Daily headlines underscore the challenges managers face in creating and sustaining ethical organizations. Accounts of scandals at companies like AIG, Goldman Sachs, Countrywide Financial, and Lehman Brothers appear alongside equally troubling stories of misdeeds in political, religious, and not-for-profit settings. Ethics researchers have explored both individual and organizational influences on ethics, and this research has increased our understanding of ethical behavior in organizations. This chapter seeks to expand our knowledge even further by considering not just the individual and the organization, but the relationship between the two—the employee–organization relationship (EOR)—as an important factor in determining ethical outcomes. In addition, it seeks to enhance our understanding of the EOR by demonstrating how organizational ethics research might inform our thinking about the EOR. In particular, it describes the role that organizational ethics play in creating a powerful contextual influence, providing both opportunities and constraints on the multiple connections that exist between employees and their organizations.
To date, little research has linked the EOR and ethics. This is surprising. Substantial research demonstrates the influence of the EOR on a host of important individual and organizational outcomes, including organizational citizenship (Bell & Menguc, 2002), commitment (Shore, Bommer, Rao, & Seo, 2009; Tsui, Pearce, Porter, & Tripoli, 1997), trust (Shore et al., 2009; Zhang, Tsui, Song, Li, & Jia, 2008), turnover (Shaw, Dineen, Fang, & Vellella, 2009; Shore et al., 2009) performance (Tsui et al., 1997), service quality (Bell & Menguc, 2002), and even corporate entrepreneurship (Ribeiro-Soriano & Urbano, 2010). It is reasonable to believe that connecting ethics and EOR research has the potential to benefit both streams of work.
Social exchange has provided the dominant framework for understanding the EOR, and as Shore and Coyle-Shapiro (2003) observed, a critical issue in understanding the influence of the EOR involves the question of who represents the organization in the exchange relationship with the employee. This is especially relevant for understanding the role of the EOR in ethics. The ethics literature demonstrates that top managers (e.g., Schminke, Ambrose, & Neubaum, 2005), supervisors (e.g., Brown, Treviño, & Harrison, 2005), and coworkers (e.g., Zey-Ferrell & Ferrell, 1982) all exert important influences on employee ethics. Therefore, a central issue in understanding the impact of the EOR involves understanding which of these contact points represents the organization as the dominant exchange relationship with the employee. Doing so has the potential to enhance our understanding of the EOR, organizational ethics, and the relationship between them.
This chapter unfolds in four sections. The first briefly reviews the literature on the influence of top management, supervisors, and coworkers on employee ethics. The second presents some initial empirical evidence that among these groups, supervisors exert the strongest influence. The third section discusses implications for both EOR and ethics research. The final section outlines a research agenda that may serve to answer some of the questions raised by the chapter.
To understand how ethics emerge and develop in organizational settings, researchers have explored the impact of top management, supervisors, and coworkers on the ethical decisions and actions of employees. Results suggest each plays an important role.
Upper level management may influence organizational ethics in several ways. One of these suggests that organizational reward and punishment systems, which are implemented and enforced by senior managers, have the potential to shape the organizational ethos with respect to ethics by sending a message about whether ethical behavior is something valued and supported by the organization. Both theoretical and empirical research points to the importance of a proper “tone at the top” for influencing the ethical behavior of employees through the messages sent by the organizational reward system (Ashkanasy, Windsor, & Treviño, 2006; Jones, 1991; Treviño & Youngblood, 1990; Weaver, Treviño, & Cochran, 1999).
Additional research points to other paths by which top management actions may influence employee ethical behavior. For example, Armstrong, Williams, and Barrett (2004) found that risky shift and escalation of commitment among top managers influenced ethical violations among employees. Bowen (2004) also identified several factors that reflect the influence of top managers in shaping organizational ethics, including a supportive ethical culture, a collaborative management style, and a strong commitment to ethics training. Similarly, Ghosh (2008) demonstrated that corporate values, which are shaped and emphasized by top management teams, exert powerful influence on employee decisions regarding ethics.
In all, scholars have uncovered multiple processes by which top management shapes organizational ethics. The literature often points to the importance of the “tone at the top” in establishing ethical organizations (Schwartz, Dunfee, & Kline, 2005; Weber, 2010). However, additional evidence identifies limitations top managers face in affecting organizational ethics.
For example, Ashkanasy et al. (2006) found that the influence of reward and punishment systems implemented by top managers was mitigated by the level of cognitive moral development (CMD) of employees. Low-CMD employees, those using self-focused reasoning, reacted in a manner congruent with reward system expectations. That is, in organizations with reward systems that condone unethical behavior, pragmatic (low-CMD) employees made less ethical decisions. However, high-CMD employees, those using other-focused reasoning, responded differently. In organizations with reward systems that condone unethical behavior, other-focused employees actually exhibited more ethical decision making.
Similarly, Treviño, Weaver, and Brown (2008) suggested that top managers differ from lower level employees in terms of roles, identities, and perceptions. They hypothesized that these differences may lead top managers to view organizational ethics in fundamentally different ways. Results supported their predictions, as top managers were significantly more positive than lower level employees about the state of ethics in their organizations. These results suggest a second form of limitation on the power of top managers to shape ethics effectively. That is, if top managers are unable to detect or to understand the ethical issues, challenges, and concerns faced by lower level employees, they are unlikely to exert effective influence over them. Further, the relationship between top managers and employees is often distant. Therefore, even if top managers do grasp the day-to-day concerns of employees accurately, even good-faith attempts to communicate the importance of sound ethical principles and to act upon those principles may either dissipate or fail to resonate with average employees.
