Professional Documents
Culture Documents
of Corporate Ethics:
A Case Study
Muel Kaptein
Jan Van Dalen
Introduction
Comprehensive empirical analyses of the ethics
of corporations are rare in spite of the energetic
development of business ethics as a scientific
discipline. Such empirical analyses are highly
relevant from managerial, social and legal points
of view. Management is increasingly interested in
the ethical content of their organization in order
to judge the current state of affairs, to justify their
business activities, or to undertake curative,
repressive or preventive action if necessary
(Kaptein, 1998). Social actors like the government, unions and environmental movements call
on organizations rather than individuals to
account for their moral responsibilities (Kaptein
and Wempe, 1998). Also, primary stakeholders
like consumers (Ferrell and Fraedrich, 1997),
employees (Turban and Greening, 1997) and
shareholders (Frooman, 1997) have been increasingly judging the ethical performance of
organizations. Furthermore, the court system
increasingly deals with the conduct of organizations instead of individuals (see for example,
the American Federal Sentencing Guidelines for
Organizations).
An important cause of the moderate application of empirical analyses in this area is the
absence of an adequate operational definition of
the concept of the ethical company. The ethical
company is used by many as a prescient notion
(e.g., Andrews, 1989; Coye, 1986; Chryssides and
Kaler, 1996; Husted, 1993; LeClair et al., 1998;
Sims, 1991), but is rarely demarcated in a meaningful way. Without a proper conceptualization,
the scientific discussion about the ethics of organizations is of a speculative nature. A second
cause is that some existing conceptualizations of
96
97
98
99
TABLE I
Summary of the three characteristic dimensions of corporate ethics
Type of dilemma
Description
Cause
Consequences of failing
context
Entangled hands
Many hands
Tension between
individual and collective
functions, tasks and
responsibilities within
organizations.
Organizations consist of
departments, units and
individuals having distinct
functional responsibilities,
which creates a potential
for failing awareness of
the interests of colleagues,
other departments, or the
organization as a whole.
Counter-productive
competition between staff,
departments and divisions;
responsibilities getting lost;
collective problems
remaining unresolved;
responsibilities being
shrugged off; and tasks
being not or only partially
performed.
Dirty hands
Tensions between
the interests and
expectations of
organizations and
those of stakeholders.
Organizations have
interests and expectations
that do not necessarily
comply with those of
stakeholders; consequently,
painful decisions
sometimes have to
be made.
Entangled hands
The entangled hands dimension relates to the
degree to which employees are stimulated to deal
carefully with the assets of the corporation.
Employees have their own personal interests and
expectations, which do not necessarily parallel
the interest and responsibilities of the corporation (Hardin, 1988; Nash, 1990; Velasquez,
1992). The entangled hands metaphor is used to
characterize the potential conflicts between the
interests of employees and the interests of the
organization in which the corporate assets are at
stake. Employees using their authority thereby
misuse information, funds, goods, equipment,
100
Many hands
The many hands dimension relates to the
degree to which employees are stimulated to give
expression to the individual and collective functional responsibilities they are assigned to do.
Within a corporation, each employee has his own
job-related duties. Internal specialization and
division of labor make efficient functioning of
organizations possible. However, the distribution
of these functional responsibilities may be coordinated inadequately, with the result that certain
corporate responsibilities may get lost. Unclear
responsibilities can result in collective problems
that remain unresolved because nobody feels
personally responsible for them. An inadequate
coupling of duties and authorities can also lead
to collective responsibilities not being met. See,
for instance, Badaracco (1997), Bovens (1998),
Cohen (1993), Ladd (1970), Steinmann and
Lohr (1992), Stone (1975), Trevio and Nelson
(1999), and Wempe (1998) who identify similar
erosions of responsibilities in corporations. The
metaphor of many hands points to the moral risks
ensuing from the need to employ more than one
employee in an organization. Examples of such
many hands dilemmas are the extent to which
employees should be individually rewarded rather
than collectively, or the extent to which cooperation is desirable, and the degree with which
responsibilities can be delegated. The many
hands dimension will be irrelevant if a corporation consists of only one person.
