Business Ethics: A view from the Trenches

For simplicity, we refer to the interviewees as “young managers.” This is not accurate in every case since some of the interviewees faced dilemmas when they were working as analysts or loan officers or in other positions in which they did not supervise other people. Also, a few had management responsibilities in non-business organizations, such as branches of the U.S. Armed Forces.

Except for a handful of articles in scholarly journals, most of which are cited below, the principal focus of research on managerial wrongdoing has focused

on senior and middle managers and on issues of illegal behavior, also known as white-collar crime, corporate crime, and corporate deviance. The seminal work in this field was carried out by Edwin H. Sutherland whose classic, White Collar Crime, examined court decisions over a span of four decades and focused upon the incidence, pattern, and causes of illegal activity by large corporations. In contrast to the sleazy behavior which many of our interviewees described, Sutherland focused upon legal violations such as actions in restraint of trade, advertising, misrepresentation, copyright and patent infringement, and unfair labor practices. See Sutherland Edwin H. , White Collar Crime (New Haven, CT: Yale University Press, 1983). Other important books in this field are Clinard Marshall B. , Corporate Corruption (New York, NY: Praeger, 1990); Clinard Marshall B. Yeager Peter C. , Corporate Crime (New York, NY: The Free Press, 1983); Ermann N. David Lundman Richard J. , Corporate and Governmental Deviance (New York, NY: Oxford University Press, 1992). Middle management deviance is examined in Clinard Marshall B. , Corporate Ethics and Crime (Beverly Hills, CA: Sage Publications, 1983): Shorris Earl , The Oppressed Middle (Garden City, NY: Anchor Press/Doubleday, 1981).

These studies are cited at various points in this article. Our findings were also consistent with three other sets of data. First, we analyzed all fifty-seven papers about personal ethical dilemmas written for a second-year MBA elective at Harvard called “Moral Dilemmas of Management.” Thirty-nine of these papers described dilemmas the students had faced at work. Of these, eighteen involved situations in which a young manager received direct orders from his or her boss to do something that seemed uncomfortable, sleazy, or worse. In eleven other cases, there was no direct order, but the young manager reported clear, strong organizational pressure to do something that he or she believed to be inappropriate or wrong.

The same pattern appeared in a second and much more extensive body of data. We randomly selected and analyzed ten percent of the applications submitted by the 820 applicants accepted in a recent year by the Harvard MBA Program. The application form asked candidates to describe an ethical dilemma they had confronted. Approximately 75% of the applicants in our sample described episodes at work. A full two-thirds of the work-related dilemmas involved strong organizational pressures to act—in the minds of the applicants—in inappropriate ways. In more than half the cases, they had been given explicit instructions by their bosses. Additional confirmation of this pattern appeared in a third sample, our interviews. A strong majority of the interviewees said they knew of other cases, involving other young people in their organizations, who had to deal with situations like theirs.

In principle, it is possible that some young and inexperienced managers may perceive ethical problems where they do not exist, or they may perceive an implicit order when there is none—a phenomenon typically called “anticipatory socialization.” Young managers today might have been lead to such expectations through the consistent portrayal of business executives on television as crooks of various kinds and through the highly publicized scandals of recent years business leaders. Nevertheless, in all the incidents they reported to us, the interviewees could cite other evidence—such as indications that the behavior they were asked to engage

in was common in their organizations—which at least corroborated their perception of the situations they faced.

It is impossible to determine whether corporate crime, or lower-grade nefarious activity—i.e., “corporate sleaze”—has become more common or less common in recent years. The difficulties of making statistical comparisons are discussed in Ross Irwin , Shady Business (New York, NY: The Twentieth Century Fund Press, 1992), pp. 6–15. Ross does, however, reach this tentative conclusion:

Business crime today is rarely as blatant and is hardly as pervasive as in the post-Civil War era or the robber barons or the manic years of the 1920s stock market boom. On the other hand, the corporate delinquencies of the past, however outrageous, were not always perceived as criminal when they occurred. They often enjoyed de facto legality… . Today, by contrast, both the common and the more exotic forms of corporate misbehavior have long been statutorily illegal, and are almost universally condemned as unethical… . Judged by the shifting criteria of social acceptability, corporate criminality today is worse than in the past. [p. 15]

Raymond C. Baumhart, S.J., has examined survey data on business ethics since the 1960s, and he concluded in 1977 that “business behavior is more ethical than it was 15 years ago, but that the expectations of a better educated and ethically sensitized public have risen more rapidly than the behavior.” See Brenner Steven E. Molander Early A. , “Is the Ethics of Business Changing?” Harvard Business Review (January/February 1977), p. 68.

