MGT 422 Saudi Electronic University Management Discussion

Cognitive Moral Development Exercise
In chapter 3, we have covered the cognitive moral development as one of the
psychological theories that focuses primarily on how people think about and decide
what course of action is right. To assure your understanding, using your critical
thinking skills, describe a situation where an ethical dilemma is occurring, and provide
a suggested solution, in this task you are required to evaluate its efficiency using the
cognitive moral development process as described in your textbook.
Instructions;
1- You can use a real situation that you have encountered, or create one.
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PSYCHOLOGICAL APPROACH
INTRODUCTION
Chapter 2 introduced prescriptive ethical theories, developed by philosophers, that
are designed to help individuals decide what they should do in response to ethical
dilemmas. But psychology teaches us that people often don’t even recognize the
ethical dimensions of the situation at hand. And, when they do, they often don’t think
about it in expected ways. So, this chapter is designed to help you understand how
people actually think and what people actually do by introducing the psychological
factors—the individual differences and mental processes that influence how people
think and behave. It also explains some factors that can keep well-intentioned people
from making good ethical decisions and suggests some ways to overcome them.
Finally, this chapter introduces relevant new neuroscience research and research on
the role of emotions in ethical decision making.
ETHICAL AWARENESS AND ETHICAL JUDGMENT
If a decision maker is to engage in ethical judgment processes (like those discussed in
Chapter 2) that will eventually lead to ethical action, she or he must first recognize
the ethical nature of the situation at hand.
Ethical Awareness ! Ethical Judgment ! Ethical Action
We refer to this initial step in the ethical decision-making process as ethical awareness. With ethical awareness, a person recognizes that a situation or issue is one that
raises ethical concerns and must be thought about in ethical terms. It is an important
step that shouldn’t be taken for granted. Sometimes people are simply unaware that
they are facing an issue with ethical overtones. And, if they don’t recognize and label
the issue as an ethical one, ethical judgment processes (like those we studied in Chapter 2) will not be engaged. In fascinating new research, parts of the brain that are
associated with recognizing the ethical nature of an issue were differentiated from
those involved in other kinds of thinking. Researchers used functional magnetic
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resonance imaging (fMRI) in a study showing that when Executive MBA students
identified ‘‘an important point or issue’’ in scenarios, a different part of the brain was
more active when the issue had ethical overtones compared to more neutral issues.1
In a different study, a part of the brain associated with emotional processing was
activated when participants viewed morally relevant pictures compared to more neutral ones.2 So, it seems that something different happens in our brains when we begin
thinking about an issue we recognize as having ethical overtones.
Consider the following ethical awareness example. Students are doing more
online research for classroom assignments. The technology makes it easy to find
up-to-date information, download it, and cut and paste it right into a paper that
then gets submitted to a professor for a grade. Perhaps you have done this without
thinking too much about it. However, in this process, students often overlook the
fact that they may be plagiarizing—‘‘stealing’’ someone else’s intellectual property. Intellectual property is protected by copyright and patent laws in the United
States. These laws are important because there would simply be no incentive to
write a book, publish a magazine, or develop a new product if anyone could simply reproduce it freely without any attention to the rights of the person or company that invested time and resources to create it. The education community has
adopted academic integrity rules that guide how students can fairly use intellectual property. In keeping with those rules, students are expected to paraphrase and
then carefully reference all sources of information. When you’re quoting someone
else’s words, these words must be put in quotation marks, and the exact citation
to the source must be provided. In the pre-Internet days, this kind of research
meant physically going to the library, searching the shelves for information, copying pertinent information by hand, making careful notes about the sources, and
then organizing the information into a paper that had to be typed from scratch.
Plagiarism actually required conscious effort in those days. Now, information is
so accessible and it’s so easy to simply cut and paste that it can be harder to
recognize the ethical issues involved. But if your college has an academic integrity policy or honor code, your professor takes the time to explain the importance
of academic integrity, the role of intellectual property in our society, the definition of plagiarism, and your responsibilities as a member of the higher education
community, you should be more aware of the ethical issues involved. Under those
circumstances, when you’re tempted to just cut and paste, you’ll be more likely to
think about the ethical dimensions of your actions—the rights of the intellectual
property owner, and whether your actions would be considered plagiarism by
your professor and others in your academic community.
Now for a work-related example.
You’ve just started a new job in the financial services industry. One afternoon, your manager tells you that he has to leave early to attend his son’s
softball game, and he asks you to be on the lookout for an important check
that his boss wants signed before the end of the day. He tells you to do him a
favor—simply sign his name and forward the check to his boss.
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To a naive employee, this may seem like a straightforward and easily
accommodated request. But if the company trained you well, you would
immediately be aware of the ethical nature of the situation. Your manager
has asked you to engage in forgery, a serious ethical lapse, especially in the
financial services industry where the validity of signatures is essential to
system functioning and trust. Recognizing the ethical nature of the situation
would likely lead to some very different thinking about how to respond.
Research has found that people are more likely to be ethically aware, to recognize the ethical nature of an issue or decision, if three things happen: (1) if they
believe that their peers will consider it to be ethically problematic; (2) if ethical
language is used to present the situation to the decision maker; and (3) if the decision
is seen as having the potential to produce serious harm to others.3
Let’s take these factors one at a time. First, as we’ll see later, most people look to
others in their social environment for guidance in ethical dilemma situations. So, if
you believe that your coworkers and others around you are likely to see a decision as
ethically problematic, it probably means that the issue has been discussed, perhaps in
a company-sponsored ethics training program or informally among coworkers or
with your manager. Such discussions prime you to think about situations in a particular way. When a similar situation arises, it triggers memories of the previous ethicsrelated discussion, and you are more likely to categorize and think about the situation
in ethical terms.4 Using the forgery example, perhaps a company training program
provided instruction on the importance of signatures in the financial industry and
labeled signing for someone else as forgery. Perhaps the company even presented a
similar problem to trainees and you all agreed that signing someone else’s name to
the check would be wrong. Having participated in such a discussion, you would recognize that signing the check would be ethically problematic and you would be more
likely to see your boss’s request as an ethical problem.
Second, situations can be represented or ‘‘framed’’ in different ways—using ethical language or more neutral language. Using ethical language (positive words like
integrity, honesty, fairness, and propriety, or negative words such as lying, cheating,
and stealing) will trigger ethical thinking because these terms are attached to existing
cognitive categories that have ethical content. For example, if the manager in the
example above had asked you to forge the check for him, the word forge would be
more likely to trigger legal or ethics-related concerns than if he simply asked you to
sign the check (more neutral language). In response to the term forgery, you would
more likely wonder if signing the check was ethically wrong, if anyone was being
hurt, and what the consequences would be if you did or didn’t do it. The term plagiarism would likely trigger similar thinking.
Think about the power of the word genocide. If you’ve seen the film Hotel
Rwanda, you know about the horrible killing in 1994 of some 800,000 Tutsi men,
women, and children by Hutu extremists while the rest of the world, including the
United States, did nothing to help. According to President Clinton’s national security
advisor, the administration refused to allow use of the word genocide for six weeks
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because ‘‘if you used the word, then you’re required to take action.’’5 Former President Clinton has said that failing to help in Rwanda is one of his ‘‘greatest regrets.’’6
Avoidance of the morally powerful term genocide likely contributed to the administration’s inaction and the public’s lack of support.
Neutral language can be used to make an unethical action seem less problematic.
The use of such euphemistic language can easily keep individuals from thinking
about the ethical implications of a decision or action. With euphemistic language, we
name or label actions in ways that minimize their ethical overtones. For example,
troubled assets don’t seem nearly as problematic as ‘‘toxic’’ assets. And the term nodoc loans (used to describe new high-risk loans that were made to mortgage
customers who were not required to provide documentary evidence of their job security or income) raises ethical antennae much less than does the term liars’ loans. The
latter term (actually used by some in the mortgage industry before the meltdown),
acknowledges that borrowers were lying about their incomes on their loan applications. The use of euphemistic language may not be intentionally unethical, but it
certainly has the effect of allowing us to feel okay about what we’re doing when
perhaps we should be thinking much harder about the ethical overtones.
Here is a great business example of euphemistic language. In 2006, HewlettPackard’s (HP) then chairwoman of the board of directors, Patricia Dunn, was upset
about boardroom leaks to the press about HP’s strategy. In an attempt to learn the
leaker’s identity, the company hired investigators who were allowed to misrepresent
their identities to the phone company (they lied) in order to obtain cell phone records
of board members and a journalist; they referred to this behavior as ‘‘pretexting.’’