Dirty hands
The dirty hands dimension relates to the
degree to which employees are directly stimulated to balance the interests of the stakeholders
against the interest of the corporation. The dirty
hands metaphor refers to the proper coordination of business interests with those of stakeholders.2 Stakeholders can have a legitimate
reason to complain when the company does not
recognize their interests or specific expectations
towards the company, or when the company
inadequately distributes the costs and benefits
among various stakeholders or between the stake-
101
TABLE II
The ethics qualities model for describing the ethical content of organizations
Ethics qualities
Organizational dimensions
Entangled hands
responsibilities in
regards to the
organization
Many hands
responsibilities
within the
organization
Dirty hands
responsibilities on
behalf of the
organization
Clarity
It is clear what
stakeholders expect
of employees.
Consistency
Referents make
enough effort to
handle the assets of
the organization
with care.
Sanctionability
If the functional
responsibilities are (not)
realized deliberately,
staff is sanctioned.
If the expectations of
stakeholders are (not)
realized deliberately,
staff is sanctioned.
Achievability
Supportability
The organization
stimulates support for
the careful use of the
corporate assets.
The organization
stimulates support for an
adequate coordination
between employees.
Visibility
(Consequences of )
conduct regarding the
handling of corporate
assets can be observed.
(Consequences of )
conduct regarding the
realization of functional
responsibilities can be
observed.
(Consequences of )
conduct regarding the
realization of stakeholders
expectations can be
observed.
Discussability
102
sion, clarity is the degree to which the organization is clear about how employees should
handle corporate assets. Lack of clarity regarding
the acceptance of gifts, for instance, can lead to
uncertainty among employees, to the idea that
anything goes, and to moral inflation whereby
practice moves steadily away from the desired
norm. The clarity of the expectations in regards
to the conduct of employees is, then, also the first
criterion by which the context can be described.
Without clarity, employees do not, after all,
know what the organization expects from them;
they remain in uncertainty without any apparent
guidance from the organization. Also see Cooke
(1991) and Waters and Bird (1989) who point
out the organizational risks of unclear norms and
values.
Consistency concerns the degree to which the
organizational expectations towards the moral
conduct of employees are coherent, univocal,
unambiguous, and compatible. In their conduct,
employees take into account the conduct of those
they emulate (referents). The management, for
instance, is an important reference group. The
organization may well pose clear expectations
with respect to the behavior of employees, but
if the behavior of referents undermines these
expectations, the guidance of employees may
become inconsistent. Adequate guidance requires
that the desired norms and values be exhibited
by the referents. The example set by management
is the most cited factor for stimulating unethical
behavior; see e.g., Baumhart (1961), Brenner and
Molander (1977), Ciulla (1998), Ford and
Richardson (1994), Hegarty and Sims (1978),
Laczniak and Murphy (1991), Petrick and Quinn
(1997), Stead et al. (1990), Wimbush and
Shepard (1994), and Zey-Ferrell et al. (1982).
Sanctionability refers to the degree to which
negative or positive sanctions can be applied in
connection with irresponsible or responsible
conduct. Sanctions constitute important behavioral stimuli and are, thus, a relevant aspect of the
organizational context. A context in which the
expectations are clear and are borne by the
referents is still vulnerable if unacceptable
behavior is not punished, but rather tolerated
instead. Unacceptable behavior that goes unpunished sends a signal out that meeting expectations
103
104
unit (unit 1) has been selected because it is supposedly fraud-free; the second business (unit 2)
because of the occurrence of several small
instances of fraud; and the third business unit
(unit 3) because of two serious incidents of
internal fraud. The opportunities to commit
fraud, like transferring money to ones own
account, are equally present in all three business
units.
The ethical content of this company was
assessed with the aid of a large questionnaire that
is filled out by all individual employees of the
three business units. The questionnaire is structured along the lines set out in the foregoing
section. It consists of about 200 propositions
about various aspects of organizational context
and ethical conduct, which employees have been
asked to evaluate on 5-point agreement scales.3
The individual perceptions thus obtained form
the basis of the quantitative assessment explained
below. The analysis consists of three steps. First,
the variety and extent of immoral behavior is
examined. Secondly, the relevant organizational
context is quantified by measuring the various
ethical qualities differentiated with respect to the
many hands, entangled hands and dirty hands
dilemmas. Thirdly, organizational context and
ethical consequences are related in order to elicit
those ethical qualities that contribute most
prominently to ethical practice. These key qualities are the starting points for the subsequent
development of an ethics program designed to
improve the ethical content of the organization.
