The morals of moral hazard: a contracts approach

Although moral hazard is a well‐known economic concept, there is a long‐standing controversy over its moral implications. The language economists use to describe moral hazard is often value‐laden, and implies moral judgments about the persons or actions of economic agents. This in turn leads some to question whether it is actually a scientific concept, or simply a convenient tool for criticizing certain public policies. At present, there is no consensus about the moral meaning of moral hazard, or about whether the concept can be salvaged by economists. As a first step toward resolving this problem, I suggest a contracts approach to moral hazard. I use the ‘title‐transfer’ theory of contract to clarify the moral content of moral hazard, thereby increasing its value to scholars in numerous disciplines. A contracts view is useful for economic policy discussions because it does not include hidden value judgments. At the same time, however, it is also valuable for ethicists because it directly explains a moral dimension of behavior under moral hazard, namely, the violation of property rights.     

Editorial: Special Issue on the Impact of Business Ethics on Public Life

Even though management scholars have offered several views on the process of corporate sustainability, these efforts have focused mainly on the technical aspects of sustainability while omitting the fundamental role played by individual moral competences. Therefore, previous work offers an incomplete and somewhat reductionist view of corporate sustainability. In this article, we develop a holistic framework of corporate sustainability in which both the moral and technical aspects of sustainability are considered. We do so by integrating the ethical, normative perspective of the Catholic social teaching (CST) with the competitive view of the natural resource-based view. This framework highlights the importance of CST principles and ideas in developing executive moral competences such as moral sensitivity and awareness, and moral cognition and motivation. Moral competences, in turn, influence the organizational selection of environmental strategies, giving leaders the intrinsic motivation to promote both a longer-term stance on corporate sustainability efforts and a relentless search for greener business models. Such strategies move the firm closer towards achieving environmental sustainability. Hence, by bridging the individual, normative-ethical with the organizational, implementational levels of corporate sustainability, our framework provides a more realistic, coherent, and complete perspective on the complex process of achieving corporate sustainability.     

Being “in Control” May Make You Lose Control: The Role of Self-Regulation in Unethical Leadership Behavior

In the present article, we argue that the constant pressure that leaders face may limit the willpower required to behave according to ethical norms and standards and may therefore lead to unethical behavior. Drawing upon the ego depletion and moral self-regulation literatures, we examined whether self-regulatory depletion that is contingent upon the moral identity of leaders may promote unethical leadership behavior. A laboratory experiment and a multisource field study revealed that regulatory resource depletion promotes unethical leader behaviors among leaders who are low in moral identity. No such effect was found among leaders with a high moral identity. This study extends our knowledge on why organizational leaders do not always conform to organizational goals. Specifically, we argue that the hectic and fragmented workdays of leaders may increase the likelihood that they violate ethical norms. This highlights the necessity to carefully schedule tasks that may have ethical implications. Similarly, organizations should be aware that overloading their managers with work may increase the likelihood of their leaders transgressing ethical norms.     

Schadenfreude: The (not so) Secret Joy of Another’s Misfortune

Despite growing interest in emotions, organizational scholars have largely ignored the moral emotion of schadenfreude, which refers to pleasure felt in response to another’s misfortune. As a socially undesirable emotion, it might be assumed that individuals would be hesitant to share their schadenfreude. In two experimental studies involving emotional responses to unethical behaviors, we find evidence to the contrary. Study 1 revealed that subjects experiencing schadenfreude were willing to share their feelings, especially if the misfortune was perceived to be deserved (i.e., resulting from unethical behaviors). Study 2 extends this work by incorporating schadenfreude targets of different status (CEO versus employee). Consistent with the “tall poppy syndrome,” subjects were more willing to share schadenfreude concerning high status targets than low status targets when the perceived severity of the target’s misconduct was low. This status effect disappeared at higher levels of perceived deservingness, however. Reported willingness to share schadenfreude was strongest at these levels but did not differ significantly between high and low status targets. These findings build on the social functional account of emotions, suggesting that sharing schadenfreude may signal normative cues to others regarding workplace behaviors that are deemed to be unethical.     

