Though the Moldable Model© places role modeling in the first position of the framework, it is best to discuss the reasons why a company would want to be ethical or the context portion of the model. One top-level executive in my research believed that employees should always be given context or solid reasons why their company practiced ethical behavior (Dunn 2013).1 It is not sufficient to state the traditional parental reasoning “because I said so,” to intelligent, educated, and well-trained employees who desire ownership and collaboration in organizations today. It is equally critical to demonstrate to employees that there are solid, research-based reasons for a company to desire ethical behavior. Interviewees in the research I conducted were clear that employees needed to comprehend their purpose in the organization and the reasons behind company policies. That purpose and those policies most assuredly include company ethics.
The context for ethical behavior finds support in benefits to employees and benefits to the company bottom line. It makes perfect sense that a company’s ethical behavior results in better financial performance due to the proper treatment of customers who do return business. It may not be as apparent, though, that a company’s ethical behavior toward employees has profound motivational and productivity effects (Dunn 2013).2 Employees relish the climate and atmosphere of an ethically infused work environment and will work for less pay in that environment when other high-paying jobs exist in the marketplace (Dunn 2013).3
The context of why or the reasons why one should be ethical has engendered debate among humans for centuries.
Plato, Frodo, and the Corporate Ethical Climate
In the Myth of Gyges, Plato sought to engage his followers in a healthy debate about moral reasoning beyond the simple motivation to avoid punishment (Rae 2009).4 Plato asked that if a person had a magical ring that could make the person invisible, why would that person behave morally? To become invisible would allow a person to do whatever he or she desired without fear of repercussion or punishment. So, what would motivate a person to behave morally other than the fear of punishment? Kohlberg and Hersh (1977) believed that the lowest stages of moral reasoning are the avoidance of punishment and the ability to gain reward.5 As children, we begin our moral and ethical journey with these two low-level stages of reasoning. Plato wished to elevate his followers to higher levels of thinking and behaving in the moral and ethical realms. Tolkien’s Lord of the Rings series capitalizes on the invisible ring theory as Frodo is tasked with the destruction of the one, powerful ring. Throughout Frodo’s journey to Mordor to destroy the ring, it is apparent that this fictional character is constantly confronted with behaving ethically or unethically through the ring’s power. After all, invisibility allows a person to act without consequence of punishment and with hope of potential reward!
When my students are tasked with offering a list of reasons as to why we should be moral, the reasons are diverse, yet follow a pattern that centers around personal holistic health and personal best interest, response to a higher power’s commands (supreme being or law), acceptance by our culture, to keep order in society versus chaos, and to remember the Golden Rule by treating others as we would want to be treated. The lower levels of moral reasoning, gaining rewards, and avoiding punishment are most represented in the desire to please a supreme being, to fall safely within the boundaries of the laws of the land, or to be accepted by others. Higher thoughts of moral reasoning often take precedent through this exercise, such as what is best for society and the fair treatment of others.
In the corporate world, the ethical climate of any organization begins with this same debate. Why should we be ethical if we can avoid punishment and gain reward? If the profit margins are high due to offering an inferior product or through exaggerated marketing, and if we do not get caught, why should we raise our ethical standards beyond Kohlberg’s lowest stages? It seems that most public figures are only remorseful when the media catches them in unethical behavior. Certainly, there is nothing wrong with acting ethically for fear of punishment or the desire to gain rewards in life or in the organization, but are there higher motivations?
Kohlberg and Hersh (1977) believed that higher moral reasoning involved peer expectations, both lateral-level peers and authority peers, and ultimately self-chosen principles of behavior.6 Later in this book, the discussion turns to peer expectations and the application of Kohlberg’s moral reasoning theory to the workplace. In terms of Kohlberg’s highest level (self-chosen moral principles) of moral reasoning applied to the workplace, there can be organization-chosen principles of behavior, which are influenced by and integrate law, and self- and society-chosen norms. Organization-chosen norms or ethical behaviors in the workplace also find foundation in deontological (duty-based) and teleological (outcome- or consequence-based) ethics.
In my research, I found that deontological (duty-based) and teleological (outcome-based) ethics served alongside ethical leadership (EL), social learning, and social exchange theories (discussed later in this book), as critical foundations to an effective corporate ethical management system (CEMS) (Dunn 2013).7 In the research literature, deontological and teleological ethics theories anchored suggested ethical management systems, including specific components in those systems (Altman 2007; Colle and Werhane 2008; L’Etang 1992; Renouard 2011; Reynolds and Bowie 2004).8 The concepts of duty and outcomes in ethics are quite applicable to the business arena and to the context of why an organization desires to be ethical. Organizational personnel should be ethical because it is their duty to do so and because there are tremendous business outcomes for acting ethically.
