Week-3
No plagiarism please.
After reading chapter-3 from the attached screen shot and from the attached journal articles. Explain about the research topic ‘Ethical Systems’.
Answer should be based on the attached three journal articles and text book.
Please answer in own words and as thorough as possible. APA format is must and strictly no plagiarism. Minimum 3 pages assignment
APA format mustNo Plagiarism
Society as an ethical system†
John Crowley*
UNESCO Division of Social Transformations and Intercultural Dialogue, Paris, France
(Received 10 August 2016; final version received 10 August 2016)
The idea of society on which the social sciences are premised is one of a structured
pattern of interdependence and interaction that drives participation in a shared
communication space and, thereby, a degree of common consciousness. These are
also the preconditions for ethics to operate as an internal mode of self-understanding
rather than an external imposition. Societies, in other words, are ethical systems. In
order to understand in what sense societies, in the context of contemporary
transformations, can still be thought of and analysed as ethical systems, the article
focuses on inequality as both a practically important and normatively complex
challenge – one that the international community, through the 2030 Agenda for
Inclusive and Sustainable Development, has recognized to be one of its action
priorities. These considerations further bear on the relation between the social
sciences and the humanities, which is one important dimension of the future of the
social sciences.
Keywords: social science; inequality; Sustainable Development Goals; ethics
In its eighteenth-century origins and nineteenth-century early development, social science
was closely connected with moral philosophy. Questions about the desirable organization
of human affairs were based in part on observations or assumptions about human nature,
and conversely considerations about how humans ought to behave were informed by an
understanding of how societies function and evolve over time.
Since Durkheim and Weber, this connection has loosened. It would be an exaggeration
to say that social science and moral philosophy have entirely parted company, as the work
of Jürgen Habermas, to name but one, suffices to show. Nonetheless, it remains true as a
generalization that the academic development of the social sciences has been broadly inim-
ical to the kind of fusion of the analytical and the normative that would earlier have been as
natural within “social philosophy”. On the one hand, the intellectual and institutional
requirement to achieve emancipation from the dominion of philosophy has led to a distinc-
tion between the social sciences and the humanities that would not previously have been
judged meaningful. And on the other hand, the aspiration to constitute a science (or
© 2016 ICCR Foundation
†This article is largely based on an address entitled “Equality, Justice, Inclusion. Ethical Perspectives
on Contemporary Social Dynamics”, originally delivered to a UNESCO conference on “Rethinking
Development: Ethics and Social Inclusion” that took place in Mexico City on 17–18 August
2011.The views expressed in this paper are those of the author and, except where specifically
stated otherwise, should not be regarded as official statements of a UNESCO position on the
topics addressed.
*Email: j.crowley@unesco.org
Innovation: The European Journal of Social Science Research, 2017
Vol. 30, No. 1, 36–46, http://dx.doi.org/10.1080/13511610.2016.1224156
http://orcid.org/0000-0002-9676-9804
mailto:j.crowley@unesco.org
http://www.tandfonline.com
sciences) of society gave rise to an epistemology in which statements about what “ought”
to be were in principle illegitimate.
It has long been recognized that, however historically and conceptually intelligible,
such distinctions between the humanities and the social sciences, and between “facts”
and “norms”, are at best practically convenient simplifications and at worst unhelpful lega-
cies. Furthermore, it is widely acknowledged that the understanding of the physical
sciences on which social science premised its foundational epistemology is, and even in
the late nineteenth century already was, somewhat misleading. And indeed, there is exten-
sive research in various disciplines that bears on the grey zone in which moral judgement
may be understood as social fact, along with ambitious theoretical attempts to make sense
of the post-positivistic nexus between facts and norms.
Among the issues that will shape the future of social science, the connection with the
humanities, and its epistemological implications, are likely to be of considerable signifi-
cance, especially as they bear on the social role of social science as it relates not just to
understanding but to policies, to social mobilization and to the everyday fabric of social
life. The purpose of this article is to consider one fairly circumscribed aspect of this
general problem, which reflects in interesting ways some of its characteristic features:
the status of ethics as a mode of inquiry into and language of justification within contem-
porary societies. In order to understand in what sense societies can be thought of and ana-
lysed as ethical systems, I will focus on inequality as both a practically important and
normatively complex challenge – one that the international community, through the
2030 Agenda for Inclusive and Sustainable Development, has recognized to be one of
its action priorities.
Statistics show clearly that contemporary social dynamics have led, over the past 20 years,
to growing social inequality within most societies. Income distributions have been
stretched, with the incomes of the richest rising much faster than the average, while the
poorest have been confronted by stagnant real wages and, in many cases, pressure on
welfare systems where they exist. In some cases, the impact has been minor, although
not trivial; in other cases, including the United States as well as some fast-growing devel-
oping countries, the result has been levels of inequality unprecedented since 1945. Inequal-
ities in terms of wealth have sharpened even more strikingly (Piketty 2014). Furthermore,
such progress as can be observed in reducing aggregate global levels of inequality is almost
entirely attributable to rapid economic growth in certain emerging countries: it is compa-
tible with rising inequalities within nearly all societies (International Social Science
Council 2016).
Nor is inequality simply a matter of income and assets. Studies in most countries point
to increased inequalities of opportunities, especially with respect to education, and to strik-
ing correlations between inequality and ill-health (Pickett and Wilkinson 2015), which are
only partly explained by differential insurance or other institutional features. In principle,
one could argue that such inequalities are inevitable in periods of rapid economic tran-
sition, and will correct themselves over time. While this may turn out to be true, the evi-
dence of the past two decades does not provide any reason to make such a prediction. On
the contrary, some studies suggest that, in the most unequal countries, inequalities might be
locked in by endogamy, residential and educational segregation, and more sophisticated
asset-protection strategies, to the point that they may become, for all practical purposes,
self-perpetuating. As readers of nineteenth-century literature know, one could then rely
Innovation: The European Journal of Social Science Research 37
on the heirs to great fortunes to dilapidate them very quickly. Great fortunes today are
much less likely to be gambled or drunk away, to the extent that philanthropy has, in
the view of some, become the only mechanism of wealth redistribution over time.
Locked-in inequalities have sociological implications that are quite different from tran-
sitory inequalities that affect positions open to all in fair conditions of equal opportunity –
to paraphrase John Rawls, of whom more later. Once they reach a certain scale, such
inequalities negate the very idea of social inclusion – which I understand here are as
full participation by all in the characteristic processes of the societies to which they
belong. This concern with the “price of inequality” (Stiglitz 2013) has both an objective
and a subjective dimension.
In objective terms, a society that is profoundly segmented by entrenched inequalities
may simply no longer be a “society”, in so far as its members may cease to share any
“characteristic processes” at all. If people do not attend the same schools, do not live in
the same neighbourhoods, do not consume the same kinds of goods and services, do not
visit the same places, are not treated in the same hospitals, do not read the same books
or watch the same films and so on, there comes a point when they become literally separate.
“Separate development”, one might recall, was the polite official rationale for apartheid.
Probably no current society quite matches this description. Indeed, one of the features
of technological globalization has been to make material culture more uniform than it
was traditionally, even though its enjoyment is highly diverse. Furthermore, many societies
remain resistant to such centrifugal pressures – populism being perhaps one of the purely
ideological ways of managing them. But the tendency is nonetheless very clear. In his
classic 1949 essay “Citizenship and Social Class”, the British sociologist T.H. Marshall
pointed out that the combination of common citizenship and class-based inequalities
was a “stew of paradox”, but nonetheless a nourishing one provided that a certain uniform-
ity of rights, institutions and material culture was maintained (1950). We are clearly no
longer in the world of Marshall.
In subjective terms, even when objective structures of inequality stop well short of
“separate development”, the idea of society as a common heritage of its members may
come to ring very hollow to those who feel excluded from such “characteristic processes”
as consumption, production, political participation and social respect. The way in which
such perceived exclusion can explode has been seen graphically on the streets of
Europe and North America on various occasions in the last 15 years, though the explosions
are rare – not least for the good reasons Marx and Engels gave when snootily dismissing
the Lumpenproletariat in the Communist Manifesto. But the seething resentment that
makes the explosions possible is ever-present, and is unlikely to go away in current econ-
omic and social circumstances. At the same time, the more privileged sections of society
are equally – perhaps more – likely to regard themselves as “not belonging” and to seek
ways to opt out from the “characteristic processes” by which most of the population
defines itself.
Inequalities might in very general terms be compatible with a just society, as Rawls argued
they could be, subject to certain demanding conditions, in A Theory of Justice (1971).
However, the patterns of inequality characteristic of contemporary dynamics do not
seem to have the requisite features. They are, prima facie, grossly unjust because they
reflect not differential modes of social inclusion, but precisely the sharp end of social
exclusion. However, this widely shared view, which is by no means radical, is only the
38 J. Crowley
starting point of serious ethical analysis. What is necessary is first to identify what is
unethical about the kinds of inequality referred to earlier, and secondly to clarify what
might constitute an ethical response.
The intrusion of ethics at this point raises a methodological question. While justice is,
at some level, an ethical notion, a theory of justice is not necessarily cast in ethical terms.
Indeed, the whole point of the Rawlsian approach, and the reason why it has proved so
influential, is that it makes it possible to focus on aggregate social outcomes – or even
more abstractly, as Rawls himself puts it, on the “basic structure” of society – without
needing to identify who is to blame. Within a reasonably cohesive, historically constituted
moral community, the question of blame does not arise. A particular basic structure, which
produces certain kinds of outcomes, is our shared inheritance and can only be modified and
improved by the participation of all – not just the beneficiaries of any particular reform.
On the other hand, the characteristic weakness of this approach is that, in the absence of
a pre-existing moral community, its implications might look pretty indeterminate. As is
well known, this was Rawls’ own view. It led him to the conclusion, in the late work
The Law of Peoples (Rawls 2001), that it was pointless to seek a theory of justice at the
global level. Admirers of Rawls such as Pogge (2008) and Barry (2005) broke sharply
with him on this point, though their own arguments for global justice are stronger in estab-
lishing what kinds of positions can seriously and cogently be defended than it showing
how they might come to be accepted.
An ethical approach to social inequality, on the contrary, presumably needs to argue not
simply that certain patterns of outcomes are unjust, but that responsibilities for addressing
them can be allocated in some meaningful way. And this, notoriously, constitutes a trap.
Critics of Rawls such as Nozick (1974) and Hayek (2012) argued strongly in the 1970s
that responsibility can attach only to individual behaviour – to things done intentionally
or done unintentionally without due regard to consequences. In other words, in the
absence of legal liability or of something analogous to it in areas that the law does not
touch, justice has nothing to say. To put it bluntly, an ethical approach to justice negates
the very idea of social justice, showing it to be, as Hayek put it, a “mirage”.
There are two possible strategies to declare unethical contemporary patterns of inequal-
ity. One would be to argue that responsibilities can be assigned for aggregate social out-
comes, once the notion of responsibility is suitably reinterpreted. The second would be
to claim that certain unjust circumstances are unethical, regardless of whether anyone is
to blame for them. Their unethical character would, in this case, be a kind of supplement
to their injustice, something that adds insult to injury.1 It should be emphasized that these
two strategies, while conceptually distinct, do not necessarily clash. Indeed, they can be
articulated quite neatly, as I hope to show in the rest of this section.
