Journal of Business Research 55 (2002) 951 962

Perceived risk, moral philosophy and marketing ethics: mediating

influences on sales managers ethical decision-making
John Cherrya, John Fraedrichb,*
a
Department of Marketing, Southeast Missouri State University, Cape Girardeau, MO 63701, USA
b
Department of Marketing, College of Business, Southern Illinois University, Carbondale, IL 62901-4629, USA
Received 1 October 1999; accepted 13 October 2000

Abstract

This study extends previous research in ethical decision-making in marketing. Using Hunt and Vitells [J Macromark 6 (1986) 5] model,
perceived risk is operationalized as the result of insufficient time and information for decision-making where substantial magnitude and
probability for loss is present. Results from a national study of sales managers indicate that risk perceptions affect the relative balance of
nonconsequential and consequential evaluations in forming ethical judgments and intentions. For all subjects, nonconsequential evaluations
contribute more to ethical judgments than consequential evaluations. However, structural analyses of the Hunt and Vitell model reveal that
under higher risk, managers attach greater importance to nonconsequential evaluations than managers who felt less risk. Lower risk is related
to greater use of consequential evaluations in the formation of ethical judgments and intentions. Finally, subjects in the high-risk treatment
group exhibited significantly harsher ethical judgments and less intention to perform the ethically questionable behavior.
D 2002 Elsevier Science Inc. All rights reserved.

Keywords: Risk; Moral philosophy; Ethics; Sales

1. Introduction be useful to examine the antecedents of moral justification:

This investigation explores the psychological and moral
tensions that exist when ideals and values are tested against
the economic consequences of marketing decisions. For
some, ideals and values may be compatible with economic
exigency. Others may sense a difficult trade-off between
personal moral values and the requirements of the market-
place not simply issues of right versus wrong, but
conflicts of right versus right (Badaracco, 1993). For all,
however, it is posited that uncertainties and risks in the
marketplace do act to influence moral reasoning.
Therefore, it seems reasonable to suggest that a better
understanding of the influences on moral reasoning in
this study, risk perception can lead to the practical end
of developing the ethical reasoning processes of managers.
While it may be untenable to suggest that managers
explicitly adhere to formal philosophical maxims, it may
* Corresponding author. Tel.: +1-618-453-7786; fax: +1-618-453-
7747.
E-mail address: fraedric@siu.edu (J. Fraedrich).
the nature and grounds of ethical choices, as well as the
context of ethical decision-making. If we derive a clas-
sification of managerial thought and understand the
assumptions used by managers, we enhance our ability
to challenge and clarify managers ethical reasoning. With
this set of tools, we may be able to point the way to the
higher ground of ethical business conduct.
Numerous studies have strongly established the influence
of formal moral philosophical reasoning in the context of
ethical decision-making. The General Theory of Marketing
Ethics (Hunt and Vitell, 1996), and other theoretical works
(e.g., Ferrell and Gresham, 1985; Ferrell et al., 1989) have
been directly or indirectly supported through substantial
empirical analysis. Moral philosophical constructs such as
deontological and teleological evaluations have been pos-
itively related to ethical decision-making, occasionally with
conflicting results. As noted above, however, it is probably
an overstatement to suggest that marketers use formal moral
philosophies per se. However, it does seem reasonable to
analyze marketers ethical reasoning in terms of more
broadly construed categories of consequential and noncon-
sequential reasoning. This re-construal retains an important