Organizational Duty
Deontological ethics is a classification into which specific ethical theories, such as Kantian ethics, divine command theory, the ethic of care, some forms of justice theory, and virtue ethics (discussed later in this book), fit according to each theory’s reasoning or focus. Deontological ethics is primarily focused on duty, and principled and reasoned thinking without much thought toward the consequences or results of any decision (Altman 2007).9
Deontological reasoning would first and foremost be concerned about what was right or the right thing to do in any decision-making situation. The decision maker operates from self- or organization-chosen principles, which would be his or her duty to follow. Though there are certainly consequences to any decision, the deontological person believes that rules guide the decision and it is only critical to do one’s duty; the results are secondary and the “chips will fall where they may.” Results are not the focus of deontological or duty-oriented decision making for personal or workplace application.
Duty to Financial Performance
Most often, organizational duty is defined from a materialistic or financial perspective. Friedman (1970) believed that the only ethical duty of companies was to maximize shareholder profit or to increase stockholder wealth and to care for employees and customers.10 This organizational belief is often tagged shareholder theory (ShaT). To spend company profits on community service or social responsibility could be seen as unethically taking money from shareholders and the duty of companies to care properly for its workers and constituents. Logically, if an organization does not tend to its financial responsibilities of profitability, it may not be around long enough to impact the community in any way. Friedman would contend that a business executive who chose to spend shareholder profits to help the community, in essence, became the employee of the public versus the employee of the company, as he or she should be. Friedman was not against community service and social responsibility; he just believed it was the company shareholders’ choice to do so, and not at the discretion of company leaders.
Freeman (1994) countered ShaT with the belief that the organization is responsible to all stakeholders, including shareholders, employees, customers, supply chain, and the community in which the company resides.11 Ethically, it is not sufficient to only make a profit for shareholders. The company must look outside its doors in reciprocity to the customers and to the community that has allowed the business to thrive. This belief is often tagged stakeholder theory (StaT) in its focus on all stakeholders, called normative stakeholder view, or its focus on only those stakeholders who are instrumental to the performance of the organization, called instrumental stakeholder view (Cennamo, Berrone, and Gomez-Mejia 2009).12 Closely aligned with and an extension of StaT is corporate social responsibility (CSR) (Dunn 2013).13 CSR posits that companies should be involved with community and global concerns. Carroll (1991) understood that CSR was part of the EL and moral management of any organization.14 EL, through its emphasis on role modeling and strong leader–employee relations, leads employees to elevate concern for both internal and external social issues (Brown and Treviño 2006; Dunn 2013).15
Some reasons for organizational ethical behavior from the normative stakeholder view are deontological in nature, as it is “our duty” or the “right thing to do” to treat all organizational stakeholders ethically. Carroll’s (1991) understanding of CSR balanced ShaT, StaT, CSR, and deontological ethics theories in order to guide an organization to act responsibly for profitability, to obey laws, to do right and avoid harm, and to philanthropically use company resources to improve life for others.16 These company acts are the “right thing to do.”
There is good debate among organizational researchers and practitioners as to the primary duty of the organization in keeping with either ShaT or StaT. While some leaders would place their allegiance fully in one camp or the other, it seems that a balance would be a workable theory to fulfill organizational duty to financial concerns. Both ShaT and StaT sense responsibility for the financial profits of shareholders and for the well-being of employees. StaT simply elevates organizational duty and responsibility to all those who are in the company’s sphere of influence. StaT may be that balance of duty to all concerned constituents. However, it would be in the best interest of the organization to have this conversation with all leaders and employees in the organization. A collaborative decision among organizational members should be reached as to the following: (1) Does our organization lean more toward shareholder- or stakeholder orientation? (2) If the organization is more focused on all stakeholders, then how are profits balanced to the benefit of all stakeholders? (3) Do shareholders receive the lion’s share of the profits with small amounts of profits reserved for employees, better resources for workers, and the community? (4) Are some profits pushed back into the company to lower costs of products for customers? (5) What events or activities could the organization provide to best serve community needs? (6) What passionate service are organizational members already providing to the community? Organizational conversations like this only elevate employee respect for leaders because leaders are transparent, collaborative, interested in the opinions of workers, and are more communicative about organizational direction than is the norm in most companies. The leader descriptors in the previous sentence are all attributes and characteristics of EL (see discussion later in this book).
