Conceptual Model of Corporate Moral Development

A Conceptual Model of Corporate Moral Development
Author(s): R. Eric Reidenbach and Donald P. Robin

Source: Journal of Business Ethics, Vol. 10, No. 4 (Apr., 1991), pp. 273-284
Published by: Springer
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A
Conceptual
Model of
Corporate
R Eric Reidenbach
Moral
Development
Donald P. Robin
ABSTRACT: The
conceptual
model
presented
in this article
argues
that
corporations
exhibit
specific
behaviors that
signal
their true level of moral
development. Accordingly,
the
authors
identify
five levels of moral
development
and discuss
the
dynamics
that move
corporations
from one level to
another.
Examples
of
corporate
behavior which are indica
tive of
specific stages
of moral
development
are offered.
The recent and
continuing
revelations
concerning
the ethical
wrongdoing
of
corporate
America have
occasioned
a
studied examination of the
dynamics
of
ethical decision
making
in business. Several note
worthy
effors,
particularly
those
by
Trevino
(1986)
and Ferrell and Gresham
(1985),
have
attempted
to
model the ethical decision
making
process
in
organi
zations.
The Trevino model relies
heavily
on the idea that
an
integral part
of the ethical decision
making
process
involves the individual's
stage
of moral
development interacting
with,
among
other
factors,
the
organization's
culture. It is this
complex
admix
ture of individual moral
development
and
corporate
culture which leads to the
proposition
that,
just
as
individuals can be classified into a
stage
of moral
development,
so too can
organizations.
In other
words,
corporations
can be classified
according
to
R. Eric Reidenbach is
Professor of Marketing
and Director
of
the
Center
for
Business
Development
and Research at the
University
of
Southern
Mississippi.
He has written
extensively
on business
and
marketing
ethics.
Donald P.
Robin,
Professor of
Business Ethics and
Professor of
Marketing
at the
University of
Southern
Mississippi,
is coauthor
with R. Eric Reidenbach
of
two recent books on business ethics
with Prentice-Hall. He is a
frequent
lecturer on business ethics
and is the author
of
several articles on the
subject.
their
particular stage
of moral
development.
Such a
typology
is useful for better
understanding
the
dynamics
that contribute to ethical decision
making.
The role of
corporate
culture in moral
development
The moral
development
of a
corporation
is deter
mined
by
the
organization's
culture
and,
in
recipro
cal
fashion,
helps
define that culture. In
essence,
it is
the
organization's
culture that
undergoes
moral
development.
Among
the
array
of definitions of
corporate
culture are
those that focus
on
the shared values and
beliefs of
organizational
members
(e.g.,
Sathe, 1985;
Deal and
Kennedy, 1982), specifically,
beliefs about
what works within an
organization,
and values about
preferred
end states and the instrumental
approaches
used to reach them.
Among
the constellation of
beliefs and values that
comprise
an
organization's
culture
are
those that
speak
to its beliefs and values
about what is
right
and what is
wrong.
This is the
focus of this article.
The
principal
sources for cultural beliefs and
values are from
(1)
individual
organizational
mem
bers,
especially top management (e.g.,
Schein, 1983;
Wiener,
1988),
and
(2)
the
reinforcing
effect of the
organization's
success in
problem solving
and
achieving objectives (e.g.,
Schwartz and
Davis, 1981;
Sathe,
1985).
Central to this latter source is the
organization's
selection of a mission from which the
more
specific objectives
and reward
systems
flow.
One mission of
profit-making organizations
is
economic.
However,
society,
with
increasing
concern
and concomitant
pressures,
is also
demanding
that
they
achieve certain social
goals.
The moral
develop
ment of a
corporation
can be classified
according
to
Journal of
Business Ethics 10:
273-284,
1991.
? 1991 Kluwer Academic Publishers. Printed in the Netherlands.
274
R. E. Reidenbach and D. P. Robin
the
degree
to which this
required
social mission is
recognized
and blended with the economic mission.
Several studies and articles have focused on the
importance
of the
organization's
culture in deter
mining
the
morality
of
corporate
activities
(Robin
and
Residenbach, 1987; Trevino, 1986; Hoffman,
1986).
Of
particular
relevance is the work of Victor
and Cullen
(1988)
which measures work climate.
Work climates
are defined as
"perceptions
that are
psychologically meaningful
molar
descriptions
that
people
can
agree
characterize
a
system's practice
and
procedures" (Schneider, 1975).
The ethical climate
questionnaire
is
designed
to measure
the ethical
dimensions of
organizational
culture. These
items,
developed
within the limited research context of
four
firms,
measure five ethical climate dimensions
characterized as
caring,
law and
order, rules,
instru
mental,
and
independence.
The
recognition
that culture is an
important
determinant in ethical decision
making
has
accept
ance outside academic
management
circles. When
asked about Drexel Burnham Lambert's recent
guilty plea
and the reasons behind
it,
Edward
Markey,
U. S.
Representative (D. Mass.) replied
that
there
was a
solid foundation of criminal
activity
behind their success. And when asked if this crimin
ality
was
pervasive
in the financial
industry during
this
time,
Markey responded,
"there was
definitely
a
culture that tolerated it"
(Wall
Street
Journal (1988) p.
Bl).
An overview of the model
The model of
organizational
moral
development
is a
conceptual
model built
by
the
study
of
a
large
number of cases of
organizations
and their actions in
response
to a
diverse number of situations. The
classificatory
variables include
management philoso
phy
and
attitudes,
the evidence of ethical values
manifested in their
cultures,
and the existence and
proliferation
of
organizational
cultural ethics and
artifacts
(i.e.,
codes, ombudsmen,
reward
systems). By
observing
the
organization's
actions,
the researcher
can deduce differences in the moral
development
of
organizations among
the
sample
of cases.
