Assesment of Ethical Performance of Organ

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Assessment of Ethical Performance of Organization Members: A Conceptual FrameworkAuthor(s): Robert D. Gatewood and Archie B. Carroll

Source: The Academy of Management Review, Vol. 16, No. 4 (Oct., 1991), pp. 667-690Published by: Academy of ManagementStable URL: http://www.jstor.org/stable/258976 .

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?

Academy

of

Management Review

1991,

Vol.

16, No.

4,

667-690.

ASSESSMENT

OF

ETHICAL

PERFORMANCE

OF

ORGANIZATIONMEMBERS:A

CONCEPTUAL

FRAMEWORK

ROBERTD.

GATEWOOD

University

of

Georgia

ARCHIE

B.

CARROLL

University

of

Georgia

This

article

describes a

conceptual

frameworkthat

facilitates

the

as-

sessment of

the ethical

performance

of

organization

members.

Based

upon

measurement

principles applied

to

general

work

performance

assessment,

this framework

is

comprised

of three

components:

the

major

stakeholders

of

the

organization,

the

categorizing

of

organiza-

tion

members

into

individual or

group units for

accountability, and

the

division of

performance into

behaviors or

results.

Ethical

stan-

dards can be

formulated for

combinations of

these

three

components

and

expressed

in

terms

of

existing

laws,

or

organizational or

profes-

sional

standards. The

importanceof the

framework for

business eth-

ics research

and

theory

development

is

discussed.

The

ethics of

organization members

has

been the

subject

of

consider-

able research over

the

past

two

decades

as both

organizational

practitio-

ners and the

academic

community

have

embraced

ethical

behavior as a

legitimate business

goal.

Although this

research

has

addressed

many top-

ics, it

has been

hampered

by

the

absence

of an

accepted

approach for

directly

assessing

the

ethical

behavior of

organization members.

Undoubt-

edly

this

deficiency

is at

least

partly

attributable

to

the

complexity and

difficulty of measuring a construct that has not yet been acceptably defined.

The

purpose

of this

article is

to take the

first

steps

toward

developing an

approach

to

assessing

ethical

performance

by

proposing

a

framework

that

defines

and

organizes

the

important

variables of

such

an

assessment.

First,

some

of

the

previous

research in

business

ethics, which has

measured

variables

thought

to be

related to

ethical

performance,

will be

considered.

Second,

some of the

central

principles

of

the

measurement of

general

work

performance are

examined. The

former

provides

an

understanding

of

where ethics

research

has been in

terms

of

attempts

to

measure

ethical

performance.

The

latter

provides

necessary guidelines

for

assessing

ethical

performance. Third, a conceptual framework is presented, and its compo-

nents are

discussed.

Finally,

the

implications

that this

framework

has for

future

business

ethics

research

and

theory

development

are

discussed.

667







668

Academy

of

Management

Review

October

RESEARCHRELATED

O ASSESSINGBUSINESS

ETHICAL ERFORMANCE

The challenge in conducting a literature review on ethical performance

is that researchers have not looked at

performance directly,

but

rather

they

have examined such related variables as

feelings,

opinions, perceptions,

orientations,

or

values

held

by organization

members. It is

as

though

the

difficulty and

complexity

of

assessing

ethical

performance

has caused re-

searchers to solicit

organization

members'

opinions of issues

related

to eth-

ical performance rather than

directly examining behaviors or results. Con-

sequently, the brief review

presented

here

examines the

approaches that

have been

used in

assessing variables thought to be surrogate

indicators of

ethical

performance

and focuses

on

the four

data-gathering

methods found

most frequently in the literature: self-report questionnaires,

hypothetical

ethical

dilemmas or

vignettes,

the

interview,

and

recording of actual illegal

behavior.

The first and oldest

approach has been the use of

self-report question-

naires,

or

surveys,

that measure

how

managers

or

other

organizational

members feel

about various

ethical issues in business. For

example,

a

1987

study by

Fleming

identified

six

of the

most-referenced articles in business

ethics

as of that date.

Only

three of these

reported

actual

data, all of which

were

survey

data

gathered

from

businesspeople.

These three studies

as-

sessed ethical performance by asking respondents to choose from among

alternative answers

the ones

that reflected their own

viewpoints

or

opin-

ions. The earliest of these three studies

was

the

now-classic 1961 Baumhart

investigation,

in which he

surveyed

executives who

read the Harvard Busi-

ness Review to determine

their

opinions

on the

current state of business

ethics

and other issues. The

second

of the

three was the

1977

replication

of

Baumhart's

study

that was

conducted, using

the

same

methodology, by

Brenner and Molander. The third

empirically based article

identified in

Fleming's

study

was

the

1975

survey by Carroll,

which

sought

to determine

the extent to

which

managers

at various

organizational levels

(top, middle,

and lower management) perceived pressures to go along with their supe-

riors'

expectations

of

them,

even

though

these

managers had to

compro-

mise their

personal

standards

to do so. In

each of these studies

the

primary

approach

was the use of

questions

that

asked

the

respondents

to

choose

from

among

alternative

responses

the one

that

best

represented

how

they

felt about an

issue.

Four other

major

studies

employed self-report

data and merit mention

here. An

investigation by England (1967)

into the

personal

value

systems

of

over

1,000 managers represented

the most

significant attempt

to that date to

profile the values that managers deemed important. England's Personal

Values

Questionnaire

employed

a

scaling technique

for

data-gathering

purposes (1967: 56-58). Aldag

and

Jackson (1977) employed

a

Social

Atti-

tudes

Questionnaire,

which also utilized a

scaling technique

to

gather

view-

points

on

the

trade-offs between ethical and

economic issues.







1991

Gatewood

and Carroll

669

Perhaps

the most

extensive attempt

to

employ

the

self-report

survey

methodology

was the

broad-based study by

Posner

and Schmidt (1984).

These

researchers

used a ranking

procedure

on

some

questions

and

a

scaling technique on others. Topics included the respondents' opinions on

such questions

as priorities

among organizational

stakeholders,

perceived

pressures

on

managers

to compromise

their

personal principles,

and influ-

ences

on unethical

behavior.

The final

use of the

self-report

questionnaire

referenced

here

is that

of Victor and

Cullen (1988).

They argued

that the

organization's

ethical

climate

helps to determine

how employees

at all lev-

els make ethical

decisions.

These

researchers sought

to assess

ethical work

climates by

asking respondents

to

indicate

on Likert-type

scales

how accu-

rately

they perceived

that

items described

the ethical characteristics

of

their

work

climate.

The ethical

characteristics

of organizations

examined

in-

cluded

law

and code, caring,

instrumentalism,

independence,

and rules.

The

second

major approach

to assessing

ethics

found in the literature

involves

presenting

respondents

with

hypothetical

ethical

dilemmas

and

asking

them

how

they

felt about

or

might

react to alternative

courses of

action

(Brenner

&

Molander, 1977;

Clark,

1966;

Posner &

Schmidt,

1984).

Some

of

the

previously

reported

studies used this

technique

in

part.

This

general

approach

has been taken one step

further through

the use

of

vi-

gnettes.

Vignettes

are

short, hypothetical

cases

that enable

the researcher

to obtain

some

measure

of the

difference

between

espoused

ethics

and

likely ethical behavior (Cavanagh &Fritzsche, 1985). One of the best exam-

ples

of the

use of

vignettes

is the research

by

Fritzsche and

Becker

(1984),

who provided

respondents

with detailed

vignettes

that described

decision

alternatives

for

potential

ethical dilemmas.

The

major

limitation of

this

study,

of

course,

is that

the data

represented

the actions the

respondent

stated

would

be taken

rather

than actual

actions

or

behaviors;

therefore,

this study represented

only

a

modest improvement

over the self-report

stud-

ies,

which

gathered

opinions,

feelings,

or attitudes.