When the press learned about it, they (perhaps more properly) used ethically charged
language to label the behavior as spying, and a high-profile scandal ensued. Dunn
was replaced, along with two other board members and the executive heading the
company ethics program (who knew about the investigation). The CEO testified in
congressional hearings, and HP (a company that had long claimed privacy as a core
value) had to scurry to try to overcome the company’s association with spying, lying,
and invasion of privacy.7 If someone involved in approving this investigation had
labeled the behavior using ethical language (lying, spying, invasion of privacy)
instead of the more neutral-sounding pretexting, red flags would have more likely
gone up to stop the investigators’ behavior.
Finally, and perhaps most important, an issue or situation that has the potential to
produce serious harm to others is more likely to be seen as an ethical issue. If HP
executives could have imagined the potential damage to board members or the journalist, or the resulting scandal and implications for the company’s reputation, they
would have been more likely to raise ethical concerns. In the forgery example, if you
see that forging the check could result in serious harm to customers, you would more
likely see it as a serious issue than if no one would be harmed. Thomas Jones proposed that individuals are more likely to recognize the ethical nature of issues that
are morally intense.8 The moral intensity of an issue is higher when the consequences
for others are potentially large, these consequences are relatively immediate and
likely to occur, and the potential victims are psychologically or physically close to
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the decision maker. For example, a decision to allow toxic chemicals to leak into
the local water supply is very likely to harm many people in one’s own community.
Such a decision is ‘‘morally intense,’’ and therefore the decision maker is more likely
to see it as an ethical issue. In contrast, a decision that might require laying off a
few individuals in a foreign subsidiary would be less likely to trigger ethical awareness. Only a few people will be affected, the consequences will occur in the future,
and these individuals are both psychologically and physically distant from the
decision maker.
So managers can encourage employees to be ethically aware by providing training and by talking with employees about the types of ethical issues they’re likely to
face and why these issues are ethically problematic. They can also encourage
employees to have these discussions themselves, to use ethical language in such
interactions, and to think about the consequences of their actions and take responsibility for the consequences of the decisions they make.
On the other hand, all of us should be on the lookout for situations that are likely
to reduce our chances of seeing the ethical overtones in a situation. For example,
downloading music from the Internet may seem benign if one doesn’t recognize that
the American economy loses an estimated $12.5 billion dollars a year from it. That
includes jobs and tax revenues that are lost because of what the industry has termed
‘‘music piracy.’’9 Investment bankers who pay for mutual fund managers to go to the
Super Bowl and lavishly entertain clients are not likely to think that they are engaged
in ‘‘bribery’’ or that their behavior is anything more than what ‘‘every one else does.’’
Never mind that the average investor is likely disadvantaged by the wining and
dining. If we think about issues in ethical terms, the ethical judgment processes we
discuss next are more likely to be triggered.
INDIVIDUAL DIFFERENCES, ETHICAL JUDGMENT,
AND ETHICAL BEHAVIOR
Once people are aware of the ethical dimensions of a situation or decision, they
engage in ethical judgment processes that can contribute to ethical (or unethical) conduct. By ethical judgment, we mean making a decision about what is the right thing
to do. As with ethical awareness, neuroscience (fMRI) research is finding that certain
parts of the brain are activated more during ethical decision making compared to
when the same individuals are making other kinds of decisions.10 These findings suggest that ethical judgment is truly a unique form of decision making.
The next part of this chapter focuses on individual differences that influence
ethical judgment and action. Much of this book will focus on situational pushes and
pulls. For example, people follow leaders or their peers. They tend to do what’s
rewarded. Yet, despite these powerful pushes and pulls, people do bring something
of their unique selves to situations. Heroes emerge when you least expect it. People
blow the whistle despite fear of retaliation. Others embezzle funds or lie to customers
despite all of management’s efforts to support good conduct. One way to explain
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these ethical and unethical behaviors is to focus on characteristics of individuals that
differentiate one person from another, making one person more predisposed to think
and behave ethically while another is predisposed to think and behave unethically.
Research has uncovered a number of individual differences that influence the
way people think and behave in response to ethical dilemma situations. In this section, we discuss several of these differences and how they influence ethical judgment
and/or ethical action. They’re illustrated below:
Individual Differences
Ethical decision-making style
Cognitive moral development
Locus of control
Machiavellianism
Moral disengagement
Ethical Awareness ! Ethical Judgment ! Ethical Action
Ethical Decision-Making Style
In Chapter 2, we introduced different frameworks for making ethical decisions and
advised that individual decision makers should use these in combination if they wish
to make the best decisions. But research suggests that individuals have preferences
for particular prescriptive ethical theories. Forsyth proposed that we think about these
individual preferences in terms of two factors: (1) idealism or the person’s concern
for the welfare of others; and (2) relativism or the person’s emphasis on ethical principles being dependent on the situation rather than being applicable to all situations.11 Idealism is related to what we referred to as thinking about consequences in
Chapter 2. For example, individuals high on idealism believe that one should always
avoid harming other people in ethical dilemma situations, while non-idealists believe
that ‘‘it depends’’ because ‘‘harm is sometimes . . . necessary to produce good’’12
Relativism is more related to deontological theories and our focus on principles in
Chapter 2. For example, individuals who are low on relativism believe that all situations are subject to universal ethical principles (such as honesty). On the other hand,
individuals who are high on relativism believe that people should weigh the particular circumstances in a situation when making decisions, because there are no universal ethical principles that determine right action in every situation. Research suggests
that those high on idealism are more likely to have ethical intentions and to be critical
of unethical behavior.13 This is probably because idealists are more concerned about
anything they might do that would harm others.14 By contrast, high relativism has
been found to be associated with unethical intentions, perhaps because relativists
who do not follow clear ethical principles find it easier to rationalize unethical behavior.15 You can discover your own style by taking a survey that your professor may
make available to you. The relationship between ethical decision style and ethical
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action has not yet been tested, but it seems logical that the way an individual thinks
about a situation and that person’s ethical or unethical intentions will influence the
action he or she takes. As we did in Chapter 2, we continue to strongly recommend
systematically considering ethical dilemma situations from multiple perspectives.
Still, it can be useful to understand that you (or the people who work with you or for
you) likely have a preference for one approach over another. If so, you may be able
to improve your own ethical decision making by forcing yourself to consciously consider all angles. You may also be able to influence ethical decision making in discussions with others by pointing them to these alternative perspectives.
Cognitive Moral Development
One important explanation for both ethical judgment and action based on individual
characteristics comes from the moral reasoning research of Lawrence Kohlberg.16
When people respond to ethical dilemma situations, they must, among other things,
decide what course of action is ethically right (as we discussed in Chapter 2), and
they must choose the ethically right path over others.17 In other words, if they decide
that blowing the whistle is the ethically right path, they must follow through and do it
(take the ethical action).
Kohlberg’s moral reasoning theory is a cognitive developmental theory that
focuses primarily on how people think about and decide what course of action is
ethically right. His research began by following 58 American boys ranging in age
from 10 to 16 years old. He interviewed them regularly, asking for their open-ended
responses to hypothetical moral dilemmas. Their responses were analyzed and
resulted in new understanding of how moral reasoning in human beings gradually
develops over time through brain development and life experience.
Kohlberg’s cognitive moral development theory proposes that moral reasoning
develops sequentially through three broad levels, each composed of two stages. As
individuals move forward through the sequence of stages, they are cognitively capable of comprehending all reasoning at stages below their own, but they cannot comprehend reasoning more than one stage above their own. Development through the
stages results from the cognitive disequilibrium that occurs when an individual
perceives a contradiction between his or her own reasoning level and the next higher
one. This kind of development can occur through training, but it generally occurs
through interaction with peers and life situations that challenge the individual’s
current way of thinking. You can think of those conversations parents sometimes
have with children at the dinner table as attempts to challenge the child’s thinking
and influence moral reasoning and moral development. According to Kohlberg, the
actual decision an individual makes isn’t as important as the reasoning process used
to arrive at it. However, he argued—and this is an important concept—that the higher
the reasoning stage, the more ethical the decision, because the higher stages are more
consistent with prescriptive ethical principles of justice and rights (like those discussed in the deontological approach in Chapter 2).
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Kohlberg’s theory has been successfully applied to studies of adults in business
settings.18 For example, James Weber interviewed business managers about their
responses to the following hypothetical dilemma:
Evelyn worked for an automotive steel casting company. She was part of
a small group asked to investigate the cause of an operating problem
that had developed in the wheel castings of a new luxury automobile and
to make recommendations for its improvement. The problem did not
directly create an unsafe condition, but it did lead to irritating sounds.