In all, evidence suggests that top management shapes organizational ethics in a variety of ways. However, a variety of limitations exist on top management's ability to understand and respond effectively to the ethical concerns of employees. Therefore, it is clear that despite their formal roles as broad-based organizational leaders, top managers may not effectively represent the organization in the EOR, at least with respect to ethics.
The ethics literature often points to supervisors as an important driver of employee ethics (Drake, Meckler, & Stephens, 2002). Although some work has singled out supervisors per se as an important influence on employee ethics (Fraedrich & Iyer, 2008), much of what we know is drawn from research on ethical leadership (Brown et al., 2005), where the focal leaders have mostly occupied supervisory roles.
Brown et al. (2005) define ethical leadership as “the demonstration of normatively appropriate conduct through personal actions and interpersonal relationships, and the promotion of such conduct to followers through two-way communication, reinforcement, and decision-making” (p. 120). As such, ethical leadership is a broad-based construct that captures a range of ethics-related activities. Ethical leaders do not simply talk about ethics; they behave ethically and work actively to spread ethical practices.
Most empirical research involving ethical leadership has focused on supervisory leadership. This work has demonstrated the power of supervisors in shaping the ethical environment and the ethical behavior of employees. For example, Walumbwa and Schaubroeck (2009) established a link between supervisor ethical leadership and outcomes including psychological safety and employee voice. Mayer, Kuenzi, Greenbaum, Bardes, and Salvador (2009) demonstrated a relationship between supervisory ethical leadership and the level of citizenship behavior and deviance activities in a work group. Others have shown ethical leadership to exert even broader impacts on the ethical context of organizations by affecting ethical climate as well (Neubert, Carlson, Kacmar, Roberts, & Chonko, 2009).
One especially compelling piece of evidence of the potential for supervisors to play a prime role in representing the organization in the EOR is the robust impact of ethical leadership on outcomes beyond those specifically focused on ethics. For example, studies demonstrate a relationship between ethical leadership and employees’ willingness to report problems, willingness to exert extra effort on the job, ratings of satisfaction with supervisor, ratings of supervisor effectiveness, and perceptions of organizational culture (Brown et al., 2005; Toor & Ofori, 2009).
In all, research points to supervisors—and supervisor ethics—as exerting a powerful influence on employee ethics and beyond. Combined with—or perhaps due to—the more proximal relationship supervisors have with employees, supervisors represent an attractive candidate for representing the organization in the EOR.
The relationship between employees and coworkers is also often a proximal one, so it is not surprising that research confirms the influence of coworkers on the ethical decision-making process of employees. For example, the second of Kohlberg's (1984) three levels of CMD—conventional reasoning—is the level at which most working adults operate (Treviño, 1986; Weber, 1990). It reflects ethical decision making as part of a collective moral entity. What is right depends on the norms, values, and expectations of one's social setting and therefore involves an understanding of the ethical beliefs of others. In an organizational setting, this includes (although is not limited to) the behavior and expectations of one's coworkers. Although supervisors—and perhaps to a lesser extent top managers—participate as active members of the organizational social setting for most employees, many jobs entail more frequent, interactive, and lengthy interactions with coworkers than either supervisors or top managers.
Early research into the influence of coworkers on employee ethics pointed to the potential for coworkers to affect employee ethics. Zey-Ferrell, Weaver, and Ferrell (1979) found that marketing managers’ perceptions about the behavior of their peers was a stronger predictor of their own behavior than either their perceptions of top management beliefs or their own personal ethical beliefs. Similarly, Zey-Ferrell and Ferrell (1982) found the ethical behavior of advertising account executives to be most strongly predicted by the behavior of their peers.
Other work also suggests the power of peer influences on ethical decision making and behavior. O'Leary and Pangemanan (2007) found that coworkers exerted considerable peer pressure on individuals facing ethical dilemmas, typically leading to less extreme (either ethical or unethical) acts on the part of individuals. Likewise, Schmidtke (2007) demonstrated coworker influences on employee theft.
Recent conceptual work lays an even stronger foundation for considering the impact of coworkers. Husted and Allen (2008) proposed a cross-cultural model of business ethics that suggests an important role for coworkers as well. This model conceptualizes societal culture, as revealed in individualism and collectivism, as a group-level construct. Group-level cultures suggest an important role for coworker influences, as cultural group values impact individual values and, in turn, individual ethical decision making.
Other work suggests that peers other than coworkers may also influence employee ethics. Fraedrich and Iyer (2008) discovered that peers such as business associates and friends also impact ethical decision making. In this study, friends exerted a stronger influence on the ethical decision-making process than either superiors or business associates. These results suggest that our thinking about peer influences might benefit from extending the concept to include peers inside and outside the organization.
In all, considerable research has explored the impact of top managers, supervisors, and coworkers on the ethical decision making and actions of employees. Results suggest each has the potential to influence employee ethics in meaningful ways. However, little is known about the relative importance of each of these sources of influence. As a result, we are left to wonder about an important question for understanding the EOR with respect to ethics: In the eyes of employees, who represents the organization? That is, who is the “O” in the EOR when ethics are involved? The next section explores some preliminary evidence about the relative impact of top managers, supervisors, and coworkers on ethical outcomes that may shed some light on the issue.
Extant research does not explicitly address the question of which organizational contact point—top managers, supervisors, or coworkers—exerts the strongest influence on employee ethics. However, I recently had the opportunity to partner with the Ethics Resource Center (http://www.ethics.org) in Washington, DC, in exploring data that may provide some preliminary answers. The data, owned by the Ethics Resource Center, include responses from 6,765 employees representing four firms engaged in technology development and manufacturing. The data allow us to examine the relative impact of the ethical activities of top management, supervisors, and coworkers on the pressure employees feel to violate ethical standards.