0148-2963/02/$ see front matter D 2002 Elsevier Science Inc. All rights reserved.
PII: S 0 1 4 8 - 2 9 6 3 ( 0 0 ) 0 0 2 1 5 - 0
952 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962
distinction among moral theories, most of which, according
to Nozick (1981), have been fitted into these two powerful
and appealing modes (p. 494).
This study addresses the following questions: what are the
relative influences of nonconsequential and consequential
considerations in forming ethical judgments and intentions?
Do they always have the same influence, or are there
situational or other variables that mediate their impact on
judgments, intentions, and behaviors? Can a situational
variable, e.g., perceived risk, provide insights into a deci-
sion-makers propensity to favor one or another approach to
moral reasoning? The objective of this study is to examine the
influence of perceived risk in the process of ethical decision-
making and to ascertain the influence of risk on the emphasis
given to nonconsequential and consequential considerations
in the presence of an ethical dilemma.
In pursuit of this objective, we first discuss classifications
and empirical research in moral philosophy. Next, we
review the literature concerning risk perception, and con-
clude with a review of empirical works related to marketing
ethics. Hypotheses are developed, the findings are dis-
cussed, and we conclude with a discussion of implications
and limitations of the research.
2. Moral and ethical theories
Philosophers and ethics researchers have found it useful
to make a fundamental distinction among ethical theories.
On one hand, consequentialist ethical theories typically
focus on the ends of actions; the rightness of an action is
totally determined by the consequences of actions (Ferrell
and Gresham, 1985). Nonconsequentialist theories, on the
other hand, concern themselves with questions of moral
obligation, emphasizing the means and motives by which
actions are justified. These are labeled in the current
literature as teleological and deontological theories, respect-
ively (Frankena, 1963; Beauchamp and Bowie, 1979; Lacz-
niak, 1983; Ferrell and Gresham, 1985; Hunt and Vitell,
1986; Robin and Reidenbach, 1987).
Two widely identified variants of teleological theories are
egoism and utilitarianism. Ethical egoism holds that indi-
viduals should promote their own greatest good (Hunt and
Vitell, 1986). Utilitarianism asks simply what alternative
will produce at least as good a balance of good over evil as
any available alternative?
In contrast with consequential teleological theories, non-
consequential theories stress that the rightness of an act is
not determined by its consequences. Instead, certain actions
are correct in and of themselves because they stem from
fundamental obligations (Ashmore, 1987; Laczniak and
Murphy, 1993). Perhaps the best known among these are
deontological theories. Based upon the Greek word deon
meaning duty, deontology expresses the moral obligation to
(among other things) pay our debts and tell the truth because
it is the right thing to do (Reidenbach and Robin, 1990).
While Kant acknowledged that people may perform good
works and derive pleasure in the process, he denied that
such consequences should be their motivation. Essentially,
people can do good things for bad reasons, and when they
do so, these actions, to Kant, have no moral worth.
Research in ethical decision-making in marketing pro-
vides substantial evidence of nonconsequential and con-
sequential moral reasoning, and their influence on ethical
judgments. Moral philosophy plays a central role in theor-
etical models of ethical decision-making (Hunt and Vitell,
1986; Ferrell and Gresham, 1985; Ferrell et al., 1989).
Several empirical studies of moral reasoning have estab-
lished firm links between ethical judgments and intentions
(Fritzsche and Becker, 1984; Robin and Reidenbach, 1988;
Vitell and Hunt, 1990; Mayo and Marks, 1990; Fraedrich
and Ferrell, 1992; Hansen, 1992; Hunt and Vasquez-Par-
raga, 1993; Harris and Sutton, 1995; Akaah, 1997; DeCo-
ninck and Lewis, 1997; Schminke et al., 1997; Thong and
Yap, 1998). While few studies examine actual subsequent
behaviors in situations having ethical content, taken collec-
tively they suggest that the study of moral philosophy is a
viable approach.
3. Review of risk literature
Although expected utility theory has long enjoyed a
central position in the analysis of decisions under risk, its
predictive ability has increasingly been called into question.
Perhaps the most well known alternative is Kahneman and
Tverskys (1979) Prospect Theory, which states that individ-
uals are risk averse in the domain of gains and risk seeking in
the domain of losses. One difficulty in testing prospect theory,
however, relates to its prima facie nature; in the face of gains,
individuals will choose a sure thing over a risky one, other
things being equal. In actual decision situations, however,
other factors including role expectations, organizational
reward structure, and moral and ethical norms may influence
ones choice (Urbany and Dickson, 1990).
While the propensity of managers to take risks and the
cultural approval of risk taking are well noted in the literature
(Kogan and Wallach, 1964; Jackson et al., 1972; Rowe, 1977;
MacCrimmon and Wehrung, 1985, 1986; March and Shapira,
1987), some researchers have observed that the identification
of a generalized risk propensity remains an elusive goal.
Simply classifying risk averters and risk takers ignores some
important characteristics of risky decision contexts, e.g., the
effects of mood (Wright and Bower, 1992), problem framing
(Tversky and Kahneman, 1981; Schneider, 1992), dispersion
of effects (Gioffre et al., 1992), and ambiguity and temporal
sequence of information (Viscusi et al., 1991). Organizational
characteristics such as monitoring, evaluating, and rewarding
outcomes achieved may actually encourage or discourage
risky behavior (Ouchi, 1977; March and Shapira, 1987; Beets
and Killough, 1990). Sitkin and Pablo (1992) have proposed
that by specifying the organizational, psychological, and
 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962
historical antecedents of risk propensity, one can arrive at a
set of situationally grounded predictions for risk taking and
aversion.
In an especially rigorous study of decision-making under
risk, MacCrimmon and Wehrung (1986) have identified
in addition to the most common components of risk, i.e.,
magnitude and probability of loss three common risk
determinants. Lack of time and information for decision-
making, and lack of control over alternative courses of
action reflect the elements that contribute most to subjective
perceptions of risk. Managers commonly attempt to adjust
risky situations by delaying or delegating decisions to gain
time, information, and/or control in the attempt to improve
the set of alternatives from which to choose.
4. Empirical studies of risk factors, ethical norms, and
decision-making
Arguing in favor of his moderate deontology, Etzioni
(1988) provides considerable evidence that economic fac-
tors and moral commitments jointly affect behavior, as well
as each other (p. 64). In a review of moral reasoning and
behavior, Blasi (1980) concluded that the empirical literat-
ure points to a significant relationship between moral
thinking and moral behavior. Hegarty and Sims (1978,
1979) found that a combination of risk-related factors,
including rewards and punishments affect individual behav-
ior. As extrinsic rewards were increased, ethical behavior
decreased. Hovden and Larsson (1987) describe a sample of
Swedish safety executives who reasoned (teleologically)
about the inherent risks in their decision-making, and at
the same time invoked deontological reasoning about indi-
viduals rights to be informed of dangers, the obligations to
punish those responsible for accidents, and their duty to
protect citizens. Song and Yarbrough (1978) have identified
the construct tax ethics, a mixture of deontological and
teleological norms, which is related to tax accountants
compliance with professional standards.
A particularly striking finding from the studies of
decision-making under risk has to do with inherent limi-
tations within such decision-making. March and Shapira
(1987) cite evidence that managers do not weigh all aspects
of a risky situation: heuristics, availability, and recency all
function to delimit the considerations factored into decision-
making situations (Kahneman and Tversky, 1979; Hogarth,
1980; Tversky and Kahneman, 1981). Janis and Mann
(1977) report that decision-makers, faced with immediate
threats, exhibit varying levels of arousal, fail to use available
information, and gravitate towards simple-minded decision
rules (p. 59). Such hypervigilant states, in their account,
lead to emotional arousal and are associated with errors in