The vice-president of engineering told the group that he was certain that
the problem was due to tensile stress in the castings. Evelyn and a lab
technician conducted tests and found conclusive evidence that the problem was not tensile stress. As Evelyn began work on other possible
explanations of the problem, she was told that the problem had been
solved. A report prepared by Evelyn’s boss strongly supported the tensile
stress hypothesis. All of the data points from Evelyn’s experiments had
been changed to fit the curves, and some of the points that were far from
where the theory would predict had been omitted. The report ‘‘proved’’
that tensile stress was responsible for the problem.19
A number of questions were presented to the interviewees. For example, they
were asked whether Evelyn should contradict her boss’s report and why. We will
use this hypothetical dilemma to understand the theory and how responses to the
above question (along with others) help identify an individual’s placement in
Kohlberg’s moral reasoning stage framework. Table 3.1 outlines the levels and
stages involved.
A level I individual (labeled the preconventional
level and including stages 1 and 2) is very self-centered and views ethical rules as
imposed from outside the self. Unfortunately, a small percentage of adults never
advance beyond this stage, and managers must be ready for that possibility. As you
read the following descriptions, see if you know anyone who thinks this way.
Stage 1 individuals are limited to thinking about obedience to authority for its
own sake. Avoiding punishment by authority figures is the key consideration. It’s
easy to imagine a child thinking, ‘‘I should share my toy because, if I don’t, Mom
will yell at me’’ (i.e., I’ll be punished). A stage 1 response to the Evelyn situation
might argue that it would be wrong to contradict her boss because she must obey her
superiors, and she would certainly be punished if she disobeyed.
At stage 2, concern for personal reward and satisfaction become considerations
in addition to a kind of market reciprocity. What is right is judged in terms of a ‘‘you
scratch my back, I’ll scratch yours’’ reciprocal relationship. A stage 2 child might
think, ‘‘If I share my toy with my brother, he might share his with me later.’’ A stage 2
response in the Evelyn situation might argue that Evelyn should support her boss
because he is responsible for her performance appraisals; and, if she lets this one go,
LEVEL I: PRECONVENTIONAL
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Table 3.1 Levels of Cognitive Moral Development According to Kohlberg
Stage
What Is Considered to Be Right
Level I: Preconventional
Stage 1: Obedience and
Punishment Orientation
Obedience to authority for its own sake.
Sticking to rules to avoid punishment.
Stage 2: Instrumental Purpose and
Exchange
Following rules only when it is in one’s
immediate interest. Right is an equal exchange,
getting a good deal.
Level II: Conventional
Stage 3: Interpersonal Accord,
Conformity, Mutual Expectations
Stage 4: Social Accord and System
Maintenance
Stereotypical ‘‘good’’ behavior. Living up to what
is expected by peers and people close to you.
Fulfilling duties and obligations of the social
system.
Upholding laws and rules except in extreme
cases where they conflict with social duties.
Level III: Postconventional or Principled
Stage 5: Social Contract and
Individual Rights
Upholding rules because they are the social
contract if they are consistent with values such as
fairness and rights and the greater good (not
because of the majority opinion).
Stage 6: Universal Ethical
Principles
Following ethical principles of justice and rights.
Acting in accord with principles when laws violate
principles.
Source: Adapted from L. Kohlberg, ‘‘Moral Stages and Moralization: The CognitiveDevelopmental Approach,’’ in Moral Development and Behavior: Theory, Research, and
Social Issues, ed. T. Lickona (New York: Holt, Rinehart and Winston), 34–35.
he might overlook some of her problems from the past. Also, if her boss has been
kind or helpful to her in the past, she may consider her obligation to repay the favor.
In general, a level I person can be expected to consider questions like ‘‘What’s in
it for me?’’ At stage 1, the questions might be ‘‘Can I get away with it?’’ or ‘‘Will I
get caught, punished?’’ At stage 2, the questions might be ‘‘How will I benefit or
what will I get in return if I do this?’’
LEVEL II: CONVENTIONAL At level II (labeled the conventional level and including stages 3 and 4), the individual is still externally focused on others but is less selfcentered and has internalized the shared moral norms of society or some segment like
a family or work group. What’s ethically right is explained in terms of living up to
roles and the expectations of relevant others, fulfilling duties and obligations, and
following rules and laws.
At stage 3, what’s right is thought to be that which pleases or helps others or is
approved by those close to you. Interpersonal trust and social approval are important.
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For example, a stage 3 response to the Evelyn dilemma might say that Evelyn
shouldn’t contradict her boss because he would perceive her as disloyal, and she
might lose the social approval and trust of her boss and peers. On the other hand,
what if Evelyn shares her dilemma with close family members whose opinions are
important to her, and they feel strongly that she must contradict her boss? In this
case, she would likely reason that she should contradict her boss because the people
she trusts and whose approval she values say that it’s the right thing to do.
At stage 4, the perspective broadens to consider society. The individual is concerned about fulfilling agreed-upon duties and following rules or laws that are
designed to promote the common good. A stage 4 person recognizes that rules and
laws often exist for good reason, and she follows them because the social system
works better when everyone does that. Therefore, a stage 4 response might say that
Evelyn should contradict her boss because of her duty to society. What if the noises
do represent a safety problem? She has a responsibility as a good member of society
to report it. She would feel particularly strongly about this if she were aware of
product safety laws that required her to report the problem.
So, a level II person is looking outside the self for guidance when deciding what
to do. A stage 3 person would likely ask, ‘‘What would my peers do?’’ or ‘‘What
would my trusted supervisor advise?’’ At stage 4, the considerations would be broader,
such as ‘‘What do the rules or laws prescribe?’’ Kohlberg’s research placed most
American adults at this conventional level, and Weber’s research found that most
managers’ responses to the Evelyn dilemma were at the conventional level as well.
LEVEL III: POSTCONVENTIONAL A level III (postconventional, sometimes called
principled reasoning—stages 5 and 6) principled individual has developed beyond
identification with others’ expectations, rules, and laws to make decisions more
autonomously. Such an individual looks to ethical principles of justice and rights
(similar to the deontological principles we discussed in Chapter 2). Note that stage 6
is thought to be a theoretical stage only, so we focus below only on stage 5.
At stage 5, the emphasis is still on rules and laws because these represent the
recognized social contract, but stage 5 thinkers are willing to question the law and to
consider changing the law for socially useful purposes. A stage 5 individual would
take into account moral laws above society’s laws, such as considering what decision
would create the greatest societal good. A stage 5 Evelyn might reason that she
should contradict her boss because doing so would be consistent with the ethical principle of the greatest societal good, particularly if she considered safety of the automobiles to be a potential problem. Her responsibility goes beyond that of a good lawabiding member of society and certainly beyond doing what her boss thinks is right.
A stage 5 Evelyn is also responsible to principles of justice and rights. So, even if
no law requires her to report what she knows, a stage 5 Evelyn would consider the
automobile consumers’ rights to safety as an important reason for her to tell. When
deciding what to do, a stage 5 person would likely ask, ‘‘What does the law say?’’
and then ‘‘Is the law consistent with principles of justice and rights? and ‘‘What’s
best for society?’’
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Students sometimes get confused by this idea of what it means to be principled
according to Kohlberg. We’re often asked questions such as, weren’t the 9/11 hijackers principled? Although a definitive answer would require probing interviews with
the hijackers to determine the reasoning for their behavior (not possible now), the
answer is that their thinking likely represented lower-level reasoning (e.g., the leader
told me to do it; I did it to receive a reward in heaven; etc.). So, it’s important to note
that Kohlberg is quite precise about the kinds of principles that qualify as principled
thinking. Broadly defined, level III principles are principles of justice and rights
similar to the principles introduced in Chapter 2 under deontological theories.
Wrongdoers often appeal to what they call principles, such as when the members of
a violent Mexican drug cartel claimed to train its members in ethical principles. But
the purpose of these principles (e.g., sobriety) was to keep members in line and
obedient to cartel authorities. The ethical trainer in this case is accused of ordering
murders and running prostitution rings with young girls; such behavior is not
supported by principles of justice and rights.20
Finally, the principle ‘‘I always do what my religion tells me to do because
the deity will punish me if I don’t’’ would not qualify as principled thinking. In
Kohlberg’s model, this type of thinking actually represents a low level of cognitive
moral development because it is based on unquestioning obedience and fear of punishment. Often religious prescriptions such as the golden rule are consistent with
theories of justice and rights. To be considered a principled decision maker, an individual would have to be capable of thinking through the ethical situation on his or her
own (reasoning according to principles of justice and rights), and not just blindly
follow a particular religious authority.
So don’t be confused just because someone uses the term principled. To be
principled in terms of cognitive moral development theory, one must have arrived at
the decision autonomously based on principles of justice, rights, and the greater good.