These
differences form the hierarchical
stages
in the model.
Evidence
involving specific
cases
supporting
the
classification schema is
provided.
Five
stages comprise
the model. Each
stage
is
given
a
label based
upon
the
types
of behavior or
organizations
that are
classified within that
stage.
This
produced
the
following classificatory
schemata:
the amoral
organization;
the
legalistic organization;
the
responsive organization;
the
emergent
ethical
organization;
and the ethical
organization.
The
model is
depicted
in
Figure
1.
BALANCEO CONCERN
Fig.
1. A model of
corporate
moral
development.
The model is
inspired by
the work on
individual
moral
development by Kohlberg (1964, 1976).
How
ever, direct
application
of
Kohlberg's
work is not
possible. Organizations simply
do not
develop
in the
same manner
and under the same
circumstances
as
individuals. As was
mentioned
earlier,
individual
moral
development
does contribute to the moral
development
of an
organization
but is not deter
minant.
There are
several
propositions
which make the
model
operational:
Proposition
1: Not all
organizations pass
through
all
stages
of moral
development. Just
as not all indi
viduals reach level six of
Kohlberg's
model,
not all
corporations
are
destined to be ethical
organizations.
The ultimate moral
development
destination of
a
corporation
is a
function of several factors
including
top management,
the founders of the
organization
and their
values,
environmental factors
(threats
and
opportunities),
the
organization's history
and mis
sion,
and its
industry,
to name a
few
(Robin
and
Reidenbach,
1987).
Corporate
Moral
Development
Model 275
Proposition
2: An
organization
can
begin
its life in
any stage
of moral
development. Again,
the deter
mining
factors
are
similar to those mentioned in
proposition
1. The
key
to the
beginning point
is an
overt
management
decision conditioned
by
a num
ber of situated factors.
Proposition
3: Most
organizations
in
stage
one
do not
leave
stage
one.
Amoral
organizations, by
their
very
nature and
oportunistic philosophy produce
a cul
ture that cannot
adapt
to the values and rules of
society.
Thus amoral
organizations
are either forced
to cease
operations
or,
relatively quickly
run their
life
cycles.
These
organizations
that do evolve
past
stage
one do
so at the cost of
significant
structural
and cultural
change.
Proposition
4: An
organization comprised
of
multiple
departments,
divisions,
or SBUs can
occupy
different
stages
of moral
development
at the same time. That
is,
one
operating
area of the
organization
could be
classified in
stage
one while other areas could be
located in
stage
three. This
multiple
classification is
based
on subcultural differences within the
organi
zation. Each subculture will have
embraced,
to
greater
or lesser extents,
the formal culture. In those
cases where the formal culture dominates all
operat
ing
areas,
a
multiple
classification is
unlikely.
How
ever, when the individual subcultures dominate an
organization, multiple
classifications
are
possible.
Proposition
5:
Corporate
moral
development
does not
have to be
a continuous
process.
Individual
corpora
tions can
skip stages.
New
management
or
mergers
and
acquisitions
can
impose
new
cultures on an
organization.
These new
cultures
may
be
radically
different from the
previous
culture with
respect
to
their ethical content
impelling
an
organization
to a
higher
stage
of moral
development.
Proposition
6:
Organizations
at one
stage
of moral
development
can
regress
to lower
stages. Regression
typically
occurs
because the concern for economic
values is not
adequately
counterbalanced
by
the
concern for moral values. In times of
organizational
stress the
pursuit
of economic values
may
win out
regardless
of the
morality
of those values. In addi
tion,
new
management
or
mergers
and
acquisitions
can
also
provide
an
impetus
for
regression.
Proposition
7: There is no time dimension associated
to the moral
development
of
an
organization.
Some
organizations
will
stay
in a
particular stage longer
than others.
Again,
the
length
of
stay
in a
particular
stage
will be
a
function of those factors cited in
proposition
1.
Proposition
8: Two
organizations
can be in the
same
stage
but one
may
be more advanced.
Thus,
it is
possible
that a
corporation
which is classified
as a
legalistic corporation may
also manifest certain char
acteristics of a
responsive corporation.
This is a
function of the
dynamics
of moral
development.
The
stages
of
organizational
moral
development
Stage
one
?
the amoral
organization
The Amoral
Organization
has
a culture that is
earmarked
by
a
"winning
at
any
cost" attitude.
Typical
of
organizations
in this
stage
of moral
development
is
a
culture that is
unmanaged
with
respect
to ethical
concerns.
Productivity
and
profit
ability
are the dominant values found in the culture.
Concern for
ethics,
if it exists at
all,
is
usually
on an
after-the-fact basis when the
organization
has been
caught
in some
wrongdoing.
At this
point
the
con
cern for
ethics,
if at all
evidenced,
becomes more of a
cynical justification
or a
post
hoc rationalization of
behavior
strictly
for
damage
control
purposes.
Com
mon to most
management philosophies
is that
being
caught
in an
unethical situation is considered
as a
cost of
doing
business. This culture is
shaped by
a
strong
belief in Adam Smith's invisible hand and the
notion that the
only
social
responsibility
of business
is to make a
profit.
Unlike Friedman's
original
contention,
that
responsibility
is seldom conditioned
by
the caveat of
a
need for law and ethic.
Top management
rules
by
power
and
authority
and
employees respond by acquiescing
to that
authority
and
power
through
a
reward
system
which
supports
a
"go along"
type
of behavior. Obedience
is valued and rewarded.
Disobedience,
on a moral
basis,
is
punishable typically by expulsion
from the
organization.
There is little concern
for the
em
ployees
other than for their value as an economic
unit of
production.