judgment and decreased efficiency in cognitive functioning.
One consequence of this arousal is that decision-makers
may exhibit defensive avoidance in business, career, and
marital decisions. These too involve errors in interpreting
953
new information, distorting the implications of unwelcome
information, and general impairment of cognitive efficiency.
In contrast, less risky situations elicit more coping res-
ponses, lowered levels of affective arousal, and fuller use
of available information (Monat et al., 1972) regarding the
possible outcomes of decision-making. Janis and Mann
conclude that a decision-maker facing a dilemma involving
the threat of serious losses and a short deadline for making a
choice will exhibit relatively poor thinking in multivalued
decisions, or those that require evaluating the consequences
of alternative courses of action (p. 61).
Possibly the best known and most extensively tested of
ethical decision-making models, the Hunt and Vitell (1986)
(HV) model postulates that at the heart of the ethical
decision-making process, an ethical judgment is formed
based on deontological and teleological evaluations. Ulti-
mately, these ethical judgments and an individuals teleolo-
gical evaluations influence behavior through the mediating
variable of intentions.
While the HV model has enjoyed substantial validation
(Singhapakdi and Vitell, 1990, 1991; Vitell and Hunt, 1990;
Hunt and Vasquez-Parraga, 1993; Harris and Sutton, 1995;
Akaah, 1997; DeConinck and Lewis, 1997; Thong and Yap,
1998), it remains to consider (1) the relative influence of
nonconsequential and consequential evaluations on ethical
judgments under higher (lower) risk, and (2) the relative
influence of ethical judgments and consequential evalua-
tions on intentions under higher (lower) risk. Specifically,
will perception of risk change the relative influence of
nonconsequential evaluations and consequential evaluations
on ethical judgments, and will risk change the relative effect
of ethical judgments and consequential evaluations on
behavioral intentions?
In cases where risk was not manipulated directly, some
evidence is reported (Mayo and Marks, 1990) that in an
inherently risky marketing research scenario (1) teleological
evaluations were more important than deontological evalua-
tions in forming ethical judgments, and (2) teleological
evaluations were more important than ethical judgments in
forming behavioral intentions. Thong and Yap (1998) report
similarly that individuals teleological evaluations are more
influential of ethical judgments than are deontological
evaluations. On the other hand, most other findings (Vitell
and Hunt, 1990; Hunt and Vasquez-Parraga, 1993; Akaah,
1997; DeConinck and Lewis, 1997), leaving risk weakly
manipulated or uncontrolled altogether, found conversely
that deontological evaluations and ethical judgments were
more predictive of judgments and intentions, respectively.
5. Hypotheses
A central question that arises from the studies cited
remains: how does perceived risk influence nonconsequen-
tial and consequential evaluations, ethical judgments, and
behavioral intentions? In view of the earlier discussion, it
954 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962
seems reasonable to expect that perceived risk will affect
the constructs in the HV model, and more importantly, the
structural parameters linking the predictors and the criteria
within the model. While the latter set of issues has
remained unaddressed in the marketing ethics literature,
it is expected that:
Hypothesis 1: Individuals who perceive greater (lesser)
amounts of risk in an ethical dilemma will differ from
those who perceive less (more) risk in their overall
pattern of decision-making.
Hypothesis 2: Individuals who perceive greater risk in
the ethical dilemma will show a stronger link (higher
path coefficient) between nonconsequential evaluations
and ethical judgments than those who perceive less risk.
Hypothesis 3: Individuals who perceive less risk in the
ethical dilemma will show a stronger link (higher path
coefficient) between consequential evaluations and
ethical judgments than those who perceive more risk.
Hypothesis 4: Individuals who perceive greater risk in
the ethical dilemma will show a stronger link between
ethical judgments and intentions than those who perceive
less risk.
Hypothesis 5: Individuals who perceive less risk in the
ethical dilemma will show a stronger link between
consequential evaluations and intentions than those who
perceive more risk.
In an early study of the ethical judgments of marketing
managers, Fritzsche and Becker (1983) concluded that as
consequences become more severe, individuals ethical judg-
ments become more ethically positive. A subsequent
study, (Fritzsche, 1988) found that subjects indicated less
intention to behave unethically as the risk factors within a set
of ethical scenarios increased in severity. Two other studies,
(Laczniak and Inderrieden, 1987; Dabholkar and Kellaris,
1992) similarly found that the seriousness of negative out-
comes is significantly linked to ethical judgments and inten-
tions. In one of the few studies to actually link risk,
judgments, and behaviors, Bellizzi and Hite (1989) observed
that supervisory reaction is more severe as risk in this case,
negative outcomes become more pronounced.
Jones (1991) has proposed that situational characteristics
of an ethical dilemma, including magnitude, probability, and
temporal immediacy of consequences, produce a condition
of moral intensity. Jones theory, and subsequent empir-
ical investigations of the moral intensity construct (Morris
and McDonald, 1995; Singhapakdi et al., 1996) suggest
strongly that risk perceptions are related to ethical judg-
ments, intentions, and perceptions of an ethical issue. In a
study that parallels Jones moral intensity construct, Robin
et al. (1996) examined the links between perceived import-
ance of an ethical issue, and ethical judgments and inten-
tions. They found that as advertising managers judged an
ethical issue to be lower (higher) in importance, they also
felt the behavior in question was less unethical (more
unethical). Also, as managers judged an ethical issue to be
lower (higher) in importance, they indicated higher (lower)
intentions to undertake the action. Singhapakdi et al. (1999)
have shown that perceived moral intensity is positively
related to perceptions of ethical issues, and ultimately
reduces intentions to act unethically. Therefore, it is
expected that:
Hypothesis 6: Individuals who perceive greater risk in an
ethical dilemma will express more severe ethical judg-
ments of the unethical behavior than individuals who
perceive less risk.
Hypothesis 7: Individuals who perceive greater risk in an
ethical dilemma will express less intention to engage in
the unethical behavior than individuals who perceive less
risk.
Hypothesis 8: Individuals who perceive greater risk in an
ethical dilemma will express significantly higher per-
ceptions that the dilemma presents an ethical issue than
individuals who perceive less risk.
6. Methodology
A national mailing list of sales managers was used to
generate a random sample. Sales managers were deemed
suitable for this research because the scenario described in the
research instrument involves sales practices and decisions
that they, as opposed to salespeople, could conceivably face.
Of the 1809 questionnaires actually delivered, 479 question-
naires were returned, with a total of 419 complete question-
naires a response rate of 23% (419/1809). The data depict
the typical respondent as a married male, between the ages of
45 and 54, with a bachelors degree, and approximately 26
years work experience. The research instrument for this
study was a self-administered questionnaire with a vignette
and several sets of questions to measure all variables, includ-
ing demographics. Information on demographic variables
was collected primarily to determine the similarity of earlier
and later respondents (used as a surrogate for nonrespond-
ents). The extrapolation procedure described by Armstrong
and Overton (1977) revealed no significant differences
between earlier and later respondents on either the sample
demographics or the major constructs measured in the study.
An additional check for demographic differences between the
high- and low-risk treatment groups reveals that such varia-
bles as sex, age, education, and job tenure are not signific-
antly different between the groups (Table 1).
6.1. The risk manipulation
To test the hypotheses of the study, subjects were pre-
sented with a vignette containing an ethical decision situ-
ation: whether to pay a bribe to gain entry into a foreign
market. Two of MacCrimmon and Wehrungs (1986) risk
determinants lack of time and lack of information were
manipulated across two treatment groups to derive high- and
 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962 955