Duty to Employee and Customer Care
Velasquez (2006) understood that humans usually care for people who are close to them or who are in their sphere of influence.17 This ethic of care is easily applied to the workplace in the care of today’s most important resources—employees and customers. Organizational executives understood that in order for companies to be at their best, leaders needed to invest in employees through listening to them, providing for them, and helping employees to develop (Dunn 2013).18 When top leaders see their principle duty as the ethic of care, employees will respond to that care with commitment to the organization when pay is better elsewhere.19 Buckingham and Coffman (1999) found through extensive research that when employees sense the organization cares for them, there is less employee turnover, more satisfied customers, better employee productivity, and higher company profitability.20
Blanchard (2010) believed that the key to good customer care was the proper treatment of employees.21 It is the duty of organizational leaders to treat employees right, who will then treat customers right. Today’s era of declining customer service may be somewhat explained by how employees are treated by organizational leaders. When a customer receives poor service, it might be best to watch the manager or the employee’s immediate supervisor to witness how he or she treats his or her direct reports. As role modeling will be discussed later, employees learn from top-tier (TT) leaders how to behave ethically, including the treatment of customers. Even if employees have an internal moral compass that directs them to the duty of proper customer service, adverse role modeling from leaders in the treatment of employees can cause employees to be demotivated toward strong customer care. But, when employees feel that ethic of care, there is a direct correlation to higher customer satisfaction and loyalty (Buckingham and Coffman 1999).22
Duty to Community
Duty to community, in leadership literature, is often described as CSR. As a paradigm, CSR guides the organization to be involved in the betterment of its community and world. Many organizations today hold values that are community-oriented and pursue yearly goals that bring members of the organization face-to-face with community needs or global concerns.
According to Angus-Leppan, Metcalf, and Benn (2010), EL has both tangential and direct relationships with CSR through the focus of EL on values of honesty, transparency, and the “desire to do what is right” (p. 194).23 The desire to do the right thing, from deontological or duty ethics, reaches beyond internal organizational issues to impact external organizational constituents through CSR. This sense of duty to community is often manifested in implicit and explicit CSR.
Implicit CSR may be the result of the combined and integrated norms of organizational members, the society in which the company operates, and any governmental policies (Angus-Leppan et al. 2010).24 Organizational members’ value systems are formed from factors such as parental constraints or liberties, cultural norms, extant laws, and self-chosen morals. Each organizational member brings his or her sense of ethical duty into the company. As these varying senses of duty combine, the usual result is an agreement that organizational community service is acceptable, required, and implied.
Explicit CSR moves beyond intuition and implication in the organization to deliberate and intentional strategic goals to involve the company in community and global affairs (Angus-Leppan et al. 2010).25 As community service is felt to be the organization’s duty or part of its overall operating responsibilities, companies often offer planned community and global connections as ways for employees to make a difference in their world. Angus-Leppan et al. (2010) believed the best way to bring CSR to organizational focus was to use a collaborative approach.26 All organizational members should gather to discuss community and global needs and to decide what impassions service from employees. One company cannot address every community or global issue, but one company can make a difference in one community or global concern if that one concern tugs at the heartstrings of employees. Shared leadership of any organizational decision empowers ownership and implementation of the decision, including choices for CSR.
In my research, employees believed that the majority of people desire to do the right thing and organizational executives often sought the right thing to do in making decisions important to the organization (Dunn 2013).27 Organizational duty, from deontological ethics, is one foundation of the context for appropriate corporate ethical behavior. The context of why organizations should be ethical seems simple enough: ethical behavior is the right thing to do and it is the duty of organizations to treat all stakeholders with care, including concern for shareholder wealth, employees, customers, and the community and greater world in which the company operates. The duty of the organization goes beyond mere profitability to an ethic of care for all stakeholders because it is the right thing to do regardless of results. However, organizations that operate ethically do find amazing organizational outcomes.
Organizational Outcomes
Teleological ethics brings some balance to deontological ethics. Teleological ethics is primarily focused on outcomes, results, and the consequences of decisions (Colle and Werhane 2008).28 Teleological reasoning would first and foremost consider all potential consequences in any decision-making process. The teleological decision maker considers potential harms and benefits, the reactions of those affected by the decision, effects on company reputation and financial performance, and any short- or long-term consequences that may result. Teleological ethics is a classification into which specific ethical theories, such as utilitarianism, ethical egoism, some forms of justice theory, the Moore–Dunn ethical theory, the New York Times or Social Media test, and situational ethics (discussed later in this book), fit according to each theory’s reasoning or focus. The context for reasons why a company should be ethical is from a teleological or outcome basis. Teleological reasons for ethical behavior include satisfied and committed employees, return customers, strong financial performance, competitive advantage, and the avoidance of legal issues. These outcome-based reasons may be in organizational self-interest, but are necessary for the survival of the organization, proper employee treatment, and to meet company profitability goals.
