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The Organization of Ethics and the Ethics of Organizations: The Case for Expanded Organizational Ethics Audits

  • Michael Metzger, Dan R. Dalton and John W. Hill

The United States Sentencing Commission’s guidelines for the sentencing of organizations found guilty of violating federal laws recently became effective. Dramatically increased penalties are possible under these gudelines, but so too is a substantial reduction in the penalties imposed on organizations that have an effective program in place to prevent and detect violations. This provides corporations with a tremendous new incentive in inaugurate organizational ethics audits both to avoid violations in the first instance and to reduce the penalty imposed in the event that a violation occurs. We argue, however, that there have always been very good reasons for organizations to conduct such audits, which emphasize the identification of the organizational factors that create incentives for unethical behavior. Corporate ethics programs initiated without reference to such factors cannot reasonably be expected to be effective in improving a company’s internal ethical environment.

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1 Murphy, P.: “Implementing Business Ethics”, Journal of Business Ethics 7, pp. 907-15, p. 904. Another survey found that only 56% of the companies sampled had codes, with a positive correlation between company size and the adoption of a code. See Sweeney, R.B., and Siers, H.L.: 1990, “Survey: Ethics in Corporate America’, Management Accounting (June), pp. 34-40, p. 34.

2 Touche, Ross: 1988, Ethics in American Business (Touche Ross & Co., New York). Other commentators, however, have noted the existence of “a gap between what mangers hope to accomplish with corporate codes and what is actually accomplished.” Robin, D., Gallourakis, M., David, F., and Moritz, T.: 1989, ‘Different Look at Codes of Ethics”, Business Horizons 32 (Jan.-Feb.), pp. 66-73, p. 71. This perception is echoed in Lane, M.R.: 1991, “Improving American Business Ethics in Three Steps’, The CPA Journal (Feb.), pp. 30-34, p. 30.

3 Rich, A.J., Smith, C.S., and Mihalek, P.H.: 1990, ‘Are Corporate Codes of Conduct Effective?, Management Accounting (Sept.), pp. 34-35, p. 35.

4 Ibid, the authors tentatively attribute this phenomenon to the greater size of the companies adopting codes. Other possible explanations also suggest themselves. For example, companies with such heightened internal pressures may adopt codes in an attempt to counteract the tendency of such pressures to produce undesirable employee behavior. For those unencumbered by an exposure to managerial accounting, ROI (return of investment) is a measure by which top corporate management attempts to gauge which intraorganizational investment centers are most profitably using the funds which have been entrusted to them. It is calculated by multiplying a center’s margin (its net operating income divided by its sales) and its turnover (its sales divided by its operating assets). See Garrison, , Ray, H.: 1979, Managerial Accounting (Business Publications, Inc., Dallas, Texas), pp. 389–90.

5 Mathews, M.C.: 1987, ‘Codes of Ethics: Organizational Behavior and Misbehavior’, Research in Corporate Social Performance and Policy 9, pp. 107-30, p. 119. In this study, firm size and industry were found to be far more significant variables than the presence or absence of a corporate code.

6 We acknowledge the possibility that, in some cases, corporate codes have had the desired effect. In other words, some companies may have adopted ethics codes purely for public relations purposes. Few things are more unlikely than a code adopted for such purposes having a positive impact on corporate behavior. Our discussion, however, presupposes the existence of a bona fide desire for an effective ethics program.

7 Kaplan, J.: 1991, ‘Now is the time to review corporate compliance programs’, Ethikos 5(1), pp. 8-9, p. 11. Another study found that only 15% of firms had ethics modules in their training programs, while about 30% discussed ethical concerns in management or policy sessions. Murphy, op. cit., p. 909.

8 Cressey, D.R., and Moore, C.A.: 1983, ‘Managerial Values and Corporate Codes of Ethics’, California Management Review 25(4), pp. 53-77, p. 73.