The Influence of Corporate Culture on Managerial Ethical Judgments

The contention that organizational culture influences ethical decision making is not disputable. However, the extent to which it influences ethical decision making in the workplace is a topic for scholarly debate and investigation. There are scholars who argue that, though corporate values are a powerful force in explaining the behavior of individuals and groups within organizations, these values are unperceived, unspoken, and taken for granted. However, there are others who argue that the formalization of corporate values facilitates job and role clarity and is the key to influencing employee behavior. The purpose of this study is to examine the extent of the influence of organizational codes of ethics. The findings suggest that, depending upon the particular situation, corporate culture and ethics may mitigate individual personal moral convictions about right and wrong.     

Do employees value strategic CSR? A tale of affective organizational commitment and its underlying mechanisms

Virtually all studies that focus on the relationship between CSR perceptions and employees’ organizational commitment have not taken into consideration the fit between social and environmental activities and a firm’s business‐unit strategy. This is essential to inquire because scholars have argued that when companies ingrain CSR activities into their strategy‐making process (i.e., in their vision, mission, and overall business model), this might send a more compelling message that resonates closer to workers’ personal standards, and actually enhance employee‐level outcomes. Nevertheless, there is no certainty “if” and “how” these evaluations could affect employees’ organizational commitment. To address this issue, we use cue consistency theory and social identity theory as overarching frameworks to develop a model where we conceptually link perceptions of strategy‐CSR fit with a particular type of organizational commitment: affective. In addition, we posit and test three mediators to understand the underlying psychological mechanisms of this relationship: perceived external prestige, organizational identification, and work meaningfulness. Through structural equation modeling, and using a heterogeneous final sample of 579 employees, we find compelling evidence to support the fact that strategy‐CSR fit enhances employees’ affective organizational commitment through the proposed mediators. Academic contributions and practical implications are then discussed.     

Character and Environment: The Status of Virtues in Organizations

Using evidence from experimental psychology, some social psychologists, moral philosophers and organizational scholars claim that character traits do not exist and, hence, that the philosophical tradition of virtue ethics is empirically inadequate and should dispose of the notion of character to accommodate the empirical evidence. In this paper, I systematically address the debate between dispositionalists and situationists about the existence, status and properties of character traits and their manifestations in human behavior, with the ultimate goal of responding to the question whether virtue ethicists need to abandon the very enterprise of building a character-based moral theory in business ethics and organizational behavior. In the course of this paper, I shall defend the claim that the situationist argument relies on a misinterpretation of the experimental evidence. Miguel Alzola is a Fulbright Fellow from Argentina completing his Ph.D. in Business Ethics at Rutgers University. He is doing research on moral psychology, virtue ethics and organizational behavior at the Prudential Business Ethics Center.     

Organisational Whistleblowing Policies: Making Employees Responsible or Liable?

This paper explores the possible impact of the recent legal developments on organizational whistleblowing on the autonomy and responsibility of whistleblowers. In the past thirty years numerous pieces of legislation have been passed to offer protection to whistleblowers from retaliation for disclosing organisational wrongdoing. An area that remains uncertain in relation to whistleblowing and its related policies in organisations, is whether these policies actually increase the individualisation of work, allowing employees to behave in accordance with their conscience and in line with societal expectations or whether they are another management tool to control employees and protect organisations from them. The assumptions of whistleblower protection with regard to moral autonomy are examined in order to clarify the purpose of whistleblower protection at work. The two extreme positions in the discourse of whistleblowing are that whistleblowing legislation and policies either aim to enable individual responsibility and moral autonomy at work, or they aim to protect organisations by allowing them to control employees and make them liable for ethics at work.     