Table 1
Demographic profile of the sample
Variable Grouping All (n=419) High-risk Low-risk c2 P
group (n=215) group (n=204)
Sex male 378 194 184 0.000 .990
female 41 21 20

Marital status single 23 6 17 6.285 .043

married 370 196 174
divorced 26 13 13

Age 18 24 3 0 3 10.457 .063

25 34 15 10 5
35 44 127 58 69
45 54 167 90 77
55 64 91 52 39
65 and over 16 5 11

Education high school 31 17 14 3.781 .436

some college 82 41 41
bachelors degree 160 75 85
some grad school 87 46 41
graduate degree 59 36 23

Job tenure (years) 26.46 27.56 25.31 (t416=1.757; P=.080)

low-risk settings, and subjects were randomly assigned to the
groups. For the high-risk group, the vignette contained
information to indicate the lack of time and information
relative to the decision. The low-risk group received a
questionnaire identical in all other aspects except that the
levels of time and information for making the decision
regarding the payment were greater. Regardless of risk level,
a financial sanction (possible loss of bonus) related to the
individuals action was included. In this way, perceptions of
risk were based upon possible adverse financial consequen-
ces, as opposed to social censure or other outcomes.
Measures of perceived risk indicated that the high- and
low-risk scenarios successfully produced a manipulation of
the risk variable, based on responses to the two-item scale:
. . .the risk involved is very high/very low and unac-
ceptable/acceptable. Overall, subjects in the high-risk
group indicated significantly higher perceptions of risk
(t417df=5.32, P<.000).

