institutionalizing ethics

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INSTITUTIONALIZING ETHICS INTOBUSINESS ORGANIZATIONS:A MODEL AND RESEARCH AGENDA*James Weber

bstract G rou nd ed upon the late 1970s ph ras e institutionalizing ethicsinto business, I prese nt a multi-component model and research agenda toenhance our understanding of organizations' efforts to integrate ethics intothe daily decision-making process of employees. Three research foci areemphasized: (1) the need to establish consistent categorical frameworks tode scr ibe b us iness organizations' efforts in the field, (2) the stud y of th e inter-relationships betw een th e various com ponen ts prese nted in the model, and(3) the exploration of the linkage betw een organizational efforts to institution-alize ethics and ethical employee behavior. Research and organizationalimplications evolving from these research foci are discussed.

FFORTS to incorporate ethics into business to enhance ethical employeedecision making and behavior are not recent phenomena. Grounded in an-cient and medieval philosophy (Vogel, 1991), researchers and practitioners haveattempted to apply ethics to modern business since early in this century (Clark,1916). However, the chal lenge has more recently evolved into a dist inct ivestream of research: the institutionalization of ethics into business (Purcell , 1977;Weber, 1981).The phrase inst i tut ional izat ion of ethics into bu sin es s ' was original ly devel-oped in a cor po rate case study by Th eod ore V. Purce ll and Jam es Weber (1 97 9),and through articles written by both researchers (Purcell , 1977; Weber, 1981).A ccord ing to Weber, institution alizing ethics me ans : . . . integratin g ethics intoall dai ly decision making and work pract ices for al l em plo yee s (198 1:47).Du ring the next deca de, the phrase inst i tut ional izing ethics beca me a cod e-word and referent point for much of the applied business ethics research thatfollowed (e.g. . Ce nter for Bu siness Ethics, 1986 ; Ho sme r, 198 7).Due to the descriptive and limited nature of past research. , prior efforts havefailed to provide a basis for successfully institution alizing e thics into busin ess .Frorn a review of the literature in this field I discovered three findings:

1. a lack of utilizing consistent categorical frameworks to describe and assessthe effectiveness of efforts seeking to institutionalize ethics into business,2. a lack of recognition and assessment ofth interrelationships between efforts

seeking to institutionalize ethics in business, and,3. a lack of a research focus linking the institutionalization of ethics with


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4 BUSINESS ETHICS QUARTERLY

used to identify each of the specific organizational efforts embodied in a larger,complex system necessary for injecting ethics into the daily decisions and result-ing behavior of organizational employees. Four components influencing ethicalbehavior are presented in the model shown in Figure 1). While not exhaustiveof all organizational efforts to ensure ethical employee decision making andbehavior, the components do represent the most common and recommendedattempts to institutionalize business ethics. By defining each component, con-ducting a review of previous research investigating this field, and developingtestable research questions, this model enhances future research in three ways.

FIGURE 1A Multi component Model to Institutionalize Ethics Into Business

EMPLOYEE ETHICS.TRAININGORGANIZATIONALETHICAL CULTUREV .

CODE OFETHICS

ORGANIZATIONALENFORCEMENTMECHANISMS

EMPLOYEEETHICALBEHAVIOR

Firs t, efforts toinstitutionalize ethicsandstudythesuccessofthese effortsareenhanced by establishing consistent categorical frameworks for each compo-nent. As presented in the following sections, m uch of the previou s researchconducted in this field typically hasconsisted of unstructured, exploratorysur-veysofcorporate p ractices. These surveys have resultedin anabundanceofdata ,butthefindings are notcomparable sinceaconsistent measu retoclassify corp o-rate practiceswas notused.Bystandardizing thecategories usedtoclassifyanddescribe each component, this model enables future researcherstocomp are theirfindings with those reportedbyothers using thesame framework.