The

interview

approach

is the

third methodology

for data gathering

that has

been

used

in business

ethics research.

Some

of the classic

work of

Kohlberg (1981) employed

the creation

of

hypothetical

moral dilemma sce-

narios

that

were

then used

as the

basis for

interviews used

to

probe

and

assess

the

respondent's

moral

reasoning.

Kohlberg's

research

suggested

six

universal

stages

through

which

moral

reasoning

develops among

individ-

uals (Kohlberg,

1981).

Another

appropriate

example

of the interview

ap-

proach

is

illustrated

by

the work of

Derry (1989).

Her

technique

was

the

open-ended

and

semistructured

interview

in which

participants

presented

actual

moral

conflicts

faced

at work and

described

the

conflict,

how

they

evaluated

what

should

be

done,

and

how

the conflict

was resolved.

The

interviews were tape-recorded, transcribed, and coded for subsequent con-

tent analysis. Derry's

approach

was

similar to that

developed

by

Gilligan,

Langdale,

Lyons,

and

Murphy (1982)

in their

study

of different

types

of moral

reasoning.

A variation

of

this

interviewing

technique

was

used

by

Toffler

(1986),

as

she

sought

to chronicle

what

executives

thought

their ethical de-







670

Academy

of

Management

Review October

cision making

was like as revealed

in

a series of

candid, in-depth

inter-

views. The

advantage

of

this

approach

is

that

it

side-steps

the

use

of

hypo-

thetical vignettes in favor of a self-described, actual ethical

dilemma per-

ceived by the respondent. The limitations are many of the same found in

vignette

research

plus

the

possibility

of selective memories and self-

justifications of the respondents (Derry, 1989: 857).

One final

approach

to

assessing

ethical

performance

is the use of

cor-

porate

crime

or

illegal corporate

behavior.

Using attempts

to examine

spe-

cific

illegal

acts

as a

measure

of ethics is

appealing

because

specific

laws

have

been broken

and, thus,

the

definition

of

right and wrong

is

simplified.

Clinard

and

Yeager (1980)

and Cochran and

Nigh (1987)

conducted studies

that are representative of

this

general line

of

inquiry. The drawback to this

approach

is

that

corporate

crime

data,

to the

extent

they

are

available,

are

aggregated

for

corporations

and are not

easily

identified to

specific persons

within the

organization.

Another

problem

is

that only illegal behavior is

taken into account and, thus, an entire range of ethical behavior and

ques-

tionable

practices may

be overlooked.

In the next

section concepts

that have

been identified as critical to the

measurement

of

work

performance

in

general and, therefore,

that are also

relevant

for

measuring

ethical

performance specifically

are

discussed.

THE

MEASUREMENT F

PERFORMANCE

Much has been written describing the strengths and weaknesses of

various techniques

of

performance measurement (e.g., behavioral

rating

scales, management by objectives,

the

mixed standards

scale, and others).

Such work

is

not

of

primary importance

to

this

article.

Instead, writings

that

address

the more

basic

issues,

the nature of who

and what should be

measured and the

general strategies

for

developing

measurement tech-

niques,

are reviewed.

Logically,

these

considerations must form the

basis

for

the

development

of

a

conceptual

framework for

assessing

ethical

per-

formance

in

organizations.

Hall (1983) explicitly pointed

out the

importance of performance evalu-

ation

of all

employees

in an

organization

when he discussed

the

impact

of

the

performance

of individuals from various levels of

an organization

on an

organization's structure, style,

and

process. Specifically,

he

stated that

the

performance

of the

top-level

individuals can

influence

the

goals

and struc-

ture of the

organization.

The

performance of bottom-level individuals

affects

the organization's culture

and the

delivery and distribution of rewards.

Mid-

dle-level

individuals,

to

a

large extent,

control the

implementation of

top

management's policies

and

systems. Therefore,

these

individuals have

more

power

to

block

or

facilitate

change

in the

organization

than

either

top-

or bottom-level individuals. For this article, the importance of Hall's work is

the related

concept

that

measurement

of

ethical

performance of all individ-

uals

in

an

organization

is

crucial because each strata has

a distinct

effect

on

the overall ethical

performance

of

the

organization. Some previous

work in

ethics

has

primarily

focused

upon managers.







1991

Gatewood and Carroll

671

Smith

discussed the

necessity

of an

adequately developed

criterion,

which

she defined as a

standard

or rule by which

a judgment can

be

made

(1977:

745).

There are three dimensions

that are critical

in

specifying

a criterion: the time span to be covered, the specificity desired, and the

closeness

of

organizational

goals

to be

approached.

Concerning

time

span,

a criterion

can be obtained

from immediately after actual

on-the-job

behav-

ior has occurred through

a

long period

afterward.

Too often mere conve-

nience, rather

than relevance

to

performance,

dictates

the measure to be

used and

the time span

chosen. Regardless

of the time span,

criteria can

differ

in

specificity

because they

may

refer to

descriptions

of small units

of

performance, global

estimates

of

performance,

or

anything

in between.

At

one

extreme

is

a

rater's check

as to whether a certain behavior has

been

observed.

On

the other extreme

is the

combining

of multiple results (e.g.,

quality,

quantity,

timeliness),

reflecting

various

aspects

of performance,

into

a composite

measure.

About the

third dimension,

Smith

stated,

Most

im-

portant

in

classifying

criteria

is the dimension that concerns

the

closeness

of

the

measure

to organizational

and societal goals. Criteria

range from

the

description

of actual

behavior

to

evaluation

Qf

results to estimates of

the

effects

upon

the

organization

and

society (1977:

750).

Smith

also

discussed

other

important

characteristics

of criteria: reliabil-

ity (consistency/stability

over

time)

and

practicality (availability,

plausibility,

and

acceptability

to those who

wish

to

use the criteria

for

decisions). Gate-

wood and Feild (1990)added controllability to this list. That is, it is important

to evaluate

an individual's

performance

on

criteria

that he or she can di-

rectly

influence. Many

criteria, ranging

from

grievances

filed

by

subordi-

nates

to a

unit's

profitability,

are

greatly

affected

by

exogenous

variables.

Such

criteria

are

inadequate

measures of the individual's

performance.

Of

additional

importance

to

this

article,

Smith

pointed

out that

the

es-

tablishment

of a

single

criterion

to measure

performance appears

to

many

to be a

hopeless quest.

Success

is not

unitary

for different

jobs

for

the same

person,

for different

persons

for

the

same

job,

or for

different

aspects

of the

same job

for the same

person.

The number of criteria measures that should

be

used

to evaluate

performance

will

vary according

to the

circumstances

of

the

job.

Related

viewpoints

are

expressed by

other writers.

Hall

(1983),

when

discussing

measuring

and

rewarding

the

performance

of

individuals,

stated

that

rewards

should

be

linked

to both

long-term

performance

and

performance

that

focuses

on

obtaining organizational

goals

as

well as the

more

commonly

used short-term

topics.

Staw

(1983)

posited

several

general

issues that must

be

addressed

in

performance

evaluation

systems.

Among

these are

the

following:

1. The

measurement

system

used

at

each

level and section of

an

organization

may

need to be different.

2.

The use of individual

versus

collective

(group)

evaluation

may depend

on the

tasks' interdependency

and

the

corporate

culture.

3.

The use of

procedural (behavioral)

measures or outcome

(results)

variables de-

pends

on the confidence

one

has in

a

given

theory

of

performance

or effective-







672

Academy

of

Management

Review

October

ness.

It

is easier

to rely on procedural

measures when

there is

a known technology

and when

certainty

in the

process

is high.

4.