Table 2
Correlations table
Nonconsequential Consequential Ethical Intention Ethical Perceived
evaluation evaluation judgment to pay issue risk
Nonconsequential evaluation 6.1492 0.521 0.882 0.827 * *
Significance (1.4534) 0.574 0.793 0.812 * *

Consequential evaluation 0.558 23.1491 0.539 0.510 * *

Significance 0.000 (9.4117) 0.648 0.649 * *

Ethical judgment 0.834 0.604 5.9708 0.760 * *

Significance 0.000 0.000 (1.4123) 0.799 * *

Intention to pay 0.814 0.597 0.776 6.1440 * *

Significance 0.000 0.000 0.000 (1.5683) * *

Ethical issue
0.624
0.377
0.580
0.581 1.7112 *

Significance 0.000 0.000 0.000 0.000 (1.4981) *

Perceived risk
0.527
0.538
0.526
0.543 0.339 2.5060

Significance 0.000 0.000 0.000 0.000 0.000 (1.7339)

Alpha 0.92 0.70 0.92 0.97 * 0.76

Correlations for entire sample below the diagonal.
Means (standard deviations) for entire sample reported on the diagonal.
Z-score correlations above the diagonal; upper figure in each cell=high-risk group, lower figure=low-risk group.
956 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962

Table 3
Multivariate test of significance: high- and low-risk groups and predictors of ethical judgments and intentions
Test Value F Significance
Pillais trace 0.050 3.604 0.002
Wilks lambda 0.950 3.604 0.002

Univariate tests of significance

Variable F Significance Group Mean S.D. n
Nonconsequential evaluationa 8.687 0.003 High risk 6.35 1.32 215
Low risk 5.94 1.56 204
Consequential evaluationb 4.227 0.040 High risk 24.28 9.57 215
Low risk 22.41 9.07 204
Ethical judgmentc 5.978 0.015 High risk 6.13 1.33 215
Low risk 5.80 1.48 204
Intentiond 18.937 .000 High risk 6.46 1.18 215
Low risk 5.81 1.84 204
Ethical issuee 5.241 0.023 High risk 1.55 1.30 215
Low risk 1.88 1.67 204
a
1=ethical, 7=unethical.
b
Lower score=more positive, higher score=more negative.
c
1=ethical, 7=unethical.
d
1=likely/possible/definitely would, 7=unlikely/impossible/definitely wouldnt.
e
1=ethical issue agree, 7=ethical issue disagree.

6.2. Measures used in the studies
To measure nonconsequential evaluations, the question-
naire used two semantic differential items, anchored by
ethical/unethical and acceptable/unacceptable, in
response to the statement: regardless of the consequences,
for you to make the payment would be. . . Consequential
evaluations were measured with a scale derived using Fish-
bein and Azjens (1975) elicitation procedure, which has been
successfully used by Dubinsky and Loken (1989). Respond-
ents were presented with a set of six statements of possible
outcomes, with negative items reverse scored. For each item,
the respondent indicated the likelihood of the outcome. This
score was weighted by the respondents corresponding evalu-
ation of the goodness or badness of each outcome, to
form a composite measure of consequential evaluations.
Ethical judgments were measured using a four-item
semantic differential scale (Dabholkar and Kellaris,

Table 4
Model comparison and parameter estimates
Model c2 df P gfi agfi rmr
A: restricted 58.474 7 .000 .931 .804 .145
B: unrestricted 3.339 2 .188 .996 .957 .069
c2 55.135 5 .000

One degree-of-freedom tests: paths 1 4 compared with restricted model

Freed path: c2 change P
P1: nonconsequential evaluation!ethical judgment 14.295 .000
P2: consequential evaluation!ethical judgment 8.219 .004
P3: ethical judgment!intention 6.272 .012
P4: consequential evaluation!intention 3.919 .048

Path loadings
Parameter High risk t Low risk t
P1: nonconsequential evaluation!ethical judgment .82 20.081a .62 12.002a
P2: consequential evaluation!ethical judgment .10 2.564a .29 5.574a
P3: ethical judgment!intention .11 1.202 .30 4.515a
* nonconsequential evaluation!intention .65 7.153a .47 7.599a
P4: consequential evaluation!intention .09 1.741 .18 3.580a

Squared multiple correlation: ethical judgment .78 .68

Squared multiple correlation: intention .65 .74
gfi=goodness of fit index; agfi=adjusted goodness of fit index; rmr=root mean square residual.
a
P<.05.
 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962 957

1992). Intentions were indicated using a semantic differ-
ential scale (Fritzsche and Becker, 1984). Respondents
were asked: In the scenario you just read, if you were
responsible, what are the chances that you would make the
payment? To Fritzsche and Beckers original definitely
would/definitely would not, have been added the items
likely/unlikely and possible/impossible. The latter
two semantic differential items were added to improve
the reliability of the measure. The vignette(s) appear in the
Appendix A.
6.3. Perceived ethical content
A final concern was whether respondents sensed the
presence of an ethical issue. A single item for the ethical
content check yielded a mean for all respondents of 1.71
(1=agree; 7=disagree that the scenario presents an ethical
issue). Apparently, all subjects felt the presence of an ethical
issue in the scenario.
All multiple-item measures included in the study dem-
onstrated acceptable reliability, as measured by coefficient
alphas ranging from 0.7 to 0.92. These are reported, along
with correlations among the constructs, in Table 2.
7. Results
Multivariate analysis of variance (MANOVA) was used
to test for differences between the high- and low-risk groups
on the constructs of the model (Table 3).
The main effect of risk on the variables in Hypotheses 6,
7, and 8 was significant. Boxs test of equality of covariance
matrices shows no difference between the covariance mat-
rices across treatment groups (Boxs M=11.60, P=.327).

Fig. 1. Model and parameter estimates.