Second, the model provides a framework to study the interre la t ionshipsbe-tween various efforts seekingtoinstitutionalize ethics into business . Rather thancontinuing toanalyze each compo nent in isolation, this model challenges futureresearchers toidentify theexistenceof, and linkages between, eachof the com-ponents in the model. Whereas previous research has provided an incompleteand somewhat distorted view of corporate efforts to institutionalize ethics,the


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INSTITUTIONALIZING BUSINESS ETHICS 421behavioral im plications of these efforts is incom plete. The linkage hetween eachcomponent enablingthe business organization to institutionalize ethics anden-hance employees' ethical behavior must be assessed.Thus, investigationsof the efforts to institutionalize ethics into businessareenhancedifthey arecategorically consistent recognize the interrelationshipsof the components and focus upon behavior. Figure 1 presentsamodel whichenables researcherstoaddress eachofthese three issues.

Ethical Employee ehaviorThe importance of promoting ethical behavior among employees is rarelyquestioned among researchers in thebusiness e thics field. However, definingwhatismeant by ethical employee behavior isproblematic. Randall and G ib-

son's review ofthe literature reported that there is little consensus regardingwhat constitutes 'ethical' beliefsor 'ethical' behaviorin anorganizationalset-ting (1990:461). They refer to Lewis' (1985) work asanillustration. He identi-fied over 300 different definitions of the term business ethics found in articles,books, and textbooksin thefield. Asanalternativetoaddingtothe plethoraofdefinitions of business ethics, most authorsof business ethics articles offernodefinition at all for the term (Randall & Gibson, 1990).If a firm is toinstitutionalize ethics, the starting point must beindefiningtheterm ethical behav ior. Rather than addingto the already voluminous listof

definitions, thechallenge for ethics researchersis toreturn to therootsofthefieldphilosophy. Ethical behavior must beunderstood in reference to thepremises underlying ethics theory. That is ethical action isjustified whenitmaximizes the greatest good for the greatest number (utilitarianism), whenitadherestothe ethical principles of justice, fairness, andarespectforindividualrights, or when it complies with the moral duty entrusted to the individual(deontology). Based upon the justifications or rationale embodiedinethics the -ory, ethical behavior can be defined.Previous researchinthe business ethics field has consideredawide spectrumof behaviorsas ethical behav ior, ranging from compliance with governm entalregulation or societal laws to employee whistleblowing. Yet it is not the actitself that is ethical, rather the actmustbeunderstood andassessed in thecontextofthe reasoning usedbythe employee which leadstothe action.For example, the actofwhistleblowing isnot necessarily ethicalorunethical. Ethical whistleblowing seeks topromote the common good, to advocateasense of justiceorfairness,or toensure the protectionofindividual rights. Theabsence of these underlying justifications maylead to whistleblowing thatis

self-serving at theexpense of others or contrary to ethical principles. Whensubjected to ethical analysis, this latter formof behavior wouldbeassessedas


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422 BUSINESS ETHICS QUARTERLYinstitutionalizationof ethics into business organizations must likewise developand clearly state a definition of ethical employee behavior based upon corephilosophical principles.It isonly after this conceptisdefined thatit ispossibletoexploretheremaining research questions contained inthemodel presentin thispaper.

Organization Ethical ultureAs depicted in Figure 1 the critical, first component of the model is theorganizational ethical culture. Organizational theorists claim that theprimaryinfluence upon corporate behavior lies in organizational culture (Deal & Kennedy,1982). Researchers generally define cultu re as thesocialor normative gluethat holds the organization together.Itis believed that the organizational cultureexpresses the group's shared values and beliefs (Schein, 1985; Smircich, 1983).Organizational theorists posit that culture influences allaspectsof operations

withintheorganization.With regard to ethical behavior, organizational culture provides collectivenorms about w hat is and what is not appropriate action (Trevino, 1990). Employ-ees generally understand that conformity togroupor organizational normsisexpectedandrewarded in theworkplace. Efforts topromotean ethical cultureby rewarding ethical activities and bygiving signalsto itsemployees thatthecompanyiscom mittedtointegrityinallofits business dealings providesafirmwithapowerful and positive force (Newton, 1986; Waters & Bird, 1987).Ethical cultureis notmerelyanabstraction of organizational valuesand be-liefs.As shown in Figure 1, it is also embodied in the corporation's ethical policystatement (codeofethics)and in theorganizational influences upon em ployeeethical decision making andbehavior through employee ethics trainingandorganizational enforcement mechanisms.The necessityandadvantagesofan ethical organizational culturetopromoteethical behavioratwork have never been seriously challenged in theliterature.Yet,itw asnotuntil recently thatamethodfor assessing organizational ethicalculture was developed. Bart Victor and John Cullen (1987) introduced the Ethi-