9 Ibid., p. 74.

10 Ibid.

11 Such audits are not to be confused with the various forms of “social” audits designed to measure an organization’s social performance. For an extensive discussion of the various forms of such audits, see Belkaoui, A.: 1984, Socio-Economic Accounting (Quorum Books, Westport, Conn.), pp. 262–94. For a seminal work in the area, see Bauer, R.A., & Fenn, D.H.: 1972, The Corporate Social Audit (Russell Sage Foundation, New York).

12 U.S. Sentencing Commission: 1991, ‘Sentencing Guidelines for Organizational Defendants’, Federal Register 56(95), pp. 2278622797. For discussions of the new guide-lines and their importance to business, see Kaplan, op. cit., p. 8; Singer, A.W.: 1991, ‘Ethics programs could save companies millions under new sentencing guidelines’, Ethikos 4(4), pp. 14; Wallance, G.: 1991, ‘Guidelines on Corporate Crime Emphasize Prevention Programs’, National Law Journal (July 1) pp. 2223.

There is some evidence, however, that many companies are ignorant of the existence and the import of the guidelines. See Hayes, A: 1991, ‘Corporate Sentencing Guidelines Trigger Limited Initial Response’, Wall Street Journal (Nov. 1), pp. B1, B7.

13 Even where federal offenses are not at issue and the guidelines are not applicable, the existence of such a program is likely to have a significant impact on judges’ and jurors’ attitudes toward a defendant corporation. At least one scholar has suggested that the imposition of corporate liability should be contingent upon the existence or non-existence of a “corporate ethos” which encouraged corporate misconduct. See Buey, P.H.: 1991, ‘Corporate Ethos: A Standard for Imposing Corporate Criminal Liability’, Minnesota Law Review, 75, pp. 10951184. An effective organizational ethics audit program presumably would go a long way toward disproving the existence of such an ethos.

14 Moses, J., and Lambert, W.: 1991, ‘Companies Given Spur to Uncover Own Environmental Wrongdoing’, The Wall Street Journal, Sept. 25, p. B2.

15 Pitt, H.L., and Groskaufmanis, K.A.: 1990, ‘Why a Corporate Code may not Protect You’, Across the Board (May), pp. 22-25, p. 24.

16 Ibid.

17 An employee troubled by an existing or contemplated corporate practice can say: “Hey, it’s not just me saying this. Our own code prohibits this Wnd of thing.” For a survey in which the majority of respondents thought that a code would help subordinates refuse improper requests from their superiors, see Brenner, S.N., and Molander, E.A.: 1977, ‘Is the Ethics of Business Changing?’, Harvard Business Review 55 (Jan.-Feb.), pp. 5771.

18 On the general reluctance of managers to raise explicitly moral concerns, see Bird, F.B., and Waters, J.A.: 1989, ‘The Moral Muteness of Managers’, Business Ethics 32, pp. 7388; Jackall, R.: 1988, Moral Mazes (Oxford Press, New York, NY) pp. 104–05.

19 Bavaria, S.: 1991, ‘Corporate Ethics Should Start in the Boardroom,’ Business Horizons 34 (Jan.-Feb.), pp. 9-13, p. 9.

20 Laczmiak, GR., and Murphy, P.: 1991, ‘Fostering Ethical Marketing Decisions’, Joumal of Business Ethics 10(4), pp. 259-71, p. 268.

21 Ibid.

22 Robin, Gallourakis, David, and Moritz, op. cit., p. 66.

23 Mathews, op. cit., p. 115. Neither of these outcomes is too surprising when one considers the fact that corporate counsel is the official most likely to be involved in drafting the code. ‘Chronikos’: 1991, Ethikos 5(1), p. 10.

24 Interestingly enough, one study found a higher incidence of legal violations in companies with codes emphasizing corporate reputation. See Mathews, op. cit., pp. 123-24.

25 We do not intend to tread here on the well trampled ground of this debate. The literature on the issue is extensive and a meaningful discussion of it is beyond the scope of this article. While most readers are quite familiar with the debate, a nice summary of the arguments can be found in Goldman, A.: 1980, The Moral Foundations of Professional Ethics (Rowman and Littlefield, Totowa, NJ), pp. 230–64.