The second strategy is very familiar, if one reformulates it slightly. A situation can be
regarded as unethical, for instance, if it offends against human dignity or constitutes a gross
failure to realize universally recognized human rights. The first of the Sustainable Devel-
opment Goals (SDGs) as adopted by the United Nations in 2015 – “end poverty in all its
forms everywhere” – can, I think, be interpreted in this light. There may of course be
specific injustices that contribute to extreme poverty, but even if they cannot be identified,
the fact of extreme poverty is in itself an affront to human dignity that demands action,
regardless of any kind of specific causal responsibility. The form of the first quantitative
target (of seven corresponding to Goal 1) is indicative in this respect, calling as it does
on the international community, by 2030, to “eradicate extreme poverty for all people
everywhere, currently measured as people living on less than $1.25 a day”.2 At one
level, this is a purely rhetorical strategy, but it can in certain circumstances motivate
Innovation: The European Journal of Social Science Research 39
those who have the capacity to act to do so. In addition, other targets related to the same
Goal either specify certain preconditions for the main target to be met (establishment of
social protection systems, rights to economic resources and enhanced resilience in the
face of environmental and other pressures) or point to the need for resources to be mobi-
lized. Furthermore, the SDGs, unlike the MDGs, explicitly relate the eradication of
extreme poverty to the reduction of poverty in general,3 thereby making a further connec-
tion between poverty and inequality, which is explicitly addressed in SDG 10 to “reduce
inequality within and among countries”.
However, making remedial action depend exclusively on the capacity to act is, when
pushed to its logical conclusion, a purely charitable approach that actually risks undermin-
ing the basis of human rights and human dignity from which the impulse to act proceed in
the first place. If the key question is what is owed to the very poor, following the title of
Pogge’s edited volume (2007), then ethics cannot remain divorced from justice without
undermining itself. This suggests that, on issues such as extreme poverty, and possibly
on all issues of social inequality, extending and reinterpreting the principle of responsibility
is essential to the pursuit of social justice.
In order to take this discussion forward, it may be helpful to start from the legal framework
that Hayek and Nozick used precisely to counter Rawls.
In civil law, one is liable for breach of duty (deontological malpractice) but also, even
in the absence of any specific duty, for tort, meaning harm inflicted on someone else as the
foreseeable (though not necessarily foreseen) result of one’s actions. Legal frameworks,
although they differ widely with respect to the details, share one feature: they typically
interpret very narrowly both “foreseeable” and “result” in this context. The self-appointed
task of ethics has consistently been to push the legal boundaries by exploring to what
extent particular agents should be held morally accountable (though not necessarily
legally liable) for outcomes that connect to their actions in ways that are less direct and/
or less foreseeable than the law would allow. Clearly, if this cannot be achieved, the
pursuit of social justice will be hampered. But this is mere wishful thinking if some
cogent grounds for an extension of responsibility beyond the narrow legal framework
cannot be established.
With respect to the aggregate outcomes of contemporary social transformations, there
appear to be three main grounds of social responsibility, each of which has been exten-
sively developed in the literature, particularly perhaps on environmental ethics, though
it bears very directly on other areas as well.
First, there is a widely recognized generalized duty of care, which relates the moral
agent directly to aggregate outcomes, whether or not there is a direct causal connection
between such outcomes and the agent’s own actions. In the environmental area, this cor-
responds to a principle of “awareness”, whereby what I should do depends on what
others have done. In economic and financial matters, this implies that corporations,
policy-makers, financial professionals and others may be reasonably held responsible
for actions that contributed to the aggravation of patterns of injustice that had already
been created by the reckless or indifferent actions of others. One cannot escape blame
simply by pointing out, however correctly, that one is not solely to blame.
In the environmental case, awareness is primarily of complex systemic connections and
of their implications, which drive aggregate phenomena such as climate change and bio-
diversity loss. The same principle can be applied by analogy, say to the financial crisis
40 J. Crowley
as it unfolded starting in 2007. It is not unreasonable to argue, even within the fairly narrow
terms of causal responsibility, that it was reckless on the part of various operators to ignore,
and fail to seek adequate information about, the ways in which their actions related to those
of others. It is no accident, in this regard, that the financial crisis was revealed, initially, in
the form of a crisis of liquidity. Liquidity is what enables investors to ignore long-term con-
sequences and systemic interactions, since it makes it possible to withdraw from the market
at any time. Conversely, the liquidity crisis froze and brought into sharp focus the various
forms of asset mispricing that were previously obscured. Metaphorically and systemically,
liquidity is to the financial system what the absorption capacities of the atmosphere and the
ocean are to the environment.
In a similar manner, it is not absurd to hold corporations morally accountable for
the systemic outcomes of their deliberate actions (to depress wages, to relocate production,
to avoid taxes, etc.) when the connections were, in principle, capable of being analysed –
and indeed were extensively discussed in the public domain. The same reasoning applies to
policy-makers, who can justly be held accountable not exactly for the circumstances they
were confronted with, but for their failure to take adequate account of those circumstances
in choosing their policies. As for demonstrably ungrounded policies that produce predic-
tably disastrous outcomes that disproportionately affect the most vulnerable, one hardly
needs even an expanded notion of responsibility to hold their proponents individually
accountable.
Secondly, regardless of causal responsibility, there is at least a generic duty to help
those in need. In most legal systems, this is institutionalized to some extent, though not
usually in a very demanding way. For instance, some criminal codes make it an offence
not to help someone in danger, so long as one can do so without endangering oneself.
This is obviously a duty that falls on the bystander – the fact that one did nothing to
cause the danger to which someone else is exposed is irrelevant to the duty to provide
assistance. Only the effective capacity to help matters from an ethical point of view. At
one level, as noted earlier, this constitutes a duty of charity that may actually undermine
rather than support social inclusion and justice. If, however, the duty to care is explicitly
based on human dignity and human rights – which is a logical implication of the United
Nations 2030 Agenda, based as it is on the internationally agreed human rights frame-
work – its potentially inegalitarian implications can perhaps be neutralized.
The financial crisis offers a straightforward analogy in this regard. Institutions that have
the capacity to provide emergency assistance have a prima facie duty to help to stabilize
the system, whether or not they contributed to its destabilization in the first place, within
the limits of their capacity to do so. Such institutions have, furthermore, a duty on the same
grounds to provide relevant assistance to those hurt by the crisis, even apart from systemic
instability. These duties need, of course, to be qualified by the moral hazard they imply. If
the reckless can count on the help of the prudent, then why be prudent? This is why the
legal form of the generic duty to provide assistance is usually quite complex. Nonetheless,
the basic moral intuition remains valid.
Thirdly, and most generally, it could be argued, at least within the so-called “virtue
ethics” paradigm (see Gardiner 2005, for an overview), that a basic value orientation
towards the good of the whole is ethically desirable, and perhaps even mandatory. From
this perspective, I should be concerned for the good of others – of my fellow creatures
in an ecosystem, of my fellow humans in a shared society – regardless of whether I
have played a role in a system that affects them, and regardless of whether they are in
any strict sense “endangered”. It is rather the combination of their inherent dignity and
my own moral identity that places duties upon me. Just as an argument can be made in
Innovation: The European Journal of Social Science Research 41
environmental ethics that “sustainability” is fundamentally an issue of virtue, not prudence,
so an ethical approach to development might require that agents judge their actions by their
effect on the social system as a whole.
The main reason to be prudent in asserting such a duty is the burden of judgement it
entails. Moral agents trying to make the “right” choice with imperfect information
might do more harm than good. As the colloquial saying has it, “the road to hell is
paved with good intentions”. Adam Smith provided a systematic moral theory in this
regard, with his idea that the “invisible hand” was more likely to be conducive to the
common good than attempts to achieve it directly (Smith 2003). Friedrich Hayek, system-
atizing the same intuition, went so far as to claim that any deliberate attempt to achieve any
social outcome is necessarily doomed to failure by imperfect information (Hayek 2012).
However, the call for prudence in acting on the duty to consider the good of the whole
does not negate the duty itself – on the contrary, it precisely the ethical concern that dictates
the prudence.
It is certainly not impossible, therefore, within the global framework as it is, to develop
ethical reflections that, by reinterpreting the principle of responsibility, offer normative
grounds – more cogent than mere denunciation – for criticism of certain patterns of behav-
iour and institutional arrangements and for promotion of specific alternatives. The key to
this approach, it will have been noted, is a certain kind of connectedness. What makes it
possible to combine justice and ethics at the conceptual level – and thereby make
applied ethics work for justice in practice – is the premise that inequalities occur within
an inchoate moral community.
This premise is undoubtedly awkward, since, observably, social exclusion currently
brings with it an erosion of shared recognition of a moral community. Nor, however, is
it mere wishful thinking.
The key point is the central plank of sociology since its inception: the idea that a society
is not just a grouping of people, but a structured pattern of interdependence and interaction
that drives participation in a shared communication space and, thereby, a degree of
common consciousness. The point is that the relation between these features is structural:
the degree of interaction and interdependence that characterizes modern societies depends
on a degree of mutual recognition – of trust, of shared institutions, of mutual understand-
ing. In no way does such a hypothesis make consensus or uniformity criteria of social
inclusion. On the contrary, complex societies are inherently pluralistic and can function
only if they include conflict within themselves.
The central question, therefore, is whether this vision of society is obsolete, and can
still offer a framework for ethical thinking about social justice and social inclusion, and
more generally about development, which remains an essential reference point for the
international community even though its precise implications are increasingly difficult
to make sense of. And it will be appreciated, for the specific purposes of this thirtieth-anni-
versary issue of Innovation, that if the idea of “society” is in some sense obsolete, the future
of the “social” sciences is necessarily in some sense called into doubt. The stakes are there-
fore high.
There are two reasons for taking seriously the possibility of obsolescence. The first is
ideological: alienation, as analysed in the Marxian tradition, is precisely blindness to con-
nectedness, particularly in the form of the belief that commodities are in themselves auton-
omous bearers of value. In so far as globalization makes production and consumption even
42 J. Crowley
less connected than they were previously, it may indeed foster growing alienation. The
second reason is structural. Interdependence relies ultimately on the necessity of employ-
ing most people most of the time to ensure an adequate economic state. If a significant part
of the population becomes (or is believed to be) durably “surplus to requirements”, then the
underlying basis for common membership in society is undermined. Clearly this feature
does, to some extent, apply in the contemporary world.
On the other hand, a (global) society characterized by large-scale, long-range interde-
pendence risks being unsustainable if it is not normatively defensible, not just because
those who are excluded may be tempted to revolt, but because those who benefit may
end up lacking the will power as well the capacity to ignore the consequences of their
actions. The wave of political instability that began in the Arab region in 2011, with
its diverse and often bloody mid-range consequences, has reminded us of the truth of
Aristotle’s dictum that “men do not become tyrants in order to keep out the cold”.
Once one ceases to believe in one’s right to rule, the magic is gone and flight is the
only option.
Therein lies the obvious difficulty for the international community in continuing to
refer to its normative horizon as “development” at the same time as the conceptual and
analytical framework within which the concept of development was elaborated has been
profoundly called into question. To put it very simply, the notion of development is pre-
mised upon the same idea of society as the social sciences in general: it sketches a
series of possible paths that connect the objective conditions and outcomes of social
change – in particular its technical manifestations – with its subjective manifestations –
in particular the forms of consciousness characteristic of it and the cultural and political
implications that flow from them. In addition, the developmental paradigm does this at
two complementary levels: within each society, taking account of its starting point and dis-
tinctive national features, and for the world as a whole within a setting of sustainable
interdependence.