958 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962

Subsequent univariate tests revealed that subjects in the
high-risk treatment group responded with more severely
negative ethical judgments, less intention to make the
payment, and felt more strongly that the scenario presented
an ethical issue in support Hypotheses 6, 7, and 8. In
addition, subjects in the high-risk group reveal significantly
more negative nonconsequential evaluations, as well as
more negative consequential evaluations.
To test Hypotheses 1 through 5, that high- and low-risk
subjects would display relatively different overall response
patterns in their ethical reasoning not merely differences
among the constructs themselves a structural model was
estimated to test for differing parameter values across the
high- and low-risk groups. Z-scores were used as inputs to
offset the differing scales of measurement used for the
constructs. Correlations among the Z-scores, as well as
means and standard deviations are presented for both high-
and low-risk groups in Table 2.
Hypothesis 1 states that individuals in the high- and low-
risk groups will differ in their overall pattern of responses to
the ethical dilemma. To test the null hypothesis of no
difference across the structural parameters of the model,
the model was first estimated with all parameters con-
strained to be equal across the high- and low-risk groups
(Model A, restricted model). Data in Table 4 show the
restricted model to be a poor fit (c7df2=54.47, P=.000). A
second model (Model B) was estimated with all parameters
freed; this model indicates a reasonably good fit between the
data and model (c2df2=3.339, P=.188). The resulting chi-
square change suggests the fit for Model B is significantly
better than for Model A, and therefore Hypothesis 1 (sub-
jects overall response patterns across the high- and low-risk
scenarios are different) is supported.
To examine Hypotheses 2 through 5, a series of one
degree of freedom pairwise comparisons of high- and low-
risk groups was conducted separately for each hypothesized
path. In each case, the restricted model (A) was compared
to a nested model having each specific parameter freed for
estimation, one at a time. Any chi-square difference in the
two models would come directly from the difference in fit
attributed to the freed path a significant chi-square
difference figure for the two models would suggest the
path estimates are significantly different. All four of the
paths in Hypotheses 2 through 5 proved different between
high- and low-risk groups; three of four in the direction
expected (Fig. 1).
Parameter estimates from Model B, reported in Table 4,
reveal that subjects in the high-risk group show greater
emphasis on nonconsequential evaluations in forming eth-
ical judgments than subjects on the low-risk group, in
support of Hypothesis 2. Conversely, subjects in the low-
risk group showed significantly greater emphasis on con-
sequential evaluations in forming their ethical judgments
than subjects in the high-risk group, in support of Hypo-
thesis 3. Hypothesis 4 predicted that subjects in the high-
risk group will show greater influence of ethical judgments
on intentions than their low-risk counterparts. The parameter
for subjects in the high-risk group was not significant,
however, and no support is found for this prediction.
Parameter estimates of the direct influence of consequen-
tial evaluations on intentions show that subjects in the low-
risk treatment group make greater use of consequential
evaluations in forming intentions than subjects in the
high-risk group, in support of Hypothesis 5.
An unexpected finding suggested by modification indi-
ces from the structural analysis is that nonconsequential
evaluations have a significant direct influence on behavioral
intentions for both high- and low-risk groups a relation-
ship not suggested by the Hunt and Vitell theory. The
apparently strong relationship between nonconsequential
evaluations and intentions is possibly attributable to com-
mon methods variance, and/or construction of the question-