To understand Kohlberg’s theory, you must also remember that it is a cognitive
theory. What matters are the reasoning processes and considerations involved in a
decision. Although these considerations are likely to affect the decision made, it is
the reasoning process that counts.
The cognitive moral development exercise at the end of the chapter will test your
understanding of cognitive moral development. You may want to try it now.
In 1982, the psychologist Carol Gilligan
published In a Different Voice, a book about women’s cognitive moral development.
Gilligan claimed that Kohlberg’s theory was flawed because he had studied only
boys. Her research led Gilligan to question the almost exclusive focus on justice in
Kohlberg’s higher moral reasoning stages. She argued that females were more likely
to use a ‘‘morality of care’’ that emphasized relationships—raising issues related to
caring for others, responsibility to others, and the continuity of interdependent
relationships.21
Gilligan’s claims received a great deal of attention. But the applicability of her
ideas to adults working in business organizations is quite limited. Gilligan’s own
ARE WOMEN AND MEN DIFFERENT?
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research comparing the moral reasoning of male and female medical students found
no significant difference between the genders, suggesting that both men and women
are strongly influenced by the powerful socialization and cultural norms of medical
practice.22 Similarly, an interview study of business managers based on Gilligan’s
theory found no gender differences.23 All but one of the managers (male and female)
who described a moral conflict at work based their moral reasoning on rights, not
care. Finally, many cognitive moral development studies based on Kohlberg’s theory
have found only trivial, if any, gender differences. Interestingly, when differences
have been found, females generally have scored higher than men in justice-based
reasoning.24 Business ethics researchers now agree that additional research on the
question of gender differences is unnecessary and likely to be fruitless.25
We can now begin to address the second requirement for ethical behavior: doing
what’s right, or ethical action. Recall that to behave ethically, people must first
decide what course of action is ethically right (probably depending to a large degree
on their ethical awareness and ethical judgment (stage of cognitive moral development). Then they must choose the ethically right path over others.26
One reason understanding cognitive
moral development is so important is that most adults are at the conventional level
of cognitive moral development (level II). This means they’re highly susceptible to
external influences on their judgment about what is ethically right and their subsequent action. Their decision about what’s ethically right, and therefore their likely
action, is inextricably linked with what others think, say, and do. We call this ‘‘looking up and looking around’’ for ethical guidance.27
These individuals aren’t autonomous decision makers who strictly follow an
internal moral compass. They look up and around to see what their superiors and
their peers are doing and saying, and they use these cues as a guide to action. Therefore most people are likely to do what’s expected of them as a result of the reward
system, role expectations, authority figure demands, and group norms. That’s why
the remainder of this book focuses so heavily on these external influences on ethical
action and why it’s so important that managers structure the work environment to
support ethical conduct and lead followers in the right direction. The large majority
of employees will be looking for guidance, and they’ll do what’s right if guided and
supported along those lines by managers and peers.
LOOKING UP AND LOOKING AROUND
Higher-stage thinking is
more independent of these external influences. The postconventional principled thinker
looks to justice and rights-based principles to guide ethical decision making. Research
has demonstrated that these people are also more likely to behave consistently with
their principle-based decisions—they’re more likely to carry through and do what they
think is right. More principled individuals also have been found to be less likely to
cheat, more likely to resist pressure from authority figures, more likely to help someone in need, and more likely to blow the whistle on misconduct.28 So the theory
AUTONOMOUS PRINCIPLED THINKING AND ACTION
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suggests that whistle-blowers such as Sherron Watkins, who tried to convince Kenneth
Lay (Enron’s CEO) to address the company’s financial shenanigans before it was too
late, are likely principled thinkers. But it’s important for managers to remember that
level III individuals are in the minority in most organizations. Autonomous decision
making based on principles of justice and rights is the exception rather than the rule.
Also keep in mind that cognitive moral development represents a cognitive
‘‘capacity’’ to reason about ethical dilemmas at a particular level and that it is possible to act below one’s capacity. However, cognitive moral development theory
argues that this inconsistency would be difficult to sustain over time because of the
cognitive strain that would come from thinking at one level and acting at another.29
Such a person might think, ‘‘I know this is wrong—why am I doing it?’’ So a
principled-level individual who found himself or herself in a situation that required
unethical action would be more likely to try to change that situation or leave.
The bottom line for managers is this: Cognitive moral development theory and
research tell us that most of the people you manage are going to be strongly influenced
by what you do, say, and reward. They can be thought of as ‘‘good soldiers’’ who are
looking up and looking around for guidance from you and their peers, and they’re
likely to mimic what they see around them. Therefore, it’s the manager’s responsibility to structure the work environment in a way that supports ethical conduct. If you
avoid this responsibility, these people will look elsewhere for guidance, probably to
their peers, and the guidance they receive may not support ethical conduct at all.
A small percentage of individuals may never advance beyond preconventional
thinking. Such individuals can be thought of as ‘‘loose cannons.’’ They will do whatever they can get away with. People like this require close supervision and clear discipline when they get out of line.
Those individuals who have reached principled levels of moral reasoning
should be singled out to lead key decision-making groups, to manage situations
where ethical ambiguities are likely to arise, and to lead organizations. Research
on ethical decision making in groups has found that when less-principled individuals lead a group, the group’s ethical decision-making performance decreases. On
the other hand, groups with leaders higher in moral reasoning either improve or
stay the same.30 Also, when an organization’s leader is high in cognitive moral
development, the entire ethical climate of the organization is stronger. This is particularly true for leaders whose choices are consistent with their ethical reasoning
capacity and for leaders who run young organizations that are more open to their
influence. Finally, when employees and the organization’s leader are similar in
their level of cognitive moral development, the employees are more satisfied and
more committed to the organization. Employee satisfaction and commitment are
especially negative when the leader’s cognitive moral development is lower than
the moral development of employees.31
Cognitive moral development can be assessed by using instruments designed by
cognitive moral development researchers. Moral reasoning can also be increased
through training. Over the years, Kohlberg and his students and colleagues have
designed training approaches based on cognitive moral development theory. In this
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type of training, facilitators give participants hypothetical ethical dilemmas for discussion. The facilitator promotes movement through ethical reasoning stages by challenging participants’ thinking and by exposing individuals to reasoning higher than
their own. This approach creates cognitive conflict, leading the participant to question and eventually revise his or her own reasoning upward. Research has supported
the effectiveness of this type of training with adults in dental, medical, and business
schools.32 Managers may want to consider incorporating these ideas into their firms’
ethics training.
Locus of Control
Another individual characteristic that has been found to influence ethical action is
locus of control.33Locus of control refers to an individual’s perception of how much
control he or she exerts over life events. Locus of control can be thought of as a
single continuum from a high internal locus of control to a high external locus of
control. An individual with a high internal locus of control believes that outcomes
are primarily the result of his or her own efforts, whereas an individual with a high
external locus of control believes that life events are determined primarily by fate,
luck, or powerful others.
External Locus of Control
Internal Locus of Control
Locus of control develops over a long period of time through interaction with
other people and the social environment. At any particular time, however, locus of
control can be thought of as a stable individual characteristic that differentiates people from each other. Some individuals are more internal and others are more external
in their locus of control. In that way, locus of control is similar to a personality trait
that characterizes a person’s thinking and action across situations. It does not shift
from one situation to another. Therefore it’s not appropriate to say, ‘‘My locus of
control was external in this situation because my boss made me fudge the numbers.’’
What has shifted in this situation is the control exerted by the boss, not the employee’s locus of control. An employee with an internal locus of control who has a controlling boss will be uncomfortable with the boss’s request to do something
inappropriate. So, due to that high internal locus of control, this employee will be
more likely to resist the boss’s influence and more likely to look for an opportunity
to leave and find a more compatible boss and work situation. An employee with an
external locus of control is more likely to see his or her fate in the boss’ hands and
simply do what the boss asks. You can test your own locus of control through a
survey measure that your professor may make available to you.
A caveat—although locus of control does not shift easily, it can change over
time due to strong life interventions or compelling situations. For example, if someone with a very high internal locus of control became a prisoner of war with little
chance of escape, he or she would likely develop a more external locus of control
over time.