TABLE III
Average values of measures of failing organizational context for the entire organization and selective subpopulationsa,b
Organization
dimension
Results of failing
organizational context
Scale Num.
Reliab. Items
Entire
Organization
Business unit
1
Mean
Nobs
Sig.
Mean
Nobs
Mean
Nobs
Sig.
Many
hands
4
1
1
1
1
3.68
3.62
3.33
3.63
3.11
157
154
150
155
157
3.71
3.65
3.73
3.73
3.36
27
27
27
27
27
3.79
3.71
3.41
3.60
2.90
88
88
88
88
88
3.44
3.41
2.93
3.63
3.41
44
44
44
44
44
0.04
0.30
0.00
0.86
0.03
3.62
3.43
3.35
3.56
3.00
120
120
120
120
120
3.81
4.18
3.26
3.82
3.38
34
34
34
34
34
0.18
0.00
0.68
0.20
0.10
Entangled
hands
Taking/giving gifts
Discrimination/intimidation
Careless use of time
Interpersonal perversities
Careless use of business assets
0.86
0.77
0.63
0.80
0.71
4
4
3
6
6
4.68
4.56
3.61
3.65
4.40
151
154
154
153
153
4.99
4.40
3.39
3.52
4.41
27
27
27
27
27
4.83
4.60
3.60
3.65
4.40
88
88
88
88
88
4.18
4.56
3.76
3.72
4.40
44
44
44
44
44
0.00
0.30
0.17
0.58
1.00
4.66
4.50
3.55
3.61
4.39
120
120
120
120
120
4.67
4.73
3.75
3.72
4.39
34
34
34
34
34
0.94
0.05
0.20
0.44
1.00
Dirty
hands
0.88
0.86
4
4
3.74
4.06
125
126
3.90
4.23
27
27
3.78
4.04
88
88
3.58
3.99
44
44
0.43
0.48
3.65
4.03
120
120
3.99
4.09
34
34
0.09
0.67
The p-values refer to the significance levels of ANOVA tests of hypotheses of the equality of the means in various sub-populations. Low p-values,
say below 0.05 or 0.10, point at the existence of significant differences between the mean values, whereas high p-values indicate that the equality
of means can not be rejected in light of the data at hand.
b
The indicators of the various concepts have been measured as multi-item rating scales. The column Reliab gives Cronbachs internal consistency
as a measure of scale reliability; the next column Num Items gives the number of items on which the indicator is based. In the case of a single item
indicator, the scale reliability can, of course, not be measured and is accordingly reported missing. All items underlying this table have been evaluated on a 5-points agreement scale varying from strongly disagree to strongly agree, except in the case of the entangled hands indicators. In these
latter instants, a 5-points frequency rating is used varying (after re-coding) from often (= 1) to never (= 5). The higher the scores, the less these
unethical practices occur.
Function
105
106
TABLE IV
Mean ethical qualities for the entire organization and for subgroups of business unit and functiona,b
Organization
dimension
Ethical
quality
Scale Num.
Reliab. Items
Business unit
1
Many
hands
0.75
0.59
0.74
0.71
0.66
0.54
0.57
05
02
05
06
02
03
10
Mean Std Nobs Mean Vobs Mean Vobs Mean Vobs Sig.