Table 5
Summary of hypothesis tests
Hypothesis 1: Individuals who perceive greater (lesser) amounts of risk in an ethical dilemma will differ supported
from those who perceive less (more) risk in their overall pattern of decision-making.
Hypothesis 2: Individuals who perceive greater risk in the ethical dilemma will show a stronger link supported
(higher path coefficient) between nonconsequential evaluations and ethical judgments
than those who perceive less risk.
Hypothesis 3: Individuals who perceive less risk in the ethical dilemma will show a stronger link supported
(higher path coefficient) between consequential evaluations and ethical judgments
than those who perceive more risk.
Hypothesis 4: Individuals who perceive greater risk in the ethical dilemma will show a stronger link not supported
between ethical judgments and intentions than those who perceive less risk.
Hypothesis 5: Individuals who perceive less risk in the ethical dilemma will show a stronger link supported
between consequential evaluations and intentions than those who perceive more risk.
Hypothesis 6: Individuals who perceive greater risk in an ethical dilemma will express more severe supported
ethical judgments of the unethical behavior than individuals who perceive less risk.
Hypothesis 7: Individuals who perceive greater risk in an ethical dilemma will express less intention to supported
engage in the unethical behavior than individuals who perceive less risk.
Hypothesis 8: Individuals who perceive greater risk in an ethical dilemma will express significantly higher supported
perceptions that the dilemma presents an ethical issue than individuals who perceive less risk.
 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962
naire. This relationship is not unique to this study, however.
Of the studies which measure these and similar constructs,
only a few (Vitell, 1986; Mayo and Marks, 1990; Hunt and
Vasquez-Parraga, 1993) report correlation matrices, and
they also find a strong association among deontological
evaluations, ethical judgments, and intentions. The studys
hypotheses and findings are summarized in Table 5.
8. Discussion of findings and implications
Taken collectively, the findings suggest that, regardless
of risk perception, nonconsequential evaluations out-
weigh consequential evaluations in forming ethical judg-
ments for all the respondents in the study. This finding
supports several previous studies of the Hunt and Vitell
theory, which report that, in the relative sense, nonconse-
quential evaluations generally outweigh consequential eval-
uations in forming ethical judgments. In the absolute sense,
however, the results also suggest that heightened risk
perception in support of Janis and Manns account of
decision-making tends to increase the impact of non-
consequential evaluations in forming ethical judgments. At
the same time, reduced risk perceptions apparently cause
consequential evaluations of outcomes and consequences to
have a greater voice both in the formation of ethical
judgments and behavioral intentions.
This latter finding should hold considerable interest for
those who believe that teleological reasoning about outcomes
may erode an organizations ethical culture. Bellizzi and Hite
(1996), for example, argue that when consequences play
more of a role in decision-making than the act itself, sales
managers may be inclined to overlook and even to encourage
unethical sales force behaviors. Hunt and Vasquez-Parraga
(1993) argue that behavior-based control systems for mon-
itoring, directing, and compensating employees as
opposed to outcome-based systems should require that
sales managers follow an internalized set of deontological
norms that focus on the intrinsic characteristics of acts that
make them right or wrong. To the extent that employees
adhere to ethical reasoning based on the intrinsic properties of
certain behaviors, they will better support an organizations
long-term goals and contribute to a more ethical organiza-
tional climate (Hunt and Vasquez-Parraga, 1993).
For decision-makers who nevertheless are more comfort-
able weighing the relevant costs and benefits of their choices,
it is advisable to consider the practical difficulties of con-
sequences-based ethical reasoning. Smart (1961) has argued
that the utilitarian (teleologist) can never anticipate all the
consequences for all the parties involved; consequences are
like ripples in a pond. A case in point has to do with a
number of much publicized incidents from recent years
involving U.S. auto manufacturers. In the case of the Pinto,
and later, the Chrysler minivan, cost/benefit calculations
suggested it was the better choice not to make design changes
in the interests of safety even when safety concerns had
959
come to decision-makers attention. The conclusion reached
in both these cases was that it would cost less to settle
anticipated lawsuits than to modify the design of the vehicle.
In hindsight, it is clear that the outcome-based reasoning of
the parties involved failed to anticipate the extent of the
damages or the public relations problems that eventually
followed.
It may be argued in these cases that the automakers either
did not perceive the ethical dimensions of the situation, or that
they believed that the primary issues are basically economic
issues, with no moral worth. If either is correct, it only serves
to amplify Belizzis concern about the ways in which out-
come-based decision processes may overlook some of the
unpleasant ethical side effects of critical decisions. At the
same time, this would point to the need for organizational
ethical guidelines that focus strongly on the intrinsic prop-
erties of choices and acts.
As noted, the results of the study find a relatively greater
voice for nonconsequential evaluations in making ethical
judgments. This does not necessarily imply, however, that
outcome-based evaluations may always be expected to
recede to the background. While the manipulation of risk
did not actually reverse the relative importance of nonconse-
quential and consequential evaluations, the results of the
study show clearly that lower perceptions of risk lead to
significantly more favorable ethical judgments of bribery, and
greater inclination to make such payments. As comfort levels
in an ethical dilemma increase, or the apparent balance of
possible outcomes becomes more favorable, it is plausible to
speculate that consideration of outcomes may actually over-
take a sales managers beliefs about the intrinsic rightness or
wrongness of paying a bribe. In addition, it seems likely that
when less risk is felt, as in decisions concerning everyday
routine tactical and implementation matters, employees will
probably be subject to more ethical lapses the giving of
small gifts, for example.
The findings of this study have significant implications for
the design of effective organizational codes of ethics. To
understand better how to use risk as a deterrent, it is important
to consider the source of risk. To the extent that risk is the
product of situational ambiguity lack of time, information,
and/or control employees may tend to more strongly
endorse and adhere to nonconsequential precepts within
ethical codes, seeing them as a set of rules and principles to
simplify ethical decision-making. Accordingly, it may be in
the firms best interest to preserve this element of uncertainty.
Business people may show strong support for the organiza-
tions ethical principles, perhaps because of moral convic-
tions, but also because of general unease about possible risks,
the difficulty of anticipating all the outcomes of their deci-
sions, and for the heuristic value of ethical codes founded on
nonconsequentially based rules and imperatives concerning
the intrinsic properties of certain behaviors.
Ghosh and Crain (1995) argue that the Internal Revenue
Services conscious efforts to make the audit environment
