Moral Psychology and Organizational Ethics Dennis Wittmer University of Denver

Building a Behavioral Model What factors influence ethical / unethical behavior or decisions in an organizational context?

Leadership Style (Kurt Lewin) – Autocratic, Democratic, Laissez Faire Some Factors from Videos and Reading: What Implications for leading and managing? Leadership Style (Kurt Lewin) – Autocratic, Democratic, Laissez Faire Group Conformity (Solomon Asche) Beach Bystander Request Positive Role and Responsibility (Langer) – flight simulator and vision Authority (Milgram Experiments)

Dan Ariely– “(Honest)Truth about Dishonesty” Most people will cheat a little…”up to the level that allows us to retain our self-image as reasonably honest individuals” Reminders matter to cheating – 10 Commandments before opportunity to cheat Psychological distance – cheating in golf Less cheating –cash vs. tokens

Other possible factors Organizational Reward structure Behavior of peers (significant others) Modeling of leaders Commitment of top management Formal polices and codes Ethical work climates Opportunity Training programs Centralization / Decentralization Control mechanisms Individual Level of cognitive moral development Ethical sensitivity / awareness Experience / tenure Locus of control Ego integrity Machiavellianism Gender

Kohlberg’s Theory of Cognitive Moral Development (Features and Assumptions) Focus is on “structure” not “content” Process or reasoning used, not outcome or conclusion Heinz and the Drug Not steal or not steal, but what kind of reasoning led to the conclusion Developmental Stage Theory Follows and extends Piaget (cognitive psychology) Highest Correlates Age and Education Cognitive disequilibrium – challenging adequacy of reasoning Correlation of CMD and Behavior Significant but modest (R-squared = .3+) Other factors (e.g. ego strength or susceptibility to authority)

Kohlberg’s Theory of Moral Development Preconventional Level Stage 1: Obedience to authority / reward– punishment “It’s wrong because mommy said it is.” Stage 2: instrumental exchange / quid pro “Wrong to take Joe’s CD, because we made a deal (i.e. he won’t take my CD). Conventional Level (Loyalty!) Stage 3: Peers (Group Solidarity) “Good Boy / Nice Girl (group norms make it right) Stage 4: Society (Social Stability) “Law and Order” (What would happen if everyone acted that way?) Postconventional Level Stage 5: Social Contract (fair process, good law) Prior to society rights / Human rights Stage 6: Universal Ethical Principles independent rational, and universal principles Reversible and universal principles

What do we know to date? “… we might say that more ethical decision making behavior tends to be associated with those who have higher levels of moral development, who have greater awareness or sensitivity to the ethical dimensions of situations, who have greater sense of personal control, who are older and more experienced, who are female, and who are less manipulative.” “Generally there is support that ethical decision making is affected by the behavior of peers and associates, by the actions of supervisors and top management, by the existence of policies and codes of conduct, by the reward and punishments, and by the general atmosphere of the organization.”

Leadership Styles Applied to Kohlberg (Jill Graham) Relating Leadership, Organizational Citizenship Behaviors, and Level of Cognitive Moral Development Relating Leadership, Organizational Citizenship Behaviors, and Level of Cognitive Moral Development Preconventional Leader - Autocratic and coercive using unquestioning rules OCB: Dependable task accomplishment Leader – Path-Goal or Transactional with exchange agreements Conventional Leader – Member Exchange with interpersonal role obligations OCB: Work group collaboration Institutional Leadership to fulfill duties as group member and cultural expectations Postconventional Transforming or Servant Leader: costs and benefits for all stakeholders, principles of justice OCB: Constructive participation in organization’s governance * OCB = “organization citizenship behavior”

The Myths It’s Easy to be ethical “Managing to be ethical: Debunking five business ethics myths” – Trevino and Brown (Academy of Management Executive, 2004) The Myths It’s Easy to be ethical Complex decisions Moral awareness Multi-stage process Organizational context Unethical behavior in business is simply the result of ‘bad apples’ Ethics can be managed through formal ethics codes and programs (only) -- Arthur Andersen (Barbara Toffler – Final Accounting) Ethical leadership is mostly about leader integrity People are less ethical than they used to be

What executives can do: Guidelines for effective ethics management: “Managing to be ethical: Debunking five business ethics myths” – Trevino and Brown (Academy of Management Executive, 2004) What executives can do: Guidelines for effective ethics management: “The overarching goal should be to create a strong ethical culture supported by strong ethical leadership.”

What to do: Understand the existing ethical culture “Managing to be ethical: Debunking five business ethics myths” – Trevino and Brown (Academy of Management Executive, 2004) What to do: Understand the existing ethical culture Communicate the importance of ethical standards Focus on the reward system Promote ethical leadership throughout the firm