The ethical culture of
a
stage
one
organization
can be summed
up
in the ideas that
"they'll
never
276 R. E. Reidenbach and D. P. Robin
know,"
"everybody
does
it,"
"we won't
get caught,"
and "there's no
way anyone
will ever
find out." Rules
can be broken if there is an
advantage
in
breaking
them. If
we are not
caught,
then who is to
say
it's
unethical?
At the basis of this culture is the
philosophical
position
that business is not
subject
to the same rules
that individuals are and that owners are the most
important
stakeholders. In
essence, belief in a
value
less business environment
produces
a
valueless busi
ness.
FRS
?
A Portrait
of
the Amoral
Corporationl
Film
Recovery Systems, previously
located in Elk Grove
Village,
Illinois,
exhibited
many
of the characteristics
of
an amoral
organization.
The
company
was
organ
ized to extract silver from old
x-ray
film which
utilized
a
chemical
process
involving cyanide.
Be
cause of the
potentially
acute
toxicity
of the
process,
the
safety
of the workers should have been a
princi
pal
concern.
On
February
10, 1983,
Stefan
Golab,
a
worker
at
FRS became weak and nauseated. He was
working
near a
foaming
vat of
hydrogen cyanide.
Fellow
employees helped
him outside and
urged
him to
breathe
deeply
in the cold fresh air. At that
point,
Mr. Golab became unconscious and did not
respond
to efforts to revive him. He was
rushed to a
nearby
hospital
where he
was
declared dead on arrival.
Cause of death
?
cyanide toxicity.
The
investigation
of this
case
reveals
a
company
that is
typical
of
stage
1
organizations. Inspectors
from the Cook
County Department
of Environ
mental Control had
previously
cited the
plant
for 17
violations that
were labeled as
"gross
violations" and
were ordered to be rectified
immediately. Typical
of
these violations
was a
lack of
a
cyanide
antidote,
legible warning signs,
a
respirator,
and other
safety
equipment
that was
judged
to be
mandatory
for a
company engaged
in this
type
of work. The
plant
itself,
which
was
described
as a
"drab,
one-story
structure" contained 140 vats of
foaming hydrogen
cyanide among
which the workers
performed
the
extraction
process. Testimony
of
many
of the work
ers
indicated that nausea,
nose
bleeds,
and rashes
were
commonplace.
That same
testimony
revealed
that
employees
were
ordered
to remove the skull
and cross bones
signs
from the containers of
cyanide
and that the owners
of FRS had
flatly
refused to
buy
what
was
described
as routine
safety equipment.
In
addition,
many
of the
employees
who worked
around the vats were
illegal immigrants
from
Mexico and Poland
(as
was the case of Mr.
Golab)
and did not
speak English
well. This
hiring practice
was
adopted, according
to the
testimony
of
a book
keeper,
because
illegal
aliens would be less
apt
to
complain.
The
response
of FRS to the
investigation
involved
laying
off workers and
closing
down the
plant
in
mid-1983. The
investigation,
and ultimate criminal
prosecution
of three FRS executives centered around
the
question
"Can two
legitimate corporations
form
a
third
(FRS),
set it
up
to
engage
in a reckless and
dangerous activity, ignore legal requirements
?
and
get
off scot-free?" Prosecutors referred
to the FRS
case as "novel" but
qualified
it
by saying
"It's an old
story
of
poor,
uneducated
people being exploited by
people
who
were more
educated,
more
privileged,
and more
wealthy."
This is a
company
whose formal culture valued
productivity
and
profits.
Costs,
especially
those that
were
morally justifiable
in
caring
for
employees,
were not incurred. To do so would have reduced the
profitability
of the
company. Management operated
on the basis that "we won't
get caught"
and "it's ok
to break rules as
long
as we
profit
from it." Their
regard
for individuals is
readily apparent
in their
hiring practices
and their treatment of their
employ
ees.
Internally, employees
were to
obey
rules which
emphasized productivity
and failure to do so meant
dismissal and
even
perhaps prosecution
as an
illegal
alien.
Stage
two
?
the
legalistic corporation
Stage
2 is the
legalistic corporation
so
named because
of the
preoccupation
the
corporation
exhibits for
compliance
with the letter of the law as
opposed
to
the
spirit
of the law.
Organizations
in this
stage
exhibit
a
higher
level of moral
development
than
organizations
in
stage
1 because
stage
2 cultures
dictate obedience to
laws, codes,
and
regulations,
a
value
missing
in the cultures of
stage
1
organizations.
Corporate
values flow from the rules of the state,
and that is
why management
is
principally
con
cerned with
adhering
to the
legality
of
an action
rather than the
morality
of the action. "If it's
legal,
Corporate
Moral
Development
Model 277
it's ok and if we're not
sure, have the
lawyers
check it
out"
typifies
the
operating
dictum of
stage
2
organiz
ations. More than
just
a
desire to
obey society's
laws
?
they
take an internal lawlike
approach
themselves.
The
corporate legal
staff
operates
as a check
against wrongdoing
as
interpreted by legal
statute. In
this
culture,
law
equates
with
justice
and there is no
difference between what is
legal
and what is
right
and
just.
The ethics of
an
action,
if considered
at
all,
is
generally
considered
on a
post
hoc basis.
Codes of Conduct reflect this
legalistic thinking.
A 1989 article
on
codes of ethics clustered codes into
three
categories (Robin
et
ai,
1989).
The
largest
cluster
was one
characterized
by
a "Don't do
any
thing
unlawful
or
improper
that will harm the
organization," suggesting
the
pervasiveness
of this
ethos.
Cressy
and Moore
(1983)
further
suggest
that
most codes
give
the
appearance
of
being legalistic
documents. It is
perhaps
not
surprising
that two of
the
largest
tobacco
companies,
R.