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How is locus of control
related to ethical judgment and action? It likely has a lot to do with taking responsibility for one’s behavior. First, in their judgment, individuals with a high internal
locus of control see the relationship between their behavior and its outcomes more
clearly than do those with an external locus of control. Internals see themselves as
being in control of things that happen in their lives. Thus they’re more likely to take
responsibility for the consequences of their actions. It would be more difficult for
such an individual to say, ‘‘Well, it’s not my responsibility; I just work here,’’ or
‘‘I’m just following orders.’’ If an individual takes personal responsibility for his
or her behavior, it seems likely that person will also behave more ethically. For
example, studies have found that internals are more likely to help another person,
even if there’s a penalty for doing so.34
Internals see themselves as being in charge of their own fates. Therefore, they
should also be less willing to be pressured by others to do things they believe to be
wrong. One interesting study asked subjects to complete a story in which the main
character was pressured to violate a social norm.35 The more internal the subject’s
locus of control, the more likely the story completion had the hero resisting the
pressure. In an obedience-to-authority experiment (explained in more detail in
Chapter 7), externals were more likely than internals to give apparently (but not
really) harmful electric shocks to someone if told to do so by the experimenter.36
For managers, it may be helpful to know where you stand and where your workers fit on the locus of control continuum. It can help you understand how they think
and how they might react in a variety of situations, including ethical situations. For
example, workers who constantly blame bad luck and other external factors for performance failures or ethical lapses may be doing so because of an external locus of
control—that’s the way they view the world. Managers can work with such individuals to help them see the relationship between their actions and the outcomes by consistently holding them responsible and accountable for what they do. As a result, their
locus of control may shift over time, and they will take more responsibility for the
consequences of their actions.
RELATIONSHIP TO ETHICAL JUDGMENT AND ACTION
Machiavellianism
Whereas internal locus of control and more principled thinking are generally associated with ethical action, another individual difference, Machiavellianism, has been
associated with unethical action. Perhaps you have heard the term Machiavellian
used to describe individuals who act in self-interested, opportunistic, deceptive, and
manipulative ways to win no matter what the cost or how it affects other people. The
personality trait known as Machiavellianism was named after Niccol!o Machiavelli, a
sixteenth-century philosopher, statesman, and political theorist who is associated
with promoting a pragmatic leadership style that included amoral, if not clearly unethical, behavior with the aim of achieving self-interested outcomes. The idea that
‘‘the ends justify the means’’ is often associated with Machiavelli. In his most famous
publication, The Prince, Machiavelli famously said that a ruler should ‘‘do good if he
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can, but . . . commit evil if he must.’’37 Research using a survey that assesses an
individual’s Machiavellianism has found that individuals high on Machiavellianism
are significantly more likely to have unethical intentions and to engage in unethical
action such as lying, cheating, and accepting kickbacks.38 Managers should be on the
lookout for employees who they think might be high on Machiavellianism because
they are likely to engage in self-interested action that can put the entire organization
at risk. Organizations may also want to consider including Machiavellianism among
other personality characteristics when assessing job applicants.
Moral Disengagement
The idea behind moral disengagement39 is that most of us behave ethically most of
the time because we’ve internalized standards of good conduct and judge our behavior against these standards. If we consider behaving unethically, we feel guilty and
stop ourselves. All of us probably recognize that process. But research has found that
individual people have a higher (or lower) propensity to deactivate that self-control
system through eight moral disengagement mechanisms. These moral disengagement
mechanisms allow individuals to engage in unethical behavior without feeling bad
about it.
Moral disengagement mechanisms can be organized into three categories. One
of these categories involves ways of thinking about our behavior that makes bad behavior seem more acceptable. A mechanism in this category is the use of euphemistic
language (discussed earlier in relation to ethical awareness). Another is called moral
justification, whereby unethical behavior is thought to be okay because it contributes
to some socially valued outcome. For example, mortgage lenders may have believed
that it was okay to sell those no-doc loans to people because they were helping individuals who would otherwise not be able to purchase a home to take part in the
‘‘American dream.’’ A related moral disengagement tactic is called advantageous
comparison, whereby people compare their own behavior to more reprehensible behavior and thus make their own behavior seem more okay. For example, the same
mortgage lender may feel okay about selling these loans because she counsels clients
to be sure to pay the mortgage every month and avoid credit card debt, while colleagues in her office don’t bother to do any counseling and care only about making
their commissions.
A second category of moral disengagement mechanisms has to do with distorting
consequences or reducing personal responsibility for bad outcomes. For example,
with displacement of responsibility, individuals will reduce personal accountability
by thinking of their actions as resulting from an authority figure’s dictates (‘‘my boss
made me do it’’). With diffusion of responsibility, individuals will reduce personal
accountability by looking to others or the group (‘‘it’s not my job,’’ or ‘‘my team
made the decision’’). With distorting consequences, individuals will think of negative consequences as less serious than they are (it’s ‘‘no big deal’’ to fudge the numbers on my expense report).
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The third category of moral disengagement mechanisms reduces the person’s
identification with the victims of unethical behavior. With dehumanization, individuals make those who would be harmed less worthy of ethical consideration because
they’re thought to be different, stupid, or not even human. This mechanism characterizes thinking among those who commit genocide. One can also imagine mortgage
lenders thinking that people who took out loans they clearly couldn’t afford were just
dumb and not worthy of concern. Attribution of blame lays blame on the victims of
harm for a variety of reasons (‘‘it’s their own fault’’).
Some of these mechanisms lend themselves to certain situations more than
others. So if you have an authoritarian and unethical boss, displacement of
responsibility (‘‘my boss made me do it’’) may be used more than other tactics.
Still, research does show that some individuals are more likely to engage in this
kind of thinking overall, regardless of the situation. And those individuals with a
high propensity to morally disengage have been found to have reduced empathy
for other people, to be more cynical, to see their behavior as resulting from
chance or fate (more external locus of control), and to have a reduced moral identity relative to their other identities—a weaker sense of themselves as ethical
beings. Most important, these individuals are more likely to behave unethically.40
You can test your own propensity to morally disengage with a short survey that
your professor may make available to you. And you can reduce that propensity by
being on the lookout for certain justifications that come up in your own mind or in
discussions with others. When you find yourself thinking the following (or hear
something like this in a meeting), ‘‘stop and think’’ about whether what you’re doing
is right:
STOP
AND
THINK
It’s not my responsibility—my boss told me to do it.
It’s not my responsibility—my team decided this.
It’s no big deal.
It’s not as bad as (what someone else) is doing.
They deserve whatever they get.
They brought this on themselves.
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FACILITATORS OF AND BARRIERS TO GOOD
ETHICAL JUDGMENT
In the previous section, we discussed characteristics that distinguish individuals from
each other. But individual differences aside, as human beings, we all share ways
of thinking about the world that can facilitate or interfere with good ethical judgment.
The steps offered in Chapter 2 assume a rational and ethical decision-making process that prescribes how an ethical decision should be made. However, studies have
found that actual human decision making doesn’t match this rational ideal. Although
people generally intend to be rational in their decision making, they’re often not.
In recent years, psychologists have discovered a number of weaknesses and
biases in how human beings make decisions.41 Some of these decision-making weaknesses have direct implications for ethical decision making in organizations and for
the advice given in Chapter 2.42 So think of this part of the chapter as a kind of reality
check. If you’re going to manage your own and others’ ethical behavior, you need to
understand how people really think in addition to how they should think.
As a backdrop, recognize that the cognitive weaknesses and biases we will be
discussing operate primarily because people try to reduce uncertainty and simplify
their world. Although uncertainty is a fact of organizational life, businesspeople
want very much to deny the uncertainty they face. Therefore they tend to act as if the
world is rational and they’re in control. Being ‘‘in charge’’ and able to predict events
is a highly valued characteristic, especially in business. But this focus on being in
charge is an illusion that can get managers into trouble. What if you really don’t
know all of the facts about the risks, the potential affected parties, and all the consequences of your decisions? You’ll see below that the best way to avoid decisionmaking weaknesses and biases is to become aware of them and to incorporate steps
into your decision making that are explicitly aimed at reducing their impact.
Thinking about Fact Gathering
In Chapter 2, we advised you to ‘‘get the facts’’ as an important first step in good
ethical decision making. Be aware, though, that your thinking about the facts is likely
to be biased. Research evidence suggests that you may look for the wrong ones or
stop looking too soon because you think you already have all the facts you need.
We know that most people, including business students and business executives,
are overconfident about their knowledge of the facts. For example, in research studies, people were asked factual questions. Then they were asked to judge the probable
truth of their answers. For example, in response to the question, ‘‘Is Rome or New
York farther north?’’ most people chose New York, and they believed that the probability was about 90 percent that they were right. Actually, they were wrong. Rome is
slightly north of New York. Being overconfident can make you fail to search for
additional facts or for support for the facts you have.43
Even if you gather additional facts or support, another cognitive bias termed the
confirmation trap may influence your choice of which facts to gather and where to
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look.44 All of us have the tendency to look for information that will confirm our preferred answer or choice and to neglect to search for evidence that might prove us
wrong. If you were an investment banker who wanted to believe that mortgagebacked securities were safe (because they were so profitable at the time), you were
more likely to look for supportive information and ask a question like, ‘‘Historically,
what percentage of mortgages have defaulted?’’ Given that question, the banker will
probably underestimate the risk involved. Because of no-doc loans and other new and
riskier subprime mortgages, relying on historical default patterns no longer made
sense. The meeting might take a very different turn if the banker were to ask, ‘‘What
future problems are possible with this type of new product? What has changed? What
haven’t we thought of?’’45
In an attempt to overcome the confirmation trap, it’s important that you consciously try to think of ways you could be wrong. Incorporate questions in your individual and group decision-making processes such as, ‘‘How could I/we be wrong?’’
