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Article Excerpt
Faith in Corporate America has not been so fragile since the early 1900s, when the public's anger over the monopoly powers of big business led to a prolonged period of trust-busting by Theodore Roosevelt. Enron Corporation's ugly demise started the current wave of skepticism and with each revelation of corporate wrongdoing, the goodwill built up by business over many years erodes a bit more, giving rise to more mistrust. Increasingly, the public perception is that too many corporate executives have directly committed flagrant breaches of trust by "cooking" the books, or shading the truth, or indirectly facilitating the process by turning a blind eye when acts of impropriety were brought to their attention (e.g., WorldCom, Imclone Systems, Tyco International, Dynergy, Qwest Communication, Adelphia Communication).
Ending this crisis of lack of confidence in the governance of Corporate America will take more than a single initiative. The challenge to corporate management is to create a corporate culture that encourages and recognizes integrity. To do so, executives need to start at the top and address basic workplace decisions which may not have legal compliance connotation but, nevertheless, are an integral part of corporate culture (e.g., accepting gifts from clients). Popular press and research suggest that top management must take the lead by being a moral compass (Business Week, 2002; Jackson, 2000; Verkerk et al., 2001). Corporate values have an enormous influence on the choices, beliefs, and behaviors of employees (Schroeder, 2002; Velasquez, 2002), as well as the discretion employees perceive is available to them to exercise in ethical situations (Key, 2002). Prior research also suggests that employees' decisions are affected by both organizational factors (e.g., values and policies) and person-based explanations (Henle, 2005). Thus, this study examines how corporate values influence employees to make more ethical everyday workplace decisions and how these values in turn affect employees' own personality (i.e., ethical standards) in making those decisions.
The rest of the article is as follows. The next section discusses the theory and states the research hypotheses. Then there is the research method section, followed by the data analyses. The last section summarizes the results and provides concluding comments.
THEORY AND HYPOTHSES
Corporate Values and Managers' Ethical Decisions
Corporate values are often used interchangeably with the concept of corporate culture. The usual paradigm is that corporations with strong positive cultures have institutionalized a set of corporate values. These values help employees identify with the organization and develop a commitment to its goals as well as provide a common language for aligning an organization's leadership and its employees (Robert Hass, Levi Strauss CEO in Howard, 1990).
The clarity and nature of corporate values toward ethical issues ultimately influences managers' attitudes to ethical decision making (Jackson, 2000; Galie and Bopst, 2006; Vitell and Hidalgo, 2006). Although an individual retains the ultimate moral agency for his or her actions, research consistently indicates that the ethical philosophies and values of management have a major impact on the ethical choices and behaviors of employees (Stead et al., 1990; Wimbush and Shephard, 1994; VanSandt and Neck, 2003). Enron's unrelenting emphasis on earning's growth at any cost without a system of checks and balances resulted in ethical lapses that ultimately led to the company's downfall. Jeffrey Skilling, former CEO of Enron, communicated his priorities to employees: "profits at all costs" (Tracinski, 2002: 3). Enron showed little regard for ethics beyond the bottomline, using a reward system that retained only those employees who achieved target profits (Sims and Brinkmann, 2003; Wong, 2002) and, hence, producing a culture with collectively non-compliant norms (Kuliks, 2005). A former vice president of Enron stated, "... break the rules, you can cheat, you can lie, but as long as you make money, it's all right (quoted after Schwartz, 2002: 1).
If corporate leaders encourage rule-breaking and foster an intimidating, aggressive environment, ethical boundaries in organizations are eroded away. The asymmetry in the employer-employee relationship and the actual functioning of power in an organization implies that an employee or group of employees can never develop responsible and ethical behavior without the support and direction of top management (Verkerk et al., 2001). Schein (1985) focused on the top management as the critical component of the organization's ethical climate because they can create, reinforce, or change the organization's climate. Such climates arise when members believe that certain forms of ethical reasoning and/or behavior are expected norms for decision making within the organization. Ethical climates represent components of an employee's environment as perceived by him or her and serves many functions in the organization. They help employees solve ethical issues by giving them answers to "what should I do?" when faced with a moral dilemma. They also help employees identify ethical issues within the organization. In other words, the ethical climates serve as a perceptual lens through which employees diagnose and assess situations when making workplace decisions.
Victor and Cullen (1987, 1988) classify ethical climates as egoistic, benevolent and principled. In an egoistic climate, company norms support the satisfaction of self-interest, ignoring the needs or interests of others. This is similar to the norms in Enron where the environment reinforced a culture that was morally flexible, opening the door to ethics degeneration and serf-centered behavior such as lying, cheating and stealing with apparently very little thought about other stakeholders in the company (see Sims and Brinkmann, 2003). In a benevolent climate, company norms support maximizing the interests of others. Finally, in a principled climate, when faced with an ethical dilemma, the decision maker resorts to decisions that are based on adherence to rules and codes. The expected sources of principles for such moral reasoning can be internal to an individual with principled-individual climate, or external such as with an ethical code or integrity of an organization, or a broader code such as law or religion.
Employees regularly make workplace decisions reflecting value judgments and having ethical connotations. Examples include using the office phone to make a private call, or to shop on the internet using the office computer. These examples are minor ethical infractions with low moral intensity (Jones, 1991). They may not respond to corporate mandates, prescribed decision processes, or the "compliance" approaches which mainly seek to obtain managers' adherence to legal requirements (Paine, 1994). But, these seemingly mundane decisions are characterized by their focus mainly on internal stakeholders, their often implicit and internalized decision-making process, and by their importance in reflecting the "moral" nature of the work environment. These decisions are symptomatic of deeper problems in the organization, and the organizations' ethical climate can subject them to the same decision-making process of moral issues as outlined by Jones (1991)--recognize the moral issue, make moral judgment, establish moral intent, and engage in moral behavior.
Research suggests that organizations can moderate these mundane forms of decisions (Jackson, 2000) not via compliance-based interventions, but by creating a principled climate based on integrity to change employees' attitudes and help their ethical decision-making processes regarding moral issues (see Paine, 1994). Organizations' ethical climate can easily neutralize this ethical decision-making process. As discussed earlier with reference to Enron, their incessant profit-oriented approach, wherein rewards and sanctions are granted based...
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