26 In 1982, Johns-Manville filed for reorganization under Chapter 11 of the Federal Bankruptcy Act due to thousands of lawsuits filed by former employees or their next-of-kin. The suits sought to recover for death or injuries allegedly attributable to exposure to asbestos while working for the company. The exposures in question were not prohibited by any existing federal or state law. For a discussion of the Johns-Manville case in particular and of the dynamic nature of the law in general, see Silverstein, D.: 1987, ‘Managing Corporate Social Responsibility in a Changing Legal Environment’, American Business Law Journal 25(3), pp. 524–66.

27 Bavaria, op. cit., p. 9; Cressey and Moore, op. cit., p. 58; Mathews, op. cit., p. 115; Robin, Gallourakis, David, and Moritz, op. cit., p. 72.

28 For a source acknowledging the internal focus of most corporate codes but arguing that “the large number of possible conflicts against the corporation seem to justify discussion of them,” see Benson, G.C.S.: 1989, ‘Codes of Ethics’, Journal of Business Ethics 8(5), pp. 305-19, p. 312.

29 See Weller, S.: 1988, “The Effectiveness of Corporate Codes of Ethics’, Journal of Business Ethics 7(5), pp. 389-95; p. 393; ‘Making Ethics a Part of a Company’s “Mythology”’: 1991, Ethikos 4(4), pp. 12-13, p. 13.

30 Hosmer, L.T.: 1987, The Ethics of Management (Irwin, Homewood, Illinois), p. 154. Hosmer believes that codes are doomed to be ineffective because “it is not possible to state the norms and beliefs of an organization relative to the various constituent groups… clearly and explicitly, without offending at least one of those groups.” Ibid.

31 Ibid., p. 169.

32 See Szwajkowski, E.: 1983, ‘Organizational Illegality: Theoretical Integration and Illustrative Application’, Academy of Management Review 10(3), pp. 558-567, p. 563. Szwajkowski observes that although ethics and profit are both typically formalized as corporate priorities, directives concerning profit are more numerous and carry more implied authority.

33 Waters, J.A., and Bird, F.: 1987, ‘The Moral Dimension of Organizational Culture’, Journal of Business 7(1), pp. 15-22, p. 21.

34 Several commentators have noted a tendency for companies to devote too little attention to implementation issues. See, for example Murphy, op. cit., p. 907; Pascale, R.: 1985, ‘The Paradox of “Corporate Culture”: Reconciling Ourselves to SocializationCalifornia Management Review 27(2), pp, 26-41, p. 28; Singer, A.W.: 1991, ‘Ethics, “quality” and the Persian Gulf War’, Ethikos 4(6), pp. 1-3, 16, p. 3.

35 Murphy, op. cit., p. 911.

36 For sources commending compliance letters as a component of a corporate ethics program, see Buey, op. cit., p. 24.

37 ‘Digital Rewards Ethical Employees who “Buck the System”’: 1991, Ethikos 5(1), pp. 5-7, 16, p. 7.

38 Pitt and Groskaufmanis, op. cit., p. 24.

39 Waters and Bird, op. cit., p. 18.

40 Ibid., p. 22.

41 Kohls, J., Chapman, C., and Mathieu, C.: 1989, ‘Ethics Training Programs in the Fortune 500’, Business and Professional Ethics Journal 8(2), pp. 55-72, p. 69.

42 Murphy, op. cit., p. 910. When we speak of free information flows we are speaking of matters of degree, given the well known problems associated with assuring accurate information flows to top decisionmakers in any large organization. Anthony Downs, for example, has compellingly described the tendency of bureaucrats to distort the information reaching their superiors. See Downs, A.: 1967, Inside Bureaucracy (Little, Brown & Co., Boston, MA), p. 77. Kenneth Boulding similarly observed:

“[A]lmost all organizational structures tend to produce false images in the decisionmaker, and … the larger and more authoritarian the organization, the better the chance that its top decisionmakers will be operating in purely imaginary worlds.”