Business Ethics: A Study of the Moral Reasoning of Selected Business Managers and the Influence of Organizational Ethical Climate

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

Intrinsic limitations of property rights

Many people take for granted an absolute conception of property rights. According to this conception, if I own a piece of property I have a moral right to do with it as I please, irrespective of the needs of others.This paper articulates an argument against this conception of property rights. First, it shows that there are many possible conceptions of property rights, and that there are significant differences among the models of ownership which have prevailed in different societies. Then, it argues that there are decisive grounds to refuse to grant that property owners have a moral right to exercise absolute control over their property, and that ownership implies not only rights but also duties and limits.J. M. Elegido is Head of the Department of Business Ethics in the Lagos Business School. He has a doctorate in Law and has published numerous articles on social and legal philosophy and on legal issues in professional and academic journals. He has just published a book on Jurisprudence.     

Individual pay for performance and commitment HR practices in South Korea

Despite the rapid growth of the use of pay-for-individual-performance systems in collectivistic societies including Korea, there are very few empirical studies regarding their effects on employee attitudes. With a data-set of 37 companies and 959 employees from South Korea, this research examines whether the new compensation system influences Korean employees’ organizational commitment and work effort and how these effects are moderated by HR practices. Using Hierarchical Linear Modeling, we found that pay-for-individual performance and commitment to HR practices did not have effects on organizational commitment, but a positive interaction effect was found. Regarding work effort, positive effects of pay-for-individual performance and the commitment HR were found as well as a significant interaction effect between them. Implications of the results are included.     

Towards Enforceable Bans on Illicit Businesses: From Moral Relativism to Human Rights

Many scholars and activists favor banning illicit businesses, especially given that such businesses constitute a large part of the global economy. But these businesses are commonly operated as if they are subject only to the ethical norms their management chooses to recognize, and as a result they sometimes harm innocent people. This can happen in part because there are no effective legal constraints on illicit businesses, and in part because it seems theoretically impossible to dispose definitively of arguments that support moral relativism. Progress is being made, however, towards a “second best” arrangement consisting of widespread institutional agreements regarding ethical norms. This development might eventually enable us to transcend moral relativism in some respects. Indeed, although some business ethicists who examine illicit business practices accept moral relativism, others attempt to surmount it. The latters’ endeavor, I show, is cross-cultural in nature in that it involves businesses that are deemed illicit in at least one but not every culture. I then recall some traditional solutions and their limits: ideological teachings are culture-specific, hence both temporally and spatially limited; legal constraints, though potentially helpful, are too diverse hence often narrow in reach. Especially problematic are defense industry businesses, which are inherently transcultural and, though uniquely harmful, are not effectively banned in any culture. Harm to quality of life (QoL) can, however, be measured. So I recommend institutional support for international human rights tied to QoL data as a workable way to counter moral relativism regarding illicit businesses.     

The Evolution of Business Groups’ Corporate Social Responsibility

Although establishing gender equality in board and managerial positions has recently become more important for organizations, companies with low levels of gender diversity seem to perceive an ethical dilemma regarding the ways, in which they attempt to attain it. One way that organizations try to move toward gender equality is through the use of their corporate websites to manage potential applicants’ impressions of their current levels of, and actions to improve, gender diversity. The dilemma is whether to truthfully communicate their low level of gender diversity, conceal it, or exaggerate it. On the one hand, organizations that are truthful may find it difficult to achieve equality because women are less attracted to companies that lack diversity. On the other hand, organizations that are untruthful risk their moral legitimacy. The present work investigates gender diversity-related communication on the corporate websites of 99 major German companies. Based on theoretical work on minority attraction, we apply an organizational impression management taxonomy to guide our in-depth content analysis. With this approach, we hope to advance the understanding of how the issue of gender diversity is presented on corporate websites, which is useful for both organizational decision makers as well as diversity researchers. We found that although gender diversity-related communications on corporate websites contain both assertive and defensive organizational impression management tactics, as well as a third type of tactic we refer to as “acknowledgement,” assertive tactics were used more frequently. We argue the existence of a paradox whereby organizations use assertive impression management tactics to maintain pragmatic legitimacy but compromise their moral legitimacy by doing so. Furthermore, we argue that moral legitimacy can be maintained or restored through the sincere use of defensive impression management tactics and acknowledgement.     