What, however, if the link between objective and subjective dynamics breaks down?
What if the historically attested correlation between structural change, driven mainly by
technology, and behavioural, attitudinal and ideational change – what Elias influentially
termed the “civilizing process” (2000) – were accidental and reversible? In this case, we
may continue to use the term “society” to refer to collections of people who share the
same geographical space and are subject to the same structural processes – but this
would no longer be the “society” on which the social sciences were originally premised,
and it would be a setting within which solidaristic or redistributive approaches to inequality
would be very difficult to formulate at all. It would thus also be a profoundly different
setting in ethical terms.
The claim that inequality is an ethical notion may thus, on the basis of the arguments
presented in previous sections, be understood in two rather different ways, one of which
is internal to the idea of society that I have summarized, whereas the other is external to
it. To defend the internal approach, as I have been doing and propose to do more assertively
in this concluding section, it is necessary to be more explicit about what it is contrasted
with.
The alternative social model of ethics, which is of course powerfully supported by
many cultural frameworks, might for present purposes be called “preaching”. What I
mean by this term, which has no specific religious connotation, is a certain kind of
Innovation: The European Journal of Social Science Research 43
social relationship, in which ethical principles are produced by some process and then pro-
pounded by a specialized group of people to a broader group of people who are assumed to
be prepared to regulate their behaviour by reference to the principles. Two things are
socially important here: first, the functional separation between the “preacher” and the
“congregation”, regardless of the source of the preacher’s authority and of the content
of what is preached; secondly, the fact that the principles are not a matter for discussion
within the relationship itself (although their practical application may be).
There are both general objections to the “preaching” model of ethics and specific pro-
blems with its applicability to issues such as inequality.
The most general objection is simply that, in the absence of strong, shared background
moral consensus, the principles preached will simply reveal, or even sharpen, divisions
within the “congregation”. Far from providing a basis for generally accepted ethical regu-
lation of behaviour, preaching may therefore simply ensure fragmentation. Conversely, in a
context of moral pluralism – which obtains certainly at the international level and typically
also within most social and political settings –, principles are very unlikely to be accepted
in practice if they have not actually been discussed.
These pragmatic limitations of the unilateral “preaching” model of ethical exchange
deserve further to be supplemented by a more principled objection. Ethics depends on,
although it is not reducible to, conscience. An ethical society is, prima facie, one each
member of which has a conscience that can grasp and make sense of ethical principles
and apply them to specific situations. The fostering of conscience is therefore one of the
processes by which the ethical texture of a society can be enhanced. It follows that
ethics cannot be reduced to preaching without undermining its own social basis.
The objections specific to issues such as inequalities are in many ways more important.
The social relationship of preaching may be pragmatically fragile and morally awkward,
but it is at least practically sustainable on condition the preacher is endowed with clear
epistemic authority. When ethicists preach to ordinary people on matters that are directly
and intimately connected to their life experiences, however, the balance of epistemic auth-
ority is at the very least uncertain. Undoubtedly, the role of historically attested religions in
successfully providing ideological warrant for highly unequal social orders shows that
preaching can work. It is on the other hand a commonplace of the sociological tradition,
explicit in both Durkheim and Weber, that the co-evolution in modernity of religions
and societies makes traditional pulpits less accessible. In the age of what Weber famously
referred to as “disenchantment” (Entzäuberung), the burden of social justification
necessarily becomes immanent to the social order itself, leaving external ethics fragile,
and unlikely to offer a basis for consensual regulation of conduct.
Overcoming the split enshrined in external models of ethics thus requires the develop-
ment of an alternative structural model. Rather than separating the development of
principles and their social dissemination, the issue is to combine both within a single,
reflexive social process of ethical discussion and deliberation. This emphasis on reflexivity
is, in social science terms, familiar to the point of cliché. Nonetheless, its implications for
ethics are perhaps insufficiently appreciated.
Furthermore, such a model has a significant disciplinary implication. Ethics is often
taken to be the distinctive preserve of philosophy. In fact, although philosophers have
an important role to play in ethics, the arguments that have just been sketched show the
need to connect ethics closely to social science, not to the exclusion of, but rather in
close relation to, philosophy. In general terms, the form of this relation derives from
the proposed reflexive structure of the ethical process. To say that ethical principles
should derive from a social process of discussion and deliberation, involving those
44 J. Crowley
to whom the principles are to be applied, is to say, consistently with the traditional
emphasis of sociology, that ethical reflection is part of the self-understanding of a
society. It is thus a social process that can be studied with the tools of social science
– even though the social sciences may have little to say directly about the substantive
content of the ethical principles involved. In other words, an understanding of the
ethical construction of inequality necessarily blurs the boundaries between the social
sciences and the humanities and requires a certain hybridization of concepts,
methods and modes of discourse.
In this sense, an ethical approach to the development challenges the international com-
munity has agreed to be judged by bears ultimately on the social as well as the environ-
mental sustainability of any possible development project. In demanding that
responsibility extend beyond the narrow boundaries of legalistic responsibility, an
ethical approach to global justice recognizes and expresses the basic fact that global
society is, increasingly, a society, in the strong sense given to the word by the sociological
tradition. Furthermore, the more territorially restricted societies that make up the global
whole have not ceased to be societies either. Within them, as well as between them, aggre-
gate outcomes are subject to ethical criteria of justice that arise from the social process
itself rather than being imposed on it from the outside. What makes inequality something
to be cared about, mobilized around, fought against – and not simply measured or theorized
– is precisely this imaginary construction of social facts.
To specify the actual content of the ethical principles that might apply to key develop-
ment issues such as inequality, as well as the procedures by which they might be elaborated
and justified, is therefore a work of imagination. However, the imaginative or fictional
character of justice does not mean that it is imaginary or fictitious, subtle though those
lexical differences may appear to be. In complex societies, solidarity is a (contentious)
fact, embedded in but not reducible to structures of objective interdependency. It is not
simply a state of mind or an aspiration or even, in the usual sense of the word, a discourse.
It is one dimension of a process of making sense, and it expresses the powerful egalitarian
current that Tocqueville pointed to as central to the very idea of democracy. Indeed, an
indirect indication of the power of this current is the intensity of the ideological investment
in damming it, by producing arguments – which are equally works of imagination – to
justify inequalities as naturally or divinely ordained.
The ultimate question, therefore, which goes to the heart of how an egalitarian society
can be imagined in contemporary circumstances, is how to understand the conditions in
which competing discourses, competing social imaginaries, coexist and compete. An argu-
ment could be made that discourses interact with reference to what they claim to account
for, and that discourses become hegemonic because of their formal properties, or because
of the resources that back them. If so, any social configuration is in principle compatible
with any discursive configuration.
The whole point of this article is to suggest, without fully establishing, that this
perspective is wrong in important respects. The conditions for discourses to flourish are
connected to the objective conditions in which they circulate, as long argued by the
proponents of ideology as a structural understanding of ideas. And conversely, structures
are sensitive to the sense made of them. The question is, therefore, whether there is
compatibility between the desire to reduce inequalities and the conditions within which
the desire emerges. For society is not a competition run for the benefit of those who
happen to win it. It is a structure of interdependence of which reciprocity is the very
lifeblood. It is, in a word, an ethical system, but one the ethical features of which
require considerable further exploration.
Innovation: The European Journal of Social Science Research 45
1. I leave aside here the question whether certain situations might be unethical without being
unjust. It is clear enough that behaviour can in principle be unethical without being unjust, in
particular when no one would possibly be harmed by it. Whether this can apply to social patterns
is less clear. However, more importantly for present purposes, the debate is not really about the
injustice of the patterns of inequality referred to, which is widely recognized. It is rather whether
anything can be done about them and, in particular, whether anyone is to blame.
2. The target adopted in 2015 represents a significant change compared to the target connected to
the first of the Millennium Development Goals (MDGs) adopted in 2000, which committed the
international community to halve by 2015 the proportion of the world’s population living in
extreme poverty. As is well known, this was criticized both as too modest, given what
extreme poverty actually entails for the people who suffer it and in light of a goal, in principle,
of eliminating extreme poverty, for which halving it would be a very poor substitute; and as nor-
matively weak. The latter criticism would claim that extreme poverty is not merely an affront to
human dignity but a violation of human rights, which demands therefore not just quantitative
amelioration, but actionable justice, for the very poor. (For a detailed discussion of these
ideas, see Pogge 2007.) These, however, were debates within an ethical approach, not alterna-
tives to it, and the validity of the criticisms has been recognized, at least rhetorically, in the 2030
Agenda.
3. SDG target 1.2 reads: “By 2030, reduce at least by half the proportion of men, women and chil-
dren of all ages living in poverty in all its dimensions according to national definitions.”
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lehrstuehle/davy/wustldata/1950_Marshall_Citzenship_and_Social_Class_OCR .
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Piketty, T. 2014. Capital in the Twenty-First Century. Cambridge, MA: Harvard University Press
(originally published in French in 2013 as Le capital au XXIe siècle).
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Oxford: Oxford University Press/UNESCO.
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Rawls, J. 1971. A Theory of Justice. Cambridge, MA: Harvard University Press.
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Smith, A. 2003. An Inquiry into the Nature and Causes of the Wealth of Nations. New York: Bantam
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46 J. Crowley
http://orcid.org/0000-0002-9676-9804
http://www.jura.uni-bielefeld.de/lehrstuehle/davy/wustldata/1950_Marshall_Citzenship_and_Social_Class_OCR
http://www.jura.uni-bielefeld.de/lehrstuehle/davy/wustldata/1950_Marshall_Citzenship_and_Social_Class_OCR
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- Abstract
Introduction
The contemporary dynamics of inequality
Inequality as an ethical notion
The nature of ethical responsibility
The obsolescence of society?
Conclusion: reimagining society
Notes
ORCiD
References
Joumal of Business Ethics (2005) 58: 249-259
DOI 10.1007/sl0551-005-1419-2
© Springer 2005
Organizational Governance and
Ethical Systems: A Covenantal
Approach to Building Trust
Cam Caldwell
Ranjan Karri
ABSTRACT. American businesses and corporate
executives are faced with a serious problem: the loss of
public confidence. Public criticism, increased govern-
ment controls, and growing expectations for improved
fmancial performance and accountability have accom-
panied this decline in trust. Traditional approaches to
corporate governance, typified by agency theory and
stakeholder theory, have been expensive to direct and
have focused on short-term profits and organizational
systems that fail to achieve desired results. We explain
why the organizational governance theories are funda-
mentally, inadequate to build trust. We advance a
conceptual framework based on stewardship theory
characterized by “covenantal relationships” and argue
that design of governance mechanisms using a cove-
nantal approach is more effective in building trust in
organizations. A covenantal relationship is a specialized
form of a relational contract between an employee and
his or her organization. We argue that regardless of
incentives and control mechanisms carefully designed
through contractual mechanisms, in the absence of
covenantal relationships it is extremely difficult to build
trust within organizations. We propose that organiza-
tions are more likely to build trust – both at the orga-
nizational level and at the interpersonal level – when
Cam Caldwell is Assistant Professor of Management at the
University of Houston – Victoria. He was a Thomas S. Foley
Graduate Fellow at Washington State University. His research
has focused on factors impacting effective organizational lead-
ership and governance.
