experiments that the effect of in-group pressure to behave unethically can be mitigated when there is an outside observer. The reason, according to the scholars, is that “when out-group observers are present, people tend to feel guilty about in-group member’s selfish or unethical behavior” (p. 1301). In other words, when I am only with members of my group, I may succumb to the temptation to follow the bad examples of other group members or not feel bad if I see others in my group doing something wrong. However, if I know that someone not of my group is watching me, I may be less inclined to follow the bad examples. The lesson here for business managers is that they need to create a positive culture that reinforces ethical conduct of workers. This is done in part by fostering a sense of collective identity among workers, but not at the expense of harming a person’s sense of right or wrong. Ideally, business managers should implement plans that help workers understand how and why their organization should have a reputation for ethical behavior. In addition, business managers should be transparent about what they are doing, not only to employees and other stakeholders but to outside observers, such as the general public. Indeed, transparency can be a strong motivation for appropriate behavior among group members (Palanski, Kahai & Yammarino, 2011).
12
Lesson Seven: People may engage in minor acts of social deviancy if their ability to rationalize is not impeded by signals that such behavior is wrong. Research has shown that when there is a personal gain to engaging in unethical behavior, then people have a tendency to rationalize away reasons for avoiding the bad behavior (Tenbrunsel & Messick, 2004). An example would be when someone taking paper supplies from his or her employer for personal use thinks “it is the company’s responsibility to make sure things like this don’t happen” or “other people do this and have not been punished, so maybe the company thinks it is okay.” These rationalizations can mitigate feelings of guilt that result from someone doing something they know or suspect they should not have done. Bersoff (1999) demonstrated the effect of such rationalization on ethical behavior in a carefully crafted experiment in which college students were overpaid for their participation (paid $8.25 instead of $6.25). The objective of the study was to determine if the students pointed out the error in payment. Bersoff conducted variations of the experiment that altered how easily students could rationalize that it is acceptable to keep the overpayment without notifying the payer, or, in Bersoff’s language, neutralize cognitive or emotional considerations that such an action is wrong. For example, some participants were told the experiment was funded by a private company while others were told the study was being financed personally by a doctoral student running the experiment. Other participants were directly asked if the amount paid to them was correct. Still others were presented, during the experiment, with a story about a woman who took office supplies from her employer home for personal use. Bersoff found that participants were more likely to report the overpayment when they were told the study was personally funded, were asked if the amount was correct, and were presented with the story of the woman taking office supplies. Combinations of these manipulations further increased rates of participants pointing out the overpayment. Bersoff concluded that these results show that the more difficult it is for people to rationalize unethical behavior, the less likely they are to do it. The lesson here is that business managers can affect how easily their employees rationalize unethical conduct by what they communicate to them and by the formal and cultural signals they foster within the organization about what is appropriate and what is inappropriate behavior. Stated differently, people are less likely to engage in unethical or inappropriate conduct if they receive signals that such behavior is wrong or if it is difficult to rationalize or justify the behavior. One of the most important signals a business manager can give employees is from his or her observed behavior, even when employees do not usually observe the actions of leaders. For example, Treviño and Brown (2004) make the distinction between being perceived as a “moral person” and being perceived as a “moral manager.” Whereas being a “moral person” is based on what people see a manager do, being a “moral manager” means the leader “leads others on the ethical dimension, lets them know what is expected, and holds them accountable” (p. 75). The combination of these two characteristics matters most. For example, a strong moral manager who is perceived as a weak moral person would be a hypocrite, and hypocrisy among business managers is a serious impediment to the promotion of ethical conduct within firms.