Years of research have confirmed the effectiveness of EL on organizational outcomes, including employee behaviors and company performance in such areas as employee satisfaction and commitment, employee levels of comfort and fun in the workplace, employee imitation of executive ethical behavior, less legal issues for the organization, and improved financial performance with competitive advantage (Brown and Mitchell 2010; Brown and Treviño 2006; Collins 2010; De Hoogh and Den Hartog 2008; Mulki, Jaramillo, and Locander 2009; Neubert, Carlson, Kacmar, Roberts, and Chonko 2009; Schwepker 2001; Toor and Ofori 2009; Treviño et al. 2000).29
Financial Performance Outcomes
As in organizational duty, often the focus of organizational outcomes is financial performance. Treviño et al. (2000) found that EL was just good for business.30 My research in three organizations confirmed, in moderate support, that EL and a CEMS were good for business in increased productivity, better financial performance, and distinct competitive advantage (Dunn 2013).31 Employees in the companies I researched believed that company growth was a direct result of company ethics, the company had a better reputation on Wall Street, and that better business opportunities came from vendors and other companies due to corporate ethical behavior. Executives interviewed in my study believed that employees were more attentive and sensitive to customer needs in an organization with ethical policies, which in turn resulted in better business results.
An organization can easily justify ethical behavior from employees based on these strong financial outcomes. Some may argue that these are ulterior motives for being ethical or that this context represents moral reasoning at Kohlberg’s lowest level of desiring reward. The argument is well founded but not without validity in ethical motivation. While the desire for financial performance may not be the highest level of moral reasoning, it is essential for the survivability of the organization. Ethical egoism or self-interest is certainly at play, justifiably so. Utilitarianism, or the greatest good for the greatest number, is also a factor from a teleological ethics foundation. It is not difficult to share with employees that their ethical behavior has a direct result on their paycheck due to these research findings.
Employee Outcomes
The benefits of EL and a CEMS go far beyond the financial performance of the organization to very specific employee benefits. In fact, without the employee outcomes discussed next, it is doubtful that the organization could realize the financial outcomes already discussed. The implementation of a CEMS with its leadership and management processes creates an ethical environment in which employees thrive.
I found strong research support for employee job satisfaction and job commitment in organizations that provided an ethical environment (Dunn 2013).32 Some employees in my research were adamant that higher-paying roles could be found elsewhere, but because of the ethic of care represented in their organization employees were committed to stay. Employees felt better about their working conditions in a company with strong ethical behavior, including the sense of job security in a company that would not go out of business due to ethical failure. Employees who gave ownership to a company’s values were committed to stay with the organization. Though organizational leaders may not be perfect with ethical attributes like transparency and empowerment of employees, leaders who demonstrated these attributes could count on employee engagement with and ownership of company goals. Executives in my study understood that a CEMS offered a more honest environment and a “fully aware ethical climate” in which employees thrived; however, when top leaders violated company values, employee morale and trust decreased. Organizational ethics was thought to result in long-tenured employees with 15 to 40 years of service to the company.
The research I conducted also found strong research support for enhanced employee comfort and fun in the workplace due to company ethics (Dunn 2013).33 Company policies emphasized the safety and welfare of employees. Employees emphasized the opportunity to voice opinions and concerns in an open and comfortable environment, and to work in a pleasant, fun, and safe environment. Employees were generally happier in an ethically run company. Top leaders were transparent and approachable, which led to employee comfort. When employees are not concerned about ethical misconduct in an organization, there is an increased comfort level in the workplace that allows employees to concentrate on healthy relationships. Workplaces become enjoyable and fun. Though the ideas of comfort and fun seem postmodern to the modern-era paradigm of a hard work ethic and that work should not be fun, the complete opposite is true. Employees are more productive, efficient, and effective in an enjoyable environment fostered by workplace ethics.
As an added employee outcome to a well-run CEMS, employees tend to emulate the ethics of their leaders and managers (Dunn 2013; Treviño et al. 2000).34 Think for a minute of the exponential benefit when all organizational members imitate and practice company values as role modeled by the top leaders. There is a permeation effect to demonstrated ethical behavior. TT leaders role model ethics to all hierarchical levels in the organization; in turn, lower-level employees role model ethics to lateral or peer levels, called peer-to-peer role modeling (Dunn 2013).35 The culture of the company becomes saturated with ethical behavior so that ethical behavior is engrained or becomes second nature to all employees (Dunn 2013).36 Employees also reciprocate the care to customers that they receive from their employers (Blanchard 2010).37
Context is critical in the organizational discussion of why a company should be ethical. There are specific deontological or duty reasons for corporate ethical behavior. Ethical behavior is the right thing to do—period—regardless of expected results. It is the duty of organizations to care for all organizational stakeholders, including shareholders, employees, and customers. The foundation of a CEMS rests on deontological ethics of duty and right actions.