Data were gathered via on-site surveys. Respondents averaged 34 years of age, with 2 years of college and 4 years of experience with their current firms. Sixty-four percent were male. Employees provided responses to questions about a variety of ethical issues in their organizations, including their perceptions of the organization's ethical practices, ethics training, and ethical culture. I explored these data for insights on two fronts: (1) whether the ethical activities of top management, supervisors, or coworkers exert the most powerful impact on employee ethics, and (2) if one of these is dominant, what particular aspect of behavior plays the most significant role in that influence?
The outcome of interest in these analyses was the extent to which employees feel pressured to commit unethical actions on the job. Pressure to behave unethically was measured in two ways. The first assessed whether employees felt pressured to violate the company's ethical standards. (Item: “How often do you feel pressured by other employees or management to compromise your company's standards of ethical business objectives?”) The second assessed whether employees felt pressured to violate their own personal ethical standards. (Item: “In this job I have to do things that really go against my conscience.”)
The predictors of these two outcomes are what the Ethics Resource Center refers to as ethics-related actions (ERAs) at multiple levels of the organization. ERAs reflect a constellation of ethics-related conduct on the part of top management, supervisors, and coworkers, such as communicating about the importance of ethics, setting a good example, and being supportive in upholding ethical standards. Four-item scales assessed the ERAs of each.
Top management ERAs were assessed with the following four items: (1) I am satisfied with the information I get from top management about what's going on my company; (2) I trust that top management in my company will keep their promises and commitments; (3) Top management in my company talks about the importance of ethics and doing the right thing in the work we do; and (4) Overall, the head of my company sets a good example of ethical business behavior.
Supervisor ERAs were assessed with the following four items: (1) I trust that my supervisor will keep his or her promises and commitments; (2) My supervisor talks about the importance of ethics and doing the right thing in the work we do; (3) Overall, my supervisor sets a good example of ethical business behavior; and (4) My supervisor supports me in following my company's standards of ethical behavior.
Coworker ERAs were assessed with the following four items: (1) My coworkers carefully consider ethical issues when making work-related decisions; (2) My coworkers talk about the importance of ethics and doing the right thing in the work we do; (3) Overall, my coworkers set a good example of ethical business behavior; and (4) My coworkers support me in following my company's standards of ethical behavior.
Employees responded to each item on a five-point (1 = strongly disagree, 5 = strongly agree) Likert-type scale. Responses for each of the three ERA scales were averaged to create ERA scores for top management, supervisors, and coworkers. Reliabilities (coefficient α) were above .70 for all scales.
The first research question asked whether top management, supervisor, or coworker ERAs exert the strongest influence on employee perceptions of being pressured to behave unethically. Ordinary least squares regression analyses revealed that all three ERAs exerted a significant impact on perceived pressure to violate both organizational and personal ethical standards. That is, the conduct of top management, supervisors, and coworkers all matter.
However, standardized betas revealed that supervisor ERAs exerted the strongest impact on both pressure to violate company ethical standards and pressure to violate personal ethical standards. (Standardized betas for top management, supervisor, and coworker ERAs were .17, .25, and .03, respectively, for pressure to violate company ethical standards, and .15, .26, and .12 for pressure to violate personal ethical standards.) In all, although all three groups’ ERAs influenced individual ethical outcomes, the impact of supervisors was felt most strongly.
The second research question asked which aspect of the supervisor ERAs exerts the strongest impact on pressure to violate ethical standards. The four supervisor ERA items may be viewed as reflecting (roughly) trust, ethics communication, ethical modeling, and ethical support. This regression analysis examined the impact of each of these components on perceived pressure to violate standards.
Three of the four supervisor ERA items (trust, modeling, and support) were significantly related to pressure to violate both organizational and personal ethical standards. (The second item, communication, was not significantly related to either.) For both types of ethical pressure, the fourth item, which reflects ethical support on the part of the supervisor, exerted the strongest impact. (Standardized betas for trust, modeling, and support, respectively, were .09, .11, and .23 for pressure to violate company ethical standards, and .12, .16, and .26 for pressure to violate personal ethical standards.) In all, these results suggest that of the supervisor ERAs, the ability to create an ethically supportive situation for an employee appears to be the most potent tool.
Of course, these results do not prove that when employees think about organizational ethics, they are thinking only of supervisory ethics. Likewise, they do not prove that when it comes to ethics, the “organization” in the EOR is captured only by the actions of supervisors. The results indicate that a variety of organization members exert an impact on the ethical pressures experienced by employees. The actions of top managers, supervisors, and coworkers all have the potential to shape employee ethics. However, among these influences, supervisors matter most. In addition, among the things supervisors do, providing a supportive ethical environment for employees is more powerful than being trusted, communicating about the importance of ethics, or even modeling proper ethical behavior. In all, these results suggest that with respect to organizational ethics, the relationship between the employee and the organization is important. Further, these results suggest that for many employees dealing with ethical pressures, the “O” in the EOR has the face of a supervisor.
The discussion and evidence thus far have implications for scholars involved in both EOR and ethics research. For EOR scholars, at least four issues emerge.
The first implication involves the role of supervisors in the EOR. The analyses performed on the Ethics Resource Center data were exploratory in nature and were not driven by a theoretical prediction of the importance of supervisory support in the evolution of organizational ethics. However, they are nonetheless consistent with evidence from the organizational support literature that supervisors provide an important foundation for the EOR. This requires a closer look at perceived supervisory support (PSS), perceived organizational support (POS), and the EOR.