Boulding, K.: 1966, ‘The Economics of Knowledge and the Knowledge of Economics’, American Economic Review 56(2), pp. 1-13, at 8.

43 Buey, op. cit., p. 1136.

44 Kaplan, op. cit., p. 11.

45 See, for example, Cooke, R.A.: 1991, ‘Danger Signs of Unethical Behavior: How to Determine If Your Firm Is at Ethical Risk’, Journal of Business Ethics 10(4), pp. 249–53; Pitt and Groskaufmanis, op. cit., p. 394; ‘A “Hotline” for Management Accountants’: 1991, Ethikos 4(6), pp. 9, 12-13; ‘Pitney Bowes’ Ombudsman: Venting Ethical Conflicts’: 1991, Ethikos 4(5), pp. 5-8.

46 Near, J.P.: 1989, ‘Whistle-Blowing: Encourage It!’, Business Horizons 32 (Jan.-Feb.), pp. 2-6, p. 5.

47 Ibid.

48 One 1976 study found that “honesty in communication” was the biggest challenge faced by managers. This included communication with clients, government, and top management. See Brenner and Molander, op. cit., p. 59. For the indicators of lack of candor in an organization, see Serpa, R.: 1985, ‘Creating a Candid Corporate Culture’, Journal of Business Ethics 4(5), pp. 425-30, p. 427.

49 Robert Jackall has discussed top managers’ “well-known aversion to bad news and the resulting tendency to kill the messenger who bears the news.” Jackall, R.: 1988, Moral Mazes (Oxford Press, New York, NY) p. 21. This tendency, according to Jackall, derives from the fact that “[b]ad news either requires action, always open to pejorative interpretations, or it upsets pre-established plans of action, scattering ducks already set in a row.” Ibid., p. 118.

50 In one survey, 50% of the respondents felt that their superiors did not want to know how results are obtained as long as the desired outcome was achieved. Brenner and Molander, op. cit., p. 62. The “I don’t want to be told” attitude has been identified as a significant contributor to corporate lawbreaking. See Clinard, M., and Yeager, P.: 1980, Corporate Crime (Free Press, New York, NY), p. 45. Saul Gellerman has also identified it as a major source of unethical behavior. Gellerman, S.: 1986, ‘Why “Good” Managers Make Bad Ethical Choices’, Harvard Business Review, (July/Aug.), pp. 85-90, p. 88.

51 Stone, C.: 1975, Where the Law Ends (Harper & Row, New York, NY), p. 45.

52 Lee Iacocca, Ford’s president during the development of the Pinto allegedly was fond of saying: “Safety doesn’t sell.” Not surprisingly, no one told him when it was discovered that there were problems with the car’s gas tank. Pinto’s designers were operating under Iacocca-dictated “limits of 2,000”—the car couldn’t weigh more than 2,000 lbs or cost more than $2,000—consequently, they rejected safety devices that would have added either weight or cost. See Dowie, M.: 1977, ‘How Ford Put Two Million Firetraps on Wheels’, Business & Society Review 23, pp. 4655.

53 The engineers and managers who were concerned about the Corvair’s design allegedly were in effect told to “stop these objections. Get on the team, or you can find someplace else to work.” See Wright, J.P., 1980, On a Clear Day You Can See General Motors (Avon Books, New York, NY), at p. 66.

54 Buey, op. cit., p. 1136.

55 Gellerman, op. cit., p. 90.

56 Saul Gellerman asserts that:

A trespass detected should not be dealt with discreetly. Managers should announce the misconduct and how the individuals involved were punished.

Gellerman, op. cit., p. 90.

57 Unethical actions must have “serious, perceived, and negative consequences” if a company’s ethics program is to succeed. Singer, A.W.: 1991, ‘The Dark Side of Leadership’, Ethikos 5(1), pp. 1-4, 3 [quoting ethicist Michael Josephson]. Two other commentators agree, observing that:

the bottom line is that the company must send a simple message: Violation of the code leads to penalties, including dismissal.

Pitt and Groskaufmanis, op. cit., p. 25.