cal Climate Questionnairea survey instrument designed toassesstheethicalclimateofan organiza tion. Their method is based upon the assumptions that (1)each companyorsubunit hasitsown moral character, (2) group members knowwhat this character is, and (3) the group members can tell an outsider about theirorganization's moral character inanobjective way (Cullen, Victor & Stephens ,1989:53).Victor and Cullen (1988) present evidenceofagroup's m oral characterthrough asurveyof872 employeesat four firms. From their results theycon-clude that organizations have distinct typesofethical cultures.Five ethical culture types, identified by Victor andCu llen, arebrieflyde-scribed as: instrument l (maximization of self-interest on the individual ororganizational level), c ring (maximization of joint interests on all levels),


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INSTITUTIONA LIZING BUSINESS ETHICS 423Researchers exploring the organizational ethical culture component of themodel should utilize an established categorical framework to classify the culturetypes discovered. Since Victor and Cullen's five types of ethical culture is thefirst framework developed in the literature, subsequent researchers should vali-

date the comprehensiveness and generalizability of the typology. Upon valida-tion, consistent use of these categories would allow for cross-study comparisonsand replications. Finally, this framework for identifying ethical culture typescould be used to determine which culture type better promotes ethical employeebehavior. The emphasis should ultimately be upon the behavioral implicationsof efforts to inject ethical values into business. Thus, researchers should explorethe following research questions:RQla: Do thefive ethical culture types (identifiedbyVictor and Cullen [1988])adequately serve as a categorical framework to describe organizationalethical culture?

R Q l b : Do certain types of organ izational ethical culture (identified by V ictorand Cullen [1988]) better promote ethical employee behavior?In theoretical discussions and Victor and Cullen's empirical assessment oforganizational ethical cultures, the concept of culture is typically considered inisolation from other components in the model in Figure One exception to thistrend is developed by Trevino (1990). She outlines a multisystem cu lturalapproach to understanding the development and change of organizational eth ics(1990:197). Formal systems are identified, including rules and policies, rewardsystems, and employee orientation/training. Trevino's framework provides thepotential for exploring the interrelationships between the components necessaryto institutionalize ethics into business, although her framework does not specifi-cally address the interrelationship issue as developed here. Trevino's work rep-resents the only multiple component approach in the literature addressing theinstitutionalization of ethics in business.

Generally, researchers have not developed theoretical models or conductedempirical investigations which link and assess the interrelationships betweenorganizational ethical culture and codes of ethics, employee ethics training, ororganizational enforcement mechanisms. A more comprehensive analysis of thelinkages depicted in the model is essential to obtain a better understanding of theefforts to successfully institutionalize ethics into business, that is to integrateethics formally and explicitly into daily business life, as envisioned by Purcelland Weber. Thus, researchers should explore the following research questions:

RQ 2a: Do specific orga nizational ethical culture types most often co-exist with,are most often aligned w ith, and better enhan ce the impact of, specifictypes of corporate codes of conduct?

RQ 2b : Do specific organ izational ethical culture types mo st often co-exist with,


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424 BUSINESS ETHICS QUARTERLYFinally, organizational ethical culture must be more than a description oforganizational values; it must also have an influence on ethical behavior. Theculture-behavior relationship has been repeatedly asserted in the literature byidentifying numerous behavioral advantages in developing a strong ethical cul-ture. By developing an ethical culture, the organization can reduce moralstress for the managers (Waters & Bird, 1987), better achieve moral excel-lence (Hoffman, 1986), and enhance the organization 's oppo rtunities forprofitability through ethical behavior (Newton, 1986). Although Hosmer (1987)warns that unethical behavior in the workplace can also be institutionalizedthrough corporate structure and policy, an organization seeking to promote anethical culture must establish ethical values at the core of the organization. Notonly must the core ethical values be in place, but to further institutionalize ethicsat this level, they must be communicated throughout the organization, creating

a candid, ethical culture (Serpa, 1985). Thus, the link between organizationalethical culture and ethical employee behavior has been proposed, but has not yetbeen measured through empirical investigation. Researchers should explorewhether certain organizational ethical cultures enhance occurrences of desiredethical behavior among the organization's employees.R Q 3 : Do certain ethical culture types (identified by Victor and Cullen [19 88])

more frequently result in ethical behavior, or result in behavior that ismore ethical?