J. Reynolds
and
Philip
Morris,
have
legalistic
codes of conduct. These
codes
are
very
concerned
with,
and limited to,
unlawful or
improper
behavior.
The
principal emphasis
is still on
profitability
but
the difference between
stage
2 and
stage
1
organiza
tions is that the latter is concerned with the
legality
of the
profits,
not
necessarily
the
morality
of them.
Owners are
still the
principal
stakeholders.
Contrary
to the "win-at-all-cost" attitude under
lying organizational
behavior in
stage
1,
stage
2
organizations
adhere to a notion of
reciprocity.
That
is,
compliance
with the law will
produce good
results.
By
extension
then,
stage
2
organizations
are
followers and not social leaders.
Society
can
expect,
for the most
part, organizations
that adhere to the
law but do little as far as
operating
in their own
enlightened
self interest is concerned.
Ford motor
of
1973
?
a
portrait of
the
legalistic corporation2
While the notorious Pinto case
has been dissected
from
numerous
vantage points,
far less attention has
been focused on
the defense that Ford Motor used in
its behalf
during
the
Elkhart,
Indiana trial in 1980. In
its defense
can be seen
many
of the characteristics of
an
organization
in
stage
2 of its moral
development.
It is
important
to
point
out that the Ford Motor
Company
of 1973 and not
the Ford Motor
Company
of
1988,
is cited
as an
example.
The trial focused
on
Ford's
culpability
in the
death of three
teenagers
who were
struck from
behind in their 1973 Pinto. The
gas
tank of the Pinto
erupted,
burst into
flames,
resulting
in the
burning
death of the three
teenagers.
A criminal homicide
indictment
was
brought against
Ford on the
grounds
that the auto
company
had
engaged
in
"plain,
con
scious and
unjustifiable disregard
of harm that
might
result
(from
its
actions)
and the
disregard
involves
a
substantial deviation from
acceptable
standards of
conduct."
In its
defense,
Ford's
attorney, James
F.
Neal,
argued
that the Pinto met all
federal,
state,
and local
government
standards
concerning
auto
fuel systems.
This
compliance,
Ford's
attorney
further
argued,
was
comparable
to other
subcompacts produced
in 1973.
He continued
by saying
that Ford did
everything
to
recall the Pinto as
quickly
as
possible
as soon as
the
NHTSA
(National
Highway Traffic Safety
Administra
tion)
ordered it to
(emphasis added).
Mark
Dowie,
then General
Manager
for Mother
Jones,
claimed that the Pinto was
involved in 500
burn deaths and that
burning
Pintos had become
such an
embarrassment to Ford that
J.
Walter
Thompson,
the ad
agency
that handled the
Pinto,
dropped
a line from its radio
spot
that
said,
"Pinto
leaves
you
with that warm
feeling."
Michael Hoffman
raises an
interesting
and
certainly
relevant
point
in
light
of the
mounting
evidence of the Pinto's defec
tive fuel
system
when he
asks,
"Even
though
Ford
violated no federal
safety
standards
or
laws,
should it
have made the Pinto safer in terms of rear-end
collisions,
especially regarding
the
placement
of the
gas
tank?" In Ford's lack of
response
to this
question
and their steadfast refusal to recall their
product
voluntarily
can be seen as one of the
inhibiting
effects of
stage
2 behavior. Because of its
preoccupa
tion with
compliance
to laws and
regulations,
cultural values
focusing
on
what is
right
rather than
on what is
legal
are
either nonexistent or
under
developed.
As a
consequence,
the
organization
does
only
what it is
required
to
do rather than what it
should do. This is
symptomatic
of the
legalistic
organization.
Moreover,
Ford's concern
for the size of the
bottom line rather than the
morality
of the bottom
line is evidenced in their cost-benefit
analysis
con
tained in a
report
entitled "Fatalities Associated with
Crash Induced Fuel
Leakage
and Fires." The $11
cost
per
car for the
improvement designed
to
prevent gas
tank
ruptures
was not cost effective. Ford estimated
that benefits would
run to
$49.5 million,
while the
costs associated with the
improvement
would total
$137 million.
Stage
2
organizations,
like their
coun
terparts
in
stage
1,
maintain a
preeminent
concern
for
profitability, especially
when it involves
a trade
off with
doing
what is
right.
Stage
three
?
the
responsive corporation
Unlike their
legalistic
counterparts
in
stage
2,
responsive corporations begin
to evolve cultures that
contain values other than
productivity
and
a sense of
legality. Responsive organizations begin
to strike
a
balance between
profits
and
doing right.
However,
doing right
is still more of an
expediency
rather than
an end
unto itself. Social
pressures
are
such that these
stage
3
corporations
must
respond
to those
pressures
or face censure or worse. The
managements
of these
corporations
are more sensitive to the demands of
society
than the
managements
in the
previous stages.
Managements begin
to
recognize
that the
organiza
tion's role exceeds a
purely
economic one and that it
has certain social duties and
obligations.
Codes of ethics take on
greater importance
and
their focus
begins
to reflect a
greater
societal
orientation. As an
example,
consider the codes of
ethics of the Bank of
Boston,
which are
typical
of
stage
3
organizations. Among
the codes include
standards, values,
and
prescriptions concerning
integrity, confidentiality, quality, compliance,
con
flict of
interest,
objectivity, personal
finances,
decency,
and
accountability.
The standard
concern
ing
social
responsibility
reads,
"Seek
opportunities
to
participate
and,
if
possible,
to
play
a
leadership
role
in
addressing
issues of concern to the communities
we serve." The
major part
of the
codes, however,
is
still
designed
to
identify
behaviors that will
bring
potential
harm
to the Bank of Boston
(e.g., compli
ance, conflict of
interest,
personal
finances,
con
fidentiality).