‘‘What facts are still missing?’’ and ‘‘What facts exist that might prove me/us to be
wrong?’’ You may still miss some important facts, but you’ll miss less of them than if
you didn’t ask these questions at all.
Thinking about Consequences
In Chapter 2, we also advised you to think about all the potential consequences of
your decision for a wide variety of stakeholders. Who can argue with such sage
advice? But psychologists have found a number of problems with how people think
about consequences.
REDUCED NUMBER OF CONSEQUENCES One way people simplify their decisions and make them more manageable is to reduce the number of consequences
they consider. They’re especially likely to ignore consequences that are thought to
affect only a few people. But consequences that affect only a few people can be serious. For example, a highly beneficial drug may have positive consequences for many
and adverse consequences for only a few people. But what if those few people could
die from side effects of the drug?46 Obviously, you wouldn’t want to ignore such
serious consequences no matter how few people are affected. In attempting to consciously deal with this situation, it helps to consult a broad range of people who have
a stake in the decision you’re making. Invite input from all interested parties, especially those who disagree with you and those with the most to lose. Ask them what
consequences they’re concerned about and why. Then, incorporate these consequences in your decision making.
CONSEQUENCES FOR THE SELF VERSUS CONSEQUENCES FOR OTHERS
Consequentialist theories require us to think about costs and benefits for society—for
multiple stakeholders. But psychological research suggests people tend to make decisions in a self-interested manner. For example, they’re inclined to give more weight
to the consequences of a decision or action for themselves (or those close to them)
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than for others. That may be because consequences to the self are more immediate or
more imminent. In addition, when the consequences of multiple alternatives are
ambiguous, people tend to choose the alternative they personally prefer rather than
the one that is more just. To make matters worse (from an ethics perspective), people
underestimate the extent to which they are self-interested and the extent to which
they rationalize their own behavior. They just aren’t aware of their own cognitive
biases. Again, it can help to consciously consider those outside of yourself who are
going to be affected by a decision or action. As a manager, you can ask your people
to make a list of those individuals or groups who might be affected and seek their
input, or have your employees try to imagine themselves in the shoes of those stakeholders. How would they react?47
One way to think about consequences is to think in
terms of decision making about risk. Managers are in the business of assessing risk.
But, research suggests that people tend to underestimate potential risks because of an
illusion of optimism. They overestimate the likelihood of good future events and
underestimate the bad. For example, even though around one-half of marriages end
in divorce, newlyweds are highly optimistic that their own new marriages will be
everlasting. And, although some analysts may knowingly have lied about the future
prospects of mortgage-backed securities, it’s likely that many were simply overly
optimistic and believed that the housing market would never simultaneously crash
everywhere in the country, bringing down an entire market and the U.S. economy
with it.
People also generally believe that they’re less susceptible to risks than other
people are. This belief is supported by the illusion of control, the general belief that
we really are in charge of what happens. And if we think we can control events, we
also think bad things are less likely to happen. This illusion of control has been demonstrated to exist in MBA students from top U.S. business schools, suggesting that
managers are certainly vulnerable.48 Managers whose judgment is influenced by
these cognitive biases are likely to underestimate the risk facing the firm as a result
of a particular decision. But if managers ignore risks, they’re also ignoring important
consequences. So it’s important to recognize this tendency to ignore risk, and design
risk analysis into your decision-making processes.
Even if we attend to risks, we still have difficulty thinking about them in a completely rational way. One tendency that can contribute to downplaying risk was already
discussed—the tendency to attend to information that will help confirm the decision
we would prefer to make (confirmation bias). In the famous space shuttle Challenger
disaster that killed all the astronauts on board, everyone knew that risk existed. The
question was how much, and was it too much? Many economic and political factors
were pushing NASA to launch this shuttle. The media were paying more attention to
the launch than they usually would because a schoolteacher was on board. Researchers
now believe that confirmation bias may have influenced decision makers to focus on
the information that confirmed their preference, which was to launch, and to discount
available information about risks that would have supported a delay.49
CONSEQUENCES AS RISK
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CONSEQUENCES OVER TIME: ESCALATION OF COMMITMENT The prescription to think about consequences also fails to account for the fact that decisions are
not isolated choices, but often become part of a series of choices within the context of
a larger decision or project. Consider the following scenario:
You finally graduated from college and landed a great job, and you’ve
invested most of your savings in the car of your dreams—a used BMW. But
in a short time, the car begins having mechanical problems. Every time you
bring it to the mechanic, he claims that it is fixed for good; but the problems
continue and your bank account is being drained. Should you quit trying to
fix the car?
Because you’ve already made the decision to buy the car, and you’ve already invested a lot of money in it, your tendency will be to continue your commitment to
this previously selected investment. This tendency has been called ‘‘escalation of
commitment to a losing course of action’’ or ‘‘throwing good money after bad.’’50 A
perfectly rational decision maker would consider the time and expenses already
invested as ‘‘sunk costs.’’ They aren’t recoverable and shouldn’t be considered in a
decision about what to do. Only future costs and benefits should be considered. But
this is difficult. Norms in our society and in our organizations support trying, persisting, and sticking with a course of action. Also, if others are involved, we’re likely to
feel the need to justify our original decision—whether it was to buy a car, a piece of
equipment, or land.
So when you’re in a situation that involves decisions about whether to continue
to invest in an ongoing project, be careful! One way to overcome escalation of commitment is, as with many biases, to recognize that it exists and try to adjust for it. Ask
yourself explicit questions about whether you’re committed to a decision just because
failure would make your original decision look bad. Ask yourself, ‘‘If I took over the
project today, with no personal investment, would I support the project?’’ Another
approach is to bring in outsiders and ask for their opinions, or turn the project over to
them completely. That gets your own ego out of the decision-making process.
Thinking about Integrity
In Chapter 2, you were also advised to think about your own character and integrity—
to ask yourself what a person of integrity in a highly ethical community would do in
the particular situation. But cognitive biases can get in the way here too. First, if your
thoughts about yourself are controlled by illusion rather than reality, how can you
make a good decision about your integrity? The basic idea here is that individuals
are likely to think positively about their own ethics. They will unconsciously filter
and distort information in order to maintain a positive self image. Psychologists
know that people have an illusion of superiority or illusion of morality. Surveys have
found that people tend to think of themselves as more ethical, fair, and honest than
most other people.51 It’s obviously an illusion when the large majority of individuals
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claim to be more honest than the average person, or more ethical than their peers. It’s
a little like Garrison Keillor’s mythical Lake Wobegon, where all the children are
above average. There isn’t a whole lot you can do here except try to be honest with
yourself. But this kind of illusion can lead to bad decisions—when physicians take
gifts from salespeople because they’re sure they’re ethical and their decisions won’t
be affected,52 or when mortgage lenders selling subprime loans convince themselves
that what they’re doing is contributing to the American dream.
Second, the virtue ethics approach suggests that you rely on the ethics of your
profession (or other relevant moral community) to guide you. But consider the
accounting professionals in recent cases, as when Arthur Andersen auditors signed
off on audits that misrepresented the finances of companies such as Waste Management, Enron, and Adelphia Communications.
Certified public accountants are supposed to be guided by the AICPA code of
professional ethics. The code says that, as professionals, auditors have a responsibility to act in the public interest to provide objective opinions about the financial state
of the organization—be free of conflicts of interest, not misrepresent facts, or subordinate professional judgment to others. Given human cognitive limitations, however,
this expectation is probably unrealistic. Consider what is likely to go through an auditor’s mind when deciding whether to provide a negative audit opinion on the financial
statements of a big client. Auditors work closely with their audit clients, often over a
long period of time. By contrast, auditors have no personal relationship with the
‘‘public’’ they are supposed to represent. Therefore, as biased information processors,
their thinking is likely to emphasize the potential negative consequences of a qualified (or negative) audit opinion for themselves and the client—not for the public. The
negative consequences for themselves and the client are clearer and more immediate.
