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Ethical Decision Making

Corporate Ethical Governance &


Accounting Department
Ethics Expectation:
Archie B. Carrol:
some definitions

Moral values- refers to peoples

fundamental beliefs regarding what is right
or wrong, good or bad

Ethics- refers to standards of conduct which

are based on moral values, that guide
peoples decisions and behaviors
Companies should care about ethics because


Improve financial performance

Reduce operating costs
Enhance corporate reputation
Increase ability to attract and retain employees
Ethics in Organizations
Why are ethics important to organizational behaviorists?

Research shows from 2000-2003 top managers

More likely to:
Keep promises
Attention to honesty and respect
Report unethical behavior
Less likely to:
Feel less pressure
Engage in misconduct
(Greenberg, 2005)
Ethics in organizations cont

Public acceptance is changing

Ethical standards, whether formal or informal, have
changed tremendously in the last century
Standards are considerably higher. Business-people
themselves, as well as the public, expect more
sensitive behavior in the conduct on economic
enterprise. The issue is not just having the standards,
however. It is living up to them -Henderson (1992)

Sometimes, some people behave unethically

Individual factors
Situational factors

Scientists studying organizational behavior are

interested in how the external workplace influence
behavior, as well as individual processes.
Influences on ethical behavior
Apples Good Bad


Good people behave Bad people behave

Good ethically in an ethical unethically in any
environment setting

Good people forced to Bad people influence

Bad behave unethically by organization to
external forces become an unethical
See: Matrix

Bad Apples in Bad Barrels: A Causal Analysis

of Ethical Decision-Making Behavior

(Linda Klebe Trevino)

To investigate
moral reasoning
moral behavior
Effects on ethical decision making in
individual influences
organizational influences
Key Factors in Individual Influences

Locus of Control (LC)

An individuals perception of how much control he or
she has over events in ones life
Cognitive Moral Development (CMD)
Differences among people in their capacity to engage
in the kind of reasoning that enables them to make
more judgments.
The Bad Apples Argument

Individual Differences Approach

attributes unethical behavior to individuals lacking
in moral character
Research suggests locus of control (LC) and
cognitive moral development are significantly
related to ethical decision making
Individual Influences on Ethical Decision Making

Locus of control has been directly related to moral

Individuals with internal LC are more likely to
Do what is right
Recognize contingency relationship between behaviors and

This study hypothesizes that LC will influence ethical

decision making through outcome expectancies
Individual Influences on Ethical Decision Making

Cognitive moral development has been divided into

six stages by Kohlberg (1969)
Empirical data supports the model and the relationship
between the stage of CMD and moral behavior, including
ethical decision making

This study hypothesizes that CMD will independently and

directly influence ethical decision making behaviors
The Bad Barrels Argument

Organizational Approach
attributes unethical behavior to environmental
workplace conditions such as:
pressure from authority
extrinsic rewards for unethical behavior
lack of reinforcement of ethical behavior
Organizational Influence on Ethical Decision Making

Banduras (1971) Social Learning Theory (SLT)

Demonstrates the use of vicarious learning to support
ethical behavior in the organization by either
Rewarding ethical behavior
Punishing unethical behavior
SLT suggests vicarious learning influences the behavior of
the observer based on their outcome expectancies

This study hypothesizes that observational learning will

influence ethical behavior through outcome expectancies
Predictions of Hypotheses
Rewarding ethical behavior or punishing unethical
behavior was expected to increase outcome
expectancies, which leads to more ethical behavior
Compared to external LC, individuals with internal LC
will have higher outcome expectancies and behave
more ethically
Subjects at higher stages of CMD were expected to
behave more ethically

Thank You
Your question and comment are welcome !