SummaryOrganizational values and beliefs are measured through an assessment oforganizational ethical culture. One promising typology of organizational ethicalculture types was developed by Victor and Cullen (1988). Future research shouldtest this typology to validate the comprehensiveness and generalizability ofthese types of ethical cultures. If the five ethical culture types are validated, thiscategorical framework should be consistently used. Since organizational ethicalculture influences every aspect of the organization, including corporate docu-

ments and practices, the interrelationships between organizational ethical cul-ture and code of ethics, employee ethics training, and organizationalenforcement mechanisms should also be explored. Finally, the ultimate goal ininstitutionalizing ethics is to increase instances of ethical employee behavior.Future research must empirically investigate the culture-behavior relationship todetermine the success of institutionalizing ethics in business. ode of Ethics

As described in the previous section, organizational ethical culture is a majorforce for subsequent corporate action which creates an ethical environment in


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INSTITUTIONALIZING BUSINESS ETHICS 425Research emphasizing corporate codes of ethics has been generally explora-tory and desc riptive. Num erous studies (Chatov, 1980; W hite Montgomery,1980;Cressey Moore, 1983; Center for Business Ethics, 1986; Benson, 1989;and, Sweeney Siers, 1990) have analyzed the content of corporate codes of

ethics.These studies tended to report their results without utilizing a consistentcategorical framework. Thus, there is limited potential for cross-study comparisons.One study did attempt to provide some structure to the categorization ofcorporate codes of ethics. Berenbeim (1988) identified three distinct types ofcodes. The three types are: constituency oblig tion (company commitment tovarious groups served),profession l responsibility (presenting a series of gen-eral company principles to be followed), and, corpor te mission (does notexplicitly direct employee conduct, but does enunciate company objectives).Berenbeim did not develop normative rankings for these three types of corporatecodes,nor did he indicate any interest in determining w hether any type of ethicalcode more often led to better ethical reasoning than the other types of codes.However, the three types of codes of ethics do provide researchers with an initialcategorical framework.The framework presented by Berenbeim needs to be validated in further re-search. In addition, the existence of additional types of codes should be ex-plored, and, if found, added to Berenbeim's list to develop a more completetypology. The effectiveness of the code should also be investigated to determ inewhich type of code better promotes ethical employee behavior. Thus, researchersshould explore the following research questions:RQ 4a: Do the three types of codes of ethics (identified by Berenbeim [1988])

adequately serve as a categorical framework to describe corporate c odesof ethics?

RQ 4b: Do certain types of corporate codes of conduc t (identified by Berenb eim[1988]) better promote ethical employee behavior?Researchers infrequently acknowledge the interrelationships between corpo-rate codes and the other components of the model. When acknowledged, therelationship is generally theoretical and asserted, rather than empirically tested

and verified. Raiborn and Payne (1990) recognize that, if a corporate code is tobe effective in achieving its objectives, it must focus upon and reflect organiza-tional ethical culture which influences employee behavior. Weber (1981) alsorecognized the linkage between corporate codes and other components in orderto institutionalize ethics. He identified the link between codes and managerialdevelopment programs (employee ethics training), as well as the link betweencodes and both negative sanctions and positive rewards (organizational enforce-ment mechanisms) for employees. The link between code and enforcement isalso drawn by Gellerman (1989). He argues that high rewards, severe punishments,and implicit sanctioning are essential for the institutionalization of a code.These researchers acknow ledge the need to link a corporate code of ethics with


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INSTITUTIONALIZING BUSINESS ETHICS 427 mp loyee thics Training