The auditor who offers a qualified audit may very well lose the client (and the money
associated with that client) as well as the personal relationships forged over time. On
the other hand, the consequences for the public of a qualified audit opinion are more
ambiguous and likely spread over more people and time. It isn’t clear how much
specific members of the public will gain or lose, especially if the misrepresentation is
deemed to be small or unclear. So auditors can easily rationalize a decision that is
consistent with their own and their company’s self-interest and downplay the potential consequences to an ambiguous, unknown public.53
What is a professional organization to do? It is important to recognize that auditors (and other professionals) are human beings who are affected by cognitive limitations and biases. Given what we know about these biases, here are some potential
solutions. First, auditors should be discouraged from developing personal relationships or socializing with their clients. Companies should change auditors every few
years to avoid forging such personal ties. Second, audit firms should work hard to
sensitize auditors to the likely negative consequences of financial misrepresentation for their own firms and the public. The Enron bankruptcy contributed to huge
financial losses to its employees and investors and to the ultimate demise of Arthur
Andersen. Regular attention to the importance of maintaining the integrity and longterm reputation of the audit firm is essential, as is the leader’s role in creating a strong
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ethical climate. The reward system (discussed more fully in later chapters) can be
used to send important signals about what’s expected. For example, auditors who
turn down client business or risk losing a client by providing a negative audit opinion
should be supported and reinforced for doing so. Those auditors who risk the reputation of the firm should be disciplined.
STOP
AND
THINK
Given the above discussion, we might suggest other ‘‘red flags’’ for you to be on
the lookout for. If you find yourself thinking (or others saying) the following, consider whether your biases are showing!
The facts support our decision.
Nothing bad will happen.
We’re ethical—we wouldn’t do anything bad.
We’ve already invested so much—we can’t afford to quit now.
Thinking about Your Gut
Our last piece of advice in Chapter 2 was to listen to your gut. But in this chapter,
we’ve spent a great deal of time telling you that your gut may well be wrong—led by
cognitive limitations and biased thinking.
Yet, your gut can still be useful in alerting you that something might be wrong—
that you’re facing an ethical dilemma—in the first place. But once that decision is
made, you should temper your gut with careful analysis guided by the knowledge
gained in this chapter and the rest of the book. Hopefully, the combination of your
gut and an informed brain will help you make better decisions.
In Chapter 2, we
treated ethical decision making mostly as a systematic and rational step-by-step
process. Even in this chapter, we have thus far discussed how ethical awareness leads
to ethical judgment, which then leads to ethical action in a seemingly systematic and
deliberative way. But new research from moral psychology, which is often backed
up by neuroscience and brain imaging studies, finds that ethical judgments are
often more intuitive, impulsive, and automatic. Jonathan Haidt, a psychologist at the
University of Virginia, has argued that much ethical judgment occurs ‘‘quickly,
YOUR GUT—‘‘AUTOMATIC’’ ETHICAL DECISION MAKING
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effortlessly, and automatically,’’54 often operating below conscious awareness. Haidt
has been particularly interested in people’s automatic reactions of disgust. For example, in his research, he has used a vignette about a family that accidentally runs over
and kills the family dog and then reacts by cooking and eating it! Most of us recoil
instantly at the thought. It seems disgusting to us and wrong to eat the family dog.
When asked why, however, we can’t explain our very strong gut reactions. After all,
most of us eat other animals. So, clearly, something besides a purely rational process
is at work—something that’s more intuitive and emotional. (You can learn more
about Haidt’s research and even participate yourself at www.yourmorals.org).
Even more intriguing is research suggesting that individuals who rely only
on more conscious, deliberative approaches to ethical decision making may arrive at worse ethical decisions than do those who use moral intuition and who
have strong emotional responses to ethical situations.55 Much more research will
be required to fully understand these important processes, when they operate,
and when they interfere with good ethical decision making rather than actually
improve it.
Unconscious Biases
One relatively new research tool that can help us understand the potential (often
negative) role of the unconscious in a certain type of ethical thinking is the
Implicit Association Test (IAT). Results reveal most people’s preferences for
young people over old, straight people over gay, able people over disabled, and a
variety of other categories. For example, hundreds of studies with the ‘‘race IAT’’
lead to the conclusion that the large majority of us have an unconscious tendency
to value white people more than black people even if we consciously disavow
such views and truly believe that we have no racial bias. Here’s how the race
IAT works. Participants are asked to press a key on the computer keyboard when
they see a black person’s face or a word that has negative connotations (e.g., rotten, bad) and to press another key when they see a white person’s face or a word
with positive connotations (love, good). Then the task is reversed, and participants
are told to press the same keyboard key in response to black faces and pleasant
words or white faces and unpleasant words. It turns out that most of us respond
more quickly when we’re linking the black faces with negative words and white
faces with positive words because such links are cognitively easier for us—they
fit with our unconscious, implicit attitudes. Although some have criticized these
studies as simply representing higher familiarity with some groups than others,
and as unable to predict behavior in real-life situations, research has found that
the IAT results can predict troubling behavior in experiments. For example, a person with a strong implicit bias against blacks is more likely to be rude in
an encounter with a black person, and white physicians with a strong implicit
bias against blacks were found to prescribe the latest heart treatment less often
for blacks than for whites. Our goal is not to defend or criticize the IAT. Rather,
we use it to point out that unconscious attitudes probably influence our behavior
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more than we think. Given the importance of fair treatment in all kinds of ethical
decisions at work (hiring, performance appraisal, layoffs, compensation, etc.),
understanding the potential impact of such unconscious bias should help us understand why we need to put organizational procedures in place that provide less
opportunity for these unconscious biases to influence our decisions.56 (To experience the IAT for yourself, go to https://implicit.harvard.edu/implicit/.)
Emotions In Ethical Decision Making
Age-old philosophical prescriptions assume cool, rational, ethical decisions. But we
are also beginning to understand how important emotions are to the ethical decisionmaking process.57 Importantly, emotions are not just an interference to good ethical
judgment, as many used to believe. Instead, emotions often lead to right action.’’58
For example, when we consider hurting someone, our brain reacts with a visceral
negative emotion (‘‘an internal alarm’’) that keeps violence in check.59 And these
reactions tend to happen very quickly, before we even have time to engage in rational
thought.
Consider two classic philosophical dilemmas. In one, a runaway train is headed
for five people who will die if nothing is done. You can save the five by diverting the
train to a different track, where it would kill only one person. Should you divert
the train?
In the second dilemma, you’re standing next to a stranger on a bridge over the
tracks. The only way to save the five people is to push the stranger onto the tracks,
where his body would stop the train. Should you push the stranger?
To philosophers, the rational logic in these scenarios is similar; in both cases,
you would be intentionally sacrificing one person in order to save five people.
But, when asked, most people say that you should divert the train in the first
dilemma but not push the stranger onto the tracks in the second. Psychologists
now tell us that emotions explain the difference between the scenarios because
the second scenario engages emotions more than the first. This hypothesis was
supported in an experiment that used brain scans to track brain activity during
decision making. In dilemmas like the second one, parts of the brain associated
with emotional processing were more active, and those who decided that pushing
the stranger would be right took longer to make a decision because emotions
slowed down their thought processes.60 Most normal people would find it difficult, if not impossible, to actually take another’s life in such a situation. This
reluctance is attributed to the strong feelings of revulsion that come up from just
thinking about taking a human life. These reactions are likely hardwired into human beings through evolution because they aid our survival. Interestingly though,
people who have damage to the prefrontal cortex of the brain have no such reaction. They are much more likely to simply make the utilitarian analysis and say
they would kill one person to save the others.61 (If you want to get a ‘‘feel’’ for
this type of exercise, try taking the moral sense test at http://moral.wjh.harvard.
edu. It presents complex ethical dilemmas that have no clearly right answer.)
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So emotions are clearly important in ethical decision making, and continuing
research will help us more fully understand the process. It seems clear that emotions can aid us in doing the right thing when they alert us to ethical concerns,
cause us to act to help others in need, or keep us from violent reactions (because
of sympathy for another, pangs of guilt, or automatically triggered negative feelings).62 Feelings of betrayal or moral outrage can also cause people to act in the
interest of fairness.63 For example, people may be more willing to speak up about
the unfair treatment of a coworker if they feel moral outrage about it.64 Interestingly, research has found that people will even forgo financial benefits if they feel
they’re being unfairly treated. In some fascinating experiments, researchers have
demonstrated that individuals will punish another individual they perceive to be
unethical even if there is nothing for them to gain and something to lose. They
will do this even if they don’t know the person who has been offended.65 Accordingly, research has shown that the parts of our brains associated with feeling
satisfaction are activated when we consider retaliating against someone who
has unfairly harmed us.66 The bottom line here is that we often act not because
we have coolly and rationally decided on the best course of action, but rather
because it ‘‘feels’’ like the right thing to do at the time. Often, such emotions can
lead us to act ethically. But emotions can also interfere with good decision making when they lead to a (perhaps irrational) desire for revenge. For example,
when a competitor ‘‘poaches’’ one of your best people, do you try to recruit
someone away from the competitor just to get even or to do damage to the competitor when you should be focusing more rationally on who is best prepared to
do the job?67
Consider how General Motors managers handled a four-year legal battle with
VW over their allegation that a 56-year-old GM executive, Jose Lopez, took 20 boxes
of GM proprietary documents when he left GM to join Volkswagen in 1993. In 1992,
Lopez was GM’s worldwide purchasing czar, known for his ability to cut costs ruthlessly. The missing documents included information about GM’s suppliers and their
prices for auto parts, as well as information about upcoming Opel car models in the
GM Europe division. Fortune magazine referred to the four-year legal battle that
ensued as a tale of ‘‘betrayal’’ and ‘‘revenge.’’ Lou Hughes, head of GM Europe, was
furious that Lopez would take proprietary documents to its fiercest competitor. He
insisted that there would be no settlement with VW as long as Lopez remained there.