58 The more serious the penalties for violation of the code and the greater the threat that those sanctions will be imposed, the more effective the code is likely to be. Weiler, op. cit., p. 393.

59 ‘The Dark Side of Leadership’, op. cit., p. 2. [quoting Harvard Professor John Kotter].

60 Weiler argues that in decentralized organizations middle managers are a more effective source of authority for promoting the corporate code than upper management. Weiler, op. cit., p. 391. This is unobjectionable, so far as it goes, but it gives too little credit to the role of top management in establishing the imperatives under which such middle managers must operate. For example, John Coffee has argued that organizationally undesirable behavior is sometimes produced when central managers press divisional managers for “quick solutions to intractable problems.” Coffee, J.: 1981, ‘No Soul to Damn: No Body to Kick.: An Unscandalized Inquiry into the Problem of Corporate PunishmentMichigan Law Review 79, pp. 386-459, p. 398. Ultimately, the zeal with which middle managers will enforce the corporate code depends in large part on the way in which their performance is measured.

61 See, for example, DeMott, D.A.: 1977, ‘Reweaving the Corporate Veil: Management Structure and the Control of Corporate Information’, Law and Contemporary Problems 41(3) pp. 182-221, p. 217; Hambrick, D.C., and Mason, P.A.: 1984, ‘Upper Echelons: The Organization as a Reflection of Its Top Managers’, Academy of Management Review 9(2), pp. 193206; Murphy, op. cit., p. 910.

62 See, for example, ‘Chocolate Aside, Hershey Keeps a Close Eye on Gifts’: 1991, Ethikos 4(6), pp. 4-6, p. 6; ‘Ethics, “Quality” and the Persian Gulf War’, op cit., p. 3; Singer, A.W.: 1990, ‘Do Business Ethics Deteriorate in a Downturn?’, Ethikos 4(3), pp. 1-3, 16, p. 3.

63 In one survey, executives ranked “formal organization policy” as the least important factor in influencing unethical behavior in organizations while the actual conduct of superiors and peers were seen as the most important factors. See Serpa, op. cit., p. 427.

64 Reynolds, L.: 1991, ‘The Ethics Audit’, Business Ethics 5(4), pp. 20-2, p. 20.

65 Gellerman, op. cit., p. 88.

66 We are far from the first to recognize this fact. For example, see the following observation from Mary Ellen Oliverio:

Writing a code of ethics, establishing procedures for communicating the code to all employees, and setting aside time in the schedule of internal auditors to check compliance may give the aura of introducing a high level of ethical behavior. However, even though such actions are necessary, they are not sufficient to assure success. There must be a constant, thorough, pervasive style of attention and assessment to ethical concerns if there is to be a difference in behavior throughout the entity.

Oliverio, M.E.: 1989, ‘The Implementation of a Code of Ethics: The Early Efforts of One Entrepreneur’, Journal of Business Ethics 8(5), pp. 367-74, p. 373.

67 Nixon, J., Wiley, C., and West, J.: 1991, ‘Beyond Survival: Ethics for Industrial Managers’, Industrial Management (May-June), pp. 15-18, p. 15.

68 See generally Reynolds, op. cit.,; ‘Malcing Ethics Part of a Company’s “Mythology”’, op. cit.

69 O’Malley, S.F.: 1990, ‘Auditors, Directors, and Management” Promoting Accountability’, Internal Auditing (Winter), pp. 3-9, p. 7.

70 See Murphy, op. cit. p. 909.

71 See, Impert, J.E.: 1991, ‘How Boeing Moved Beyond the Prohibition List Toward Inspiring “Right Behavior”’, Ethikos 5(2), pp. 1-9, 11, p. 9.

72 The term is Robert Jackall’s. He defines it as:

[T]he complicated, experientially constructed,…, set of rules, premiums, and sanetions that men and women in a particular context create and re-create in such a way that their behavior and accompanying perspectives are to some extent regularized and predictable.