Once

an

organization's

philosophy

or market strategy

is formalized,

it provides

a

set

of constraints

and

assumptions

on which more specific

theories

of performance

and effectiveness can be based.

From these

writings, the following

principles

emerge

for the measure-

ment of

ethics

in

organizations:

1.

The measurement

system

should

be linked to the

philosophy,

culture,

strategy,

and goals

of the organization.

2.

Measurement

should be

applied

to

all

levels

of

employees

in the

organization.

3. Multiple

measures

should

be used within

jobs

and across levels.

4. Different

measurement systems

may

be

appropriate

for different organizational

units.

5. Measurement

may

be

applied

to

an

individual

or

a

group

of workers depending

on the characteristics of the work.

6. Measurement

should

address both

long-

and short-term aspects

of

performance.

7. Measurement

should address

both behaviors

and results.

8.

Whatever is

being

assessed should

be under the control of the individual(s) being

evaluated.

These principles provide

the basis

for the conceptual

framework that

is

described

in the

following

section.

FRAMEWORK FOR

EVALUATION OF

ETHICS

The goal here is to set forth a framework or way of conceptualizing the

evaluation

of the ethical

performance

of

employees.

In its

essence

this

framework

may

be

thought

of as a

categorization

scheme

for the assessment

of ethical

performance.

Because

such a framework has

not been

previously

developed,

the concentration

is

placed

on essential

issues

needed

to set a

foundation

for

assessing

ethical

performance.

The framework

consists

of three

parts

that answer the following

key

questions:

(a)

What

is

being

evaluated?

(b)

What content areas

of

employ-

ees'

roles are

being

evaluated?

and

(c)

What

standards

are

being

used to

make

ethical evaluations?

What Is

Being

Evaluated

To

identify

what

is

being

evaluated,

we

propose

separating

conceptu-

ally

(a)

individual

worker

performance

from

group performance,

(b)

behav-

iors of

employees

from

results achieved

by employees,

and

(c)

actions taken

that are

in

response

to mandates

of law from those that are discretionary,

or

not

legally

required.

Regarding

the

first

characteristic,

individual

versus

group

perfor-

mance,

it is

essential

in

effective

evaluation that

the

decision makers

be able

to distinguish between ethical performance for which the individual should

be held accountable

from

that

for which

the

group

should be held account-

able. The

key

issue here

is

pinpointing

accountability.

The

group

referred to

may

be

a

work

group,

a

department,

or

a

larger

administrative unit.

It is

necessary

to

identify

accountability

not

only

for assessment

purposes

but







1991

Gatewood

and Carroll

673

also for

thinking

about

or

designing

strategies

for

improving ethical

perfor-

mance. The next

key

issue once level of

analysis

or

accountability has been

determined

is

that of

evaluating

employee

behaviors

versus results.

This

is

a process versus outcomes dichotomy discussed previously. At this stage in

the evaluation

scheme the researcher

must

identify whether

it

is

the actions

(behaviors) taken

by

the

employee

that

are

being assessed for

ethical

per-

formance or the

results

being

achieved

by

him

or her.

Whether

employee

behaviors or results

are used will be

principally determined

by

the

charac-

teristics of

the

work.

The third part of

conceptualizing

what is

being evaluated calls for

the

researcher

to consider whether

the action or

result is in

response to a legal

mandate.

It is

helpful

to the

evaluator

to

be able to

separate

performance

in

which the

employee(s)

are

engaging

in

response

to law versus

action

taken

at

the volition of the

individual(s)

or

organization.

This

second

category

is

referred

to

as

discretionary,

to

imply that the

employee's actions

are subject

to

some

degree

of

voluntary decision

making,

rather

than

in

response to a

legal mandate.

Although both

the legal and

the discretionary

components

comprise ethical

performance,

there are two

major

purposes for this

dis-

tinction.

First,

it

allows the

explicit specification of

all

behaviors and results

necessary to exhibit ethical

performance that

complies

with

existing

laws.

Second,

it allows for

ethical standards to

be

systematically

stated

for

per-

formance not

addressed

by

laws or for which

criteria

higher

than

legal

statements are desired.

Content Areas of

Employees'

Roles

The second

major part

in the

framework

development

is to

think in

terms

of the

question,

What content

areas of

employees'

roles

are

being

evaluated? This

part

of the

classification scheme is

based on

the stake-

holder

concept.

An

expansion

of

Freeman's

(1984)

definition of a

stakeholder

is useful:

any

individual

or

group

who can

affect or is

affected

by

the

ac-

tions, decisions,

policies,

practices,

or

goals

of an

organization.

Major, ge-

neric stakeholder

groups, therefore,

would include

customers,

managers,

nonmanagers, owners,

suppliers,

competitors,

the

local

community,

and

any

other

group

such as

government

or the

media

with

which the

organi-

zation has transactions. It

should be

noted

that

managers

and

nonman-

agers

are

considered as

separate

stakeholder

groups.

Throughout

the

arti-

cle, however,

the term

employees

is inclusive of

both

groups.

These

stakeholder

groups

present

a useful

way

of

thinking

about the

important

contacts

or

transactions that define

employees'

roles.

It

should be

emphasized

that the nature of the

job

tasks of

the

employee's position

will

dictate which stakeholder groups are interacted with by the employee. For

example,

at

the

extremes, top-echelon

managers

may

interact

with

all

ma-

jor

stakeholder

groups,

whereas an

operational

employee's

contacts

may

be restricted

to

only

other

employees or, through

product

or

service

quality

or

safety,

to customers. In all

cases,

however,

the

stakeholder

groups

with







674

Academy

of

Management

Review October

which

the various employees

interact will lend definition to

this phase of

the

framework.

Figure

1 illustrates

the framework developed

to this

point.

It

depicts

the

major conceptual distinctions that have been made in this discussion: indi-

vidual versus group

performance,

behavior versus

results, mandated

ver-

sus discretionary

actions,

and interactions

with stakeholder

groups.

Principles

for Setting Ethical

Standards

The

third

part

in the framework addresses

the

question, What

stan-

dards are being

used

to make ethical judgments?

The

process

of ethical

decision making

requires

that

behaviors

or results be

assessed

against

stan-

dards

or norms

of

acceptability.

The most

significant

problem

in this com-

parison process

is the decision

as to what

or

whose standards

will

be

used

in this comparison.

To be sure, standards

of moral behavior emanate

from

many sources:

the law,

family, friends,

one's religious faith, one's

employer,

the community,

and

one's

profession,

just

to

mention

a few.

To make

judgments

about

employees'

ethical

performance,

however,

necessitates

more

specificity

than

just

listing

the sources

of

ethics.

A

number

of different approaches

to

making

ethical judgments

have

been

set forth in

the literature.

Cadbury

(1987),

for example, argued

that a

person

needs to

understand

his or

her own value

system,

potential

conflicts of interest that

might

be encountered,

and

the

social consequences

of decisions or actions.

Nash (1981) proposed a list of 12 questions that, when answered, should

help

an

individual

assess his or her decisions.

These 12 questions address

such issues as

problem

definition,

the

other

person's perspective

on the

issue,

the employee's

motivation,

who the decision could

hurt, and so on.

Finally,

Velasquez,

Cavanaugh,

and

Moberg (1983) presented

a

schematic

for ethical decision making

that focuses

on whether an action or decision

meets three

ethical criteria:

utility, rights,

and

justice.