Mean
4.03
3.84
3.32
3.69
3.94
3.80
3.31
26
26
26
26
26
26
26
4.11
3.84
3.35
3.80
3.90
3.85
3.27
88
88
88
88
88
88
88
3.88
3,84
3.16
3.47
4.06
3.73
3.34
44
44
44
44
44
44
44
0.14
1.00
0.20
0.02
0.54
0.57
0.54
4.02
3.75
3.24
3.66
3.86
3.80
3.25
120
120
120
120
120
120
120
4.07
4.16
3.59
3.70
4.07
3.75
3.48
34
34
34
34
34
34
34
0.69
0.01
0.02
0.75
0.20
0.75
0.03
3.72
26
3.73
88
3.64
44
0.63
3.65
120
3.83
34
0.08
3.77
3.49
3.41
3.74
3.56
3.71
3.49
157
152
155
158
158
149
155
3.79
3.52
3.38
3.73
3.66
3.67
3.39
26
25
27
27
27
27
27
3.75
3.43
3.50
3.72
3.42
3.74
3.50
87
86
84
87
87
82
84
3.78
3,60
3.27
3.79
3.78
3.68
3.52
44
41
44
44
44
40
44
0.96
0.66
0.32
0.90
0.03
0.92
0.70
3.73
3.45
3.36
3.71
3.49
3.75
3.39
119
114
118
120
120
113
118
3.87
3.57
3.55
3.82
3.77
3.53
3.81
34
34
33
34
34
33
34
0.29
0.53
0.23
0.42
0.05
0.28
0.00
3.60
27
3.58
87
3.63
44
0.88
3.56
120
3.71
34
0.14
3.92
3.87
2.67
3.73
3.04
3.71
3.83
125
151
122
150
154
156
128
4.01
3.96
2.42
4.00
2.92
3.69
3.99
21
24
21
22
25
25
21
4.06
3.87
2.72
3.75
3.00
3.78
3.91
70
84
69
85
86
87
73
3.56
3,84
2.72
3.55
3.19
3.60
3.56
34
43
32
43
43
44
34
0.01
0.75
0.53
0.09
0.49
0.32
0.04
3.89
3.82
2.69
3.68
3.03
3.68
3.78
093
114
089
114
117
118
096
3.94
4.03
2.64
3.88
3.15
3.83
3.97
29
33
29
33
33
34
29
0.79
0.09
0.86
0.20
0.52
0.22
0.22
3.52
27
3.58
88
3.40
44
0.11
3.51
120
3.57
34
0.54
Average overall
3.61
27
3.63
88
3.56
44
0.65
3.57
120
3.70
34
0.12
Clarity
Consistency
Sanctionability
Achievability
Supportability
Visibility
Discussability
0.32
0.75
0.80
0.53
0.73
0.95
0.84
02
02
03
03
03
02
08
Clarity
Consistency
Sanctionability
Achievability
Supportability
Visibility
Discussability
0.96
0.66
0.96
0.90
0.72
0.84
04
02
04
02
01
07
04
0.64
0.80
0.76
0.63
0.85
0.67
0.54
0.69
0.98
0.82
0.75
0.76
1.00
0.70
0.84
0.64
1.12
0.79
1.00
0.62
0.73
107
a,b
4.03
3.83
3.49
3.71
3.87
3.76
3.39
158
158
158
158
158
158
158
Clarity
Consistency
Sanctionability
Achievability
Supportability
Visibility
Discussability
Function
108
Results of failing
3.33
3.63
3.11
4.06
4.29
Interpersonal perversities
4.06
3.74
3.39
4.56
Discrimination/intimidation
4.68
3.62
Taking/giving gifts
3.68
average
tion
Organisa-
organizational context
126
125
153
153
154
154
151
157
155
150
154
157
of obs.