EOR research typically focuses on the exchange relationship between the employee and the organization. At the individual level, these exchange relationships include psychological contracts (Rousseau, 1995), POS (Eisenberger, Huntington, Hutchison, & Sowa, 1986), and leader–member exchange (LMX) (Graen & Uhl-Bien, 1995). Each points to the importance of understanding who represents the organization in the exchange relationship (Shore & Coyle-Shapiro, 2003). Because the implications of this are similar across the three domains, we will consider the case of POS as an illustration of the role of supervisors in the EOR.
The POS literature describes a process by which employees assess whether their organization values the contributions they make and cares about their well-being. Early research focused on POS as a global representation of organizational support. However, even this early work emphasized that perceptions of support must emanate from the actions of organizational actors, and employees may draw inferences from the favorable or unfavorable actions of their supervisors as indicative of support on the part of organizations (Eisenberger et al., 1986). Thus, early research paved the way for considering the role of supervisors in the EOR.
More recently, POS researchers have turned their attention explicitly to PSS and its relationship to POS. Evidence suggests PSS serves as an antecedent to POS (Eisenberger, Stinglhamber, Vandenberghe, Sucharski, & Rhoades, 2002; Shanock & Eisenberger, 2006). In doing so, it confirms the role immediate supervisors play in developing perceptions of general organizational support (POS), which, in turn, is viewed as a foundation of the EOR. This structured relationship between PSS and POS—that PSS serves as a foundation for POS—in conjunction with the Ethics Resource Center results presented earlier suggest supervisors might play a more central and explicit role in conceptualizing and modeling the EOR.
Some EOR scholars have recently integrated the role of supervisors into their work. For example, Zhang et al. (2008) explicitly integrate the role of supervisory support into research involving the EOR. However, one aspect of this research is noteworthy. Rather than PSS serving as a foundation for, a component of, or an indicator of the EOR, supervisory support and EOR were conceptualized as being distinct from one another. Zhang et al. proposed (and found) that supervisory support and an organization's EOR approach independently influence the level of trust that develops among middle managers. Further, they proposed (and found) that supervisory support moderates the relationship between the organization's EOR approach and trust.
One especially promising avenue for research on the role of supervisors in the EOR involves the concept of supervisor's organizational embodiment (SOE). Eisenberger et al. (2010) describe SOE as a belief by the individual employee that his or her supervisor's identity is shared with that of the organization. That is, a high-SOE employee believes praise or criticism from a supervisor reflects praise or criticism from the organization. Eisenberger et al. demonstrate that SOE moderates the relationship between LMX and affective commitment to the organization such that the relationship is stronger for high-SOE employees. However, perhaps as importantly for advancing our understanding of the central role played by supervisors in the EOR, Eisenberger et al. provide thoughts both about the processes by which SOE should operate (through both socioemotional and instrumental paths) and the levels at which it operates (both individual and collective).
In all, placing supervisors—and in particular the role of supervisory support—into models of the EOR is potentially both interesting and valuable. However, EOR scholars might benefit even more from considering supervisory support as an integral component of the EOR, rather than distinct from it.
Implications for EOR research exist beyond those focused on supervisors and supervisory support. They also include issues related to psychological contracts and the possible role of ethics as a more general foundation for thinking about the EOR from this perspective.
For example, the social exchange literature acknowledges that individuals establish exchange relationships with multiple others in organization settings. Establishing multiple exchange relationships implies individuals also establish psychological contracts with each of these exchange partners (Rousseau, 1989). To date, little research has explored the structure and importance of these multiple exchange relationships and multiple psychological contracts that result from them. Therefore, we do not know much about their implications for modeling the EOR.
More complex theorizing on the part of EOR scholars is needed in order to accommodate the existence of these multiple psychological contracts and their varied—and perhaps unstable—level of influence on employees. Theorizing about the conditions under which multiple relationships (and thus, multiple contracts) are likely to emerge, theorizing about the pattern of strong and weak relationships (and contracts) and the processes by which those patterns emerge, and theorizing about the conditions that would give rise to a dominant relationship (and contract) may all help to understand the EOR more fully.
Our earlier examination of ethics data reveals clues that may provide a preliminary foundation for such theorizing. For example, results showed that top management, supervisors, and coworkers each exerted a significant influence on the ethical pressures felt by employees. However, those influences differed depending on whether the outcome of interest was pressure to violate company standards or pressure to violate personal standards. Coworkers exerted a very modest impact on the pressure employees felt to violate company standards (standardized beta of .03, versus .17 and .25 for top management and supervisors, respectively). However, coworker influences were considerably stronger when predicting pressure to violate personal standards (standardized beta of .12), which was on par with the impact of top management (standardized beta of .15).
If part of the psychological contract between employees and organizations involves organizational ethics, these outcomes might be viewed as reflecting distinct components of the psychological contract. For example, the employee may view maintaining organizational ethical standards as an obligation to the organization, whereas organizational assistance in maintaining the employee's ethical standards may be viewed as an obligation on the part of the organization to the employee. These results suggest that potentially interesting asymmetries may emerge with respect to the importance of different relationships—and thus, different contracts—for different aspects of organizational ethics. As such, they provide a foundation for speculating about the process by which, and conditions under which, stronger and weaker contractual relationships might be expected to emerge.
Greenbaum, Folger, and Ford (in press) have formalized the notion of moral contracts in organizations. They argue that employees expect organizations to uphold obligations beyond those that relate only to the employee's well-being. In particular, employees expect organizations to uphold more general moral obligations as well. These expectations comprise a moral contract, and a breach of the moral contract may lead employees to experience psychological violation similar to that experienced as a result of violation of other psychological contracts.
A third implication for EOR research lies in considering organizational ethics not simply as an exemplar of the EOR process at work, but rather as a foundational component of the EOR in its own right, one reflecting an important aspect of the organizational context. Scholars point to the importance of context as a key influence on EOR. Tetrick et al. (2004) have taken up the issue of context explicitly, arguing that recent increases in the diversity of types of linkages between individuals and organizations make it increasingly important that scholars recognize the potential impact of context on the EOR. They suggest that EOR research should explore context as a primary research question, in that it has the potential to influence the locus of obligations in EORs.