Ranjan Karri is Assistant Professor of Management at Bryant
University. He received his Ph.D. in strategic management
from Washington State University. His research interests in-
clude corporate and business strategies, ethical leadership and
corporate governance.
they create reinforcing and integrated systems that honor
implied duties of “covenantal relationships.”
Introduction
American businesses and corporate executives are
faced with a serious problem: the loss of public
confidence. This lack of trust has been accompanied
by profound public criticism, increased government
controls, and growing expectations for not only
improved fmancial performance, but also increased
accountability for financial results (Alkhafaji, 1989).
At issue is corporate governance — how a firm is
Inanaged to optimize perfonnance and who is doing
the governing. At risk is the “consequential imph-
cations of reciprocal dependence and vulnerabihty
between participants” (Dingwall, 1983, p. 12). Put
more simply, governance systems seek to balance
trust and accountability, recognizing that the form of
the relationship between parties directly influences
the willingness to trust (Sheppard and Sherman,
1998).
This paper suggests that the organizational gov-
ernance theories of traditional agency and stake-
holder theory are fundamentally inadequate to build
trust. We propose an altemative theory and ap-
proach based on managerial stewardship. In this
paper, we briefly compare agency theory, stake-
holder theory, and stewardship theory as models of
organizational governance. We propose that stew-
ardship theory offers a system of governance that is
ethically consistent with the needs of organizations
in today’s business environ. We conclude by pro-
viding insights into the key implementation steps
that are important in implementing an ethicaUy
250 Cam Caldwell and Ranjan Karri
consistent stewardship model – key steps for
restoring and rebuilding public trust.
Three models of govemance
The governance form selected by an organization is
based on decisions to reduce any potential exchange
problems created by bounded rationality, on the one
hand, and the threat of opportunism, on the other hand
(Barney and Hesterley, 1996). The expectation is that
the manager – or agent – will maximize perfonnance
for the benefits of shareholders and other controlling
interests. However, as trust erodes, an increase in
organizational perfonnance may be offset by increases
in the costs of attaining it (Williamson, 1975).
Traditional approaches to corporate govemance,
typified by agency theory and stakeholder theory,
have been expensive to direct and have focused on
short-term profits and organizational systems that fail
to achieve desired results (Baucus and Beck-Dudley,
2000). Agency theory assumes that humans are self-,
interested and prone to opportunism (Eisenhardt,
1989). Arrow (1985) notes two sources of agency
problems. First, moral hazard, or hidden actions are
costly to observe. Second, adverse selection, or
hidden infonnation is costly to ascertain. Monitoring
and bonding agents in order to control their
opportunism are two approaches that deal with these
two problems. Thus, the solutions are driven by a
lack of trust and increase the cost of doing business.
According to agency theory, shareholders repre-
sent the only interests that managers should be
concemed with in making decisions (Jensen, 1988;
Jensen and Meckling, 1976). Managers, on the other
hand, are presumed to be self-interested and, unless
constrained, will inevitably behave in self-interested
ways (Canella and Monroe, 1997). Agents may
emphasize growth over profitability, since their
individual compensation typically depends upon
firm size. Alternatively, they may consume excess
perks, or may initiate strategies that yoke them to the
firm and make it difficult for the firm to remove
them.
The assignment of a competent “agent” to
manage the organization allows shareholders to
diversify their portfolios and allows managers, who
may lack resources for ow^nership, to specialize in
managing. Although the separation of ownership
from control has many benefits, this separation also
has a number of associated costs. Prominent among
these costs are agency problems, which frequently
manifest in opportunistic behavior by rnanagers
(Williamson, 1975). Agency problems exist because
principals (shareholders) and agents (managers) have
difFering risk preferences and have conflicting
interests (Eisenhardt, 1989). When agents misrep-
resent their abilities (adverse selection) or put in less
efFort than required to achieve their principals’
objectives (moral hazard), principals must expend
resources to monitor agent perFormance and/or
create perFormance-based compensation systems to
incent desired behaviors (Hendry, 2002).
Stakeholder theory, a Framework designed to
examine situations in which executives pursue the
best interests oF corporate owners but that also
includes the needs oF other stakeholders, was pro-
posed as an altemative theory to traditional agency
theory (Donaldson and Davis, 1989, 1991). Winn
and Keller (2001) posit that traditional stakeholder
theories Focus on the achievement oF traditional
corporate objectives — and the present and increas-
ingly complexity oFthese objectives must be revised.
The stakeholder theory concept is based on the
ethical premise that “the task oF management is not
only to deal with the various stakeholder groups in
an ethical Fashion but also to reconcile the conflicts
oF interest that occur between the organization and
the stakeholder groups” (Carroll, 1996, p. 23).
Advocates oF an expanding role oF corporate social
responsibility recognize that organizations must
pursue both proFit and service (Carroll, 1996).
Carroll notes that the traditional economic model,
based on Adam Smith’s notion oF the invisible hand,
held that society determined its needs through the
marketplace. He observes that the marketplace may
do a reasonable job in determining goods and ser-
vices to produce but that it does “not Fare as well in
ensuring that business always acted Fairly and ethi-
cally (CarroU, 1996, p. 29).” CarroU’s (1996, pp. 9 2 –
93) model For moral organizational decision-making
incorporates a standard oF normative ethics that
requires those who govern to ask “What ought to
be?” in terms oFbusiness behavior as the standard by
which business ethics might be judged. Those who
are advocates oF stakeholder theory argue For its
virtues primarily in terms oF its normative value
(Donaldson and Preston, 1995).
Organizational Govemance and Ethical Systems 251
The stakeholder relationship imposes duties that
they describe as a network oF implicit contracts
between each stakeholder group and management;
proposing a set oF heuristic or social contracts based
upon normative principles oF human conduct. Thus,
the “Firm as contract” notion oF Freeman and Evan
(1990) obtained precedent in which the manager
oversees the contractual relationship with each
stakeholder. Ultimately, Freeman and Evan (1990)
see stakeholder theory as redefining the purpose oF
the Firm as serving as a vehicle For coordinating
stakeholder interests. Other scholars similarly argue
that the duty owed to all stakeholders is the creation
oFlong-term wealth (c.F. Hosmer, 1986; Post, et al.,
2002; Selznick, 1992).
Davis et al. (1997) describe “stewardship theory”
as a relationship in which managers are stewards
whose motives are aligned with the objectives oF
many parties. In their model, the behavior oF the
steward is collective or organizationally centered in
terms oF seeking and sustaining the objectives oFthe
entire organization. They suggested that the role oF
the steward was to protect and maximize share-
holder and organizational wealth and to avoid or
prevent substituting individual selF-serving behav-
iors For organizational behaviors that enhance
organizational Functioning and efFectiveness.
Advocates oF the stewardship model argue that
managers who are stewards are most efFective when
corporate govemance structures give them high
authority and discretion (Jones, 1995). However,
this approach is likely to be viewed as dysFunc-
tional, and possibly unrealistically naive, under
agency theory assumptions.
In describing the ethical role oF the corporate
steward, Davis et al. (1997, p. 26) provide clarifying
detail:
“Given a choice between self-serving behavior and
pro-organizational behavior, a steward’s behavior will
not depart from the interests of his or her organization.
A steward will not substitute or trade self-serving
behaviors for cooperative behaviors . . . Because the
steward perceives greater utility in cooperative
behavior and behaves accordingly, his or her behavior
can be considered rational.”
Tbis rational perspective Fits contextuaUy witbin a
principle-based and a duty-based ethical Framew ôrk
— sometimes called a “virtue etbics model”. Tbis
duty is based upon a complex set oF etbical
assumptions based upon tbe assumed “community/
citizenship” obligation oF organizations and utilitar-
ian etbics – creating tbe greatest good For multiple
stakebolders. Solomon (1993) articulates tbis multi-
Faceted etbical relationsbip, noting tbat a business bas
a societal duty to bonor its obligation to tbe
community – an idea dating back to tbe early
Greeks. ManviUe and Ober (2003) ofFer additional
insigbts about tbe nature oF tbis community-based
obligation, and opine tbat tbis same duty applies to
modem day businesses. Tbe steward’s perspective is
contextuaUy rational as part oF bis or ber model oF
bow a leader serves.
Peter Block proposes a related but distinctive
stewardship theory model, based upon “service
over selF-interest (Block, 1993, tide)”. Adapting
Block’s model, we extend tbe role oF tbe steward
beyond tbe perspective oF Davis et al. (1997) but
fuUy incorporate tbeir view oF tbe steward’s con-
cem For tbe needs oF tbe entire organization and
tbe creation oF organizational wealtb. Consistent
witb the perspectives oF tbese autbors, we suggest
tbat tbe steward’s role is to pursue organizational
goals, believing tbat botb organization and indi-
vidual needs wiU be achieved best by pursuing
coUective ends (Hosmer, 1996). Tbe Fundamental
assumption underlying stewardship theory is tbat
tbe maximization oF long-term economic wealtb
wiU ultimately serve to be in tbe best interests oF
tbe principals and tbe various stakebolders coUec-
tively, in addition to maximizing social welFare
and tbe long-term economic beneFit to society
(CaldweU et al., 2002; Post et al., 2002).
Morrison and Robinson (1997) describe tbe
employees’ point oFview regarding tbis perspective,
noting tbat employees bave perceptions and belieFs
about the nature oFtbe relationsbip between tbem-
selves and tbeir employer tbat relate to bi-directional
obligations and entitlements. CaldweU and JefFries
(2001) suggested tbat tbese perceived relationsbips are
individuaUy assessed. Rousseau (1995) noted tbat tbe
mutual responsibUities and obligations inherent in tbe
employee—employer relationsbip oFten differ, as per-
ceived by employee and employee. Yet, it bas been
generaUy acknowledged tbat tbe violation oF the
perceived contract or covenant by employers can bave
a proFound impact on job attitudes and bebaviors
(Rousseau, 1995; Tumley and Feldman, 1999).
252 Cam Caldwell and Ranjan Karri
Covenantal relationships
Rousseau (1995) notes that the duties of organiza-
tions are often perceived as implicit contracts. Other
scholars also note that the ethical obligations of
organizations to individuals are subjectively
detemiined and rise to the level of an implied con-
tract (Caldwell and Jeffries, 2001; DePree, 1989).
The concept of the organization as involved in
covenantal relationships has an Aristotelian base and
deep ethical roots (Solomon, 1993). Ethical philos-
ophy has pursued an integrated set of expectations in
honoring the rights of others, but management
theory has consistently failed to keep pace in practice
with ethical duty (Selznick, 1992).
Bamett and Schubert (2002, p. 280) defme a
covenantal relationship as “a specialized form of a
relational contract between an employee and his or
her organization”. They note that this relationship is
both a transactional relationship and a psychological
relationship. Smircich (1983), in her seminal dis-
cussion of organizational culture, noted that indi-
viduals interpret their organizational internal
environment broadly – at the cognitive, the sym-
bolic, and the psycho-dynamic levels. When
employees are treated as complex individuals and
understood in terms of their worth and value, they
“feel valued by and value their organization” and the
covenantal relationship is achieved (Bamett and
Schubert, 2002). Selznick (1992, p. 479) defmed a
covenant as integrated with the creation of a true
community – fundamentally based upon “moral
ordering” and “self-defining comniitment”. Pava
(2001: p. 86) also incorporated the concept of
“shared community” in his definition of a covenant
— noting that a covenant provides “a stable social
location for the interpretation of life’s meanings in
order to help foster human growth, development,
and the satisfaction of legitimate human needs”.