Each

of these

approaches

is

interesting

and

useful

for a variety of con-

FIGURE 1

A

Framework

for

Evaluating Corporate

Employees' Ethics

Individual

Performance Group Performance

Behavior

Results Behavior Results

Legally Legally

Legally

Legally

Man-

Discre- Man-

Discre- Man- Discre- Man- Discre-

dated

tionary

dated

tionary

dated tionary dated tionary

Owners

Managers

Stakeholder

Nonmanagers

Groups

Customers

Community

Other

Stakeholders







1991 Gatewood and Carroll 675

texts. However, for the purposes of this article standards are needed that

can be operationally applied. Therefore,

it is

proposed that these standards

be captured by the following questions:

1. Does the behavior or result achieved comply with all applicable laws, regulations,

or

government codes?

2. Does the behavior

or result

achieved comply

with

organizational standards of

ethical behavior?

3.

Does

the

behavior

or result achieved

comply

with

professional

standards

of

eth-

ical behavior?

The

first

standard corresponds

with the

legally

mandated

component

of

Figure 1,

and

the

second and

third

standards

correspond to the discretion-

ary component

of

this same figure.

These three

levels

of

standards capture

the essential

codified

norms of

acceptable

behavior

as

they

are manifested

in

(a) society's

codified

ethics-law, (b)

the

organization's

belief

system,

and

(c)

codes of behaviors

that

may

have been

promulgated by industry

asso-

ciations or professional

associations. As

such, they provide

the

evaluator

with a useful screen

for

sifting

out

behaviors

or

results

that

are

deemed

unethical according

to

the

set of

standards

employed.

The use of

organizational

or

professional standards, however,

must

embody

a basis

for

normative

judgment

that

transcends

organizational

or

professional

cultures.

Philosophers

and

ethicists,

over the

centuries,

have

debated criteria

and theories for ethical decision

making,

and three

stand

out as particularly prominent and useful: rights, justice, and utilitarianism

(DeGeorge, 1990; Velasquez, 1982).

These three are

proposed as

the nor-

mative

principles

that should be used

to

anchor

organizational

and

profes-

sional

ethical

standard setting.

Each

of the

principles

utilizes distinctive

moral concepts,

and each

one

emphasizes aspects

of

behavior

or results

that are

neglected

or not

emphasized by

the others

(Velasquez, 1982).

Rights theories,

such

as those

proposed by

Kant

(personal rights)

and

Locke

(property rights),

focus on the entitlements of

individual

persons.

Rights express

the

requirements

of

ethics from the

standpoint

of the individ-

ual

(Cavanagh, 1984)

and

essentially

hold that

ethical decisions must

pro-

tect the individual's

legal

and moral entitlements.

Legal rights

are rooted

in

law

and, accordingly,

are

protected.

Moral

rights, according

to

DeGeorge,

are

important, normative, justifiable

claims or

entitlements

and are

rooted

in

the nature

of the members

of the moral

community.

In

just societies, legal

and moral

rights overlap considerably (DeGeorge,

1990:

81).

Justice

theories

have an older tradition than

rights theories,

and these

can be traced to

Plato and Aristotle in the fifth

century

B.C.

The

concept

of

justice requires

that

all

persons

be

guided by fairness, equity,

and

impar-

tiality.

A more recent contribution

to this

body

of

thought

has been made

by

Rawls (1971), who suggested that justice requires that people look at rules

and laws as

if

they

did

not

know what

role

they

were to

play

in

a

society

that

would

be

governed by

them.

Utilitarianism

as

an ethical

theory

holds that an action or decision

is

right

if it

produces,

or tends to

produce,

the

greatest good

for the

greatest







676 Academy

of

Management

Review

October

number

affected

by

the

action; otherwise,

the decision or action

is wrong

(DeGeorge, 1990). Utilitarianism may be traced

to

Adam Smith and David

Ricardo. Jeremy Bentham (1789/1970) and John Stuart Mill (1863/1957) more

precisely formulated the theory. Utilitarianism employs a teleological ap-

proach to

ethics and asserts that behavior

or

actions

should be evaluated in

terms of their consequences. That is, the behavior that produces the greatest

net

gain

for

all

affected

groups

is considered moral.

Each of

the

theories

presented-rights, justice,

and

utilitarianism -has

its own rich history, nuances and adherents. Each also has its strengths and

weaknesses.

Taken

together

as a set of ethical

principles, however, moral

philosophers

have

argued

that each addresses an ethical

aspect of behav-

ior that should not be overlooked. There is no standard answer to the ques-

tion of how

one

should reconcile

the

different

views if

they

should

compete

with

one

another in a decision situation.

DeGeorge (1990: 72-74) discussed

what course

a

person

should

take when confronted with a

clash of

moral

rules, but space

does not

permit

that

complex discussion here. Velasquez,

Cavanagh,

and

Moberg (1983) presented

a schematic for ethical decision

making

that

employs

the

combined

criteria of

utility, rights,

and

justice.

They essentially argued

that

if

an action meets all three

criteria,

it is

deemed

ethical;

if the action fails all

three

criteria,

it

is deemed not

ethical;

if

the

action fails

to meet one or

two

criteria,

a

person

must consider

whether

any

overwhelming

factors would tilt the decision

one

way

or

the

other. In

addition, Carroll (1989: 128) presented a process of ethical decision making

that

employs

an ethics

screen,

which is

comprised

of

ethical

principles

(utilitarianism, rights,

and

justice),

ethical

tests,

and standards or

norms

(personal, organizational, societal).

A

special challenge arises

when the decision

maker attempts to apply

these

ethical

principles

in the face

of cross-stakeholder interactions.

This

would be a situation

wherein

organizational responsiveness

to

one set

of

stakeholders

(e.g., owners) might

have ethical

implications

for another set

of stakeholders

(e.g., employees).

Ethicists

have

no

sure

way

of

reconciling

these

competing

demands.

Some

general guidelines

were

provided by

Barry (1986: 67), however,

when he

proposed

some decision

making

rules

regarding

cases

of conflicts and mixed effects:

1. When two or more

obligations conflict,

choose the

more

important

one.

2. When two or more ideals

conflict,

or

when

ideals conflict

with

obligations,

choose

the action that honors

the

higher

ideal.

3.

When

the

effects

are

mixed,

choose

the action that

produces

the

greater good

or

the lesser harm.

These

guidelines,

when

used

in

conjunction

with the ethical

principles

discussed

previously, provide

the

decision maker

with

guidance

in

dealing

with cross-stakeholder conflicts and competition. This approach provides

some

assurance

that

principled

decision

making

with

an

aim

toward ethical

due

process

takes

precedence

over a

haphazard

or

thoughtless

consider-

ation

of the trade-offs

involved.

Thus,

it

is

posited

that the ethical

standards

to be

einployed

include







1991

Gatewood and Carroll

677

those manifested in law

(to

include

regulations or government

codes), or-

ganizational

standards,

and

professional standards. It is

unrealistic, how-

ever,

to

think

of

organizational

or

professional standards that

have

no nor-

mative anchor which transcends the local culture. This is because without

such an

anchor, any

standards

derived by

an

organization,

no

matter how

ill-formed, would by definition be

acceptable.

Therefore, the rich history

and

tradition

of moral

philosophy

should

be employed to

guide the setting

of

standards.

In

particular,

norms

emanating from

a

consideration

of

rights,

justice, and

utilitarianism should be

brought

to

bear on the

standard-setting

process. Though this will not yield a

simple process, it will

produce stan-

dards

for

making ethical

judgments,

which are

rooted in principled decision

making

and which can

be defended when

both

interorganizational and

intraorganizational research is pursued.

Examples

of Ethical

Standards

It

should be

recognized

that,

in

most

instances,

standards would not be

developed

for

each cell

in our

framework

for

every topic

of

ethical perfor-

mance.

For

the

component

of

the

framework,

behaviors versus

results,

the

two

categories are,

for

all

practical

purposes, mutually

exclusive in

use.

That

is,

standards would

normally

be

set for

either

behaviors or

results,

but

not for both.