“Moral Distance” in Organizations: An Inquiry into Ethical Violence in the Works of Kafka

In this paper, we demonstrate that the works of Franz Kafka provide an exemplary resource for the investigation of “moral distance” in organizational ethics. We accomplish this in two ways, first by drawing on Kafka’s work to navigate the complexities of the debate over the ethics of bureaucracy, using his work to expand and enrich the concept of “moral distance.” Second, Kafka’s work is used to investigate the existence of “ethical violence” within organizations which entails acts of condemnation and cruelty purportedly in the name of ethics. Kafka’s work provides insight into the processes of moral distancing across a range of organizational contexts including highly formal as well as more informal settings. The paper enriches the concept “moral distance” by identifying the existence of facilitators of moral distance beyond the mechanisms of formal rationality that have been the focus of existing studies. We argue that Kafka’s intense portrayal of “ethical violence” points to an aporia at the very heart of organizational ethics.     

Developing meaningfulness at work through emotional intelligence training

To date, there remains a significant gap in the human resource development (HRD) literature in understanding how training and development contributes to meaningful work. In addition, little is known about how individuals proactively make their work more meaningful. This article shows how emotional intelligence (EI) training promotes learning about sources of meaningful work and documents managers’ experiences of independently applying to the workplace what they have learnt about meaningfulness from their EI training. Data is collected from participant observations and interviews with trainers and managers attending three externally provided, ‘popular’ EI training courses. Interpreting the data through Lips‐Wiersma and Morris's model of meaningful work enables a clear articulation of managers’ capacity to shape their work environments to create four, interconnected sources of meaningfulness: inner development, expressing one's full potential, unity with others and serving others. The findings also reveal structural and agential constraints when individuals attempt to create meaningful work. Practically, the study demonstrates the importance of training to enhance work of value and significance and offers recommendations for practitioners.     

How income shapes moral judgments of prosocial behavior

The current research extends past work on how consumers (as “observers”) view ethical choices made by others (“actors”). Using a person-centered approach to moral judgments, we show that consumers are judged differentially, based on their income, for engaging in certain prosocial behaviors. Nine studies demonstrate that engaging in the same prosocial behavior, such as volunteering, leads to different responses depending on whether the actor earns income versus receives government assistance. Consistent with our theorizing, we find that aid recipients are given less latitude in how they spend their time than those earning an income and are scrutinized to a greater degree for their choices because people believe their time would be better spent seeking employment. Consequently, the lower moral judgments of aid recipients who choose to volunteer (vs. income earners) are driven, at least in part, by the anger observers feel about the perceived misuse of time. Additional information or cues about employment efforts or work inability attenuate these judgments. Importantly, we document implications for support for federal spending on welfare programs.     

Corporate sustainability and organizational culture

The concept of corporate sustainability has gained importance in recent years in both organizational theory and practice. While there still exists a lack of clarity on what constitutes corporate sustainability and how to best achieve it, many scholars suggest that the pathway for the adoption of corporate sustainability principles leads via the adoption of a sustainability-oriented organizational culture. In this paper, we provide a closer examination of this suggested link between the cultural orientation of an organization and the pursuit of corporate sustainability principles. Specifically, we seek to assess (1) what constitutes a sustainability-oriented organizational culture, (2) whether it is possible for organizations to display a unified sustainability-oriented organizational culture, and (3) whether organizations can become more sustainable through culture change. Directions and challenges for practical management and future research are identified and outlined.     

Consumer Rights: An Assessment of Justice

For the last 50 years the idea of consumer rights has formed an essential element in the formulation of policy to guide the workings of the marketplace. The extent and coverage of these rights has evolved and changed over time, yet there has been no comprehensive analysis as to the purpose and scope of consumer rights. In moral and ethical philosophy, rights are integrally linked to the notion of justice. By reassessing consumer rights through a justice-based framework, a number of key issues emerge regarding the way in which markets enable justice for consumers. The consumer rights which underpin the United Nations consumer protection guidelines address all forms of justice to some degree, but the predominant focus is on procedural justice. Our conclusions question whether this is sufficient and also whether there is a case to develop the notion of consumer ‘duties’ that complement the idea of rights.