Corporations traditionally conduct training programs to educate their employ-ees. Training programs range from general orientations introducing the firm'sorganizational chart to an intensive indoctrination of employee health insurancebenefits or an awareness of governmental regulations. Germane to the institu-tionalization of ethics is the development of an employee ethics training pro-gram that presents the organization's values (ethical culture) and corporatepolicies (code of ethics) to enhance employees' ability to make ethical judg-ments and act in an ethical manner.In order to integrate ethics into the employees' daily decision making, theorganization must supplement the general ethical culture and writing of an ethicscode with employee training. Maclagan (1990) argues that a firm must educatemanagers after drafting a code of ethics to fully develop moral behavior in theorganization. To achieve this objective, ethics training programs attempt to de-velop in employees an awareness of existing and potential ethical issues in theworkplace (Harrington, 1991). In addition, these programs provide the employ-ees with specific guidance for ethical decision making (Trevino, 1990), whichshould lead to instances of ethical action. Trevino concludes that [b]y offeringethics training, the organization not only offers specific skills to managers, butindirectly communicates that ethical behavior is valued and that ethical dimen-sions should be considered in decision making (1990:20 7).

Despite the importance placed upon employee ethics training, research empha-sizing this component of institutionalizing ethics into business has been gener-ally descriptive (Berenbeim, 1988; Thompson, 1990). Two attempts have beenmade to develop a framework to categorize types of ethics training programs andapproaches taken by these programs. The Center for Business Ethics (1986)constructed an initial categorical typology of types of training programs: semi-nars, internally conducted courses, courses conducted by an external ind ividual,courses conducted by an external institution, personal interviews, or orientationsessions. Unfortunately, from the Center for Business Ethics's list, we do notknow which type of training program is most successful in assisting employeesin ethical decision making and thus better promotes ethical employee behavior.Harrington (1991) also develops a categorical framework adaptable for futureinvestigations. She identifies four approaches to ethics training: case studies,rules and guidelines, decision-making frameworks, and cognitive approaches.What is unknown after reading H arrington 's work is whether one approach betteraids the employee in decision making than the other approaches.Both the categorical frameworks of ethics training types presented by theCenter for Business Ethics (1986), and the approaches for ethics training pro-grams identified by Harrington (1991), should be utilized in future research.These frameworks need to be validated and assessed regarding their com prehen-


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428 B U SIN ESS ETH IC S Q U A R TER L YRQ7b: Do the four approaches to employee ethics training programs (identified

by Harrington [1991]) adequately serve as a categorical framework todescribe approaches to employee ethics training programs?

RQ7c: Do certain types of employee ethics training programs (identified by theCenter for Business Ethics [1986]) better promote ethical employeebehavior?

RQ7d: Do certain approaches to employee ethics training (identified by Har-rington [1991]) better promote ethical employee behavior?Althou gh research ex ploring organizat ional ethical cul ture and codes of ethicstends to look at these efforts in isolation from the other components necessaryto institutionalize ethics into business, this focus is generally not true wheninvestigating ethics training programs. There is a general belief that ethics train-ing should develop out of organizational ethical culture and codes of ethics.

Ha rrington extensive ly discusses the cul ture-train ing l ink: [f]or training toachieve an effect, executives must insure that the corporate culture is such thatem ployee s w il l understand and bel ieve in the message that is being co nveye d bytraining (Harrington , 1991:28).Maclagan (1990) addresses the code-training l ink. He argues that , while cor-porate codes are necessary, organizations must go beyond merely drafting acode. The code of ethics provides the s tructure, in Ma clag an's o pinion, for moralbehavior , but organizat ions must also address the process of ethical decisionmaking which wil l lead to moral behavior . The process requires management

deve lopm ent program s in which a com mitme nt to personal principles, a wellintegra ted sense of person al integrity, and relevan t interpe rsona l skills are de-veloped (Maclagan, 1990:17).Absent in the literature is a recognition of the need to link employee ethicstraining with organizat ional enforcement mechanisms. In addit ion, other l ink-ages of the com pone nts to insti tut ional ize ethics (cul ture-training, by Harrington[1991] , and code-tra ining , by Maclag an [199 0]), show n in Fig ure 1, are theore ti-cal and have not been empirical ly assessed. Thu s, researchers should e xplore thefol lowing research quest ions:

RQ8a: Do specific employee ethics training program types or approaches mostoften co-exist with, are most often aligned with, and better enhance theimpact of, specific organizational ethical culture types?