Summary of Seven Lessons of Why Do Good People Do Bad Things in Business The lessons presented above provide a clear message about why and under what circumstances employees in business firms might engage in unethical behavior. Although there is nothing inevitable about the behavior of employees – that is, just because members of a group 13
behave badly does not mean that a particular group member will follow their behavior – the research summarized here shows a compelling connection between the situational and organizational features and functions of firms and the ethical behavior of employees. Fortunately, business managers can learn from these lessons. As an outcome of this research, Table 2 summarizes the lessons that business managers can learn from this research, as described in more detail earlier in this chapter. Although it is prudent to note that this list of lessons is not fully comprehensive, it does point toward important issues in business in relation to the ethical and unethical conduct of people. Moreover, the specific responses that business managers can take are also not particularly novel. However, collectively they provide important guidance for business managers seeking to improve the ethical climate of their businesses. Since ethical problems continue to exist, these lessons clearly need to be repeated, studied, respected and, most importantly, implemented. Table 2. Lessons from research on why and when people might engage in unethical conduct in business. Lesson from Research People may harm others if asked to do so by a legitimate authority People may act according to their assigned roles and business “scripts” or expectations People may do bad things as part of a group, even though they may never consider doing so when acting alone
People may respond to the incentives and disincentives created by or existing within the business structure
People may rationalize unethical conduct the more they think others do it People may engage in unethical conduct if they see others within their in-group doing so, but they are less likely to behave unethically if they see outgroup members doing so People may engage in minor acts of social deviancy if their ability to rationalize is not impeded by signals that such behavior is wrong
Appropriate Business Manager Response Do not require employees to behave unethically Make task instructions clear Take responsibility for what happens in the business firm Make expectations of employee behavior clear Monitor employees Minimize conflicts of interests employees face Understand that employees behave differently in groups than when working alone Take responsibility for actions of the group Hold individuals in groups responsible for specific unethical actions they take Review the reward and compensation system of the firm Monitor employee behavior when incentives are introduced or change Help employees place business objectives in proper perspective Do not put too much pressure on employee performance Listen to employee reports about problems in the firm Do not retaliate against people who bring bad news Be aware of the organizational culture Set a good example by being a moral person Reinforce the desirability of ethical conduct Foster a healthy collective identity among workers Be transparent about managerial actions and policies Reinforce what is appropriate and inappropriate conduct Make sure signals about appropriate behavior are consistent throughout the organization Set a good example by being a moral person Be a moral manager by setting clear expectations and by holding people accountable for their actions
14
FUTURE RESEARCH Future research on ethical behavior of people in business will continue, utilizing the full array of scholarly tools available. These will include not only improvements in our theoretical models of human decision-making but also experiments, surveys, interviews, case studies and participant observation. Four directions seem to the follow from the presentation of lessons in this chapter. Firstly, the primary limitation of the empirical studies underlying these lessons is that they were not conducted within business settings. For example, many of these studies were conducted on university campuses using college students as research subjects, such as the experiments conducted by Zimbardo (2007), Gino, Ayal and Ariely (2009), and Bersoff (1999). Peterson (2001) shows that results of experiments using college students differ “both directionally and in magnitude” from studies using subjects from non-student (adult) populations (p. 450). Therefore, future research needs to replicate these studies in the business environment. Secondly, the review by Kish-Gephart, Harrison and Treviño (2010) suggests three main areas of focus that future research should consider – the characteristics of the individual, the characteristics of the organization and the characteristics of the ethical issue. While each of these areas of focus is important, it is equally important to examine how these characteristics combine and interact to affect ethical behavior. According to these scholars, “there is a need for broader band research that investigates more complex configurations of individual, moral issue, and organizational environment variables” (p. 23). If, as this chapter has shown, various aspects of organizational features affect the incentives and disincentives that people face in business to behave unethically, then can we conclude that people with a strong moral compass will be less tempted, for instance, to rationalize and reason unethical behavior or to follow the “bad apples” in a group than people with a weak moral compass? If so, then how, and why? What does it mean to be tempted? When can business managers rely on an employees’ moral disposition rather than on external safeguards to prevent or mitigate unethical behavior? These are important questions that studies considering combinations of these characteristics might be in a better position to examine. Thirdly, research needs to continue with behavioral studies that can inform both academics and practitioners on unethical business practices, even when there is disagreement among scholars about the conceptual models developed to