In that sense
they
are
internally
directed.
Concern for ethical conduct is evidenced in the
accountability
statement which
reads,
"Report ques
tionable, unethical,
or
illegal activity
to
your manager
without
delay" (Bank
of
Boston).
It is
interesting
to
point
out that these codes
were
published
at about
the same time that the Bank of Boston
pleaded
guilty
to
charges
of
money
laundering.
Studies indicate that about 75% of all U. S. firms
have codes of conduct. Those same
studies also
indicate that the most common items mentioned in
the codes
are
conflict of interest
provisions, political
contributions,
use of insider
information,
illegal
payments, bribery
and
kickbacks,
improper
relation
ships, proprietary
information,
use
of
corporate
assets,
gifts
and
favors,
and unrecorded
or
falsely
recorded funds
or
transactions,
most
of
which,
like
their
stage
2
counterparts,
have an internal focus
designed
to
protect
the
organization (Raelin,
1987,
p.
177;
Robin etal.
1989).
Concern for other stakeholders
begins
to
manifest
itself as
managements being
to
realize the
import
ance
of
employees
and the
community
in which
they
operate. Again,
this nascent concern is not motive
ated
by
a sense of
doing right
for
right's
sake,
but
rather as a
recognition
of the
organization's greater
social role.
Movement from
stage
2 to
stage
3 is often
initiated
by
outside events. Some
potentially damag
ing
occurrence to the
organization
or
other
organiz
ations
may
happen forcing
the
organization
to react
by countering
with some
apparent
ethical
response.
The intention is to
sway opinion
of different state
holders
by doing good.
A "do what we
gave
to
do,
not because it's
right
but because it's
expedient"
dominates the
responsive organization's
ethical
system.
P & G reacts to the
Rely Tampon problem.
The reaction
that Proctor 8c Gamble made to the
Rely Tampon
problem
is indicative of an
organization
that has de
veloped
a
stage
3
responsive
level of
morality.
It is
decidedly
different from the
type
of
thinking
and
actions one finds in the
stage
2
legalistic type
of
organization.
P & G
management
made
an
enlight
ened decision to act in the best
interests,
not
only
of
themselves,
but also with
respect
to a
number of
different
publics.
In the summer of
1980,
Proctor & Gamble was
first made aware,
by
the Centers for Disease
Control,
that there
might
be
a
possible linkage
between the
incidence of toxic shock
syndrome
and the use of
tampons.
No indication existed that there
was
any
linkage
between toxic shock and the
specific
use
of P & G's
Rely product. During
this same
period
of
time,
P & G
began
an
investigation
into the
alleged linkage.
Initial information indicated no
rela
Corporate
Moral
Development
Model 279
tionship
between toxic shock
syndrome
and
tampon
usage.
On
September
15, 1980,
the Centers for Disease
Control informed P & G that in their
study
of 42
cases of toxic shock
syndrome,
71% of the women
were
Rely
users. This
put
P & G
management
in the
position
of
deciding
to defend their brand
against
what P & G scientists consdered rather
sketchy
evidence. On
September
18, 1980,
three
days
after
the
study
results were
announced,
P & G made their
decision to withdraw the
product
from the market
and to halt
production
of
Rely Tampons.
The
decision,
according
to Edward G.
Harness,
chairman
and chief executive of P &
G,
hinged
on the
dilemma,
"We didn't know
enough
about toxic
shock to
act,
and
yet,
we
knew too much not to act."
(Gatewood
and
Carroll, 1981,
p. 12)
P & G had
begun pulling
400,000
cases of their
product.
Under an
agreement
with the
FDA,
P & G
was
absolved of
any
violation of federal law or
liability
for
product
defect.
However,
the remarkable
aspect
of the
response
was
yet
to come. P & G
bought
back all unused
products, including
$10
million in free
promotional samples.
Moreover,
they
voluntarily pledged
research assistance to the Cen
ters for Disease Control for the
study
of toxic shock
and
agreed
to finance and initiate an
educational
campaign
about the disease. The educational cam
paign
was remarkable in both the
speed
and the
scope
of information dissemination.
P & G
management recognized
the
longer
term
value of
making
this
type
of
response.
Although
20
years
of research and
marketing expenditures
were
tied
up
in what would
ultimately
be
a
significant
loss,
their action demonstrates
a
greater
balance
between
profits
and ethics than would be seen in
earlier
stages
of
corporate
moral
development.
Cynics might respond
that P & G did this out of
economic reasons. In
part,
that is
probably
true.
Yet,
unlike Ford whose sole interests were
economic,
P &
G
recognized
that their
long
term economic well
being
was
inextricably
intertwined with the
morality
of their decision. This is the hallmark of the
respon
sive
organization.
Stage
three is a
pivotal point
in the moral
development
of most
corporations.
It is a
learning
stage
wherein
managements
test the
efficacy
of
socially responsive
behavior and
begin
to understand
the economic value of moral behavior. This
attitude,
however,
moves the
organization beyond
a
strictly
legalistic
focus
and,
in some
cases, has the effect of
making
the
organization
a
social
pioneer.
Still,
it
must be
emphasized
that cultures of
stage
three
corporations
are
dominated
by
a
reactive
mentality,
not a
proactive mentality.
Stage four
?
the
emergent
ethical
organization
The
emergent
ethical
organization
is one in which
management actively
seeks
a
greater
balance be
tween
profits
and ethics. There is an overt effort to
manage
the
organization's
culture to
produce
the
desired ethical climate. This
change
in the culture
involves a
recognition
of a
social contract between
the business and
society. Management approaches
problem solving
with an awareness of the ethical
consequence
of an action as well as its
potential
profitability.