RQ8b: Do specific employee ethics training program types or approaches mostoften co-exist with, are most often aligned with, and better enhance theimpact of, specific types of corporate codes of ethics?

RQ 8c: Do specific employee ethics training program types or approaches mostoften co-exist with, are most often aligned with, and better enhance theimpact of, specific types of organizational enforcement mechanisms?

Opinions in the literature consistently assert that employee ethics trainingleads to more ethical behavior (Trevino, 1990). Weber (1981) argues this point


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INSTITUTIONALIZING BUSINESS ETHICS 429program (versed in ethical theory and daily business operations), and the partici-pants to be trained (selected from middle and lower management, moving up theorganizational ladder).The specific procedure to be followed in the ethics module is also outlined byWeber. Initially participants should prepare for the training by constructingdescriptions of ethical issues confronted at work. The coordinator evaluatesthese situations and prepares for the subsequent training program discussion.During a roundtable discussion, participants identify ethical issues inherent inthe cases and discuss alternative resolutions. Weber cautions that the sessionneed not formulate specific solutions, but develop ethical guidelines for themanagers to consider when confronted with similar issues (1981:51). The train-ing module should conclude with recommendations for additions to, or deletionsfrom, the corporate ethics policy.

Despite these theoretical positions, no empirical assessment has been under-taken to discover if the various types of employee ethics training programspresented by the Center for Business Ethics (1986), approaches to employeeethics training identified by Harrington (1991), or specific guidelines for con-structing an ethics training module developed by Weber (1981), are, in fact,effective in promoting ethical behavior. Thus, researchers should explore thefollowing research questions:RQ9a: Do the types of employee ethics training programs (identified by theCenter for Business Ethics [1986]) more frequently result in ethicalbehavior, or result in behavior that is more ethical?

RQ9b: Do the approaches to employee ethics training programs (identified byHarrington [1991]) more frequently result in ethical behavior, or resultin behavior that is more ethical?RQ9c: Do the guidelines for constructing employee ethics training programs,(developed by Weber [1981]) provide for an environment that morefrequently results in ethical behavior, or results in behavior that is moreethical? ummary

It is encouraging to find a significant interest in developing a consistent frame-work to classify organizational ethics training programs in the literature. Thecategorical frameworks identifying the types of employee ethics training pro-grams (Center for Business Ethics, 1986) and approaches to employee ethicstraining programs (Harrington, 1991) need to be validated in future research. Inaddition, the effectiveness of the types of, and approaches to, employee ethicstraining programs must be investigated regarding their success in institutional-izing ethics into business.


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430 BUSINESS ETHICS QUARTERLYresearchers should continue to investigate the linkages between ethics trainingprograms and the other components of institutionalizing ethics into business.Finally, there is a strong theoretical orientation toward developing employeeethics training programs that will influence, or change if necessary, ethicalemployee behavior. Empirical research should be undertaken to determine w hichtype, approach, or structure of ethics training program is the most effective inachieving this goal. Thus, the training-behavior link should be further investigated.

Orga nizational nforcemen t MechanismsIn order for organizational ethical cultures, codes of ethics, and employeeethics training programs to fully enter the daily decision making and behavior ofthe organ ization s employees, these organizational values, policy g uidelines,and training p rograms must be reinforced. T his reinforcement occurs through the

development and utilization of positive or negative organizational enforcementmechanisms. These mechanisms serve to providea priori motivation and/or expost facto rewards or punishment administered by the organization upon itsemployees.Descriptive accounts of organizational enforcement mechanisms are found inthe literature (Center for Business Ethics, 1986; Benson, 1989). These surveysprovide a description of what corporations are doing to further institutionalizeethics. Beyond a general description, Berenbeim s (1988) survey of co rporateethics activities provides an initial categorical framework of enforcementmechanisms: termination, suspension, demotion, probation, and appraisal com-ments. The five negative sanctions identified by Berenbeim need to be investi-gated to determine if they comprise a comprehensive list of organizationalenforcement mechanisms that punish employees for unethical conduct. Researchshould also explore which negative sanction better promotes ethical employeebehavior.Com plimenting the need for negative sanctions as organizational enforcementmechanisms is the possibility of rewarding ethical employee behavior. Weber