Herman (1997, p. 39) suggests that covenants in
an employement relationship are founded upon two
generic commitments from both parties. First, the
parties must be united around some common
interest or purpose and second, in pursuit of this aim,
the parties must bind themselves not to abuse the
advantages they hold over each other. Herman
(1997) cautions that contracting as a device to build
enduring relationships is limiting in the sense that
contracts provide the actors involved “certain stip-
ulations as a means of neutralizing the suspect con-
tingencies they present each other”. Covenantal
aspect of a contractual relationship arises from going
beyond the specified contingencies and committing
to the two conditions stated above.
The steward’s duty is to create this covenantal
relationship (Caldwell et al., 2002). The long-term
impact of a stewardship approach maximizes share-
holder profits, achieves balanced professional growth
and job security for employees, and honors corpo-
rate social responsibility relationships (Hosmer,
1996). Solomon (1993) articulates the importance of
organizational duty, noting that duties are defined by
one’s role in the organization carry a moral weight.
In pursuing long-term organizational wealth rather
than just short-term objectives, stewards serve the
best interests of society, stakeholders, customers, and
shareholders (Hosmer, 1996).
Covenantal duties operate within a framework of
virtue ethics in which there is congruence between
business, the public good, and the individual interest
(Solomon, 1992, 1993). Organizational leaders
operating from a covenantal penpective recognize
that stakeholder interests are often syncretic or
dynamically balanced and are sometimes not per-
fecdy aligned (Lado and Zhang, 1998). This syn-
cretic balance allows stakeholders to recognize that
not every decision can benefit all parties equally –
but that the nature of the relationship is such that the
parties recognize that they seek to maintain a long-
term interdependent relationship even if individual
decisions may not result in a short-term maximiza-
tion of benefits. Pava’s (2001, p. 86) insights about
the open-ended, long-term, and interest preserving
nature of covenants are instructive here — allowing
parties to be “simultaneously both free agents and
members of a living community”.
Solomon created a framework of six contempo-
rary virtues for ethics in business: Community,
Excellence, Role Identity, Holism, Integrity, and
Judgment (Solomon, 1993). He defines these terms
as follows:
Community — A corporation is more than a col-
lection of self-interested individuals. A sense of
community helps define individual identities.
Communities focus internally on cooperation
rather than competition.
Organizational Governance and Ethical Systems 253
Excellence – Corporations must both “do well” and
“do good”. Corporations must improve their
ability to fully recognize and reward merit within
and to thus inspire ongoing improvement.
Role Identity – Individual affiliation occurs best
when personal and organizational values fit. Duties
and virtue, rightly applied to the individual, en-
able each person to align and integrate that fit.
Holism – Holism is synonymous with aligned con-
text with the big picture, rather than an incre-
mental focus. It demands a synergistic approach
and a recognition of long-term priorities.
Integrity – Integrity is the integration of virtues into
a consistent character. It encompasses moral
courage and the will and willingness to do what
one ought to do.
Judgment – The ability to balance conflicts in roles
without compromising principle is the essence of
judgment (Solomon, 1993, pp. 145-186).
Solomon’s six virtues provide a foundation that is
conceptually consistent with the factors of the cove-
nantal relationship defmed by both Selznick (1992) and
Pava (2003). Other scholars, (Cameron et al., 2003)
suggest that this virtuous approach to organizational
governance has not only an inherent connection w îth
the interdependent duties of a community but is strong
applicability to the modem business organization. The
heart of the covenantal approach is its dependence
upon values — to provide for “the interpretation oflife’s
meanings in order to help foster human growth,
development, and the satisfaction of legitimate human
needs” (Pava, 2003, p. 2).
The covenantal model
In an effort to clarify the elements of the covenantal
model of stewardship theory, we provide a summary
of its implicit assumptions and duties at the organi-
zational level and contrast those assumptions with
our view of parallel assumptions of both agency and
stakeholder theories (Table 1).
In distinguishing the stewardship firamework from
either an agency theory or stakeholder theory ap-
proach, we present the stewardship model as ethically
superior because it honors the societal obligations and
the duties to all stakeholders. The strength of the
covenantal approach of the stewardship model is that
it incorporates the ability to look internally (within
both self and the organization) and toward the
external environment in assessing organizational
needs within a full context. Argyris and Schon (1978)
described this process of simultaneous assessment
internally and externally as a double-loop model for
learning, a concept that is well accepted in the
management literature (Senge, 1990).
Traditional management thinking is critical of
approaches that do not pursue short-term bottom
line results (McCoy, 1985). McCoy notes that cor-
porations are increasingly recognizing that their
obligations are not one-dimensional. We concur
with McCoy’s conclusion that the “paramount task”
of leadership in organizations is the management of
instrumental organizational objectives and nonnative
values (McCoy, 1985, p. 13). As Hosmer (1996) has
suggested, the managerial dilemma of governance
represents the conflict between economic and social
performance. He notes that extending the steward-
ship responsibility of management to long-term
issues and to all stakeholders is essential because the
moral problems of management (1) have extended
consequences, (2) multiple altematives, (3) mixed
outcomes, (4) uncertain consequences, and (5) per-
sonal implications for the parties involved (Hosmer,
1996, pp. 10-11).
Although many scholars focus on pursuing short-
tenn profit and profit maximization as the primary
mission of the firm, institutional microeconomic the-
ory encompasses “ethical as well as economic precepts”
(Hosmer, 1996, p. 33). Although profit maximization
is a part of the theory of the firm, “it is only a part, and
certainly not the central focus” (Hosmer, 1996, p. 33).
The covenantal model is fundamentally committed to
the ongoing process of managing change, recognizing
that the governance role necessitates creating a culture
that guides moral development while simultaneously
meeting the legitimate needs of organizational stake-
holders (Pava, 2003, p. 13).
Systemic implementation
Pava (2003, pp. 18-19) emphasized that “the idea of
covenant implies that our theory of being human is
inextricably related to how we construct organiza-
tions”. Lawrence and Lorsch (1967) suggested a
systems approach to understanding how organiza-
254 Cam Caldwell and Ranjan Karri
TABLE I
Organizational assumptions of covenantal duties
Agency Theory Stakeholder Theory Stewardship Theory
Overall
Ethical Focus
Manager Role
Time Focus
Teleological or goal oriented
and deontological
or duty oriented
Maximize short-term wealth
for the Principal
Often short-term
Manager Motivation Serving principals and
preserving self-interests
Use of Information Maximizes profitability
Basis of Trust
Moral Position
Function of Rules
Key Value
Manager’s
Primary Function
Organization Goal
Manager’s Personal
Goal
Motivational Model
Vision/ Focus
Assumptions
about People
Competence
Conditional
Control
Results
Profit producer
Create highest possible
short-term wealth
Preserve self-interest
Economic model with
extrinsic motivators
Protection of self-interest
while
People seek rewards in an
exchange relationship and
are individualistic utility
maximizers
Focused on the utilitarian
needs of all stakeholders
with an ethics of balance
Balancer of demands and
advocate of coUective interests
Both short-term and
long-term
Equalizing benefits to aU
parties
Creates understanding about
interests and needs and
identifies trade-ofis
Equity
Situational
Clarify process
Balance
System maintainer
Create wealth and
preserve relationships
Serve aU parties fairly
Mixed model with mixed
motivators
Integrating shareholder and
organizational interests
Peope are concerned with
equity and fairness and want
to be dealt with justly.
Utility is measured
distributively
Virtue ethics based upon a
commitment to society
based virtues and rights
Integrator of shared interests
Primary concem is long-term
Virtues and values and society
Achieves synergies
Integrity
Principled
Defme opportunity
Authenticity
Steward
Create long-term wealth
and achieve best interests of aU
Achieve potential
Self-actualizing model with
intrinsic motivators
Increasing organizational
wealth to serve aU interests
People are coUective self-
actuaHzers who achieve
utility through organizational
achievement
tions can manage change. Although their model of
organizational development and change does not
address covenantal concepts specifically, they clearly
understand the importance of a systems theory ap-
proach to integration and differentiation. Similarly,
Schein (1992) articulates the importance of extemal
adaptation and intemal integration in aligning
behaviors, values, and core assumptions. This sys-
temic integration of values and behavior, Schein
notes (1992, pp. 374-383), is the duty of the leader
and the key to creating organizational trust. As Pava
(2003, p. 21) emphasized, the way in which an
organization is organized is “an inherently ethical
activity” and “ethical issues intersect with organi-
zational concems at every tum”.
The ethical foundation of a covenantal approach
parallels the thinking of practitioner studies that have
begun to receive increased acceptance in the
management Hterature. Pfeffer (1998) focused on the
importance of valuing people while simultaneously
pursuing the instrumental objectives of the organi-
zation. CoUins (2001) and CoUins and Porras (1997)
found that organizations that outperformed their
competitors were value-based and reHed heavily on
core values advocated by highly committed leaders.
Cameron et al. (2003) have articulated the impor-
tance of a virtue-based role in guiding organizations,
and Cameron (2003, p. 190) has noted that virtuous
firms outperformed those led by leaders with low
scores in virtuousness in “profitability, productivity.
Organizational Covernance and Ethical Systems 255
innovation, quality, customer retention, and
employer loyalty.” Stewardship leaders provide an
integrated and congruent set of organizational
systems that reflect an aligned set of priorities and
that focus on contextual fit.
We note, as did Lawrence and Lorsch (1967)
that a well-founded systems approach that integrates
organizational govemance principles and values
will impact organizations at the organization-to-
environment, organization-to-organization, and
individual-to-organization levels.
Building trust
The stewardship model is neither unique to ethics nor
to management theory. It assumes a commitment to
the welfare, growth and wholeness of others that
Kouzes and Posner (1994) find in their studies to be
critical to the establishment of organizational credi-
bility. Although trust has been acknowledged to be an
elusive constmct at both the individual and organiza-
tional levels (Mayer et al., 1995; Hosmer, 1995),trustis
also acknowledged as the glue that holds organizational
culture together and the basis of interpersonal and
organizational success (Reina and Reina, 1999).
Block defined stewardship as “to hold something in
trust for another.” (Block, 1993). In a true conve-
nantal relationship govemance occurs by pursuing
long-term, wealth producing interests for aU stake-
holders. Block explained that choosing service over
self-interest occurred when leaders were willing to be
accountable without choosing to control or manip-
ulate others. Block’s approach was to treat stake-
holders “as owners and partners” without creating
conditions of dependency or control — by creating
conditions of empowerment that “offers choice and
spirit” to core workers (Block, 1993, p. 22). At the
same time. Block recognized that the stewardship
approach was respected by practitioners and aca-
demics when it passed “the test of the marketplace”.