In short, “the way a particular social world works.” Jackall, op. cit., p. 112. The institutional logic of their corporation is of critical importance to managers because their “fates depend on how well they accomplish defined goals in accordance with the institutional logic of their situation.” Ibid.

73 Murphy, op. cit., p. 911.

74 Kerr, S.: 1975, ‘On the Folly of Rewarding A, While Hoping for B’, Academy of Management Journal 18, pp. 769-83, p. 769.

75 Kerr, J., and Slocum, J.W. Jr.: 1987, ‘Managing Corporate Culture Through Reward Systems’, Academy of Management Executive 1(2), pp. 99-108, p. 99.

76 The example is drawn from Buey, op. cit., p. 1139.

77 Brooks, L.J.: 1989, ‘Corporate Ethical Performance: Trends, Forecasts and Outlooks’, Journal of Business Ethics 8(1), pp. 31-38, p. 34.

78 Brenner and Molander, op. cit., p. 1149.

79 Buey, op. cit., p. 1149.

80 Kerr, op. cit., p. 769 (original emphasis). Kerr gives the example of a manufacturing company where a survey revealed that behaviors which management labeled dysfunctional were seen by lower level employees as behaviors which were rewarded. Ibid., p. 778. See also Reynolds, op. cit., p. 22, for the case of a company which found that its aggressive pursuit of sales and service quotas caused employee behavior that undermined its customer service objectives.

81 Hosmer, op. cit., p. 12.

82 Kerr, op. cit., p. 775.

83 Wright, op. cit., pp. 251-52.

84 For a full discussion of plant-milking, see Jackall, op. cit., pp. 91-95. Saul Gellerman has observed that:

[I]t is not difficult to look remarkably gook in the short run by avoiding the things that pay off only in the long run. For example, you can skimp on maintenance or training or customer service, and you can get away with it—for a while.

Gellerman, op. cit., p. 89. ROA (return on assets) is a measure of operating performance which seeks to determine how well assets have been employed. It is calculated by dividing the sum of a firm’s net income and interest expense by its average total assets. Garrison, op. cit., p. 652.

85 This tendency is aggravated in cases where the division has excess capacity which the manager cannot control in the short-run. Such excess capacity has a negative impact on the manager’s ability to reach target ROI because it increases the amount of fixed overhead which must be covered.

86 Merchant, K.A.: 1987, Fraudulent and Questionable Financial Reporting: A Corporate Perspective (Financial Executives Research Foundation, Morristown, NJ 1987), p. 12. Merchant identifies the organizational factors that contribute to deceptive financial reporting as: emphasis on results; pressure to meet unrealistic performance targets; upper and lower cutoffs on bonus plans; nonexistent internal control systems; environmental change which renders existing controls ineffective; and high divisional autonomy. Ibid. pp. 12-14.

87 Wolfe, C.: 1991, ‘An Inside Job’, Mortgage Banking (May), pp. 45-53, p. 47.

88 Robert Jackall makes the following observation:

Whenever structural inducements place premiums on immediate personal gains, especially when mistakes are not penalized, there seems to be a sharp decline in the likelihood of men and women sacrificing their own interests for others, for their organizations, or least of all for the common weal.

Jackall, op. cit., p. 96 (emphasis added).

89 Gellerman, op. cit., p. 89.

90 Ibid.

91 Jackall, op. cit., pp. 87, 90.

92 Ibid., p. 95 (the phrase belongs to C. Wright Mills).

93 See Gellerman, op. cit., p. 89; Hosmer, op. cit., p. 169; ‘How the Numbers are Obtamed is as Important as What the Numbers Are’: 1991, Ethikos 4(5), p. 16; Murphy, op. cit., p. 911.

94 Pascale, op. cit., p. 31. Pascale argues that at highly socialized companies, “in-the-trenches” training and orchestrated promotion paths lead “all trainees [to] understand there is one step by step career path,” which has the effect of reducing politics and short-term behavior because “[t]here is no quick way to jump ranks and reach the top.” Ibid., p. 30. Firms that lack a strong culture, Pascale asserts, are forced to rely on formal controls, leading to an inordinate amount of energy being dissipated fighting the system. Ibid., p. 34.