(1981) identifies four possible incentives to promote ethical behavior in theworkplace: recognition, appreciation, commendation, and monetary rewards.Subsequent research in the field has generally ignored exploring the existenceof positive rewards as organizational enforcement mechanisms in the workplace.Thus,future researchers should utilize Weber s list of positive rew ards, in addi-tion to Berenbeim s list of negative sanctions. Research should validate thecomprehensiveness of Weber s four positive rewards, as a well as investigatewhich rewards better promote ethical employee behavior. Thus, researchersshould explore the following research questions:RQ lOa: Do the five negative sanctions (identified by Berenb eim [1988]) ad e-quately serve as a catego rical framew ork to desc ribe negative org aniza-


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INSTITUTIONALIZING BUSINESS ETHICS 431RQlOc: Do certain types of negative sanctions (identified by Berenbeim [1988])

better promote ethical employee behavior?RQlOd: Do certain types of positive rewards (identified by Weber [1981]) better

promote ethical employee behavior?Enforcement mechanisms have occasionally been investigated in relationshipwith other components required to institutionalize ethics into business. Weber(1981),Lombardi (1987), and Beets and Killough (1990) have discussed a theo-retical relationship between codes of ethics and organizational enforcementmechanisms. These authors realize that for a code to be fully influential in a firmit must have the backing of strong enforcement sanctions. Yet, this belief has notbeen empirically tested. In addition, the other relationships between organiza-tional enforcement mechanisms and ethical culture and employee ethics train-ing, shown in Figure 1, are unexplored. Thus, researchers should explore thefollowing research questions:

RQlla:Do positive and/or negative organizational enforcement mechanismsmost often co-exist with, are most often aligned with, and better enhancethe impact of, specific organizational ethical culture types?

RQ]lb:Do positive and/or negative organizational enforcement mechanismsmost often co-exist with, are most often aligned with, and better enhancethe impact of, specific types of corporate codes of ethics?

RQllc:Do positive and/or negative organizational enforcement mechanismsmost often co-exist with, are most often aligned with, and better enhancethe impact of, specific types of em ployee ethics training programs?The theoretical link between organizational enforcement mechanism and ethi-cal employee behav ior has been extensively investigated in the literature. Jansenand Von Glinow (1985) argue that organizational members typically seek infor-mation regarding what activities are endorsed as appropriate or accep table by theorganization, and thus are rewarded by the organization. This relationship goesback to the notion embodied in organizational ethical culture, where employeesseek to understand the values supported by the organization. An extension of the

cultural influence is the organizational development of rewards or sanctions toreinforce the values embedded in organizational culture. Thus, the organiza-tion's reward system can influence the ethical/unethical behavior of its membersthrough specific rewards and punishm ent (Trevino, 1990:205).Numerous suggestions as to how to effectively enforce organizational prefer-ences toward ethical actions have been made in the literature. Murphy (1988)calls for blunt and realistic sanctions to create an ethical business environment.Gellerman (1986) initially argued that the issue is not severity of punishment,

but the probability of getting caught. He claims that if the organization raises theprobability of employees getting caught when performing unethical acts, the


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432 BUSINESS ETHICS QUARTERLY(punishments) is considered by Weber (1981). He argues that rewards may be amore effective enforcement mechanism for promoting ethical behavior than thetraditional corporate use of negative sanctions. Each of these suggestions suffersdue to a lack of empirical validation.

Some empirical research has been conducted to investigate the enforcementm echanism -behavior relationship. A positive relationship between rewardsand/or punishments and ethical decisions and/or intended ethical behavior hasbeen repeatedly found (Hegarty Sims, 1978, 1979; Trevino, Sutton Wood-man, 1985; Worrell, Stead, Stead Spalding, 1985; Laczniak Inderrieden,1987;Trevino Ball, 1988, 1989). However, the most recent study investigatingthe enforcement-behavior link reported that rewards demonstrated an indirectlink with ethical behavior. No link was found between negative punishm ents andethical behav ior (Trevino Youngblood, 1990). Based upon the most recentfindings, there appears to be a need for further investigation of the relationship.Thus, future researchers should explore the following research questions:

RQ12a: Do certain types of positive enforcement sanctions (rewards, identifiedby Weber [ 98 ]) or negative enforcement mech anisms (san ctions, iden-tified by Berenbeim [1988]) more frequently result in ethical behavior,or result in behaviors that are more ethical?