Ethics scholars have long pointed to the ethical context of organizations, whether in the form of ethical climate (Schminke, Arnaud, & Kuenzi, 2007; Victor & Cullen, 1988) or ethical culture (Treviño, 1990), as an important contextual influence on employee behavior. The ethical context of organizations represents a prime candidate for such a contextual consideration of the EOR. As Tetrick et al. (2004) note, context surrounds the locus of obligations and contains the terms and conditions of the relationship. It provides both constraints and opportunities that influence the connections between individuals and their organizational contact points. Organizational ethics represent a key determinant of such constraints and opportunities, in that they represent normative judgments about appropriate social conduct (Green, 1994), “the principles, norms and standards of conduct governing an individual or group” (Treviño & Nelson, 1995, p. 12).
One path by which organizational ethics may influence the EOR, therefore, lies in the nature of the exchange relationships between the employee and the organization. Social exchange theory notes that work relationships emanate from reciprocal, ongoing interactions between employees and organizations. In these interactions, employees reciprocate the treatment they receive from others, including the organization (Cropanzano & Mitchell, 2005). When organizations treat employees well (e.g., ethically), the positive norm of reciprocity (Gouldner, 1960) dictates that employees will respond in kind (e.g., ethically), leading to high-quality relationships. However, Gouldner notes that negative behavior is reciprocated as well. Mistreatment of employees on the part of organizations (e.g., unethical treatment) activates the negative norm of reciprocity, prompting employees to respond to unethical treatment with unethical behavior of their own.
The chapters in this volume raise a number of intriguing issues with respect to the potential impact of culture on the EOR. Similarly, it is impossible to discuss ethics—and the potential for ethics to inform our thinking about the EOR—without considering cross-cultural issues as well. At a general level, the relative influence of coworkers, supervisors, and top managers on employee ethics and the EOR will depend on cultural differences like power distance (Hofstede, 2001). However, cultural issues pertaining to ethics present additional unique challenges as well.
One prominent approach to thinking about ethics from a cross-cultural perspective is known as integrative social contracts theory (ISCT) (Donaldson & Dunfee, 1994). ISCT seeks to balance the tension between localized ethical norms and universalistic ethical principles (hypernorms). Local norms are reflected in what Donaldson and Dunfee refer to as community-specific microcontracts, which represent shared understandings of the ethical norms relevant to a particular community. Hypernorms reflect a more general set of principles that apply across communities, thereby placing a higher order set of constraints on those responsible for establishing local norms. As such, hypernorms comprise a macrocontract that serves as a guide for evaluating lower level microcontracts. Although a single, unequivocal list of hypernorms has yet to emerge, Donaldson and Dunfee argue that the convergence of religious, cultural, and philosophical beliefs has allowed scholars to identify a foundational set of norms (often cast in the language of rights) that may be viewed as universal. These include the rights to physical security and well-being, political participation, informed consent, the ownership of property, the right to subsistence, and the obligation to respect the dignity of all individuals.
ISCT provides four basic principles for guiding the relationship between local and universal ethical norms: (1) Local communities may specify ethical norms for their members; (2) these microsocial contracts must be grounded in informed consent and supported by a right of exit; (3) in order to be valid, a microsocial contract must be compatible with hypernorms; and (4) if conflicts exist among norms that satisfy the first three principles (1 through 3), they are to be resolved by applying rules consistent with the spirit and letter of the macrosocial contract.
ISCT provides adequate flexibility for communities to establish different norms with respect to ethical issues, yet constrains the moral free space of those communities within certain parameters. As an illustration, consider the issue of gift-giving in business settings. Some communities may embrace gifts between parties, while others may prohibit it (so long as informed consent and right of exit are present). However, substantial gifts from a businessperson to a political official, which may intentionally or unintentionally subvert the political process, would not be considered valid in a microsocial contract because they violate the hypernorm of political participation in the macrosocial contract. That is, they negate the validity of others’ participation in the open political system (Donaldson & Dunfee, 1994).
Because of this flexibility in allowing variation in local ethical norms while holding fast to a more macro-level set of ethical hypernorms, ISCT may provide a useful platform to consider cross-cultural issues in the EOR as well. This is especially true if, as suggested earlier, ethics may serve as a general foundation for thinking about the EOR, at least from a psychological contracts perspective.
In all, ethics—and the contextual manifestations of ethics in the form of ethical climate and ethical culture—represent a potentially important contextual factor in defining the terms and conditions of relationships and the constraints and opportunities facing each party in the relationship. The issue of how ethical theory and research might be integrated more directly into contextual considerations of the EOR is revisited below.
Ethics researchers have not embraced fully the concept of the EOR and the role it might play in improving and expanding ethics research. Karnes (2009) is a partial exception, exploring from a historical perspective the changing relationship between employees and employers as a function of changes in the social contract between them. But even Karnes does not explicitly embrace the EOR as presented in this volume. Nowhere in the ethics literature do the basic building blocks of EOR research (e.g., social exchange, psychological contracts, and the employment relationship) appear center stage. Nor does the work of the EOR scholars that populate this volume appear prominently in theory development papers related to ethics. That should change. Embracing the EOR as a potential foundation of one or more streams of ethics research presents two considerable opportunities for ethics scholars.
From a purely practical perspective, the apparent link between organizational ethics and the building blocks of EOR research presents a prime opportunity for ethics researchers to extend the impact of their work. Business ethics reflect normative judgments about what constitutes acceptable behavior in organizational settings. It is difficult to imagine how these standards of conduct could not be closely tied to the employee's organizational experiences and, thus, to the employee's relationship with the organization. This places business ethics squarely at the foot of the EOR.