When asked what he hoped to gain from the litigation, Hughes replied, ‘‘Look, this is
not a question of business. This is a question of ethics.’’68 Years of investigation
yielded no hard evidence to suggest that anyone at VW had actually used the secret
GM information. Fortune suggested that at the time, ‘‘one might have expected GM
to act pragmatically, find some face-saving exit, and return its attention to the car
business.’’69 That might have been the ‘‘rational,’’ coolheaded thing to do. Instead,
GM escalated the fight, bringing a racketeering suit that was expected to drag on for
years and cost tens of millions of dollars. When pragmatic board members questioned the action, the board chairman insisted that the company had to pursue the suit
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because it ‘‘had been terribly wronged.’’ ‘‘Some things aren’t measured in time and
money. They’re just who we are.’’70 Finally, in January 1997, the two companies
settled the case. Lopez, who had already resigned from Volkswagen, was barred
from doing any work for VW through the year 2000. Volkswagen paid GM $100
million and agreed to buy $1 billion worth of GM parts over seven years. Fortune
asked, ‘‘But what, in the end did the long, bitter, and costly struggle accomplish?
In the cold light of day, the answer seems simple and shocking: not much.’’71 A
huge company devoted years of attention and spent millions of dollars because its
managers were morally outraged that their former friend had betrayed them. It was
obviously an emotional reaction.
Clearly, anger and other emotions can influence thoughts and actions. Whether
that is good or bad depends on whether the emotion leads to ‘‘right’’ or ‘‘wrong’’
action. If empathy or guilt lead you to recognize an ethical issue or think about the
consequences of your actions for others, that’s a good thing. If moral outrage leads
you to seek justice, that’s good as well. But moral outrage can also lead to a desire
for revenge, and that may be the time to bring cooler heads to the decision to determine whether action based upon revenge is a good ethical (and business) decision.
Those who are not as emotionally involved in the interpersonal issues may be able
to offer a more rational and balanced assessment of the situation. In the GM–
Volkswagen case, those pragmatic board members may have been right to support
a quick settlement.
TOWARD ETHICAL ACTION
Most of this chapter has focused on ethical awareness and ethical judgment processes. We’ve seen that these also influence ethical action. For example, those who
are higher in ethical awareness are more likely to make ethical choices because they
think about the harm they’re doing, they use ethical language to label the situation, or
they recognize that others would see an action as ethically problematic. Also, we
know that some individuals are more prone to think in ways that make ethical action
more likely. Individuals who are higher in cognitive moral development, internal
locus of control, and idealistic decision-making style, and those who are lower in
Machiavellianism and less prone to use morally disengaged thinking, are all more
likely to behave ethically.
But we’ve also seen that, as human beings, we’re all prone to cognitive biases
that can get in the way of good thinking and interfere with ethical action. Beyond
that, it’s sometimes hard to do what’s right even for those of us with the best thinking
and intentions. We may have an unethical boss who insists that we do inappropriate
things, we may find ourselves in an unethical culture, or we may fear repercussions
for speaking the truth. Next, you’ll read an article that addresses some of these issues:
Dennis Gioia’s reflections on his involvement in the Pinto Fires case. In future chapters, we’ll focus more on how you can find your moral voice and do what’s right
despite the challenges.
Example 1An ethical dilemma is a situation we normally face in our daily lives. It is part of the
decision-making process that requires individuals to make a choice that can
compromise their ethical standards. Recently, I witnessed an ethical dilemma in the
parking lot. One young man scratched another car parked next to his accidentally
when getting out of the parking area because the available space was tight. The
young man got out of his car, assessed the damage caused, and looked in all
directions to confirm if someone was watching him. He was in dilemma whether to
report the incident to security personnel, drive off without being noticed, look for
the owner of the dented car, or leave behind a note with his contact details.
Unfortunately, the young man decided to drive off, thinking he would not be
identified .
In the above example, the young man was aware of the ethical issue at hand.
However, his judgment and action were unethical. The young man should have
informed the owner of the car about the accident or reported the issue to the police.
After the owner has been identified, the young man should have negotiated how to
repair the car individually or via insurance. Another ethical action is that the young
man should have left behind a note bearing his contact details so that the owner of
the dented car can communicate with him the way forward on how to repair the car.
Driving off without showing any willingness to repair the car was unethical.
Example 2Kohlberg developed the model of cognitive moral development to explain human reasoning.
The stages are divided into three levels, with each level having two stages. Each stage tends
to respond to morality or ethical dilemma more than the preceding stage (Habbe et al.,
2020). Ethical dilemmas can be highly complicated and not easily solved. As such, the ability
to resolve the dilemma through the optimal solution is critical.
An ethical dilemma that I have encountered is with regard to unfair employment at my
previous workplace. The organization hired a new manager, whom I later found out was
related to the branch manager. I also discovered that he did not have the necessary
qualifications. He also bragged about not going through the interview process. I was faced
with the ethical paradox of questioning the decision or simply accepting it.
The dilemma did not provide any easy solution. First, the branch manager had the final
say in the hiring process. Additionally, the issue involved someone way up in the company
management. A confrontation could thus lead to me losing the job. I had the option of
submitting an anonymous complaint to the Human resource. However, I suspected they
were part of the unethical behavior. I evaluated my ethical and moral grounds, and I decided
to quit the job. I strongly felt that I could not continue working for a company that was going
against my ethical and moral believes. I drafted my resignation letter and explicitly stated
the reason for quitting.
Kohlberg defined post conventional level principles as those of justice and rights. At stage
five, one considers the rules and laws as presented by the social contract (Linda Klebe
Treviño & Nelson, 2011). However, a person in this stage is not bound by the existing laws
and can change the law for societal benefits as per individual rights and justice. Even though
no law required me to report the unfair employment, I resigned and reported the matter to
ensure fairness in the workplace. My judgement relied on self-based principles.
Example 3Cognitive Moral Development Exercise
When Mai logins into her colleague’s computer, she discovers that her colleague has been
keeping consumers’ credit card information on the computer, an infringement of the firm’s
policy. The firm’s code of ethics stipulates that workers are accountable for reporting
infringements. Moreover, the company proscribes sharing passwords or logging in to
computers used by other employees. Thereby, if Mai decides to report her colleague, she
will get in trouble because she only acquired the data via a breach of firm policy. If she
decides not to tell the truth, the persons whose credit card data she hoarded could be
victimized by theft or fraud. Should Mai jeopardize her job by reporting to the management?
Does she owe loyalty to her colleague, the customers, or the company?
Mai begins making the decision centered on obedience and punishment. Her perception of
bad and good is directly connected to whether she will get punished or not.
Mai knows what is going on with her coworker and want to report it. However, she is afraid
of losing her job due to violating the company’s password policy. Mai wants to act morally,
which would subsequently save the customers money and the company’s reputation.
However, she realizes that someone will get hurt no matter what choice she makes. If Mai
chooses to keep herself out of trouble, will the fact that she comprehends what the
colleague has done persist to trouble her? Will she be accountable in some manner if
consumers are swindled due to her colleague’s deed? Mai might desire other people to
perceive her as a morally upright individual compliant to the society’s ethics and would
thereby choose to report her coworker to the management.
At this stage, Mai must understand that rules are a social contract (Trevino & Nelson, 2011).
Clearly, the company and customer privacy policy prohibit employees from saving customer
credit card details and sharing computer passwords. Maybe her colleague deserves to learn
a lesson. With this understanding, Mai can thereby make a moral judgment regarding the
dilemma. She can choose not to report her coworker and thereby save herself from losing
the job. On the other hand, Mai can decide to report her coworker, thereby saving the
customers and the company from fraudulent activities hoping that the company would
pardon her violations of company policies

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