explain why good people sometimes do bad things. Bazerman and Gino (2012), for example, state that an important implication of behavioral studies is that they help “students and professionals better understand their own behavior in the ethics domain [so that they can] compare it to how they would ideally like to behave” (p. 101). The problem is not that people do not know what the right answer might be. Rather, it is that they often know what the right answer might be, but they have incentives to do what they know or believe to be inappropriate or wrong (see James, 2003). Understanding when and why this occurs requires that we examine actual behavior of individuals rather than theoretical models of behavior, which is the primary focus of behavioral ethics studies. It also requires that we understand how people think, reflect and contemplate on their circumstances, especially if people are unable to articulate what they would do if they were to face a difficult situation, even though they might make the right decision when actually placed in that circumstance – a difference that Schön (1992) defined as “reflection-in-action” in contrast with “knowing-in-action” (p. 11). Thus, it is very important that research moves to think more seriously about individuals, their values, their moral compass, their motivation and how these would intertwine with organizational culture, regulations and frameworks. 15
Fourthly, based on medical studies relating to trust, research focusing on a neurological, biological or medical basis to unethical decision-making is emerging. For example, research demonstrates that the hormone oxytocin increases the likelihood that people will trust others (Kosfeld, Heinrichs, Zak, Fischbacher, & Fehr, 2005). Are there hormones that affect the ability of people to identify and reason through ethical dilemmas, or that affect the degree to which people are tempted to do things they know to be wrong? Is there a medical basis for why some people may do the right thing in one context but the wrong thing when the context changes? For example, Damásio (1994) argued that emotion plays an important role in decision-making, especially in assessing the morality of one’s actions. If so, then how does a person’s emotional state, which can often vary dramatically in the short-term and long-run, affect the degree to which he or she is willing to be tempted? Can the emotional center of humans be manipulated so that they are less willing to rationalize unethical conduct? How does emotion affect the ability of people to think reflectively or to contemplate their actions and circumstance? These and similar questions clearly show that neuroscience and medical can contribute in helping us understand what happens in the human mind and body when people are faced with incentives to do things they ought not to be doing. This suggests that trying to understand why good people do bad things in business is a complex issue that might take us to think seriously about combining research in ethics with neurological research.
CONCLUSIONS As highlighted in this chapter, there might be diverse ethical problems that occur in business. Many of these problems arise because of the situation, context or environment within which people work. Since there is a growing need for guidance on how business managers and others can respond to the widespread problem of unethical conduct in business, this chapter has summarized research studies that provide clear lessons that managers can use to improve the ethical climate of their businesses. Implied in this discussion is the understanding that business managers have control or influence over many things that affect the incentives of their employees to behave unethically. For example, business managers can control what they do and say, since what they do and say has an effect on the tendency of employees to do things that they know or believe to be irresponsible or wrong. Business managers can also manipulate many aspects of the business organization defining the incentives and disincentives that enhance or mitigate ethical problems for employees. They can do this through the ways they structure their compensation programs and by how they deal with employees found to engage in unethical conduct. Thus, this chapter is a reminder that there is a connection between management and the ethical conduct of their employees, a connection that links to the incentives created by the organizational structure and culture of business firms. Most importantly, the lessons provided here are independent of geopolitical and socioeconomic considerations. Thus, the role of authorities in influencing the ethical conduct of employees or the effect of group dynamics on what individuals do applies both in developed and in developing countries as well as in the East and the West. While specific circumstances might affect the degree to which people feel the temptation to engage in unethical conduct, the lessons presented here are still applicable. For example, we might expect the effect of authoritative instructions on employees – whether direct or implied – to behave unethically to be stronger in cultures in which respect of authority is considered a virtue. Similarly, the effect of group 16
pressure to behave unethically might be stronger in cultures in which conformity is prized. Therefore, the lessons presented here can and should be adapted to local contexts. Regardless of specific circumstances, the lessons presented here need to be heeded. Responsible management is in part about prevention. That is, it is better to prevent unethical behavior than to deal with its consequences after problems arise. Recognizing that people are self-interested but might also be prone to make mistakes or to engage in actions that can harm others, business managers can and should learn from a growing yet extensive scholarly literature that seeks to understand human behavior. This chapter has outlined some of this literature, with an objective of identifying specific things that business managers can do to help improve the ethical climate of business. Business managers who utilize these lessons by improving the ethical culture of their businesses are behaving responsibly.