A challenge often faced by ethics researchers is a tendency to be insular, often speaking to each other about issues that are of interest primarily to other ethics scholars and participating in scholarly give-and-take primarily among other ethics scholars. The EOR, its established conceptual frameworks, and its established record of scholars and scholarship offer ethics scholars a prime opportunity to adopt new ways of thinking, while at the same time taking their work to a broader audience to touch on issues of importance outside their immediate domain.
Beyond the practical implications of a broader impact for the work of ethics researchers, the EOR presents scholarly implications as well. The most significant of these may be that it opens access to the well-established family of concepts and constructs that provides the foundation for EOR research, including social exchange, psychological contracts, LMX, POS, and the employment relationship.
For example, the most comprehensive recent review of the organizational ethics literature (Treviño, Weaver, & Reynolds, 2006) makes no mention of the EOR per se. Further, it makes only passing reference to social exchange and no reference at all to the concepts typically viewed as representing the exchange relationship (e.g., psychological contracts, POS, LMX, and the employment relationship). This is not the fault of the review. A review cannot shine light on research that does not exist. It is rather a comment on the extent to which ethics scholars have failed to draw upon well-developed models and concepts that have great promise for adding to our understanding of organizational ethics. Each of these constructs holds potential for ethics research and researchers, for extending both the power and reach of models of organizational ethics.
Social exchange is the only component of EOR research that appears to occupy a significant role in current ethics research. Research on ethical leadership builds on the premise that it matters, at least in part, due to norms of reciprocity (Blau, 1964), employees will react to caring and fair leaders in positive ways. However, although social exchange has found its way into conversations about organizational ethics, neither of its primary indicators—POS and LMX—plays a significant role in current ethics research. Yet as indicators of quality of social exchange (and thus, of the EOR), both present opportunities for ethics researchers to develop a more refined picture of the interplay between ethics and the quality of the relationship individuals have with their organizations. In the next section, we look at these and other issues as potential avenues for future research.
For authors and readers alike, one of the most significant benefits of a volume like this is its ability to juxtapose interesting and important—but often unconnected—concepts with one another. In doing so, new connections may initiate ideas for creative and useful research that were previously overlooked. Overlaying ethics research on the EOR has the potential to do that. Several potentially interesting research ideas emerge as a result.
For example, each of the topics outlined in the earlier Implications for EOR and Ethics Researchers section represents a potentially productive stream of research. As noted there, research has not yet fully integrated the role of the supervisor into models of EOR. Scholars have not yet come to grips with how best to think about and to model the multiple psychological contracts any one employee wrestles with. EOR scholars have not embraced the potential importance of ethics into their EOR frameworks, and ethics scholars have not recognized the potential value of thinking about how the foundational concepts of EOR could inform thinking about organizational ethics. Each of these represents potentially useful paths for additional work. But beyond these broad strokes, the material covered in this chapter raises several more specific opportunities for meaningful research.
If, as argued earlier, ethics provide a basic foundation for the relationship employees experience with their organizations, then EOR scholars might benefit from looking deeper into the ethics literature for inspiration about the next generation of EOR research. Both traditional and emerging approaches to studying organizational ethics could provide relevant foundations. We explore two possibilities here: multidimensional models and the role of emotion.
Rest's (1986) four-component model of ethical behavior changed the face of ethics research. Rest noted that four factors are necessary for the emergence of moral behavior: (1) moral sensitivity, (2) moral judgment, (3) moral motivation, and (4) moral character. Moral sensitivity allows an actor to recognize a situation as involving a moral issue. Moral judgment provides an individual with the tools for assessing the correct course of action. However, knowing what to do is not the same as actually doing it. Although an actor might identify the correct course of action from a moral perspective, other values (e.g., safety, economic, power) may be deemed more important than one's moral values in a given situation. When that occurs, motivation to pursue the morally correct course of action diminishes. Finally, even if an individual recognizes a moral event exists, selects the moral course of action, and values moral outcomes, most situations require a level of moral character to ensure follow-through. Such character reflects an individual's moral courage and ability to overcome obstacles in seeing intentions through to outcomes.
Considerable ethics research and even reviews of ethics research (see the review by Treviño et al. [2006] of the behavioral ethics literature as an example) have embraced Rest's (1986) multidimensional perspective on the sources of ethical action as a general organizing framework. It may be possible that a similar structure could apply to the EOR. A multidimensional model of the EOR would allow scholars to break the EOR into component parts—EOR sensitivity, EOR judgment, EOR motivation, and EOR character—each of which might provide scholars with a finer-grained picture of the processes by which the EOR emerges and the impacts it exerts on employees and the organization.
For example, EOR sensitivity may represent an important individual-difference variable. Certain individuals may enter the workplace with more sensitive “radar screens” for issues relating to their relationship with their organization. As such, they would be more likely to notice, and to react to, issues related to the EOR such as quality of exchange relationship, contract violations, and so on.
Even if an employee is sensitive to EOR issues (e.g., LMX, POS, or contract violation), the employee may not have well-considered, well-defined positions on what constitutes an appropriate EOR or an appropriate response to a faltering EOR. Such an employee may be thought of as being deficient on EOR judgment. Likewise, an employee might notice EOR issues when they emerge (sensitivity) and might even harbor thoughtful positions about appropriate responses to those issues (judgment), but if the importance of other factors such as economic security, serious health issues, or a burning passion for a nonwork hobby or political cause has pushed EOR issues to the back burner, motivation to respond to EOR issues will be low. Finally, even if an employee is sensitive to EOR issues, has thoughtful responses prepared, and EOR concerns are among his or her top priorities, the issue of EOR character—perhaps better framed as EOR efficacy in this context—would remain. Does the employee have the tools, courage, ability, or other contingencies necessary to respond to the EOR relationship in the manner in which the employee would prefer?