One of the more visible manifestations of
stage
4
organizations
is the
proliferation
of "ethics vehicles"
throughout
the
organization.
Codes of conduct
become more
externally
oriented and become
living
documents instead of
lofty
ideals to be read once
and
then
put away
or
highly
limited rules that are
designed primarily
to
protect
the
organization.
In
addition,
and
typical
of
stage
4
corporations,
is that
handbooks,
policy
statements, committees,
ombuds
men, and ethics
program
directors
begin
to reinforce
the existence of codes. This
signals stronger manage
ment commitment to ethical behavior.
For
example,
at
Boeing,
an
emergent
ethical
corporation, greater
CEO involvement in
ethics,
and
line
management
involvement in ethics
training
programs
are two
aspects
of their cultural concern
for
morality.
In
addition,
their ethics committee
reports
to the board and
management
has installed
a
toll-free number for
employees
to
report
ethical
violations.
General Mills has
developed guidelines
for deal
ing
with
vendors,
competitors,
and customers.
Recruiting
focuses
on
the
hiring
of individuals that
share the same
cultural values and an
emphasis
on
open
decision
making
hallmark their concern
for
ethical behavior.
While
responsive corporations begin
to
develop
ethical mechanisms to increase the
probability
of
ethical
behavior,
these
organizations
are not
yet fully
comfortable with their
implementation. Organiza
tional actions are still characterized
by
ad hoc
attempts
to
develop
and instill
organizational
values.
These
attempts
often lack direction in both the
selection of the values and their
implementation.
Top management recognizes
the
importance
and
value of this
type
of behavior but lacks the
experi
ence and
expertise
to make it work
effectively.
Examples of emergent
ethical
organizations
A
growing
number of
organizations
can
be classified as the
emergent
ethical.
Boeing
and General Mills were
cited earlier for their ethical efforts.
Boeing's pro
grams
have been in
place
since 1964 but the mere
existence of ethical
programs
does not insure that
the
emergent
ethical
organization
will behave ethi
cally.
In
1984,
a unit of
Boeing
was cited for
illegally
using
inside information to secure a
government
contract,
a case of
regression.
Often cited for unethical
behavior,
General
Dynamics
has an extensive ethics
program.
A
publi
cation
by
the
giant
defense contractor asks 10
questions
about the
program.
These
questions
in
clude:
1. Who is
my
Ethics
Program
Director?
2. How can the Ethics Director
help
me?
3. How can I contact
my
Ethics Director?
4. Do I need
my supervisor's permission
to talk
with the Ethics Director?
5. How does the ethics hotline work?
6. How do I know what General
Dynamics'
ethics
standards
really
are?
7. What is
my
responsibility
if I become aware
of
someone
who is
violating
the standards?
8. What
happens
if I violate the standards?
9. How does the ethics
program apply
to me?
10. What should I do if I am directed to do some
thing
that I believe is a
violation of
company
standards?
The
publication goes
on to answer each
question.
For
example,
in
response
to the
question concerning
how
an
employee
contacts the Ethics
Director,
General
Dynamics
has created a
hotline
complete
with
answering
machine. In
addition,
the Ethics
Director can
be reached
by
mail, EMOS,
or
by
direct
contact.
Does the
system
work? Not
perfectly.
General
Dynamics
has
recently (1988)
been indicted on
further
charges
of defense contractor
fraud. The
process
has been revised at General
Dynamics
to
include
a
"squeal
clause" which is
designed
to both
reward and
protect
employees
who
report
on co
workers who have broken
company
standards.
Consider the
following excerpts
from Sara Lee's
codes which
recognize
the
importance
of
balancing
profits
and ethics:
Business has a role
beyond
the
generation
of
profits. By
investing
their
good
will, time,
and
money, companies
can
?
and should
?
serve as
catalysts
in
helping
deal with
significant
social issues.
Perhaps
one of the best
examples
of the
emergent
ethical
corporation
is that of
Johnson
&
Johnson.
Johnson
&
Johnson
is an
advanced
stage
4
corpora
tion as
suggested
both
by
their CREDO and their
actions in the wake of the
Tylenol tamperings.
First
consider the CREDO.
The CREDO
represents
a
strong
balance between
ethical concern
and
profitability.
However,
what
really signals Johnson
&
Johnson
as an
advanced
stage
4
corporation
is found in the
response
of one of
their senior executives who was
asked about the
decision
concerning
the massive recall of
Tylenol
products.
"We never
really thought
we
had much of
a
choice in the matter of the recall. Our Code
of
Conduct
(CREDO)
was such a
way
of life
in the
firm
that
our
employees, including
me,
would have been scandalized
had we taken another course
(emphasis added).
We
never
seriously
considered
avoiding
the
costly
re
call."
(William
and
Murphy, 1988).
What can be seen in all of these
examples
is
a
management
that is
wrestling
with
a
growing
realization that the
corporation
must
develop
a
mechanism to balance the
organization's
concern
for
profits
and ethics. Some
attempts
are
clumsy,
some
work,
some don't. What is
important
is that there is
among stage
4
organizations
a
shift in the
culture,
one that
gives increasing emphasis
to the
morality
of
the bottom line.
Stage five
?
the ethical
organization
The final
stage
of
organizational
moral
development
is the ethical
organization.
We know of no
examples
of
organizations
which have reached this level of
development.
Corporate
Moral
Development
Model 281
Exhibit 1
Johnson
&
Johnson's Corporate
Credo
OUR CREDO
We believe our first
responsibility
is to the
doctors,
nurses and
patients,
to mothers and all others who use our
products
and services.
In
meeting
their needs
everything
we do
must be of
high quality.