REFERENCES Adams, S. (1995, May 22). Manager’s journal: The Dilbert principle. The Wall Street Journal, p. A12. Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50, 179–211. Andre, C., & Velasquez, M. (1988). Conscience and authority. Issues in Ethics, 1(2). Retrieved from http://www.scu.edu/ethics/publications/iie/v1n2/conscience.html Andre, C., & Velasquez, M. (1989) Unmasking the motives of the Good Samaritan. Issues in Ethics, 2(1). Retrieved from http://www.scu.edu/ethics/publications/iie/v2n1/samaritan.html Annenberg Foundation. 2012. Economics U$A: Oligopolies: What ever happened to price competition (Airscript). Retrieved from http://www.learner.org/series/econusa/pdfs/unit7_oligopolies_videotranscript.pdf Armstrong, J. S. (1977). Social irresponsibility in management. Journal of Business Research, 5(3), 185-213. Asch, S. E. (2004). Opinions and social pressure. In E. Aronson (Ed.), Readings About the Social Animal, 9/e (pp. 17-26). New York, NY: Worth Publishers. Ashkanasy, N.M., Windsor, C.A., & Treviño, L.K. (2006). Bad apples in bad barrels revisited: Cognitive moral development, just world beliefs, rewards, and ethical decision-making. Business Ethics Quarterly, 16(4), 449-473. Ball, J. (2014, January 23). Oil chiefs linked to mystery offshore firms. The Guardian (London), p. 21. Batson, C. D., Dyck, J. L., Brandt, J. R., Batson, J. G., Powell, A. L., McMaster, M. R., & Griffitt, C. (1988). Five studies testing two new egoistic alternatives to the empathyaltruism hypothesis. Journal of Personality and Social Psychology, 55(1), 52-77. Bazerman, M. H., & Gino, F. (2012). Behavioral ethics: Toward a deeper understanding of moral judgment and dishonesty. Annual Review of Law and Social Science, 8, 85-104. Bazerman, M. H., & Tenbrunsel, A. E. (2011). Blind Spots: Why We Fail to Do What’s Right and What to Do About It. Princeton, NJ: Princeton University Press. Bergman, R. (2004). Identity as motivation: Toward a theory of the moral self. In D. K. Lapsley & D. Narvaez (Eds.), Moral Development, Self and Identity (pp. 21-46). Mahwah, NJ: Lawrence Erlbaum.
17
Bersoff, D. M. (1999). Why good people sometimes do bad things: Motivated reasoning and unethical behavior. Personality and Social Psychology Bulletin, 25(1), 28-39. Bob, Y.J. (2013, February 13). Former technologist convicted in baby formula case. The Jerusalem Post. Retrieved from http://www.jpost.com/National-News/Formertechnologist-convicted-in-baby-formula-case Brown, M. E., Treviño, L. K., & Harrison, D. A. (2005). Ethical leadership: A social learning perspective for construct development and testing. Organizational Behavior and Human Decision Processes, 97(2), 117-134. Burger, J.M. (2009). Replicating Milgram: Would people still obey today? American Psychologist, 64(1), 1-11. Caldwell, D.F., & Moberg, D. (2007). An exploratory investigation of the effect of ethical culture in activating moral imagination. Journal of Business Ethics, 73(2), 193-204. Chang, M. K. (1998). Predicting unethical behavior: a comparison of the theory of reasoned action and the theory of planned behavior. Journal of Business Ethics, 17(16), 18251834. Chen, A.Y.S., Sawyers, R.B., & Williams, P.F. (1997). Reinforcing ethical decision-making through corporate culture. Journal of Business Ethics, 16(8), 855-865. Cialdini, R.B., & Goldstein, N.J. (2004). Social influence: Compliance and conformity. Annual Review of Psychology, 55, 591-621. Collins, D. (2000). The quest to improve the human condition: The first 1,500 articles published in the Journal of Business Ethics. Journal of Business Ethics, 26(1), 1-73. Condly, S. J., Clark, R. E., & Stolovitch, H. D. (2003). The effects of incentives on workplace performance: A meta-analytic review of research studies. Performance Improvement Quarterly, 16(3), 46-63. Damásio, A. (1994). Descartes’ Error: Emotion, Reason, and the Human Brain. New York, NY: HarperCollins. Dionysios, D. D., & Tsoukas, H. (2013). Understanding the (re)creation of routines from within: A symbolic interactionist perspective. Academy of Management Review, 38(2), 181-205. Duke University. (2009). What makes unethical behavior contagious? Retrieved from http://www.youtube.com/watch?v=T4sylxCx3MA Ethics Resource Center. (2013). National Business Ethics Survey. Retrieved from http://www.ethics.org/nbes/key-findings/nbes-2013/ Ethridge, D. (2004). Research Methodology in Applied Economics. Ames, IA: Blackwell Publishing. Felps, W., Mitchell, T.R., & Byington, E. (2006). How, when, and why bad apples spoil the barrel: Negative group members and dysfunctional groups. Research in Organizational Behavior, 27, 175-222. Ferrell, O. C., & Gresham, L. G. (1985). A contingency framework for understanding ethical decision making in marketing. Journal of Marketing, 49(3), 87-96. Frank, R. H. (1988). Passions Within Reason: The Strategic Role of the Emotions. New York, NY: W.W. Norton. Frith, U., & Frith, C. (2009). The social brain: Allowing humans to boldly go where no other species has been. Philosophical Transaction of the Royal Society, 365(1537), 165-176. Gandz, J., & Hayes, N. (1988). Teaching business ethics. Journal of Business Ethics, 7(9), 657669.