EOR scholars might benefit from such a multidimensional approach. For example, research shows large, unexplained variation in the strength of the relationship between LMX and various outcomes (Gerstner & Day, 1997). To date, reasons for such variation have been largely speculative. However, a four-component model like this offers four distinct paths through which scholars might probe the causes of such ambiguities it the literature. Are some individuals—or perhaps more importantly, types of individuals—simply not sensitive to EOR issues? Are some lacking in understanding of what constitutes appropriate responses to various EOR states? Are some motivated by events beyond those reflected in the EOR? And do some wish to react to their EOR situation but find they cannot, due to a lack of tools, courage, or training? The answer to all four of these questions is undoubtedly yes. The challenge for EOR scholars is to unpack the processes by which each might influence the development of—and reactions to—the EOR.
Recent neuroscience research on ethical judgments and behavior points to emotion as a critical component of the ethical decision-making process (Greene, Nystrom, Engell, Darley, & Cohen, 2004; Greene, Sommerville, Nystrom, Darley, & Cohen, 2001; Koenigs et al., 2007; Moll & de Oliveira-Souza 2007). The importance of emotion in ethics has not been of interest only to neuroscience scholars. Ethics research based in psychology (Krettenauer & Eichler, 2006; Moore, Clark, & Kane, 2008; Valdesolo & DeSteno, 2006; Vélez García & Ostrosky-Solís, 2006), organizational studies (Gaudine & Thorne, 2001; Sekerka & Bagozzi, 2007), and moral education (Morton, Worthley, Testerman, & Mahoney, 2006; Walker, Pitts, Henning, & Matsuba, 1995) has offered theoretical and empirical perspectives on the critical role emotion plays as a part of the moral judgment and behavior process as well.
By contrast, the EOR literature is largely silent on the role of emotion as a component of the EOR or its development. EOR scholars are aware of the role emotion may play in how employees interact with and respond to their organizations. For example, a meta-analysis by Zhao, Wayne, Glibkowski, and Bravo (2007) reveals that psychological contract breach is related to the affective reactions of violation and mistrust. Further, in Chapter 6 of this volume, Shore and Coyle-Shapiro reference the potential negative emotional reactions employees may experience as a result of distrust that may emanate from negative EORs. Similarly, in Chapter 18 of this volume, Tetrick notes potential health issues that may arise from employees’ emotional reactions to their relationship with their organization.
All of these efforts consider emotion as a reaction to the EOR, rather than its role in the formation of the EOR, its underlying psychological contracts, and so on. The modest emphasis placed on emotion in research concerning the development of the EOR is surprising in that it plays such a central role in the theoretical foundations of the EOR. For example, Rousseau's early work on psychological contracts (e.g., Rousseau, 1990; Rousseau & McLean Parks, 1993) emphasizes the importance of emotion in social contracts by framing relational contracts as exhibiting a socio-emotional focus.
Of course, modeling the role of emotion as a component of the EOR would not be a straightforward transfer of its role in the ethical decision-making literature. EOR research does not rest as heavily on understanding a specific decision-making process as does ethics research. However, research shows emotion plays a critical role in the formation of judgments more broadly (Damasio, 1994; Etzioni, 1988; Pizarro, 2000), and employee judgments certainly comprise an important component of the process by which the EOR comes into focus. Thus, exploring the role of emotion in the EOR may provide an important extension of current EOR research.
Results from the Ethics Resource Center data point to supervisors, and in particular to supervisory support, as a critical component in understanding the relationship between the organization and employee and the impact of that relationship on ethical outcomes. Initial results focused on the pressure employees feel to behave unethically. One extension of this work would be to explore the impact of top management, supervisors, and coworkers on a broader array of ethical outcomes. Understanding the factors that exert pressure on employees to violate ethical standards is valuable. But ethics officers and ethics scholars are interested in more than just whether employees feel pressure. They are interested in whether that pressure converts to unethical action. They are interested in whether employees develop a greater awareness of the ethical issues that surround them. They are interested in whether employees are willing to report unethical behavior when they encounter it. Considerable additional research is needed to determine whether supervisors play the leading role in determining these and other ethics-related outcomes or whether other organizational contact points (top management, coworkers) exert more profound influences on other types of outcomes.
In addition, the data suggest supervisory support plays a strong role in influencing ethical outcomes. But the data do not provide a clear picture of what supervisory support with respect to ethics really means. Is supervisory ethical support distinct from general PSS? If so, it suggests a potentially complex relationship between the employee and the organization with respect to support. It suggests not only that employees may experience generalized perceptions of supervisory and organizational support (PSS and POS, respectively), but also that ethics-specific support may exist and may matter, at both levels. Therefore, we could conceive of four distinct types of support (PSS, PSS-Ethics, POS, and POS-Ethics), all of which could play a role in shaping the EOR.
Researching these issues—whether ethics-specific forms of support exist alongside general POS and PSS assessments, and whether they influence different ethical outcomes differently—would be challenging but straightforward. Existing measures of POS and PSS could be employed alongside modified versions that tap employee perceptions of ethics-specific support. Paired with a broader array of ethical outcome variables (e.g., ethical awareness, ethical behavior, reporting behavior, and so on), researchers could assess whether PSS and POS generalize to ethical support and the extent to which different types of support are related to different outcomes. Doing so would provide direct insights for ethics scholars interested in the role played by support in shaping organizational ethics. It would also provide an indirect view into the relationship between global and facet-specific (e.g., ethical) support that may contribute to a deeper understanding of the relationship between support and the EOR.