We must
constantly
strive to reduce our costs
in order to maintain reasonable
prices.
Customers' orders must be serviced
promptly
and
accurately.
Our
suppliers
and distributors must have an
opportunity
to make
a
fair
profit.
We are
responsible
to our
employees,
the men and women who work with us
throughout
the world.
Everyone
must be considered as an individual.
We must
respect
their
dignity
and
recognize
their merit.
They
must have a sense of
security
in their
jobs.
Compensation
must be fair and
adequate
and
working
conditions
clean,
orderly
and safe.
Employees
must feel free to make
suggestions
and
complaints.
There must be
equal opportunity
for
employment,
development
and advancement for those
qualified.
We must
provide competent management,
and their actions must be
just
and ethical.
We are
responsible
to the communities in which
we live
and work and to the world
community
as well.
We must be
good
citizens
?
support good
works
and charities and bear our fair share of taxes.
We must
encourage
civic
improvements
and better health and education.
We must maintain in
good
order
the
property
we are
privileged
to
use,
protecting
the environment and natural resources.
Our final
responsibility
is to our stockholders.
Business must make a
sound
profit.
We must
experiment
with new ideas.
Research must be carried on, innovative
programs developed
and mistakes
paid
for.
New
equipment
must be
purchased,
new facilities
provided
and new
products
launched.
Reserves must be created to
provide
for adverse times.
When we
operate according
to these
principles,
the stockholders should realize a fair return.
Johnson
&
Johnson
Stage
five behavior is characterized
by
an
organi
zation-wide
acceptance
of a common set of ethical
values that
permeates
the
organization's
culture.
These
core
values
guide
the
everyday
behavior of an
individual's actions. Decisions are
made based
on the
inherent
justness
and fairness of the decision
as
well
as the
profitability
of the decision. In this sense there
is a
balance between concerns
for
profits
and ethics.
Employees
are
rewarded for
walking
away
from
actions in which the ethical
position
of the
organiza
tion would be
compromised.
At the heart of this
organization
is a
planning
system
much like the one
described
by
Robin and
Reidenbach
(1987, 1989).
The
concept
of a
parallel
planning
system
wherein ideas and
concepts
from
the normative moral
philosophies
are
used in the
analysis
of
potential organizational
activities.
An
example
of
parallel planning
is seen in the
deliberation made Sir Adrian
Cadbury's grandfather
(Cadbury, 1987).
Sir Adrian's
grandfather,
then CEO
of
Cadbury's
was
confronted with a
profitable pro
position
that he found
morally repugnant.
It con
cerned a contract to
furnish
English
soldiers in the
Boer War with a
Christmas tin of chocolates. He was
opposed
to the war on
moral
grounds
but was
cognizant
of the economic
repercussions
to
his
employees
that refusal of the contract
would
bring
as
well as the morale
impact
on
the soldiers. His
decision involved
producing
the chocolate at cost so
that his
employees
were
compensated,
the soldiers
received the
chocolate,
but Sir Adrian
personally
did
not
profit
from a
situation he found unethical.
In
implementing
the
parallel planning
system,
the
organization may
be viewed
as a
family
with certain
ethical
family
values that
guide
decision
making.
These core
values can
be translated into ethical
action statements such as:
Treat customers with
respect,
concern, and
honesty,
the
way you yourself
would want to be treated or the
way
you
would want
your family
treated.
Make and market
products you
would feel comfortable
and safe
having
your
own
family
use.
Treat the environment as
though
it were
your
own
property (Robin
&
Reidenbach, 1987,
p. 55).
What makes an
ethical
organization
work is the
support
of a
culture that has a
strong
sense
of moral
duty
and
obligation
inherent within it. This culture
TABLE I
A
summary
of the moral
development
of
corporations
Stage
in Moral
Development
Management
Attitude
and
Approach
Ethical
Aspects
of
Corporate
Culture
Corporate
Ethics
Artifacts
Defining Corporate
Behavior
Stage
I
The Amoral
Organization
Get
away
with all
you
can;
It's ethical as
long
as
we're not
caught;
Ethical
violations,
when
caught,
arc a cost of
doing
business
Outlaw
culture;
Live
hard and
fast;
Damn the
risks;
Get what
you
can
and
get
out
No
meaningful
code of
ethics
or
other
documentation;
No set
of values other than
greed
Film
Recovery Systems;
Numerous
Penny
Stock
Companies
Stage
II
The
Legalistic
Organization
Stage
III
The
Responsive
Organization
Stage
IV
The
Emerging
Ethical
Organization
Play
within the
legal
rules;
Fight changes
that
effect
your
economic
outcome;
Use
damage
control
through public
relations when social
problems
occur;
A
reactive concern for
damage
to
organizations
from social
problems
Management
understands
the value of not
acting
solely
on a
legal
basis,
even
though they
believe
they
could
win;
Manage
ment still has a reactive
mentality;
A
growing
balance between
profits
and
ethics,
although
basic
premise,
still
may
be a
cynical
"ethics
pays";
Management begins
to
test and learn from more
responsive
actions
First
stage
to exhibit an
active concern for ethical
outcomes;
"We want to
do the
'right' thing"; Top
management
values
become
organizational
values;
Ethical
perception
has focus but lacks or
ganization
and
long
term
planning;
Ethics
manage
ment is characterized
by
successes and failures
If it's
legal,
it's
OK;
Work the
gray
areas;
Protect
loopholes
and
don't
give ground
without
a
fight;
Economic
performance
dominates evaluations
and rewards
There is a
growing
concern for other
corporate
stakeholders
other than owners;
Culture
begins
to
embrace
a more
"responsible
citizen"
attitude
The Code of
Ethics,
if it Ford Pinto
Ethical values become
part
of
culture;
These
core values
provide
guidance
in some
situations but
questions
exist in
others;
A
culture that is less
reactive and more
proactive
to social
problems
when
they
exists,
is an internal
document;
"Don't do
anything
to harm the
organization";
"Be a
good corporate
citizen"
Codes are more
externally
oriented and
reflect a concern for
other
publics;
Other
ethics vehicles are
undeveloped
Codes of Ethics become
action
documents;
Code
items reflect the core
values of the
organiza
tion; Handbooks,
policy
statements, committees,
ombudsmen are
sometimes used
Firestone 500
Nestle Infant Formula
R.