18
Gino, F., Ayal, S., & Ariely, D. (2009). Contagion and differentiation in unethical behavior. Psychological Science, 20(3), 393-398. Gino, F., Gu, J., & Zhong, C.B. (2009). Contagion or restitution? When bad apples can motivate ethical behavior. Journal of Experimental Social Psychology, 45(6), 1299-1302. Goodpaster, K. (2004). Ethics or excellence? Conscience as a check on the unbalanced pursuit of organizational goals. Ivey Business Journal, (March/April), 1-8. Goodpaster, K. (2013). Corporate culture. In H. LaFollette (Ed.) The International Encyclopedia of Ethics (vol 2). Wiley-Blackwell. Grover, S. L. (1993). Why professionals lie: The impact of professional role conflict on reporting accuracy. Organizational Behavior and Human Decision Processes, 55(2), 251-272. Haidt, J. (2001). The emotional dog and its rational tail: A social intuitionist approach to moral judgment. Psychological Review, 108(4), 814-834. Handwerk, B. (2005, June 20). Sports riots: The psychology of fan mayhem. National Geographic News. Retrieved from http://news.nationalgeographic.com/news/2005/06/0620_050620_sportsriots.html Hanners, D. (2014, February 24). Waters trial: Accused of embezzling, he says boss knew of his withdrawals. St. Paul Pioneer Press. Retrieved from http://www.twincities.com/localnews/ci_25219568/waters-trial-accused-embezzling-hesays-boss-knew Hunt, S. D., & Vitell, S. (1986). A general theory of marketing ethics. Journal of Macromarketing, 6(1), 5-16. James, H. S., Jr. (2000). Reinforcing ethical decision making through organizational structure. Journal of Business Ethics, 28, 43-58. James, H. S., Jr. (2003). On finding solutions to ethical problems in agriculture. Journal of Agricultural and Environmental Ethics, 16(5), 439-457. James, H. S., Jr. (2006). Self-selection bias in business ethics research. Business Ethics Quarterly, 16(4), 559-577. James, H. S., Jr., & Hendrickson, M. K. (2008). Perceived economic pressures and farmer ethics. Agricultural Economics, 38(3), 349-361. Jones, T. M. (1991). Ethical decision-making in organizations: An issue-contingent model. Academy of Management Review, 16(2), 366–395. Karl, K. A., Hall, L. M., & Peluchette, J. V. (2013). City employee perceptions of the impact of dress and appearance: You are what you wear. Public Personnel Management, 42(3), 452-470. Kerr, N.J., Rumble, A.C., Park, E.S., Ouwerkerk, J.W., Parks, C.D., Gallucci, M., & van Lange, P.A.M. (2009). “How many bad apples does it take to spoil the whole barrel?”: Social exclusion and toleration for bad apples. Journal of Experimental Social Psychology, 45(4), 603-613. Kerr, S. (1975). On the folly of rewarding A, while hoping for B. Academy of Management Journal, 18(4), 769-783. Kish-Gephart, J. J., Harrison, D. A., & Treviño, L. K. (2010). Bad apples, bad cases, and bad barrels: Meta-analytic evidence about sources of unethical decision at work. Journal of Apply Psychology, 95(1), 1-31. Kohlberg. L. (1969). Stage and sequence: The cognitive-developmental approach to socialization. In D. A. Goslin (Ed.), Handbook of socialization theory and research (pp. 347-480). Chicago: Rand McNally. 19
Kohlberg, L. (1984). The Psychology of Moral Development. San Francisco, CA: Harper & Row. Kosfeld, M. Heinrichs, M., Zak, P. J., Fischbacher, U., & Fehr, E. (2005). Oxytocin increases trust in humans. Nature, 435, 673-676. Litzky, B.E., Eddleston, K.A., & Kidder, D.J. (2006). The good, the bad, and the misguided: How managers inadvertently encourage deviant behaviors. Academy of Management Perspectives, 20(1), 91-103. Lord, R. G., & Kernan, M. C. (1987). Scripts as determinants of purposeful behavior in organizations. Academy of Management Review, 12(2), 265-277. Matthiesen, S. B., Bjorkelo, B., & Burke, R. J. (2011). Workplace bullying as the dark side of whistleblowing. In S. Einarsen, H. Hoel, D. Zapf, & C. L. Cooper (Eds.), Bullying and Harassment in the Workplace: Developments in Theory, Research, and Practice, 2/e (pp. 301-325). Boca Raton, FL: Taylor