A strong accompaniment to deontological ethics is the context of teleological or outcomes reasons for corporate ethical behavior. Organizations that behave ethically because of a CEMS find a more committed and satisfied workforce that has more comfort and fun in the workplace. That workforce emulates ethics so that ethical behavior is contagious creating a culture of proper behavior to each other and to customers. As a direct result, the company thrives financially in better business results, financial performance, and competitive advantage in the marketplace of public opinion and public purchasing power.
In your organization, set the context for a CEMS with these deontological or duty principles and these teleological outcomes, which find basis in solid research evidence. A CEMS is more than a forced or “because I told you to” proposition. Employees who understand this context for a CEMS will take ownership of and practice company ethics.
Chapter 2: Workplace Application Exercises
1. In assessment of employees at your workplace, what is the level of moral reasoning per Kohlberg’s theory, as described here: Level 1 = avoidance of punishment; gain of reward; Level 2 = motivated by peer and authority expectations; Level 3 = adherence to self- or organization-chosen principles of ethical behavior regardless of Levels 1 and 2? Why do you believe that is so?
2. Find time this week to collaboratively discuss your organization’s position on ShaT or StaT.
3. What organizational duties to shareholders, employees, customers, and/or the community could be improved at your workplace?
4. What needs are represented in the community in which your company operates? Which of those needs might impassion service from your employees?
5. What do you consider the most important teleological reasons or outcomes for workplace ethical behavior and why?
6. Develop talking points for a frank discussion at your workplace on the CONTEXT or reasons for a CEMS.
1. Dunn, “The Moldable Model,” 1.
2. Ibid.
3. Ibid.
4. Rae, “Moral Choices,” 1.
5. Kohlberg, “Moral Development,” 53.
6. Ibid.
7. Dunn, “The Moldable Model,” 1.
8. Altman, “The Decomposition of the Corporate Body,” 253.
Colle, “Moral Motivation,” 751.
L’Etang, “A Kantian Approach,” 737.
Renouard, “Corporate Social Responsibility,” 85.
Reynolds, “A Kantian Perspective,” 275.
9. Altman, “The Decomposition of the Corporate Body,” 253.
10. Friedman, “The Social Responsibility of Business,” 32.
11. Freeman, “The Politics of Stakeholder Theory,” 409.
12. Cennamo, “Does Stakeholder Management,” 491.
13. Dunn, “The Moldable Model,” 1.
14. Carroll, “The Pyramid of Corporate Social Responsibility,” 39.
15. Brown, “Ethical Leadership: A Review and Future Directions,” 595.
Dunn, “The Moldable Model, “ 1.
16. Carroll, “The Pyramid of Corporate Social Responsibility,” 39.
17. Velasquez, “Business Ethics,” 102.
18. Dunn, “The Moldable Model,” 1.
19. Ibid.
20. Buckingham, “First, Break All the Rules,” 265.
21. Blanchard, “Leading at a Higher Lever,” 57.
22. Buckingham, “First, Break All the Rules,” 265.
23. Angus-Leppan, “”Leadership Styles and CSR Practice,” 194.
24. Ibid.
25. Ibid.
26. Ibid.
27. Dunn, “The Moldable Model,” 1.
28. Colle, “Moral Motivation,” 751.
29. Brown, “Ethical and Unethical Leadership,” 583.
Brown, “Ethical Leadership,” 595.
Collins, “Designing Ethical Organizations,” 95.
De Hoogh, “Ethical and Despotic Leadership,” 297.
Mulki, “Critical Role of Leadership,” 125.
Neubert, “The Virtuous Influence,” 157.
Schwepker, “Ethical Climate’s Relationship,” 39.
Toor, “Ethical Leadership,” 533.
Treviño, “Moral Person and Moral Manager,” 128.
30. Treviño, “Moral Person and Moral Manager,” 128.
31. Dunn, “The Moldable Model,” 1.
32. Ibid.
33. Ibid.
34. Ibid.
Treviño, “Moral Person and Moral Manager,” 128.
35. Dunn, “The Moldable Model,” 1.
36. Dunn, “The Moldable Model,” 1.
37. Blanchard, “Leading at a Higher Lever,” 57.