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Forces that drive business ethics

Business ethics is not an oxymoron, but figuring out what drives ethical behavior in a competitive environment, and how to strengthen it, is a complicated endeavor.

Enter John Cullen, professor of management and operations in the College of Business, whose ethical climate theory has been used by scholars and business leaders around the world to help them understand why some companies — indeed some countries — adhere to higher ethical standards than others.

In his recent work, Cullen has looked at business environments in numerous countries and found that managers are more likely to justify unethical acts and engage in activities such as bribery and tax evasion if they operate in an achievement-oriented, individualistic society with a diminished emphasis on the human consequences of business decisions.

International cultures
As more and more managers have counterparts in other regions of the world, he said, it is important to have a basis for understanding how they might deal with ethical issues.

Cullen’s research has shown that to understand ethical behavior in a foreign country, you must consider more than that company’s ethical climate. You must also consider cultural differences including institutional factors such as social mobility and access to education.

Cullen began studying ethical climates in the business world long before names such as Enron, Tyco or WorldCom became synonymous with scandal. In fact, Cullen’s seminal work on ethical climates in business organizations was funded in the 1980s by a grant to the University of Nebraska as part of a judgment against a large construction firm for bribery.

Cullen, whose graduate work was in organizational sociology, created a matrix to help business men and women better understand their company’s ethical climate and, if necessary, begin to change it.
While personal ethical decisions depend on one’s own values and worldview, Cullen discovered that ethical decisions in a business environment depend in large part on the company’s ethical climate, what employees perceive to be the company values and hence the expected behavior in any given situation.

Dominant reasoning
Three basic forms of ethical reasoning can dominate an ethical climate, Cullen said: egoistic, benevolent and principled. They are similar to psychologist Lawrence Kohlberg’s oft-cited stages of moral development; but whereas Kohlberg’s system considers the stages hierarchical and individual, Cullen does not. They represent part of an organization’s ethical culture, he said, and one system is not necessarily better or worse than another. But, before a company can make meaningful progress in strengthening an ethical climate, it must understand what is driving it.

For instance, in one company, say a car dealership where everyone is on commission, the prevailing consideration might be, “How can I make this sale for me?” In that environment, ethical behavior might be defined by what is legal, so active enforcement of existing laws and regulations might be the best way to encourage ethical behavior.

In another company the prevailing consideration might be, “What is the right thing to do?” In that case, he said, the best way to encourage ethical behavior might be to appeal to an employee’s sense of fairness — who or what is harmed by unethical behavior.

In any case, extensive research based on Cullen’s work shows that employees are more committed to their company and have more job satisfaction when their personal ethics are in line with their company’s ethical climate.

Company climate
To help top officials determine what their company’s ethical climate is, Cullen has developed an employee survey that can be used in conjunction with the matrix or map.

“Practitioners are using the map to come up with training that is congruent with the culture of the organization,” he said.

In recent years Cullen has turned his attention to understanding how managers from different nations make ethical decisions for their organizations.

His recent work includes a study that compares the prevalence of bribery from one country to another. According to his research, in countries where competition is valued but the national political system is weak, there will be a higher incidence of bribery because managers are under pressure to “get things done.”

Cullen said the cultural and institutional pressures on managers are so intense in some countries that bribery thrives even though it is universally denounced.

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