Several studies provide evidence that managers and other employees often feel pressure to compromise their personal principles, and some of these studies indicate that these pressures are even more severe at lower levels of the organization. See, for example, Carroll Archie B. , “Linking Business Ethics to Behavior in Organizations,” S.A.N. Advanced Management Journal (Summer 1978), pp. 4–11; Harris James R. , “Ethical Values of Individuals at Different Levels in the Organization Hierarchy of a Single Firm,” Journal of Business Ethics, 9 (1990): 741–750; Lincoln Douglas J. , “Ethical Beliefs and Personal Values of Top Level Executives,” Journal of Business Research, 10 (1982): 475–487; and Posner Barry Z. Schmidt Warren H. , “Values and the American Manager: An Update,” California Management Review, 26/3 (Spring 1984): 202–216.

The difficulties of relying upon punishment to deter corporate crime have been examined in Coffee John C. Jr. , “Making the Punishment Fit The Corporation: The Problems of Finding an Optimal Corporation Criminal Sanction,” Northern Illinois University Law Review (Fall 1980), pp. 3–55; Coffee John C. Jr. , “Corporate Crime and Punishment: A Non-Chicago View of the Economics of Criminal Sanctions,” American Criminal Law Review, 17 (1980): 419–471; and Coffee John C. Jr. , “‘No Soul to Damn: No Body to Kick’: An Unscandalized Inquiry into the Problem of Corporate Punishment,” Michigan Law Review, January 1981, pp. 386–459.

To our knowledge, only one study has examined the frequency of with which senior executives have been punished for serious infractions. Robert Nathan found that only half of all the senior executives indicted for or convicted of serious offenses—such as illegal, political contributions, fraud, price-fixing, or securities violations—had not been retained or rehired by their firms. See Nathan Robert Stuart , “Corporate Criminals Who Kept Their Jobs,” Business and Society Review (Spring 1980), pp. 19–21.

The Ethics Resource Center, in a recent survey of 700 U.S. companies, the firms with the most important ethics issues facing these firms were: Drug and alcohol abuse, employee theft, conflicts of interest, quality control, discrimination, abuse of proprietary information, abuse of expense accounts, plant closings and layoffs, misuse of company assets, and environmental pollution. Few of these issues figured prominently in the dilemmas described by the interviewees, suggesting again a significant difference between the way ethics is viewed at the top of an organization and a view from the trenches. See Ethics Policies and Programs, a report by the Ethics Resource Center and the Behavior Research Center, Washington, D.C., 1990, pp. 4–5.

The young managers' less trusting, more skeptical attitudes may indeed be sound preparation for at least some of the individuals they will meet in their professional lives. John Wood's study of 2,500 students and managers and their approach to ethical reasoning concluded that 8%–10% of both groups were “strongly unprincipled and egoistic.” See Wood John , “Ethical Attitudes of Students and Business Professionals: A Study of Moral Reasoning,” Journal of Business (1988), pp. 249–257. These skeptical or cynical views are hardly a recent phenomenon even though there are many reasons to think that these viewpoints have become more widespread. Evidence of “growing cynicism” among business managers appears, for example, in studies conducted during the 1950s. See Brenner Molander , op. cit.

The young managers' views of themselves, as well as their views of their middle manager bosses, is consistent with Phillip Lewis's longitudinal study of the ethical principles used by executives, middle managers, and students as guidelines for making decisions. He characterized the students as “self-reliant ethical seekers,” while describing the middle managers he studied as “organizational realists.” See Lewis Phillip V. , “Ethical Principles for Decision Makers: A Longitudinal Survey” Journal of Business Ethics (1989), pp. 271–278. John Wood's survey of more than 2,000 business professionals and business students concluded that the students were more individualistic and egoistic in their ethical reasoning than the managers. See Wood , op. cit.