In

the measurement of work

performance

in

general,

a

com-

mon practice is that work behaviors are

assessed

in

those cases in

which (a)

there is one, or a small number of, behavior(s) that are appropriate for

successful

completion

of

the task or

(b)

the

results

of

the work

activity may

not be measurable

for a

long period

of time.

In

other

situations,

it is

common

to

assess

results.

Similarly,

the

applicability

of a

second

component

of the

model,

indi-

vidual versus

group,

is dictated

by

the

nature

of

the work

activity

of

interest.

That

is,

it is often

impossible

to

separate

and

assess

either

the

actions

or

the

results

of

one individual from those

of

others

in

the work

group.

In

these

cases,

the

setting

of standards at the

group level,

but not

the individual

level,

would

be

appropriate

for

assessing

ethical

performance. However,

in

cases

in

which the behaviors

or

results of the

individual are

distinct from

others,

it

is

possible

to set

standards at the individual

level.

For these

reasons,

it

is uncommon

for

standards

to

be

derived

for

each

cell of the framework for a

given topic.

For

example,

standards

developed

for the

stakeholder

group, employees, regarding

their

design

and conduct

of national advertisement

campaigns would,

most

likely,

be

written for

be-

haviors

of

group

members rather than for

results obtained

by

individuals.

This is because the nature of the work involves

group interaction and

the

results

(e.g.,

customer

perceptions

of

advertising

are

difficult to

measure).

On the other hand, sexual harassment is an example of a topic for which

standards

could

be

developed

at

both

the individual

and

the

group levels,

and

both behaviors

and

results could be

assessed.

In the

following

paragraphs examples

are

given

of

types

of

standards

that

may

be

developed by using

this

conceptual

framework.

First,

consider







678 Academy of Management Review October

a standard that

would address the issue of

bribery.

A

standard for bribery

of a potential customer could

be

depicted

in

an excerpt of the framework

presented earlier

in

Figure 1. For this discussion this standard is categorized

as an individual behavior that is legally mandated by a specific law, the

Foreign Corrupt

Practices Act.

Figure

2

depicts

this

standard placed within

the context

of the

applicable

sections

of

the

Figure

1

framework.

In this case adherence to the Foreign Corrupt Practices Act, which

prohibits bribery for the purpose of getting business, is seen as the standard

of behavior that

would

be

used to

judge

the

ethics of

the individual

orga-

nization member

under

consideration.

Our second

example

illustrates

a

standard

affecting

a different

stake-

holder group-employees.

Here

the

issue or

behavior under

consideration

is sexual harassment.

In

this case,

a

legally mandated standard and a

corporate standard are presented.

This

example

is

also

an

illustration of an

individual behavior.

Figure

3

presents

this

example, along

with an indica-

tion

of

the applicable

law and

corporate policy statement.

A

third example illustrates

a

corporate standard that can be applied to

an

employee's

results rather than to behaviors. Here the

stakeholder

group

is employees and

the result under

consideration is the achievement of a

workplace

where minorities

are not

only

treated

fairly

but also are

fully

integrated

into

supervisory positions.

For

the division

manager whose per-

formance

is

being

evaluated

in

this

example, the achievement

of

specified

results established in corporate goals is the frame of reference. Figure 4

illustrates excerpts

from

the evaluation framework

that

depicts this stan-

dard.

The

final

example

is

one

in

which

group

standards

concerning results

are determined

in

reference

to

the

community

stakeholder

group.

Both

le-

gally

mandated

and

discretionary

standards are set. The

general issue

is

water pollution. The specific issue

is

effluent

limits

for surface water con-

tamination.

In this

case

a

specific manufacturing plant

of

a multidivisional

corporation

is the

group

under consideration. The water

pollution flowing

from

this

plant

is

a function of the

decisions and actions of

a

number of

personnel

within the

plant, and, therefore, corporate headquarters

decided

to use

the

group (entire plant)

as the unit of

evaluation.

The

legally man-

dated

standards

are

those set

by

EPA

Standard 101:

Effluent

Limits.

The

discretionary

standards

are those

set

by

the

National Association of

Chem-

ical

Plant

Managers (NACPM),

a

professional association,

which

has

set

FIGURE

2

An

Example

of

a Legal Standard for Individual Ethical Behavior

Individual Performance

Behavior

Legally

Mandated

Stakeholder

Group

Customers

Standard

for

bribery: Foreign

Corrupt

Practices Act







1991

Gatewood and

Carroll

679

FIGURE 3

Examples of a

Legal Standard and

a Corporate

Policy

Standard for

Individual

Ethical

Behavior

Individual

Performance

Behavior

Legally

Mandated

Discretionary

Employees Sexual

harassment is

Corporate

policy: Not

only are

prohibited

under

forms of

sexual

harassment (as

Title

VII of the Civil

defined in Title

VII) prohibited,

but

Rights Act.

it

is also

company policy that

Stakeholder

employees have

a right to work

in

Group

an environment

completely

free

of

sexual innuendos, jokes, or

references. Employees

are to be

regarded as

individuals, not as

members of a

gender group

who

have

common

characteristics.

higher

standards

for this

industry

category.

These

standards

are stated in

NACPM

Guideline 44G: Effluent

Goals for

Member

Corporations. The as-

sessment of the

group's performance

in

this

example would be a

product of

comparing

its results to

both federal

guidelines as well

as

those recom-

mended

by

the

professional

association.

Performance Measurement

Principles Manifested

in

the

Framework

In this section

the

proposed

assessment

framework is

elaborated on

through

a discussion of

how it

manifests the

principles

of

performance mea-

surement identified

previously.

The first

principle

is

that

the

measurement

system should be linked to

the

philosophy, culture,

strategy,

and

goals

of

the

organization.

It should be

noted that

when

applied

to

the

measurement

of

ethical

performance,

the

appropriate statement of this

principle

is

that the

measurement system should be linked to the ethical philosophy, culture,

strategy,

and

goals

of

the

organization.

These

ethical

considerations

FIGURE 4

An

Example

of

a

Corporate Standard

for

Individual

Ethical Results

Individual

Performance

Results

Discretionary

Stakeholder

Group

Employees

Corporate

goal

for an

integrated

supervisory

level

of

management:

By

the

end of the

evaluation

period

under

consideration,

each

manager

is

to

have

achieved at least a 12%

representation

rate

of minorities in

entry-level

supervisory positions

reporting

to

him/her.







680

Academy

of

Management

Review

October

should,

in

turn,

be

linked

to the overall

philosophy, culture,

strategy,

and

goals

of the

firm.

Logically,

an assessment

system

of

ethical

performance

should be directly linked to the former and indirectly linked to the

latter.

The organization's ethical concepts can be directly represented in this

framework. This

representation

is a function of

the stakeholder

groups that

are specified and the standards

that

are designated. The

stakeholder

groups clearly signify

those for whom the

organization chooses to be re-

sponsible. The

standards indicate the level of

responsibility. Legal

man-

dates usually

indicate

minimum

levels,

whereas

discretionary standards

usually indicate higher

levels of

responsibility.

The

resulting

statement of

the

parties

and the

extent of

ethical

responsibility

is a clear

representation

of

the explicit ethical culture, philosophy,

and

goals

of

the organization.

The second principle

is that measurement

should be applied to all

levels

of

the organization.

As illustrated

previously

in

Figure 1, the frame-

work can be

tailored

to

each

employee

or

group

of

employees through the

identification

of stakeholders and the use of the

behavior-results, legally

mandated-discretionary,

and

individual-group

dichotomies. These con-

structs can be

applied

to all

members

of

the

organization,

with differences

among

members

being

reflected

in

the

particular pattern

of

cells that have

specified

standards.

