Thesis Background: Ethics and ethical business codes of conduct

2011/02/21 § 3 Comments


Introduction: Ethics and morale in a Business context and the effect of honor codes






The terms moral and ethical behaviour include a wide variety of different actions. Commonly lying, cheating and stealing are defined as unethical behaviour (Trevino Linda, Weaver Gary et al. 2006). More generally speaking, deception of any kind is thought of as unethical, while behaviours such as honesty, obeying the law, and whistle-blowing are conform with ethical standards (Jones 1991).

Deception and the capacity to detect deceit are products of animal and human evolution (Buchanan 2006). While the way we are dealing with deception certainly is a product of our social evolution the psychological capabilities involved enabling us to lie and cheat have developed in our biology and are hardwired (Leighton 1906). Deceit and detection thereof is a universal human trait (Bond, Omar et al. 1990).

A scenario of deception in the animal kingdom could for instance be a signal warning of a predator when in fact no predator is present. After all animals have fled the scene the deceiver may have a resource such as feed for itself. Deception is thereby defined as a signalling act that in the broadest sense can be any exchange between two or more individuals (Buchanan 2006).

If this exchange manifests as an exchange of goods, a financial, social or material gain can manifest on the expense of the deceived. The origins of deceit may have been simple survival mechanisms that ensure that the more pushy ones, the more egoistic individuals, would survive more easily (Leutenegger 1987).

Human society has come up with definitions for dishonesty and developed coping strategies for dealing with deception (Bond, Omar et al. 1990). However, these definitions are far from fixed, but rather vary in different societies and may change over time (Jones 1991).

In some instances deception may be punished and sanctioned, in others it may be a generally accepted occurrence or even be encouraged. For instance, law-enforcement may employ deception and use misrepresentation as a tool in a number of areas, such as setting up sting operations to catch corrupt officials, placing informants in various undercover situations, and falsifying documents in witness relocation plans (Shine 1989).

The example demonstrates, the line between deception and socially accepted behaviour is at times vague at best. The attempt of defining this line is the function of ethics and the study of morale. Some fields of study distinguish between ethics as being of a more universal relevance and morale as being applicable for a distinguished social group (Wiktionary 2011). In this thesis the terms ethics and morals are interchangeably used for “The rules or standards governing the conduct of a person or the members of a profession” (Dictionary 2011).

Honesty and deception are concepts of ethics and morale that are being investigated not only by moral philosophers, psychologists, psychiatrists and sociologists, but in a more applied arena in recent times by researchers from such fields as business studies (Ayres and Ghosh 1999; Chan, Fung et al. 2010).

The need for research on ethics and morale in a business context arises from the fact that lie, betrayal and deception are at the core of such problems as accounting fraud, as in recent cases such as the Enron scandal (Bazerman, Loewenstein et al. 2002; House, Watt et al. 2004) or the Bernard L. Madoff fraud scandal (Battalio and Loughran 2008). The Enron and WorldCom scandals alone are estimated to have cost the US economy 37-42 billion USD (Carol Graham 2002; BBC 2004; Rice 2010).

Some argue that these problems arise from a relentless application of the idea of the homo economicus and discuss the moral implications of the assumption that individuals are merely out to maximize their own gain, if needed on the expense of others, and if opportunity permits by deception (White 2004). In a similar vein, individuals in companies such as in accounting may, if presented with an opportunity to beget immoral advantage, may abuse the special position they are occupying (Kravitz 2009).

Past research has investigated deception in business contexts by investigating the importance internal psychological factors, such as motivation (Bazerman, Loewenstein et al. 2002), moral or religious identity (Vitell, Bing et al. 2009), measures of ethical sensitivity (Shawver and Sennetti 2009), self-concept and self-regulation (Markus and Wurf 1987) to name but a few, as well as external factors, such as incentives for ethical behaviour (Battalio and Loughran 2008), organizational structures, including company norms and climate (Nijhof, Fisscher et al. 2000), governmental legislation (Rockness and Rockness 2005) for example.

Maybe not surprisingly, all these factors pay their dues to a problem that is not only prevalent in many arenas of business but in our daily life (Serota Kim, Levine Timothy et al. 2010). But apparently it is a meticulous task to dissect which exact role the individual factors play. Notwithstanding, much progress has been made in understanding dishonesty and the underlying causes and psychological processes (Chan, Fung et al. 2010).

In a recent development, research has move on to the next level of the problem, i.e. how to remedy the occurrence of dishonesty with prudence (Tullberg 2009). In this context it naturally has been discussed how external factors can be altered in order to stifle the occurrence of fraught and deception (Amir, Ariely et al. 2005). One may look at this approach as the stick and carrot approach that tries to use incentives and penalties in an attempt to manoeuvre individuals away from committing fraught (Nina, Dan et al. 2010).

At the same time, others have begun understanding how internal factors manipulate moral decisions in order to accomplish the same end, i.e. improve morality (Shu Lisa, Gino et al. 2011). The question has been addressed: How can the moral attitude or the very sense of morality be altered in order to diminish unethical reflexes (Schweitzer and Hsee 2002; Reynolds and Ceranic 2007; Mazar, Amir et al. 2008)?

Methods that have been thought of are often directing attention towards raising awareness or attentiveness for moral problems arising from ethical dilemmas (Reynolds 2008). Attempts have been undertaken to do so by using lectures on ethics and by means of moral education (Kidwell 2001; Kulshreshtha 2005).

An interesting approach is raising ethical attentiveness using another type of moral reminder, such as a Code of Honour, or more precisely, Business Ethical Codes of Conduct (BECC) (Kidwell 2001; Kaptein 2004). Several studies have shown that the effects of such codes or lectures on their content can be efficient in rendering immoral behaviour more ethical, but may even have detrimental effects at time, or be ineffective at others (Kaptein and Schwartz 2008) (Pater and Van Gils 2003).

The studies mostly have concentrated on long-term usage of the code though, and the multiple variables influencing the outcome of a BECC in such a long-term scenario include the content of the BECC, the mode of communication, the frequency of communication as well as the quality of the code (Kaptein 2010).

Only few studies so far have addressed the idea of measuring acute effects of BECC in real life scenarios, such as having students sign a BECC immediately before a written test at a university (Mazar, Amir et al. 2008; Shu Lisa, Gino et al. 2011).

–> Read the previous chapter: Thesis Introduction: Ethics and morale in a Business context and the effect of honor codes

–> Read next chapter: Thesis Literature Review: PSYCHOLOGICAL BASIS OF MORALITY


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