J. Reynolds
Philip
Morris
P & G
(Rely Tampons)
Abbott Labs
Borden
Boeing
General Mills
Johnson
&
Johnson
(Tylenol)
General
Dynamics
Caterpillar
Levi Strauss
Corporate
Moral
Development
Model 283
Table I
(Continued)
Stage
in Moral
Development
Management
Attitude
and
Approach
Ethical
Aspects
of
Corporate
Culture
Corporate
Ethics
Artifacts
Defining Corporate
Behavior
Stage
V
The Ethical
Organization
A balanced concern for
ethical and economic
outcomes; Ethical
analysis
is a
fully integrated
partner
in
developing
both the mission and
strategic plan;
SWOT
analysis
is used to
anticipate problems
and
analyze
alternative
outcomes
A total ethical
profile,
with
carefully
selected
core values which
reflect that
profile,
directs the
culture;
Corporate
culture is
planned
and
managed
to be
ethical;
Hiring,
training, firing
and
rewarding
all reflect the
ethical
profile
Documents focus on
the ethical
profile
and
core
values;
All
phases
of
organizational
documents reflect them
has been
designed
and
managed by top management
to
produce
the work climate
necessary
to
support
an
assurance of the balance between
profitability
and
ethics. Reward
systems
are
developed
which
support
individuals who make the
"right"
decision,
even at
the
expense
of
profitability.
Sanction
systems
exist to
penalize
and correct the behavior of those
making
a
wrong
decision. Ethics
training
is an
ongoing
con
cern of the
stage
five
organization,
which
integrates
technical
training
with a
focus
on the
morality
of the
job. Hiring practices emphasize
not
only
the
aptitude
and skill of the
potential employee
but also how that
employee
is
likely
to behave in moments of stress.
An
organizational
mentor
program
exists with the
purpose
of
providing
work and moral
guidance
for
the new
employee.
This
parallel system
wherein
profits
and ethics
go
hand-in-hand is the hallmark
of the ethical
organization.
The
principal
difference between
stage
four and
stage
five
organizations
is seen in the commitment
that the
organization
makes to ethical behavior.
Stage
four
organizations
have not
fully planned
for
and
integrated
ethical values
throughout
their cul
ture.
Instead,
they rely
on
mechanisms to
guide
ethical behavior. There is still
an imbalance between
the
goals
of
profitability
and ethics so that in times
of stress,
it is not uncommon to see the
pursuit
of
profitability produce
unethical behavior. It is here
where
an
organization
in
stage
four,
in
spite
of the
ethics vehicles existent in an
organization,
can
regress
to an
earlier
stage
of moral
development.
This is
unlikely
to occur in the
stage
five
organiza
tion. The ethical
emphasis
in the culture of the
organization
is so
strong
that the individual is not
placed
in a dilemma in which he or
she must choose
the correct action. The correct action is
always
the
just
and fair action. Of course,
organizations
will
make mistakes in their
planning.
However,
these
mistakes,
once
identified,
will be corrected
so that
the final outcome
corresponds
to an
ethical out
come.
Some
concluding
comments
Organizations
are
struggling
with their records of
ethical behavior. This
struggling
is indicative of
moral
growth
where in
organizations
move from
one level of moral
development
to another.
This
conceptual
model of
organizational
moral
development
identifies five
stages
of
growth.
Table 1
summarizes the salient features of this
development
process.
Not all
organizations
will evolve to the
highest stage.
And,
not all
organizations begin
at
stage
1. It is our
opinion
that most
organizations
are
currently
in the
legalistic
and
responsive stages
of
moral
development.
More and more
organizations,
however,
are
beginning
to manifest the characteris
tics of
stage
four
organizations. Corporate emphasis
on
profitability
still far
outweighs
concern
for ethics.
Moreover,
many managements
have not
yet
learned
that
corporate
cultures can be
managed
to
produce
the desired ethical behaviors. What
we are
seeing
are
cultures that are
unmanaged,
and when
unmanaged,
evolve in their
own
directions,
usually
in the direc
tion
pointed
out
by
the reward
system.
Thus,
cultures devoid of ethical concerns or in which
ethical values
are
absent,
will
normally grow
in the
direction of
productivity
and
profitability,
two
values
typically
embraced
by management.
While the
conceptual
model
presented
in this
article
requires
confirmation and
possible respecif
ication,
it
represents
a start in the
study
of the
dynamics
of
corporate
moral
development.
Further
study
is sure to
provide
a clearer view of the
process
by
which
organizations change
and
develop
their
own moral characters.
Notes
1
Abstracted from
McClory,
R.:
1986,
'Murder on the
Shop
Floor',
Across the Board
(June), pp.
29?32.
2
Abstracted from
Hoffman,
W. M.:
1984,
The Ford
Pinto',
in W. M. Hoffman and
J.
Mills Moore
(eds.),
Business Ethics
(McGraw-Hill
Book
Co.,
New
York).
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Conceptual Model of Corporate Moral Development

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A Conceptual Model of Corporate Moral Development

Author(s): R. Eric Reidenbach and Donald P. Robin

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