The third

principle, multiple

measures within

jobs

and

across

levels,

is

manifested

through

the

use of the

three factors used to define the frame-

work. Each cell of the framework could employ different measurements,

depending

on the combination

of

what

is

evaluated,

the content

areas

spec-

ified, and the standards

used.

A single overall measure would be

unlikely

to

capture

the

appropriate specificity. Similarly,

the fourth

principle,

that

different measurement

systems may

be

appropriate

for

different

units,

can

be

easily

demonstrated.

If two units differ on

any

of

the three factors

in

the

conceptual framework,

the measurement

systems applied

to

them would

necessarily

differ. For

example,

if

the difference was in

the use

of

behaviors

versus

results, entirely

different data would

be

gathered

to make an eval-

uation

of

ethical

performance.

Individuals

or

organizational

units

would

only

use the

same measurement

systems

if

they

were

similar in

all factors of

the

framework.

The

fifth and seventh

principles

are

directly

stated as

part

of

the frame-

work: the distinction between

individual and

group performance

and

the

distinction between

behaviors

and results.

By

direct

implication

the sixth

principle

of measurement of

both short-

and

long-term aspects

of

perfor-

mance

can be

captured by using

these

two distinctions.

The most

direct

example

is the use of behaviors

(short-term)

versus

results

(long-term).

Re-

sults also can be divided to

capture

various frames of

longitudinal

devel-

opment. Lastly, the eighth principle, that of the assessment of performance

controlled

by

the

individual(s),

is

operationalized

in

the

individual

versus

group

and

behavior versus results

dichotomies. The

proper

allocation of

these

factors allows a

precise specification

of

responsibilities

that are

di-

rectly

controlled

by

one

individual or a

group

of

employees.







1991 Gatewood and

Carroll 681

IMPLICATIONSOR RESEARCH

The most important

characteristic of this framework is that it is a com-

prehensive specification

and

arrangement

of

those variables that are fun-

damental

to ethical

performance

in

organizations. Because

of

this charac-

teristic, the

framework has two uses for

researchers of business ethics. Both

of these uses

will

be described

in

detail in

this section.

The

first use is an

instrument

for

theory development. One critical

part

of

theory development

is the examination of

the relationships among vari-

ables. The framework identifies the variables of

stakeholders, ethical stan-

dards,

unit of

accountability

(group

versus

individual),

and dimensions

of

performance

to

be measured

(behavior

versus

results). Furthermore, sub-

categories

within

pertinent

variables

are

specified (e.g., legally mandated

and discretionary within the variable-ethical standard), and a general

organization

of

these

variables

(Figure 1)

is

given.

The

discussion and elab-

oration

of

interactions

among

these variables will

contribute

to

the

specifi-

cation of

relationships among

constructs of

ethical performance and will

assist

in

model

and

theory development. One example

of

how the frame-

work can be used

in

this

way

will

be discussed.

The second

use of

this

framework

is to

provide

a

method

of

measuring

ethical

performance

of

individuals and

groups. Presently,

business

ethics

research has

been hindered

by

the

difficulty

in

measuring performance

in

terms

of its ethical value. This framework would

enable

researchers

to

scale

ethical behaviors or results

as

having negative

or

positive

value in com-

parison

with the standards that can be

specified

in

each

of

the cells of

the

proposed

matrix.

Such

measurement is

essential to several

topics

of

empir-

ical research

in

business ethics. This use of

the framework

will

be

incorpo-

rated

into a

discussion

of research on the

development

and

implementation

of ethical

standards into

organizations.

Theory Development

in Business

Ethics

In order to

specifically

describe the use of this

framework

in

theory

development,

this section illustrates how it

may

be used to

complete previ-

ous work in ethics

theory.

One

such work is

that

of

Kahn

(1990),

who dis-

cussed activities

necessary

for the

development

of

an

agenda (an organiz-

ing framework)

for business ethics

theory

and research. He

conducted

in-

terviews with 32

business

ethics researchers from various

academic

disciplines

and used this information to

generate

themes about

past

and

present

research activities.

One

of

Kahn's conclusions is

that there are

two

classes of

concepts

that

comprise

the core of

business ethics

theory:

norma-

tive,

which focuses on how

an

individual

ought

to

behave,

and

contex-

tual, which focuses on the situational aspects of ethical behaviors or results.

The next

phase

of business

ethics research

and

theory development

must

bridge

these two classes

of

variables. Kahn described the

images

that

are

essential to this

bridging.

These

images

are the

analogies

that

research-

ers use

to

describe

their

work,

and

they

are

regarded

as

the subtexts and







682

Academy

of

Management

Review

October

driving

forces of the field's ethical

concepts (1990:

314).

These

images

present

ethics as

conversation, history, vision,

and

community.

Collec-

tively, these images

serve as a

way

to link the

conduct and

content

of

future

research. They map the interaction of academic research and theory with

normative practice. In

order

to

illustrate the use of the present

framework in

theory development,

the

following paragraphs

discuss its use in

operation-

alizing

two

of Kahn's

images.

The image, conversations, emphasizes the

importance

of

dialogues in

creating theory

of

ethical

behavior. An ideal

way

for ethical

behavior to

develop

is to start as

public,

verbal debate between

individuals. Such

de-

bate

requires

the

two-stage process of, first,

self-confrontation

and, second,

confrontation

of others. Inherent in this is

the idea that moral

knowledge

arises

from the confrontation of

diversity

of

opinion (Srivastva

&

Barrett,

1988). The conceptual framework specified in this article would require sys-

tematic

conversations,

as standards for each of

the cells

in

the framework

are

developed. Within-organization

conversations,

for

example,

would

be

necessary

as

ethical standards for behavioral

interactions between

sales

personnel

and

customers

would be determined.

The

specifications

of

the

standards

for all

appropriate

cells of the framework would

require

conver-

sations

among

all

organizational

members.

Similarly,

the

proposed

frame-

work

also can

provide

a

map

for

conversations

among

researchers.

Among

the

specific

research

questions

that Kahn

introduced as

being

appropriate

for the conversation image and which can be addressed effectively with this

framework

are

the

following:

What are the characteristics of conversations that

help people struggle

with

and

resolve ethical dilemmas?

What

types

of issues create

the

need for

conversations about ethical issues?

(1990:

322)

For both of these

questions,

the characteristics of

the framework

(e.g.,

individual versus

group,

results

versus

behaviors, types

of

stakeholders,

and

mandatory

versus

discretionary

standards) provide variables that can

be used in research efforts. For example, in reference to the first

question,

it

may

be

determined

that

there are many

differences of

opinion among

organization

members in conversations

characterized

as

being

about

the

behaviors of individual

employees

directed toward consumers

and which

seek to

develop

standards

other than

legal

ones.

These differences of

opin-

ion,

in

turn,

force

an

examination of the

assumptions

about human

behavior

that are

made

by

the

various

parties

and

lead to more

commonly

under-

stood ethical standards.

The

image

of

ethics

as

history emphasizes that ethics evolve

over time.

It is only possible to understand them by using a longitudinal perspective.

Concurrent

snapshots provide

only momentary relationships

among

vari-

ables,

which

may change

unexplainably.

The

study

of ethics'

relationship

to

organizational

culture,

for

example, would

require

historical data

about

both the traditions and the

ethical standards of

the

organization. Some







1991 Gatewood and

Carroll

683

relevant research questions that Kahn

posed for study using the history

image include

How does the

history of conflict and segmentation among certain

organization

groups (e.g., labor/management, manufacturing/development) influence ethical and

unethical

behavior?