more uncertain are effective in controlling unethical tax
960 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962
reporting. The challenge for designers of ethical codes is to
establish guidelines that operate effectively as a deterrent by
creating risk perceptions based on appropriate tangible
information, i.e., organizational procedures and values,
and unambiguous information about the strength of the
firms position without unintentionally encouraging
outcome-based evaluations of the ethical dilemma.
8.1. Limitations of the study
The choice of a single scenario raises concerns about the
generalizability of the results. Because of the situational
quality of moral deliberation, it would be unwarranted to
suggest that similar results would hold for all situations
having ethical content. Additionally, it is possible that the
sample for this study sales managers may exhibit
different responses to ethical dilemmas and risky decisions
than market researchers, or retail sales personnel, for
example. The results reported here should be tested against
other samples using a variety of scenarios. A more serious
limitation has to do with the measure of nonconsequential
evaluations. A more detailed approach to measuring man-
agers beliefs about rights, duty, and justice would provide a
stronger comparison with teleological evaluations, and the
influence of risk perception on each.
9. Implications for future research
One question that designers of organizational ethics
codes might consider is What kinds of moral philosophies
will be most effective in maintaining ethical behaviors? It
may be reasonable to assume, on the basis of our results,
that deontological arguments dealing with the intrinsic
properties of ethical reasoning concerns for justice and
the rights of the parties involved, as opposed to desired
outcomes are more persuasive, especially under higher
risk conditions, if only because they are easier to remember,
and fit better with the high-risk decision-making mind-set
(Janis and Mann, 1977). The relative accessibility from
memory of consequential and nonconsequential moral rea-
soning in the context of organizational ethical codes remains
an open question.
Another question, which may have far-reaching implica-
tions for ethics research in business, deals with the means by
which researchers have historically operationalized the
decision-making process. At first glance, it would seem that
higher risk entailing harsher consequences and uncertain
probabilities deals entirely with teleological judgments. If
this is true, how then can decision-makers emphasize the
intrinsic moral worth of the behavior without regard for
consequences as risk goes up? The answer may be that they
dont, entirely. Possibly, the measurement for nonconsequen-
tial evaluation (it is unacceptable. . .) may be deeply
confounded with subjects affective responses to the ethical
dilemma.
It is plausible to speculate that the nonconsequential
statements such as: it is just wrong to pay a bribe. . .
and one has no obligation to make the payment have an
immediacy similar to a gut-level response which
suggests something besides the cognitive complexities of
deontological thought. In his Ethics, Dewey (1932) makes
the observation that much of human behavior is met with an
unmediated stamp of approval or disapproval. This leads
him to conclude that an ethic of approbation and condem-
nation in addition to deontological and utilitarian (tele-
ological) reflection is a third independent variable of
ethical theory.
In the Fishbein and Ajzen (1975) theory judgments of
evaluative character are subordinated into a cognitively
driven attitude model. Affect, however, may better be
conceptualized as a valenced feeling state, and not merely
an evaluative judgment. The limitations of capturing and
recording unmediated affective processes are well noted
(Cohen and Areni, 1991). Although attempts to measure
cognitively unmediated affective responses have proven
problematic, advances in this area should greatly enhance
our understanding of moral reasoning.
Finally, some have suggested that purely consequential
analyses do not imply moral imperatives, but merely
hypothetical ones (Mascarenhas, 1995). Do managers
who emphasize outcomes perceive their actions as less
moral and does this self-perception lead to unethical
behaviors? In the demanding arena of sales management
and personal selling, sales personnel continuously find
themselves balancing conflicting duties and expectations.
Bribery, in particular, has emerged as an especially
significant area of concern in a survey of managers (Hunt
et al., 1984). A question that remains to be addressed has
to do with whether such conflicts lead to a form of
emotional exhaustion a product of role ambiguity and
role conflict, among other factors with resultant dec-
reased feelings of job satisfaction, organizational commit-
ment, and increased turnover intentions (Babakus et al.,
1999).
The answers to these questions will have far-reaching
implications for better sales-force management, and ulti-
mately, for the design of more effective organizational
ethical codes. Future research in ethical decision-making
should incorporate, beyond formal moral philosophical
abstractions, the emotional dimensions of ethical dilemmas
facing the organizations most visible decision-makers.
Appendix A. (measures indicated in CAPS)
This survey is aimed at understanding how people think
about business problems. In this questionnaire, there are no
right answers in the way there are right answers to math
problems. In exchange for your help, your privacy is
guaranteed: your responses in this questionnaire will be
completely anonymous.
 J. Cherry, J. Fraedrich / Journal of Business Research 55 (2002) 951962
A.1. (HIGH-RISK SCENARIO)
Rollfast Bicycle has been barred from entering the
market in a large Asian country by the concerted efforts
of local bicycle manufacturers. Rollfast could expect to net
very substantial profits from sales if it could penetrate the
market. Last week a businessman from the country in
question contacted you and stated that entry into this market
could be had for an under-the-table payment that you
personally could afford. However, the payment must be
received by the end of the day, tomorrow.
You have been with Rollfast for a number of years, and
while youve always been a solid performer, you never quite
closed that breakthrough deal. If you can close this one,
though, it seems clear you can take an early retirement.
However, if you are caught you will more than likely be out
of a job. You have no information concerning what is
usually done in these situations, and since the payment
is expected tomorrow, you have no time to gather additional
information. About all you do know is that the payment is
not actually illegal.
A.2. (LOW-RISK SCENARIO)
Rollfast Bicycle has been barred from entering the
market in a large Asian country by the concerted efforts
of local bicycle manufacturers. Rollfast could expect to net
very substantial profits from sales if it could penetrate the
market. Last week a businessman from the country in
question contacted you and stated that entry into this market
could be had for an under-the-table payment that you
personally could afford. However, the payment must be
received by the end of next month.
You have been with Rollfast for a number of years, and
while youve always been a solid performer, you never quite
closed that breakthrough deal. If you can close this one,
though, it seems clear you can take an early retirement.
However, if you are caught, there is some chance of losing
your annual bonus. You know the payment is not actually
illegal, and you are aware of occasions in the past when
such payments have been made with no financial penalties
imposed on anyone involved.
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