Number
0.30
0.50
(0.00)
0.43
(0.00)
(0.00)
(0.10)
0.15
0.30
(0.00)
0.32
(0.00)
0.44
(0.00)
0.37
(0.00)
0.32
(0.00)
0.22
(0.01)
0.33
(0.00)
0.23
(0.29)
0.09
0.16
(0.00)
(0.48)
0.06
0.24
0.18
(0.03)
0.24
(0.00)
0.10
(0.23)
0.18
(0.03)
0.34
(0.00)
0.28
(0.00)
0.58
(0.00)
0.38
(0.00)
tency
Clarity Consis-
(0.91)
0.01
(0.22)
0.11
(0.12)
0.13
(0.00)
0.36
(0.00)
0.28
(0.05)
0.16
(0.21)
0.10
0.21
(0.16)
0.11
(0.01)
0.21
(0.00)
0.25
(0.00)
0.41
tion
(0.00)
0.40
(0.00)
0.34
(0.00)
0.24
(0.00)
0.31
(0.03)
0.17
(0.00)
0.25
(0.61)
0.04
0.13
(0.02)
0.18
(0.30)
0.09
(0.00)
0.28
(0.00)
0.54
ability
(0.79)
0.02
(0.53)
0.06
(0.21)
0.10
(0.02)
0.18
(0.03)
0.18
(0.31)
0.08
(0.01)
0.22
0.23
(0.01)
0.21
(0.38)
0.07
(0.00)
0.28
(0.00)
0.58
ability
(0.00)
0.57
(0.00)
0.47
(0.08)
0.15
(0.06)
0.16
(0.00)
0.26
(0.00)
0.24
(0.88)
0.01
0.15
(0.10)
0.13
(0.09)
0.14
(0.02)
0.19
(0.00)
0.23
bility
(0.00)
0.44
(0.07)
0.16
(0.30)
0.09
(0.00)
0.27
(0.04)
0.17
(0.02)
0.19
(0.54)
0.05
0.19
(0.01)
0.21
(0.09)
0.14
(0.04)
0.16
(0.00)
0.33
ability
Pearson correlations
In all instances, significance values have been reported between parentheses below the correlation coefficients and the parameter estimates.
hands
Dirty
hands
Entangled
Many
dimension
Organization
TABLE V
(0.70)
0.16
(0.53)
0.42
(0.00)
3.20
(0.00)
1.42
(0.00)
1.51
(0.00)
3.15
(0.00)
4.85
1.11
(0.02)
1.50
(0.00)
2.26
(0.03)
1.46
(0.01)
0.93
cept
Inter-
0.04
(0.02)
0.15
(0.38)
0.09
(0.01)
0.21
(0.04)
0.21
(0.71)
0.04
(0.89)
0.01
(0.89)
0.01
0.44
(0.05)
0.37
(0.20)
0.24
(0.40)
0.15
(0.71)
(0.19)
0.13
(0.66)
0.07
(0.07)
0.10
(0.00)
0.22
(0.00)
0.23
(0.04)
0.12
(0.19)
0.09
0.11
(0.88)
0.02
(0.70)
0.06
(0.05)
0.28
(0.00)
0.30
tency
Clarity Consis-
(0.93)
0.00
(0.16)
0.10
(0.77)
0.02
(0.02)
0.19
(0.01)
0.22
(0.54)
0.04
(0.01)
0.20
0.23
(0.24)
0.19
(0.10)
0.27
(0.45)
0.12
(0.49)
0.06
tion
Sanc-
(0.08)
0.12
(0.06)
0.22
(0.61)
0.04
(0.32)
0.09
(0.55)
0.06
(0.26)
0.08
(0.79)
0.02
0.21
(0.78)
0.05
(0.33)
0.18
(0.58)
0.10
(0.00)
0.37
ability
(0.41)
0.04
(0.17)
0.12
(0.91)
0.01
(0.59)
0.05
(0.56)
0.06
(0.26)
0.08
(0.00)
0.25
0.26
(0.31)
0.14
(0.86)
0.02
(0.19)
0.17
(0.00)
0.29
ability
Achiev- Support-
Regression coefficients
Pearson correlations between ethical qualities and various symptoms of failing organizational context a
Visi-
(0.00)
0.45
(0.00)
0.79
(0.82)
0.01
(0.76)
0.02
(0.01)
0.16
(0.01)
0.12
(0.51)
0.04
0.01
(0.51)
0.11
(0.64)
0.08
(0.84)
0.03
(0.03)
0.20
bility
(0.01)
0.20
(0.41)
0.11
(0.53)
0.05
(0.60)
0.06
(0.58)
0.06
(0.32)
0.09
(0.87)
0.02
0.08
(0.24)
0.27
(0.69)
0.09
(0.13)
0.35
(0.23)
0.15
ability
Discuss-
0.53
0.29
0.15
0.29
0.23
0.18
0.10
0.10
0.09
0.06
0.15
0.51
R2
0.24
0.68
0.25
0.40
0.49
0.30
0.37
1.40
1.07
1.06
1.02
0.30
s2
113
113
138
138
138
138
138
147
147
147
147
147
110
111
112
References
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of Marketing Professionals about Ethical Issues
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