How do organization

members translate procedures that are developed

in one his-

torical context to

issues reflecting changed

contexts? (1990: 322)

The proposed

conceptual framework

could provide the organizing con-

tinuity for the collection

of

relevant data to address these

questions. For

example, to

examine

the

first

question,

it

would be

appropriate

to note the

changes

in the frequency

of ethical

behavior or

results in

specific

cells of the

framework over

a

period

of time. These changes in the frequency of ethical

behavior or

results could then

be

related to data measuring the degree of

conflict between labor and management.

The usefulness

of

the framework

also can be illustrated with the re-

maining images.

To do

so, however,

is

beyond

the

scope

of

this article.

Rather,

the article's purpose

has been

to

present

one

way

that the variables

that comprise

this framework-stakeholders, behaviors

or results, individ-

ual and

group,

legally

mandated and

discretionary

standards-can be

used

to

systematically expand previous

theory development

in

business ethics.

Research

in the Development

of

Ethics

in

Organizations

In this section the potential use of the framework for a second purpose,

research

into

the

factors

important

for

the

development

of

ethical standards

in

organizations

and

the

socialization of

organization members

to

those

ethical

standards,

is

discussed.

In

research

on these topics,

the framework would serve

mainly

as a

means

to

develop

criteria

or

ethical

performance

measures that are neces-

sary

for

empirical

research. The

development

of

this framework allows

for

the

specification

of standards

of ethical behaviors or results

for

individuals

or

groups

of

employees.

These

standards

would,

in

turn, permit

the

devel-

opment

of either

within-organization

or

between-organization

measure-

ment

systems.

In the

former,

the standards would be the basis

against

which the

actual

behavior or

results

of

organization

members

can be

com-

pared.

These

actual behaviors

or results can then be assessed

as

either

below, equal to,

or above the standards. For

between-organization

mea-

surement,

the standards

for

each

of

the

cells in the framework would be the

points

of

comparison.

This framework

would

permit

the

comparison

of

state-

ments

of ethical standards

on

common

topics

or

issues

by

the

organizations.

Scaling systems

could be

developed

that measured

differences

in

either the

levels

of the standards or

the

breadth

of

the

standards between

organiza-

tions. The scores resulting from these methods would be the ethical perfor-

mance data

necessary

for

empirical analyses. Although

there are

many

research

topics

for which this

conceptual

framework

would be

useful,

four

of these

are addressed.

Stakeholders'

influence

and

ethics.

According

to Freeman's

(1984)

def-







684 Academy

of

Management

Review

October

inition,

the term

primary

stakeholder

generally applies

to

owners,

suppli-

ers,

employees, customers,

and

competitors. Through

economic

power,

each

group

has influence

on the actions of the

organization. Understanding

the impact that various stakeholder groups have on the ethics of the orga-

nization

is

important.

One

fundamental research

question

is the

extent to which

stakeholder

economic power

translates into

impact

on the

development

of

ethical

stan-

dards of

the

organization.

The

act

of

mapping

relations

between stakehold-

ers and

the firm

(Freeman

&

Reed,

1983)

includes

two

important

assess-

ments of stakeholder

influence:

(a)

how

seriously

the

stakeholder's interests

affect

the firm if left unattended and

(b)

the

extent

to

which the

organization

can be affected in either the

long

or the short run

by

stakeholder demands

and actions. These assessments

are useful

for

this

topic of

ethics research.

Basically,

data

from

the

mapping process

can be

related

to

ethical stan-

dards

developed

for various

cells

of the framework. One research

project

would

be

to compare

the ethical standards of

groups

of firms that differ

in

their assessed profiles of stakeholder influence. For

example,

one

might

suspect

that

ethical standards

would be

lower for those

firms

for

which

competitors

have a

dominant

impact

relative

to other stakeholders than

for

those firms for

which

employee groups

are dominant. This

prediction

is

based

on

the

premise

that firms with

large competitor impact

would

be

less

likely to endorse behaviors

that

may increase costs and lessen their posi-

tions relative to competitors. Frequently, higher-level ethical standards are

regarded

as

being of

increased

short-term cost in

their

development

and

implementation.

Another

research

topic

that

could

be

studied in

a

similar fashion

is the

relationship between

the

level of conflict among stakeholder groups in their

demands

on the

organization

and the ethical behavior

and results of

the

organization.

It is to be

expected

that

there

would

be

various

levels

of

dis-

agreement among

stakeholder

groups

about

the

appropriate

ethical

stan-

dards for

cells in the

framework.

The

examination

of

this

disagreement

in

relationship

to both

the level

of standards

that

are

developed by

the

orga-

nization and

the actual

ethical

behavior or

results

of

individuals

and

groups

of the

organization

would be

important.

Socialization

of

ethics.

This

process

is

the

internalization

of

organiza-

tional ethical standards

by

the individual

employee.

The

dynamics

of

this

internalization

are of

major

research

importance

to the field of

business

ethics. Internalization

is

fundamental

to the

ethical conduct of

organization

members

(Wood, 1990).

According

to

McCoy (1985),

control

systems

are

an

integral part

of

employee socialization. One

important control system

that

he

discussed

is

corporate

culture,

the

embodiment

of

the

values

of the or-

ganization. Saffold (1988) described two important characteristics of corpo-

rate

culture when

measuring

its

impact

on

organizational

variables: cul-

tural

dispersion (diffusion

across

the

social

and personal dimensions of an

organization)

and

potency (power

of

culture

to

influence

behavior).

One

research

question

in

this

topic is,

To what extent

are ethical stan-







1991 Gatewood and Carroll

685

dards

part

of

organizational

culture? It seems reasonable to

expect that if

culture reflects

the values of the

organization, then standards for

the cells

of

this framework are part

of that

culture. One tentative hypothesis is that

organizations with highly dispersed and highly potent cultures have devel-

oped consensus relative to the ethical behaviors or

results of individuals and

groups

of stakeholders more often than

have other

types

of

organizations

(Victor & Cullen, 1988).

To examine this

hypothesis,

one would

measure the

dispersion

and

potency

of

corporate culture

in

a

sample of organizations.

This

conceptual

framework could be used to

assess the level

(mandatory

versus

discretionary)

and the extent

(number

of

cells with

specified

stan-

dards)

of ethical standards

in

the same

sample

of

organizations. Compar-

isons could be made

among high

and

low

diffusion or

high

and low

potency

organizations

on these measures

of

ethical standards.

One would

anticipate

that organizations

that are

high

on the

cultural measures also would be

high

on the ethical

measures.

A related

and

important

second research

question

is the

relationship

between

value orientations

of

organizations

and

their

ethical standards.

England (1975) developed

a

classification scheme for

identifying

the value

orientations of

managers.

The

pragmatic approach describes those whose

foremost

concern is whether an action

will

advance the

company's objec-

tives. The

ethical/moral

approach

concentrates on

whether the action is

defensible

within a

coherent

framework of

principles.

Managers with

the

affective approach are mostly concerned with the expected pleasure or

pain

of the action. A mixed

approach

is

also

possible,

which describes

combinations

of the

previous

three value orientations.

England (1975)

de-

veloped survey procedures

for

measuring

these values of

managers and

describing

either an

individual's,

or

group

of

managers',

value

orientation.

Generally,

the

pragmatic

orientation

is

the

most

common,

and

the

affective

orientation

is the least common.

One

obvious

expectation

of this

research

topic

is

that

there

should

be

differences in

the ethical standards

among managers

with different domi-

nant

values. For

example,

it

would seem

logical

that

managers

character-

ized

by

the ethical/moral

approach

would have more

stringent

standards

than

others.

However,

this

supposition

has

not been

empirically tested, nor

has

the

nature

of

differences in

ethical

standards

among managers

with

other

value

orientations been examined. The use

of

England's procedures

and this framework would allow researchers

to

gather

data

about

both

values

and

ethical

standards

of

managers

and

to

examine the

relationship

between

the

two.

Incorporating

ethics

into

performance

measurement

systems.