Similarly, Pfeffer (1998) endorsed an approach to
developing within employees a commitment to the
organization and its purposes. Consistent with a
systems approach, Pfeffer (1998) advocates creating a
culture of high involvement and ownership. Pfeffer
is sharply critical of govemance techniques and
menus that seek success by imitating other organi-
zations without understanding the conditions under
which govemance principles are based. Pfeffer
explains: “success frequently entails implementation
rather than coming up with great ideas” (Pfeffer,
1998, p. 13). It is not enough to find or define an-
swers — implementation that occurs with the coop-
eration and buy-in of fully involved employees is the
key to successful organizations. Both PfefFer and
Block wrote eloquently about the importance of
employees at the lowest level being involved in
developing and implementing solutions that serve,
both intemal and extemal customers.
Pfeffer observes that there is “a substantial and
rapidly expanding body of evidence, some of it quite
methodologically sophisticated, that speaks to the
strong connection between how firms manage their
people and the economic results achieved “(PfefFer,
1996, p. 31). The key catalyst for achieving this
result is a faithful adherence to principles, duties, and
core values. Block (1996) advocated that the key to
releasing this energy in people came by redistribut-
ing the role of management organization-wide
through the process of clearly articulating employee
roles, estabhshing new social contracts in relation-
ships, and empowering employees by supporting
them in their positions and redefining the role of
bosses. He acknowledged that creating a new social
contract “based on partnership and empowerment is
the difficult emotional work of stewardship” but
declares it to be an important step in creating a
stewardship culture (Block, 1996, pp. 84-85).
The process by which stewardship governance – a
covenantal relationship – occurs most easily in what
Senge calls a “leaming organization” (Senge, 1990).
Both Senge and Block emphasize the importance of
open dialogue in creating such a culture. Block puts
this process of dialogue into cultural context:
Moving fi-om parent to partner comes down to a series
of conversations. Dialogue is the solution. The con-
versation is about purpose, ownership and responsi-
bility. Shifting these concems fi-om the exclusive
province of the management class and distributing
them among people doing the core work. We do this
for the sake of the institution, not because the load is
too heavy. The boss says in effect, “I want you to share
in the felt ownership of this fi-anchise. I plan to share
with you the power and privilege of ownership, as
long is it is used in service of the larger unit. This is the
partnership agreement that I want to manage by.” This
256 Cam Caldwell and Ranjan Karri
conversation accompanies the definition of the stew-
ardship contract … which defines the playing field.
(Block, 1996, p. 86)
The willingness of organization leaders to reframe
their mental models and to create an empowering
dialogue with employees is consistent with DePree’s
thoughts about the obligations of the servant leader.
He also describes the leader’s duty as a “covenantal
relationship” in which the leader and the organiza-
tion owe a broad array of obligations to employees at
all levels (DePree, 1989, p. 53). In addition to
defining expectations about the organization, leaders
owe employees the opportunity to grow and to
make a contribution to organizational objectives.
Defining the new reality is “the first task of the
leader” according to DePree — including identifying
boundaries and ground rules both internally and in
the external environment (DePree, 1989, p. 11).
The critical role of the leader in the covenant
relationship model is not an autocrat coach – al-
though the transitional role of coach may be nec-
essary for the short-term (Block, 1996). Block
explained that the coaching role carried the same
limitations as benevolent patriarchy. “Turning
supervisors into coaches keeps the managing and the
doing of the work separate” but managing the
organization must become a part of each employee’s
duty (Block, 1996, pp. 105-106). In the model we
propose, the leader fulfills his/her role by securing
funds for unit operations, communicating results and
requirements for continued financial support, and
brokering services and other supports that enable the
work unit to succeed – tasks that make leaders vital
to teams while reinforcing the fact that governance is
a function that is integrated throughout the organi-
zation (Block, 1996, p. 107).
Implementing systemic covenantal approach has a
variety of human resource applications. For example,
a covenantal approach instead of focusing on perfor-
mance appraisal – criticized by many as organiza-
tionally dysfunctional (c.f. Deming, 1986; McGregor,
1960) – is team-based and customer-focused. Block
(1996, p. 97) noted that the key focus on performance
must begin w îth knowing what the customer values
“and how the unit is doing in living up to those
values”. Both intemal customers and end-users of
organizational goods and services are the determiners
of unit effectiveness and “each person should be en-
gaged in this discovery process” (Block, 1996, p. 97).
Rather than the boss being the customer of the em-
ployee, the stewardship model revenes this relation-
ship and “the subordinate is the customer of the boss”
(Block, 1996, p. 107). In honoring the covenantal
duty “the leader must become a servant and a debtor”
to employees PePree, 1990, p. 11).
In a similar vein, compensation systems congruent
with a covenantal model must be team-based and
systemically reinforcing. Baucus and Beck-Dudley
(2000) noted that traditional compensation systems
result in outcomes that tend to divide organizational
loyalties and produce the wrong results. Kerr’s (1975)
famous article about the “folly of rewarding A while
hoping for B” similarly acknowledged the dysfunction
of traditional human resource compensation systems.
Among Pfeffer’s seven practices of successful organi-
zations is his recommendation that organizations
establish contingent compensation systems, such as
gainsharing, based upon organizational performance
outcomes (Pfeffer, 1998, pp. 64-65). Effective orga-
nizational leadership requires establishing congruent
and well-conceived organizational systems that dem-
onstrate a commitment to all of stakeholders — and a
commitment to governance that transcends short-
term outcomes at the expense of long-term success.
Implementation is the key
The challenge of implementing a covenantal model
of organizational governance is that its successful
adoption requires much more than an understanding
of its concepts and principles. PfefFer (1998) and
Block (1996) note that successful organizations rec-
ognize that the design of improved organizational
systems must “ultimately get beyond the issues of
philosophy, architecture, and mind set — even
though these are absolutely critical and fundamen-
tal” (Pfeffer, 1998, pp. 99-100). Pfeffer noted that
the alignment of system elements is “easier described
than accomplished, because few organizations have
developed a set of consistent practices” (Pfeffer,
1998, p. 100). As a result, managers make the mis-
taken assumption that “because they recognize the
need for alignment and state the concept on paper
and make one or two changes – at one point in time
— that everything is suddenly in alignment” (Pfeffer,
1998, p. 104).
Organizational Governance and Ethical Systems 257
Collins and Porras (1997) also emphasized that the
key to successful implementation of change is in
understanding change as an evolutionary process that
takes time and extended effort. Changing traditional
mental models and developing a driving core ide-
ology – inherent in a covenantal approach – was the
critical first step. They emphasized that a short-term
“build it quickly, make a lot of money, cash out, and
retire” approach is not consistent with long-term
success. Nonetheless, the systemic and ahgned ap-
proach that they advocated has been the method of
great companies in the past fifty years.
Block noted that the implementation of stew-
ardship concepts provides “no safe path” although
the change in mental models is decidedly difficult
(Block, 1996, p. 237). The question of “How?” –
the implementation issue, he noted, “becomes more
interesting than the answer” (Block, 1996, p. 233).
But Block also noted that the implementation pro-
cess is as much a “letting go” of old thinking as it is
an adoption of new ideas.
The chaUenge
A covenantal approach to govemance suggested by
the stewardship model is a profound challenge for
corporate leaders because it presumes to share con-
trol, reframe the traditional leadership model, and
focus on values rather than techniques. Despite
nearly fifty years of acknowledgement of the duties of
corporate social responsibility, agency theory is still
the predominant mental model for corporate gov-
emance (CarroU, 1996). Notwithstanding the track
record of great companies identified by Pfeffer
(1998), Cameron (2003). Collins (2001) and Collins
and Porras (1997) organizational leaders are unwilling
to rehnquish models of self-interest that are
acknowledged to be morally and, possibly, eco-
nomically hmited (Hosmer, 1996; Carroll, 1996).
The ethical implications of pursuing long-term
organizational wealth, multiple stakeholder inter-
ests, socially beneficial outcomes, and mdrally
beneficial purposes are perceived by some to be in
confiict with the profit-focused thinking of cor-
porate traditionalists. As W. Michael Hoffman
(1989) noted in his article, “The Cost of a Cor-
porate Conscience”, ethical behavior can “cost
dearly”, because, in the words of Andrew Stark,
“ethics and interests can and do conflict” when
short-term economic objectives are given primacy
(Stark, 1993, p. 40). Nonetheless, evidence from
many successful organizations makes it clear that
long-term economic growth and profit can be
achieved by organizations that operate within a
framework consistent with the stewardship model.
Contributions of our model
In this paper we suggest that stewardship theory’s
covenantal model of corporate governance offers the
following contributions:
(1) It provides a meaningful altemative to agency
theory and stakeholder theory that is not
inconsistent with instmmental goals of long-
term profitability for organizations.
(2) It offers a normatively superior approach to
corporate govemance based upon qualitative
virtues that have worth in and of themselves.
(3) It is a model of govemance consistent with
management theories that have both a practical
and a theoretical base.
(4) It is systemically hohstic and founded in weU-
estabhshed management theory and organiza-
tional development principles.
(5) It is intuitively acceptable as ethically virtuous. Its
commitment is fundamentally centered on opti-
mal solutions and the growth and thriving of a
community of participants.
We acknowledge that a covenantal approach is
fraught with challenges for many corporate leaders –
particularly because those leaders possess a control-
focused paradigm for corporate govemance that
tends to treat employees either paternalistically or
with little regard for their long-term welfare.
Clearly, acceptance of our proposed model will not
be undertaken without a significant refi-aming of the
mental models of corporate executives, managers,
boards of directors, and academicians.
Conclusion
In Ught of the fact that corporate America is strug-
gling to gain increased public confidence, the prin-
ciples upon which corporations are governed seem
258 Cam Caldwell and Ranjan Karri
to merit close examination and possible reform. The
model of covenantal relationships presented in this
paper offers an ethically solid altemative to agency
theory and stakeholder theory. Although a cove-
nantal govemance model is unlikely to be accepted
quickly, its assumptions and principles merit both
careful review and practical testing. As a paradigm
for ethical govemance, covenantal theory is founded
upon an ethical base that is theoretically sound and
that has a realistic practical foundation as well. Fur-
ther testing of this model seems merited in hght of
the demand for a more socially responsible ethical
and moral framework for American business.
The model of covenantal leadership presented and
described in this paper contains opportunities for a
wide variety of future research. One potentially
fruitful area to test is the continuing research being
done that identifies outstanding and fmancially suc-
cessful organizations (cf Cameron et al., 2003).
Another potentially rich area of research is the
exploration of the ethical mental models of corpo-
rate executives, boards of directors, managers and
employees. Studying those models in the context of
understanding the underlying theories of govemance
inherent therein can provide insights into what
might be necessary to sustain comprehensive stew-
ardship theory as a new system of corporate gover-
nance. Additional research opportunities exist
through qualitative research in work units or orga-
nizations on an experimental or applied basis.
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Cam Caldwell
University of Houston — Victoria Campus,
Victoria, TX 11901, U.S.A.
E-mail: camcaldwell2002@yahoo.com
Ranjan Karri
Bryant College,
Smithjield, RI 02911,
U.S.A.
A Proposed Infrastructural
Model for the Establishment of
Organizational Ethical Systems
Louis P. Wliite
Long W. Lam
ABSTRACT. We define ethical system infrastructure
as being composed of three major factors — means,
motivation, and opportimity. Means are defined
as organizational rules, policies, and procedures.
Motivation focuses upon the values and the interests
being pursued by the position occupant and the orga-
nizational value system, while opportunity is discussed
in terms of the environment in which the dilemma
occurs, proposing that position in the hierarchy
presents its own unique set of ethical dilemmas.