and Francis Group. Milgram, S. (1963). Behavioral study of obedience. Journal of Abnormal and Social Psychology, 67(4), 371–378. Miller, D. T. (1999). The norm of self-interest. American Psychologist, 54(2), 1053-1060. More, D. A., Tetlock, P. E., Tanlu, L. & Bazerman, M. H. (2006). Conflicts of interest and the case of auditor independence: More seduction and strategic issue cycling. Academy of Management Review, 31, 10-29. O’Fallon, M. J., & Butterfield, K. D. (2005). A review of the empirical ethical decision-making literature: 1996–2003. Journal of Business Ethics, 59(4), 375-413. Palanski, M. E., Surinder, S. K., & Yammarino, F. J. (2011). Team virtues and performance: An examination of transparency, behavioral integrity, and trust. Journal of Business Ethics, 99(2), 201-216. Palazzo, G., Krings, F., & Hoffrage, U. (2012). Ethical blindness. Journal of Business Ethics, 109(3), 323-338. Perlman, A. M. (2007). Unethical obedience by subordinate attorneys: Lessons from social psychology. Hofstra Law Review, 36(2), 13. Peterson, R.A. (2001). On the use of college students in social science research: Insights from a second‐order meta‐analysis. Journal of Consumer Research, 28(3), 450-461. Puzzanghera, J. (2014, May 17). GM fined over recall delays; The automaker still faces an ongoing criminal inquiry, as well as Congress and SEC investigations. Los Angeles Times, p. A1. Porterfield, E., & Berliant, A. (1995, June 16). Jack In The Box ignored safety rules. The News Tribune. Retrieved from http://www.about-ecoli.com/ecoli_outbreaks/news/jack-in-thebox-ignored-safety-rules/#.U6if-cZOXmI Randall, D.M., & Fernandes, M.F. (1991). The social desirability response bias in ethics research. Journal of Business Ethics, 10(11), 805-817. Reicher, S. (2001). The psychology of crowd dynamics. In M. A. Hogg & S. Tindale (Eds.), Blackwell Handbook of Social Psychology: Group Processes (pp. 182-208). Malden, MA: Blackwell Publishers. Rest, J. R. (1986). Moral Development: Advances in Research and Theory. New York, NY: Praeger. Rose, D. C. (2011). The Moral Foundation of Economic Behavior. New York, NY: Oxford University Press. Ross, C. (2010, December 10). $540,000 overcharge sheds light on law firm bills. The Boston Globe. Retrieved from 20
http://www.boston.com/business/articles/2010/12/10/540000_overcharge_sheds_light_on _law_firm_bills/?page=2 Schön, D.A. (1987). Educating the Reflective Practitioner: Toward a New Design for Teaching and Learning in the Professions. San Francisco, CA: Jossey-Bass. Schön, D.A. (1992). Designing as reflective conversation with the materials of a design situation. Knowledge-Based System, 5(1), 3-14. Sen, A. (2009). The Idea of Justice. Cambridge, MA: Belknap Press. Simon, H. (1991). Bounded rationality and organizational learning. Organization Science, 2(1), 125-134. Sims, R. R. (1992). Linking groupthink to unethical behaviour in organizations. Journal of Business Ethics, 11, 651-662. Stellar, J., Feinberg, M., & Keltner, D. (2014). When the selfish suffer: Evidence for selective prosocial emotional and physiological responses to suffering egoists. Evolution and Human Behavior, 35(2), 140-147. Sunstein, C. (2003). Why Societies Need Dissent. Cambridge, MA: Harvard University Press. Tenbrunsel, A. E. (1998). Misrepresentation and expectations of misrepresentation in an ethical dilemma: The role of incentives and temptation. Academy of Management Journal, 41(3), 330-339. Tenbrunsel, A. E., & Messick, D. M. (2004). Ethical fading: The role of self-deception in unethical behavior. Social Justice Research, 17(2), 223-236. The Economist. (2012, July 7). The LIBOR scandal: The rotten heart of finance. The Economist. Retrieved from http://www.economist.com/node/21558281 Tourish, D., & Vatcha, N. (2005). Charismatic leadership and corporate cultism at Enron: The elimination of dissent, the promotion of conformity and organizational collapse. Leadership, 1(4), 455-480. Treviño, L. K. (1986). Ethical decision-making in organizations: A