95 See Stone, op. cit., p. 44.

96 Wolfe, op. cit., pp. 51-52.

97 Chester Barnard tellingly observed that “a person can and will accept a communication as authoritative only when… at the time of his decision, he believes it to be compatible with his personal interests as a whole. Barnard, , Chester, I. 1964, The Functions of the Executive (Harvard University Press, Cambridge, MA), p. 165.

98 A recent article in the Wall Street Journal succinctly makes the point where governmental regulation of business activity is concerned:

In a properly designed institutional and contractual setting, ethical conduct is consonant with, not contrary to, economic gain.

Furbush, , Dean, : 1991, ‘Better Rules for More Ethical Finance’, Wall Street Journal, Nov. 8, p. A14.

99 Cressey and Moore, op. cit., p. 73.

100 Even if outsiders are used, significant employee suspicion will probably need to be overcome if candid responses are to be obtained. Techniques are available, however, to elicit such responses without violating employee privacy or confidentiality. See Dalton, D., and Metzger, M.: 1992, ‘Towards Candor, Cooperation, & Privacy in Applied Business Ethics Research: The Randomized Response Technique’, Business Ethics Quarterly, 2 (2), pp. 207221. Despite what we have said about the desirability of outsiders as ethics auditors, some organizations may prefer to rely on internal auditors. We have addressed this possibility elsewhere. See Metzger, M., Hill, J., & Dalton, D. (1992), ‘How Ethical is Your Company’, Management Accounting (July), pp. 5961.

101 Reynolds, op. cit., p. 22.

102 Ibil., p. 20.

103 On the relationship between organizational ethics and quality, see ‘Ethics, “quality” and the Persian Gulf War’, op. cit., pp. 2, 16.

104 For the assertion that improving a company’s ethical climate can yield dividends in the form of improved employee satisfaction and morale, see Nixon, Wiley, and West, op. cit., p. 18.

105 A major part of a manager’s job is processing information. When truthful information is flowing freely throughout the organization decisionmakers have the “greatest likelihood of formulating realistic objectives and strategies.” Serpa, op. cit., p. 426.

106 It is surely not accidental that the defense industry, which has suffered greatly from ethics scandals, is a leader in corporate ethics programs. See ‘Pitney Bowes’ Ombudsman: Venting Ethical Conflicts’, op. cit., p. 9.

107 See Aupperle, K.E., Carroll, A.B., and Hatfield, J.D.: 1985, ‘An Empirical Examination of the Relationship Between Corporate Social Responsibility and Profitability’, Academy of Management Journal 28, pp. 446–63; Cochran, P.L., and Wood, R.A.: 1984, ‘Corporate Social Responsibility and Financial Performance’, A cade my of Management Journal 27, pp. 4256; McGuire, J.B., Sundren, , and Schneeweis, : 1988, ‘Corporate Social Responsibility and Firm Financial Performance’, Academy of Management Journal 31, pp. 854–72. Also see O’Toole, J.: 1991, ‘Doing Good by Doing Well: The Business Enterprise Trust Awards’, California Management Review 33(3), pp. 9-24, p. 21, for the assertion that “[o]ne may either succeed or fail taking the high road, as one may either succeed or fail taking the low road.”

108 For an exhaustive overview of the state of research on corporate social performance, see Wood, D.J.: 1991, Academy of Management Review 16(4), pp. 691718.

109 See Harrington, S.J.: 1991, ‘What Corporate America is Teaching About Ethics’, Academy of Management Executive 5(1), pp. 21-30, pp. 2122.

110 David Vogel has observed that:

It is irresponsible to imply that acting responsibly is always costless, and it is unethical to base a case for ethics on economic self interest. If we want executives to act more ethically, we need to be more honest with each other. The market has many worthwhile features, but setting an appropriate price on virtue is not among them.

Vogel, D.: 1990, ‘Ethics and Profits Don’t Always go Hand and Hand’, Ethics: Easier Said than Done 2(1), p. 63.

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