Ethical breeches are discussed in terms of the inter-
actional processes among means, motivation, and
opportunity. Finally, a sequential process is suggested
to use the infrastructural components to institution-
alize organizational ethics training and subsequent
behavior.
KEY WORDS: ethical dilemmas, ethical systems,
training on ethics
“Ethics” constitutes a discipline concerned with
moral judgments, the goodness or badness of
behavior, the rightness or wrongness of an
action (Ferrel and Fraedrich, 1994; MacKinnon,
1995; Shaw, 1991). Judgments are made by
individuals, and the resulting behaviors are those
of individuals. Neither a group nor an organiza-
tion “judges” or “behaves.” Instead, groups and
Louis P. White is Professor of Management at the
University of Houston — Clear Lake. His research inter-
ests include the ethical considerations in organization
development and the cross-cultural implications of orga-
nizational development ethics.
Long W. Lam is an assistant professor of management at
the University of Houston – Clear Lake. His research
focuses primarily on organizational adaptation and deter-
minants of corporate performance.
organizations are composed of individuals who
bring their value systems to bear when making
moral judgments (Holloman, 1991).
These individual value systems, instilled during
our early years, are impacted upon by environ-
mental forces. Sometimes these forces are
explicit, but more typically, they very subtly
expand the involvement of individuals in ethical
dilemmas. The following shows the expanding
sphere of an ethical dilemma as a result of envi-
ronmental influences:
A high school class sells candy Co students as a way
to raise money for class activities. Students selling
the candy are placed under no restrictions of
accountability for what they sell, or the amount
of money taken. They merely return the money
and unsold candy to the homeroom teacher at the
end of each sales period. One of the students is
from a poor family and usually goes without lunch.
This student sells the candy, partaking freely of the
product without paying for it, and occasionally
pocketing the monies from the candy sold.
Nothing is said by the teacher ahout any discrep-
ancies in the inventory or the monies.
It can readily be seen that the student engaged
in dishonest behavior; hut less obvious, are the
environmental forces in eflect. The scene suggests
an absence of accounting, for either the product
sold or the revenues, and notably, the teacher’s
silence. In effect, the teacher has created the
opportunity and the means for the theft. The
immediate ethical question, “was it right or
wrong for the student to steal?” is thus expanded
to include another ethical issue: “was it right or
wrong” for the teacher to remain silent? The
ahove is not so different from what occurs in
many organizations, as Paine (1994) notes:
fournal of Business Ethics 28: 3 5 – 4 2 , 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
36 Louis P. White and Long W. Lam
. . . unethical business practice involves the tacit,
if not explicit, cooperation of others and reflects
the values, attitudes, beliefs, language, and behav-
ioral patterns that define organization’s operating
culture. Ethics, then is as much an organizational
as a personal issue. Managers who fail to provide
proper leadership and to institute systems that
facilitate ethical conduct share responsibility with
those who conceive, execute and knowingly
benefit from corporate misdeeds, (p. 106)
In this paper, we investigate what may be the
underlying structural factors for ethical dilemmas
to occur in organizations. First, we will review
the literature to explain why the mere creation
of ethics codes cannot reduce the likelihood of
ethical dilemmas in organizations and that most
organizations rarely implement ethics training
programs for their employees. We believe this is
caused by the lack of understanding of how
ethical dilemmas may occur and why employees
may engage in unethical behavior. Second, we
build an infrastructural model that describes the
roots of ethical dilemmas in terms of organiza-
tional rules and procedures, individual motives,
and opportunities from the employee’s job
position. This model will then be used to illus-
trate how training in ethics can be implemented
effectively in organizations.
Review of the literature
The types of systems organizations have instituted
in the interest of facilitating the ethical conduct
of individuals are varied, as are their outcomes.
Some organizations begin and end ethical systems
development with the creation of an ethics
code. In a 1987 survey of 2 000 U.S. companies,
eighty-five percent (85%) reported having a
written code of ethics (Ireland, 1991). In another
survey conducted by the Ethics Resource Center
in 1997, almost three out of every four compa-
nies reported they had written standards of
ethical business conduct. These surveys suggested
that the creation of an ethics code is a very
typical approach to ethical systems infusion.
However further analyses offer doubts as to the
effectiveness of such approaches. In the same
1987 survey, results indicated that only 50% of
the ethics code were actually distributed to all
employees and 38% of companies restricted dis-
tribution to management only (Ireland, 1991). In
the 1997 survey by the Ethics Resource Center,
57% of the executives interviewed had observed
actual instances of business misconduct within
the previous year. In another study of 350 firms
who had written ethics codes, it was found that
those companies with written policies were more
often charged with wrongdoing than those
without pohcies (Mathews, 1988).
Bohren (1992) and Hyman et al. (1990) are
among those who have argiied that the existence
of an ethics code is a necessary, but not suffi-
cient condition for creating an ethical organiza-
tional chniate (Bernheim, 1987; Dean, 1992;
Robin et al., 1989). Whereas Borhen suggests
that a code of ethics needs to be combined with
effective management and employee education,
Hynian et al. (1990) have suggested the use of a
checklist, a series of questions a manager should
ask to determine if a decision is or is not ethical.
There are numerous case studies and anecdotal
reports suggesting that many companies agree
with Borhen and the other researchers, and
employ some form of management education as
a strategy for creating an ethical climate.
However, a study conducted by the Ethics
Resource Center suggests that only 28% of the
firms responding to a 1988 survey provided ethics
training. A 1991 study conducted by Training
magazine reported a higher percentage of firms
offering training to employees, 37% of 1 649
firms. A Price Waterhouse survey also offered a
similar conclusion. Among the sixty Fortune 250
companies surveyed, only 21% provided educa-
tion and training to all employees in the company
(Price Waterhouse, 1994). These results suggest
that the educational efforts are not as widespread
as one would think, given the volumes written
about organizational ethics.
A review of the case studies and anecdotal
reports suggests that the nature of these training
programs is also quite variable, implying that the
effectiveness of ethics training may be equally
varied. For example, Citicorp developed a game
intended to teach ethics by asking employees
to confront difficult scenarios (Ireland, 1991).
This approach differs from the nature of the
A Proposed Injrastructural Model 37
ethics training received by the management of
Pharmacia Company, who was exposed to
autonomous cognitive ability training rather than
moral content (Kavathatzopoulos, 1994).
Empirical evidence of the success of these
varying types of ethics training programs is scant,
and for the most part, focuses on the nature and
dehvery of the programs rather than effectiveness
(Thompson, 1990). For instance, in a 1994
survey by Price Waterhouse, only 17% of the
surveyed companies formally assessed the effec-
tiveness of their training programs. One source
of empirical evidence includes a survey con-
ducted by Working Women which indicated that
eleven percent (11%) of the readers had received
ethics training, but only one percent (1%)
believed that it made a difference. Delaney and
Sockell (1992) suggest that there is room for
cautious optimism that ethics training has value.
They cited a study by Vitell and Davis (1990)
which indicated that top management attention
to ethics has been reported to increase employees’
job satisfaction. Another study also suggests that
training reduces the occurrence of opportunistic
behavior among members of corporate research
departments (Kelley et al., 1989). Further, a
survey conducted by Delaney and Sockell (1992)
of Columbia University alumni revealed that
training does have a “positive effect, but that rel-
atively few firms provide such programs (about
one third)” (p. 719).
The preceding suggests two important ques-
tions: (1) Why have not more organizations
adopted ethics training, given that individuals
make moral judgments and that these judgments,
when ignored, can expand the sphere of an
ethical dilemma? (2) Why is there so little effort
aimed at evaluating the effectiveness of ethics
training programs among those who do offer
them? We believe there are three plausible expla-
nations behind this lack of attention.
First, the answers to these questions may be
found in the attitudes of management toward
ethics infusion. For example Paine (1994, p. 105)
believes that “many managers think of ethics as
a question of personal scruples, a confidential
matter between individuals and their con-
sciences.” As indicated earlier, ethical judgments,
as is typical of all judgments, are made by
individuals; but as also pointed out earlier, these
individual judgments are influenced by the orga-
nizational environment. Thus, the decision not to
invest in training may be attributable to a trun-
cated perspective regarding the factors which
bear on ethical judgments. At the very least, the
organization creates the type of climate which
can either expand the sphere of ethical dilemmas
or contain them (as exemplified by the teacher’s
lack of action in our previous example).
Ferguson (1993), the chairman and chief
executive officer of NYNEX, provides alterna-
tive reasons for reluctance of managers to recog-
nize the importance of ethics infusion:
Most managers saw bottom line, hard business
issues as priorities and ethics didn’t make the short
list. Other people felt that ethics training was
unnecessary for them, and some even felt that it
was a personal affront, (p. 32)
The preceding quotes suggest that the absence of
organizational efforts aimed at evaluating ethics
programs, including the effectiveness of codes
and training, can be attributed to management
attitudes.
Second, the absence of pro-active reasoning
suggests another reason why effectiveness of
ethics training program is rarely measured.
Ireland (1991, p. 75) found that motivations
influencing the introduction of ethics codes were:
company growth (53%)); diversification (29%);
industry trends (26%) and; prompting by the
board of directors (23%i).Notably absent from this
list is pro-active reasoning, i.e. the introduction
of ethics codes or training as a strategy for
resolving and containing ethical dilemmas before
they become high profile, media cases. When
companies institute ethics training as a reaction
to the bad news of an ethical violation, the efforts
may be the band-aid that gives an appearance of
problem resolution, but not the cure. In effect,
despite the volumes published on ethics in orga-
nizations, the ethics program is not considered
strategically important enough to measure effec-
tiveness.
Third, another reason for the absence of wide-
spread ethics training and the lack of evaluative
efforts, may be found in an argument proffered
by Delaney and Sockell (1992). They contend
38 Louis P. W}nte and Long W. Lam
that there is an absence of a link between moral
reasoning, which constitutes most ethics training
programs and organizational decision making
(Kavathatzopoulos, 1994). Delaney and Scokell
(1992) suggest that “there is a gap in our knowl-
edge of work place ethical behavior and the
factors that influence it (p. 720).” The same gap
is also evident from both of Paine’s preceding
quotes concerning the influence of organizational
climate on ethical decision making.
A model of ethical behavior
We propose a model of ethical behavior that may
fill the gap proposed by Delaney and Sockell
(1992). The same model is also intended to
clarify the role and scope of the individual and
the organization in creating and resolving ethical
issues. The clarification of the role and scope of
both, we beheve, is needed as a pre-requisite for
demonstrating and evaluating the strategic impor-
tance of ethics training. The conceptual frame-
work for doing so is provided in Figure 1.
Addressed in this model are macro level compo-
nents of the factors bearing on ethical behavior
in the workplace. These factors include: means,
motivation and opportunity for engaging in
unethical behavior. In short, we suggest that indi-
viduals are more likely to face an ethical dilemma
if (1) Organizations do not provide the “means”
to prevent unethical behavior; (2) Individuals
have personal “motivation” to be benefited from
Figure 1. Components of ethical dilemmas.
behaving unethically; and (3) Job positions
provide the “opportunity” to engage in uneth-
ical practices.