person-situation interactionist model. Academy of Management Review, 11(3), 601–617. Treviño, L. K., & Brown, M. E. (2004). Managing to be ethical: Debunking five business ethics myths. Academy of Management Executive, 18(2), 69-81. Treviño, L. K., & Nelson, K.A. (2011). Managing Business Ethics: Straight Talk About How to Do it Right. Danvers, MA: John Wiley & Sons. Treviño, L. K., Weaver, G. R., & Reynolds, S. J. (2006). Behavioral ethics in organizations: a review. Journal of Management, 32(6), 951-990. Tsoref, A. (2008, September 15). Remedia formula to finally disappear from shelves. Haaretz. Retrieved from http://www.haaretz.com/print-edition/business/remedia-formula-tofinally-disappear-from-shelves-1.253834 Umphress, E. E., & Bingham, J. B. (2011). When employees do bad things for good reasons: Examining unethical pro-organizational behaviors. Organization Science, 22(3), 621-640. Umphress, E. E., Bingham, J. B., & Mitchell, M. S. (2010). Unethical behavior in the name of the company: The moderating effect of organizational identification and positive reciprocity beliefs on unethical pro-organizational behavior. Journal of Applied Psychology, 95(40), 769–780. Victor, B., & Cullen, J. B. (1988). The organizational bases of ethical work climates. Administrative Science Quarterly, 33, 101-125. Vozzella, L. (2013, September 11). Cuccinelli donates $18,000 value of Star chief’s gifts to charity. The Washington Post, p. A1. 21
Welner, M. (2011, August 11). Mob violence: Psychological myths, facts, solutions. ABC News. Retrieved from http://abcnews.go.com/Health/london-riots-2011-psychological-mythsfacts-solutions/story?id=14276532 Williamson, O. E. (1985). The Economic Institutions of Capitalism. New York, NY: The Free Press. Zimbardo, P. (2007). The Lucifer Effect: Understanding How Good People Turn Evil. New York, NY: Random House. Zimbardo, P. (n.d.). Stanford prison experiment: A simulation study of the psychology of imprisonment conducted at Stanford University. Retrieved from http://prisonexp.org/
KEY TERMS AND DEFINITIONS Bounded Rationality: Limitations in the ability of a person to understand the scope of a problem or to evaluate potential solutions to the problem. Conflict of Interest, Values or Duties: A situation in which the interests (things one might care about), values (things one believes are important as an end in themselves), or duties (things one has an obligation to do) of a person are not compatible with the interests, values or duties of other individuals or organizations. Corporate culture: The ideas, beliefs, attitudes, values, standards and expectations shared by individuals within an organization (usually a business firm) that are implied or understood by employees but which are not formally written as organizational rules. Dispositional approach: A focus on the inherent characteristics or psychological qualities of a person, with particular emphasis on a person’s moral awareness, moral judgment and moral intention. Ethical Dilemma: A situation in which a person faces an incentive or pressure to engage in unethical conduct, often arising out of a conflict of interest or values, or a situation in which a person does not know what the right answer or course of action is. Moral Reasoning: The process of evaluating the morality, or rightness or wrongness, of a situation or action, usually involving some degree of reflection, thinking, or logic analysis. Opportunism: A situation in which a person is able to take advantage of the vulnerability of others by lying, cheating, stealing, misleading, confusing or other inappropriate actions. Self-interest: A desire to advance or enhance things that a person cares about. Situational approach: A focus on the external context within which a person makes a decision, with particular emphasis on the incentive and disincentives a person considers. Unethical behavior: Knowingly making a decision that harms others or that a person knows, feels or believes to be irresponsible or wrong.
22