RQ12b:Do es the degree that certain types of positive enforcement sanctions(rewards, identified by Weber [1981]) or certain types of negative en-forcement mechanisms (sanctions, identified by Berenbeim [1988]) areexercised more frequently result in ethical behavior, or result in behav-iors that are more ethical?

RQ 12c : Do positive enforcement m echanisms (rew ards) mo re frequently influ-ence employees to act in an ethical manner than negative enforcementmechanisms (argued by Weber [1981], and discovered by TrevinoYoungblood [1990])?

umm ryEmpirical researchers have conducted extensive explorations regarding thecorporation 's use of enforcement mechan isms to fully institutionalize e thics intobusiness. However, this research has failed to develop a validated categoricalframework of negative sanctions or positive rewards. This framework couldserve as a guide for subsequent research investigating the institutionalization ofethics into business through organizational enforcement mechanisms.There is a general belief that organizational enforcement mechanisms are anecessary extension from a corporate code of ethics, enabling the code to be-come an effective deterrent to unethical action or a promoter of ethical action.

Yet, this relationship has not been empirically verified. In addition, other link-ages between organizational enforcement mechanism to the other com ponents of


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INSTITUTIONALIZING BUSINESS ETHICS 433explorations pointedto a strong relationship,a more recent study failedto un-cover this relationsh ip to the same degree. Further testing is needed to more fullyunderstand theimpact of organizational enforcement mechanisms on ethicalemployee behavior. Researchers should explorethe issues of which rewardsand/or punishments shouldbeused, the degree that the rewardsorpunishmentsshould be exercised, and whether rewardsorpunishments are m ore effectiveasa behavioral influence.

onclusionsThe model presented in Figure provides greater form and detailto the initialconceptualizationofinstitutionalizing ethics into business developed by Purcell(1977) and Weber (1981). Given the advantageofover ten yearsofexploratoryresearch, I emphasize three aspects of the model: categorical frameworks, analy-sis linking components containedin themodel,andresearch assessingthe im-pactof these efforts upon ethical employee behavior.The three dimensions presentedinthe model categorical fram eworks, inter-related components, and influence upon employee behaviornot only have sig-nificant research implications,but should also serveasguidesfororganizationsseekingto institutionalize ethics. Based uponthecomponents presentedin themodel, researchers may beginto answer questions frequently posedbymanag-ers: Howdo Ichange my organizationto bemore ethic al? or, phrased differ-

ently: How doIintegrate ethics formally and explicitly into daily business life,makingita regular and normal partofbusiness? Managers are seeking answersto these questions, and researchers may be abletoprovide some initial answersas they begintoexplore the research questions posedinthis paper.The model presented here hasas itsroots the early conceptualizationofwhatit meansto institutionalize ethics into business. Subsequent research has beguntoaddstructure anddetail to thefield, aswellasclarifying what additionalquestions need to be addressed by future researchers. The model is an attempt toidentify and support what has been done to further our understanding ofthe field,and to identify and provide guidance as to what issues still need to be addressed .Consistent throughoutall past efforts and future challengesforthis fieldis thehopeofcreatingan environment withinanorganization which fosters e thicalemployee decision making and action.

ot*The author would liketo thank Sharon L.Green, LindaK.Trevino,and twoanonymousreviewersfor their comm entsonearlier draftsof this paper.


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434 BUSINESS ETHICS QUARTERLYBenson, G.C.S. (1989) Codes of Ethics, Journal of Business Ethics 8: 305-319.Berenbeim, R .E. (1988)Corporate Ethics: Research ReportNo.900.New York:The Conference Board.Center for Business Ethics (1986) Are Corporations Institutionalizing Ethics ?

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