Means
The “Means” presented in Figure 1 are the rules,
policies and procedures in an organization, and
not limited only to those which refer specifically
to “ethics.” In this paper, however, we are pri-
marily concerned with whether organizations
have provided clear rules and policies that safe-
guard unethical behavior. We also propose that
it is the organizational climate that determines
whether ethical rules and procedures will be
created and will actually be implemented. As
Hyman et al. (1990) suggested, organizational
climates are composed of the countless, every day
events, attitudes, policies, beliefs and culture no
matter. Organizational climate shapes individual
actions by providing exphcit and implicit guide-
hnes of acceptable behavior. In effect, the nature
of the organization’s climate provides the
“means” for the emergence of an ethical
dilemma, and the blueprint for resolving any
emergent dilemmas.
Thus, while ethics is a question of an indi-
vidual’s judgment and behavior, the host orga-
nization must accept primary responsibility for
the “means” component of an ethical system.
Because the means are composed of all organi-
zational policies, procedures and practices con-
sidered collectively, it is incumbent upon
managers to set clear expectations and standards
for the ethical conduct of every organizational
member and to model the highest ethical prac-
tices. Modeling ethical practices is not limited
to the exercise of moral judgment in areas where
there are obvious potential conflicts of interest.
It includes a proactive and continuous reassess-
ment of all aspects of organizational life.
Motivation
Even in those organizations where management
models ethical behavior in all aspects of organi-
zation life, there may exist ethical violations
A Proposed Infrastructi4ral Model 39
attributable to individual motivations. Referring
back to the earlier scenario, it may be recafled
that the child’s motivation for stealing candy and
money was hunger and poverty. The interplay
between means and motivation is now obvious:
Had the child known that the teacher would
account for every penny of the candy sold and
the inventory, even the most basic motivation
may have been averted by the child’s cognizance
of penalties. Yet, had the dishonesty occurred
anyway, the “means” for determining that an
ethical violation had occurred would have been
available to the teacher. This notion fits with
Paine’s argument, that “creating a climate that
encourages exemplary conduct may be the best
way to prevent damaging misconduct” (p. 117).
Every individual brings to the organization his
or her own motivations, the need to achieve, the
need to affiliate, and the need for power and
dominance. These motivations are mirrors of
our value systems, and as Rokeach (1973) has
noted, the social environment can influence thi-s
system. Similarly, the social environment can be
influenced by individuals who, through aware-
ness of a company’s ethical policies and beliefs,
can affect the nature and extent of ethical
violations incurred by others. The process is
cychcal because an organization is composed of
the unique constellation of all of its members’
values or motivational systems, or what many
researchers call, “the organizational value
system.”
Opportunity
Opportunity plays a unique role in the frame-
work depicted in Figure 1 when compared to the
majority of discussions about organizational
ethics. This departure is highlighted by the
proposition that categories of ethical dilemmas
operate as a function of job position in the hier-
archy. Specifically, different job positions create
their own unique sets of opportunities to engage
in ethical or unethical behavior. A corollary to
this proposition is that, given the heterogeneity
of job classifications and accompanying ethical
scenarios, effective ethics training would vary as
a function of job classification.
This notion is grounded in the state of pro-
fessional ethics and unique sets of standards.
Attorneys have a code of ethics geared to situa-
tions that confront the legal profession as do
psychologists and physicians. The same pattern
prevails in the model shown in Figure 1. The
CEO of an organization faces ethical dilemmas
unique to that position as does the human
resource employee and other job classes within
the organization. In a 1994 survey conducted by
the Ethics Resource Center, employees in tech-
nical positions, such as manufacturing and quality
control, felt the strongest pressure to commit
business misconduct. The prevailing method of
ethics training, however, assumes homogeneity of”
ethical confrontations as reflected by ethics
training programs.
The literature also suggests that “opportunity”
for engagement in unethical conduct is a
function of occupational category, bernheim
(1992), in a study of how MBA candidates and
executives view ethical situations, concluded that;
“it appears that ethical priorities depend on
where you sit” (p. 46). Further, a study by KroU,
Wright and Theerathorn (1993) of insurers and
top managers found that “when managers have
discretionary control . . . they are more likely to
absorb greater pecuniary and non-pecuniary
benefit and shirk responsibilities” (p. 145). As
Cyriac (1992) has stated.
ethics therefore should be integrated into the flitic-
tional and technical specialties of management.
Each function of management and each area of
business education should discuss extensively and
debate seriously on related ethical issues (p. 12).
Inferred from Cyriac’s statement is the notion
that “related ethical issues” is specific to a given
discipline.
Figure 1 can be summarized, then, as an
infrastructural model for integrating the shared
interaction between the individual and the orga-
nization in the emergence of an ethical dilemma.
Dilemmas operate as a function of the interac-
tive qualities of means and motivation which, in
turn, are influenced by opportunity provided by
position or job classification. In other words,
we suggest ethical dilemmas as an interactive
product of means, motivation, and opportunity:
40 Louis P. Wiiite and Long W. Lam
Ethical Dilemmas = (Means X Motivation X
Opportunity). Ethical dilemmas are much less
likely to occur if one of the interactive compo-
nents is absent.
Institutionalizing organizational ethics
How can our n)odel be applied in ethical training
in organizations? The analysis so far has focused
on the components as forming the infrastructure
of ethical dilemmas. It follows then that the
establishment of viable organizational ethical
systems should be grounded in this infrastructure.
To do so organizations need to look at each
of the components as an individual contributor
to the total ethical milieu existing at the organi-
zation.
We have defined means as the rules, policies,
and procedures of organizations. Ethical behavior
or being ethical connotes pro-activity from the
organization by formulating policy that sets the
tone for acceptable behavior. A well-publicized
indictment of an aerospace contractor in 198O’s
was tainted by its reactivity; that is, unethical
behavior was terminated as a result of getting
caught (Hartley. 1993). While the result may be
more acceptable business practices, this kind of
situation does not set what would appear to be
the right tone. Paine (1994) appears to support
organizational pro-activity by arguing that
management has the responsibility for ethical
behavior and that through integrity strategies,
ethical lapses can be prevented. Management
should set the tone and provide the leadership
for a viable ethical system (Hartley, 1993). The
organization’s leadership should state publicly that
ethical behavior is a top priority. To accomplish
this, representatives for all job classifications or
levels of the organizational hierarchy should take
part in the formulation of a company pohcy on
ethical behavior (Bernheim, 1992; Kroll et a l ,
1993; Cyriac. 1992). The formulation and sub-
sequent publication through this inclusionary
process contributes to ethical behavior and is
linked to the means component of” the infra-
structural model (Shaw, 1991; De George, 1995).
Motivation focuses upon the resultant behavior
of the interactional processes between the values
of the individual and organizational values that
manifest themselves through the organizational
culture or chmate. Motivation to behave ethically
can be increased by making ethical behavior
a part of the performance evaluation of each
position holder. In doing so, the valence for
ethical behavior becomes very positive and the
causal link between behavior and outcome is
estabhshed. Moreover, the organization demon-
strates the value placed on ethical behavior,
thereby influencing and enhancing organizational
culture.
While means and motivation are seen as
interacting to direct the j o b occupant toward
ethical behavior, opportunity is seen as the milieu
in which the behavior occurs. A key proposi-
tion of our analysis is that the type of ethical
dilemma occurs as a part of, and is unique
to, position in the organizational structure.
Employees throughout the organization, from
C E O to mail room clerk, confront dilemmas
relating to his/her job. Recognition of this posi-
tional difference is fundamental to a viable ethical
system.
In Table I, we propose a list of organizational
activities that can be done to manipulate the
means, motivation, and opportunity variable in
the infrastructural model.
Summary and conclusions
Paine (1994) and Hyman et al. (1990) are among
those who argue for a comprehensive approach
to the infusion of ethics in an organization. A
comprehensive approach contrasts with the pre-
dominant practice of relying principally on
ethical codes as a means of influencing individual
moral judgments. The perception of some
managers, that these individual judgments are
impervious to organizational influences, may be
one of the reasons organizations do not move
beyond ethical codes. However, as indicated, the
scope of an ethical dilemma can expand when
the ethical milieu is included.
Even in the minority of companies who do
move beyond ethical codes by implementing
training programs, there are some questions
regarding their effectiveness. The minimal
A Proposed infrastructural Model 41
TABLE I
Proposed activities on using the infrastrucEural model of organizational ethics
Means
1. Lead by examples. To foster a positive organizational climate, top management should set the tone and serve
as role models of acceptable ethical behavior.
2. liiuoli^e employees of all levels. Include members from different job levels to formulate a company’s rules and
procedures on ethical behavior.
Mosiuafion
1. Restructure performance evaluatioti. Part of the evaluation criteria on employees should include adherence to
rules and procedures on ethical behavior.
2. Compensating for the right behavior. Pay and salary systems should tie monetary values to ethical performance
of employees.
Opportunity
1. Group ethical scenarios by Job types. This activity can be accomplished by asking job occupants to describe the
types of ethical questions they confront.
2. Develop simulations from these critical incidents. These simulations will be used in subsequent ethics training
workshops.
3. Develop resolution strategies. These resolution strategies should include input and participation by employees
who experience the set of ethical situations that are part of a particular milieu.
4. Develop training programs. Design training programs based upon the information from these incidents and
simulation.
evidence which does exist is not overwhelming,
and the absence of training evaluation implies
that there may be discrepancies between
expressed commitment to infusing ethics in the
organization and reality. Further, much of ethics
training focuses on moral content rather than the
factors which affect ethical behavior, suggesting
that the training may not be regarded as relevant,
or relevant only to the extent that the organiza-
tion is reacting to externally imposed sanctions.
The model we have suggested provides orga-
nizations with a tool for overcoming some of the
previously cited barriers to ethical infusion. By
proposing the model, we anticipate that managers
who believe ethics are personal decisions will also
come to understand that there is an interplay
between an ethical organizational environment
and individual ethical judgments. The organiza-
tional environment can also avert motivations
contrary to an ethical spirit and reinforce those
which support the ethical organization. Finally,
the nature of the ethical judgments confronted
by individuals will also vary according to the job.
In practical terms, the model points to the
need for “ethics audits,” not merely of existing
ethics codes, but of all the organization’s prac-
tices. When discussing social responsibility of
organizations, De George (1995, p. 13) empha-
sized the need for social and moral audits such
that corporations are able to “inform the public
as to where they stand on some social issues, and
to explain their policies and their impact on
society.” The same principle can be applied to
ethics audits. This is inferred from the notion that
organizational practices serve as the means for the
emergence of ethical dilemmas, and the existence
of ethics audits can enhance or retard the indi-
vidual’s motivation to behave in an ethical
manner. In other words, organizations can imple-
ment ethics audits to determine if there are clear
rules and procedures that prevent unethical
behavior of employees.
Finally, the model points to the need tor
training tailored to individual job classes. Such a
design may make ethics training more relevant
and effective than what has been practiced
by most organizations. We suggest that since
opportunity to commit unethical behavior
differs among job positions, organizations should
provide different training programs to employees
42 Louis P. Wliite and Long W. Lam
of various positions. In other words, the ethical
training a vice president of finance receives
should be drastically different from that of a sales-
person. We have also proposed a list of training
activities that organizations can develop to create
ethical scenarios and resolution strategics by
various job categories.
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University of Houston – Clear Lake,
2700 Bay Area Blvd.,
Houston, TX 77058,
U.S. A.