This chapter has not delved into the portion of EOR research that explores employment relationships from the perspective of the employer. For example, Tsui et al. (1997) propose a typology of four employment relationships organizations may create, each of which reflects a particular set of expectations on the part of both employer and employee.
Two of these approaches reflect balanced exchanges between employers and employees. A quasi-spot contract relationship reflects a closed-ended, short-term, nearly purely economic exchange between employer and employee. The employer offers short-term economic rewards for performing specific tasks, and neither party expects additional contributions or inducements beyond those specified in the employment agreement. As a result, employees are not expected to perform tasks beyond those specified, nor are they expected to demonstrate concern for the welfare of other organization members or even the organization itself. A mutual investment relationship is also a balanced relationship, but reflects a more open-ended, long-term social exchange relationship. Employer inducements go beyond short-term economic payoffs, extending to longer term employee well-being and development. Employees in turn contribute beyond formal job requirements and are willing to invest in learning firm-specific skills that may not be marketable outside the firm.
Two other approaches reflect unbalanced exchanges. An underinvestment approach exists when employees are expected to embrace broad and open-ended obligations to the employer, who responds with only short-term, economic inducements. An overinvestment approach exists when employees perform only a limited, well-specified, job-specific set of activities, while the organization offers open-ended, long-term, broad-ranging inducements (Tsui et al., 1997).
Interestingly, although a mutual investment approach leads to high performance on the part of both individuals and firms, research reveals it appears in only about 30% of firms studied. Why that is true remains a puzzle, but such employment relationship choices on the part of employers may have significant implications for understanding organizational ethics.
As an illustration, consider the issue of ethics training. Scholars and practitioners alike devote enormous attention to the question of how to develop effective ethics training. Research has focused on the characteristics of the trainee, the design of the training program, the transferability of training back to the job, and the challenges of evaluating training effectiveness as all contributing to the ethics training effectiveness (Wells & Schminke, 2001). However, the role of the employment relationship itself, as an important component of the context in which the ethics training occurs, has not been considered, and its impact could be considerable.
For example, in a quasi-spot contract arrangement, ethics training would be expected to be of limited effectiveness, regardless of the characteristics of the trainee, design of the program, transferability of the training, and evaluation of training effectiveness. Rather, ethical behavior would be likely to result only by integrating explicit, legalistic behavioral rules into the performance assessment system, rules capable of translating specific behaviors into specific economic rewards. However, even if precise behavioral guidelines could be developed, implemented, and accurately assessed, research shows compliance-based ethics programs to be of limited use (Weaver & Treviño, 1999).
In contrast, a mutual investment relationship may represent rich soil for the type of values-based programs shown to be effective in creating and maintaining ethical organization environments. Effective ethics programs emphasize a constellation of ethical values as a guide for ethical behavior. Once internalized, these values then set the stage for continued ethical activity on the part of employees who are committed to upholding organizational ideals (Weaver & Treviño, 1999).
This example of ethics training also reiterates an important point made earlier, that an organization's ethics may influence how it treats its employees in terms of the EOR. For example, the Tsui et al. (1997) framework suggests the nature of the employment relationship is a choice to be made by employers. Ultimately, that is true. Organizations do dictate the type of employment relationships they engage in with their employees. However, previous actions on the part of the employer may serve to constrain the choices it has with respect to employment relationship types.
As noted earlier, the negative norm of reciprocity (Gouldner, 1960) suggests employees will respond to negative treatment on the part of their organization with negative behavior of their own. Thus, unethical organizational treatment will lead to unethical behavior on the part of employees. Repeated instances may result in a spiral of unethical treatment and reactions, reflecting Masuch's (1985) concept of vicious circles, in which discrete negative organizational actions in organizations may lead to harmful, structurally persistent conditions in the organization. As Masuch notes, “once caught in a vicious circle, human actors continue on a path of action that leads further and further away from the desired state of affairs” (p. 23). In the case of unethical treatment of employees, and subsequent unethical reactions on the part of employees, an organization may find its choices limited with respect to the type of employment relationship to pursue. More specifically, the deterioration of trust, liking, and respect that may result from such a downward ethical spiral may remove social exchange as a possibility for organizing the EOR. Rather, the organization may view economic exchange relationships as the only viable option for coping with unethical employees (which they have, perhaps unknowingly, produced).
To date, ethics researchers have done an admirable job of considering a variety of contextual factors capable of shaping the ethical environment of organizations, including ethical culture, ethical climate, leadership, reward systems, and codes of ethics (Treviño et al., 2006). However, a focus on the structure of the EOR as implemented by the employer has not yet been considered as an important component of the ethical environment. Evidence suggests it should be.
The goal of this chapter has been to explore the potential benefits of integrating EOR and ethics research. Doing so allows us to address the important question of who represents the organization in the EOR. Ethics research provides evidence that multiple organizational contact points have the potential to influence the relationship between the employee and the organization; top management, supervisors, and coworkers may all play a role. But among these, preliminary evidence suggests supervisors may be more likely to occupy that role than other organization members.
The conversation in this chapter has implications for EOR and ethics scholars alike. It encourages EOR scholars to consider more closely the role supervisors play. Further, it argues that ethics may represent one of the foundations of the EOR, and as such, what constitutes an attractive ethical context may be applied directly to understanding what constitutes an attractive EOR as well. However, beyond these specific applications of ethics research to the issues of EOR, this chapter has argued that a more general consideration of how the thinking, models, and constructs that comprise both ethics and EOR research might fruitfully be brought to bear on issues and problems faced by the other. Each has the opportunity to gain useful insights from the other.
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