Accord-

ing

to

reinforcement

theory,

one means

of

increasing

the

frequency

of eth-

ical behavior or results would be to reward such activity when it occurs.

Giving

rewards in reinforcement

theory, however,

assumes

that

appropri-

ate

behaviors

can

be

defined and identified.

Otherwise,

the

reward

is

some-

times

given

for

inappropriate behavior,

and the association that must

be

made

by

the

individual between

the reward

and

the

desired

behavior

is







686 Academy

of

Management

Review October

tenuous; deficiency

in

forming

this

association reduces the impact of the

reward

in

increasing

the frequency

of

the desired behavior. Jansen and Von

Glinow (1985)

described this

phenomenon

in

organizations.

In terms of reinforcement for ethical performance, the framework de-

scribed here

would enable

organizations

to be

specific

in

the

standards of

expected ethical

behavior or results. In

essence,

these standards would be

the statements

developed

for

the

cells of

the framework. These standards

could be

incorporated

into

existing performance

measurement

systems

of

the organization and, thereby,

would formalize the review of ethical behav-

ior or results of employees. Rewards

could

then be linked

to the results of

this formalized review.

A

more

nearly complete description

of

the appro-

priate

features of reward systems

can be found in

Lawler

and Rhode (1978).

One

important

research

question regarding

this

topic is,

What is the

effect of the use of rewards on the frequency of ethical behavior or results of

employees?

This

question

can

be

studied

in different

ways.

For

one, orga-

nizations similar in terms of industry and size could be

compared on the

basis

of

how

adequately

rewards

are

linked

to

ethical actions

or

results

of

employees

based on the

previously

mentioned

guidelines

of Lawler

and

Rhode

(1978).

The

hypothesis

would

be

that

a

positive relationship

would be

found

between

the

adequacy

of the reward

system

and

the level of

ethical

performance

of

the

employees.

Because of the

expected

small number of

organizations

that

actually

have reward and measurement

systems linked

to ethics, a second, more feasible approach, might be to collect data in a

sample

of

organizations

before and after the

implementation

of this

concep-

tual framework

and an

accompanying

reward

system.

The hypothesis

would

be that an

increase in ethical

performance

would

occur after the

intervention. A third

approach

would be to examine the effect of

monetary

versus nonmonetary

rewards

on

the

frequency

of

ethical performance.

Such

information

would be

important

in

the

design

of reinforcement

sys-

tems.

Ethical performance and

economic

performance.

Most of

the research

which has

focused on the

relationship

between

socially

beneficial

organi-

zation performance and economic performance has been conducted under

the rubric

of

corporate

social

performance (CSP).

In

some instances the term

CSP

has been

used

in

a manner consistent

with

ethical

performance.

In

other

instances,

ethical

performance

more

nearly

has been seen as a

subset

of

CSP.

In

either

case, previous

research has

yielded

inconsistent

findings

concerning

the

relationship

between

corporate

social

performance

or ethi-

cal

performance

and measures

of the

organization's

financial

performance

(Aupperle, Carroll,

&

Hatfield, 1985; McGuire, Sundgren,

&

Schneeweis,

1988).

This is due

in

part

to the

variability

in the measures of social or

ethical

performance that have been used. For one early measure, researchers

used

expert

evaluation of

corporate policies.

For

example,

Sturdivant and

Ginter

(1977)

used an index from the Council of Concerned Businessmen.

Moskowitz

(1972, 1975)

used

two

rankings

from Business and

Society.

The

validity

of such

evaluations

depends

to

a

large

extent on the

knowledge

of







1991 Gatewood and Carroll

687

the

individuals

doing

the evaluation and the

agreement among

evaluators

of what characteristics

are

being judged.

For a

second

type

of

measure,

researchers used

content

analysis

of

corporate

annual

reports

or

other cor-

porate documents (Abbott & Monsen, 1979; Preston, 1978). However, the

relationship between such public statements

and

actual

corporate actions is

unknown. For

a third

measure,

researchers used

performance

in control-

ling pollution as an indicant (e.g., The Council of

Concerned Businessmen

Pollution

Performance Index

[Spicer, 1978]). However, pollution control is

only one segment

of total ethical

performance,

and it

applies to only a

limited number

of

industries. Other studies have nicely summarized the

kinds of measurements

that

have been used

to

operationalize corporate

social and economic

performance (Aupperle

et

al., 1985;

Cochran &

Wood,

1984; Ullmann, 1985).

The use of the framework presented in this article would provide a more

direct measure

of

ethical

performance

than

any

of

the

previously mentioned

methods.

Therefore,

it

is

expected

that there

would

be more

consistency

in

the demonstrated

relationships

between ethics

and performance across

studies.

The most feasible research

strategy

would focus

on the

organization

as the unit of analysis

rather

than individual

or

groups within

the

organi-

zation.

For a

sample

of

firms

in

the same

industry,

the standards of each

of

the firms

for

cells

of the

conceptual

framework

could be

gathered.

These

data would enable

researchers to rank the

firms on the basis of

level

of

specified ethical performance standards. This ranking could be related to

the

financial performance

of

the firms

to

estimate the

relationship between

these ethical

standards

and economic performance.

DISCUSSION

AND

IMPLICATIONS

The

ethical

performance

of individuals and

groups

within business or-

ganizations

has become

an

increasingly

important topic

in

management

research.

Though

this

body

of

research

has

addressed

several subjects,

including managers' opinions

about

the

general

level

of

ethical perfor-

mance in business, organizational factors related to the level of ethical

values expressed by employees,

and factors

affecting

the

alternative cho-

sen

by

individuals

when faced with

ethical

dilemmas,

almost no research

has

directly

studied the actual ethical

performance

of

organizational

mem-

bers

and

the variables related

to

this

performance.

This article addresses

this

deficiency

in research

by describing

a frame-

work

for

assessing

ethical

performance.

This framework is

composed

of

three organizing components:

an

identification

of the

major

stakeholders of

the

organization,

the

categorizing

of

organization

members

into

individual

or group units for accountability, and the division of performance into be-

haviors

or

results.

These

three

components

are crossed in a

three-variable

framework

in

which the cells

represent

combinations of the interactions

among

these three

components.

Ethical standards can

then

be

formulated

for each cell

in terms of

existing laws,

or

organizational

or

professional







688 Academy

of

Management

Review

October

codes of conduct established through

the

application of normative princi-

ples such

as

rights, justice,

and utilitarianism. These

standards become,

then, the criteria for

ethical

performance

of

organization members. Assess-

ment of ethical performance becomes the result of evaluating the behaviors

or results of members in comparison to the expressed, appropriate ethical

standards.

Both the process of developing this framework within organizations and

the resulting

measurement

of

ethical

performance

of

organizational mem-

bers should make important

contributions to the

body of research in busi-

ness

ethics. The

process

of

development

forces the interactions

that Kahn

(1990) described

as critical

for the

specification

of

the next

stage

of

theory

in

business ethics. The assessment

of

individuals and groups provides the

quantification

of ethical

performance

and

the possibility of conducting em-

pirical research using this measured variable.

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Robert D. Gatewood received his Ph.D. from Purdue University. He is currently serving

as the Interim Chairman

of the

Department

of

Management

at

the University

of

Geor-

gia. His recent research is in the areas of recruitment, selection, and adjustment to job

loss.

Archie B. Carroll is professor of management and holder of the Robert W. Scherer

Chair

of

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and

Corporate

Public Affairs at the

University

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Georgia.

He

received his D.B.A. degree from the Florida State University. His current research

interests include business ethics and corporate social performance. He is a former

chairperson (1976-1977)

of the

Social

Issues in

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Division of

the Academy

of Management.

Documents

Assesment of Ethical Performance of Organ